Space utilization and use of FIFO (First In First Out) at the client’s central warehouse was not optimal. This lack of space utilization led to two main issues, waste of space and during peak season lack of capacity. To offset capacity issues, the customer was utilizing a third-party warehouse at significant cost. The client has a FIFO policy; however, the current warehouse layout does not efficiently allow for FIFO. This warehouse layout results in significant additional handling and rework.
To generate a full understanding of the situation, Focused Improvement conducted a detailed assessment of the warehouse layout, material handling, and quality management processes.
This assessment identified various options to optimize warehouse operations. The changes made to improve the current situation were:
- Space utilization in the warehouse was optimized for the number of pallets stored however, this limited the use of a ‘drive in’ system, prevented effective inventory management and FIFO. To improve inventory management and FIFO, gravity roller racks were installed.
- To monitor capacity utilization, KPI’s were put in place to monitor capacity utilization daily to give further visibility to production teams about available capacity in the warehouse.
- Warehouse storage locations were color-coded with dedicated areas for Finished Goods and WIP as well as separate locations dedicated to fast-moving SKU’s.
- Direct loading and improvements to the loading schedule were made to improve the flow of products within the warehouse.
- Wooden pallets were replaced with reusable plastic containers in both the warehouse and the food manufacturing area.
Post implementation of the roller racks and KPI’s led to the capacity utilization improving by over 30% and reduced reliance on third-party warehouse by 50% leading to savings of approximately $180,000.