Warehouse audit: objectives, warehouse performance analysis

It is not easy for both business owners and logistics managers to organize a fine-tuned and well-established warehouse operation.
It is not easy for both business owners and logistics managers. Everything
is learned through trial and error. And when you realize that the warehouse
is operating inefficiently, and moreover, this inefficiency is causing
losses, the decision for a comprehensive audit is made. And that’s what a warehouse audit
is a warehouse audit. A warehouse audit is a set of
processes and actions aimed at obtaining a complete and unbiased
picture of the current state of the warehouse, identifying problem areas and ways to optimize the logistics component of the company. In other words, the results of the audit should make it clear: “what is wrong with the warehouse operation” and “how to fix it”. Warehouse management analysis is especially relevant and informative in the case of a “manual” model of organizing the work of warehouse processes, because nobody can cancel the human factor.

So what does studying the results of an audit of a particular warehouse give us?

• How efficiently the warehouse facilities are used (whether the warehouse area is properly selected, whether the goods are rationally placed on shelves, whether quick and free access to the goods is ensured, etc.).
• How efficiently machinery, equipment and software are utilized.
• How productively the warehouse employees interact with each other and other departments, and how this affects the overall performance of the warehouse.
• How competitive the logistics product is.
• How efficient is the management of all warehouse processes.

So, the audit has already been carried out. A warehouse audit and a detailed analysis of its results allows you to understand:

• how to improve the efficiency of inventory management;
• how to use the budget allocated for warehouse maintenance in the most expedient way;
• how to properly organize the operation of warehouse space and warehouse equipment;
• how to establish effective communication between warehouse employees and other departments and, possibly, to increase the level of motivation of warehouse personnel (e.g., training to improve their skills).
• A practical example of organizing the activities of a warehouse that needs to be optimized and audited.

How the client was before the project was launched

The warehouse of the distributor company is about 3000 square meters, 10 meters – height to the bottom edge of the beam, shelving – in 4 tiers, docks; there are shipping/receiving/ready orders/storage/reject areas.

Problem Description

At 9:00 a.m., there is a congestion of cars in front of the docks for loading and
heavy-duty arrival vans. The vehicles are loaded manually. The incoming trucks
are waiting for the flow rate to finish loading. No other warehouse operations
no other warehouse operations are performed. The storage and picking area
(including aisles) there is a lot of haphazardly scattered, dusty goods.
Goods can be moved no higher than 3 tiers due to technical features.

Accordingly, the 4th tier is 90% empty, the 3rd tier is 50% full, and the 2nd tier is overcrowded. The goods are labeled either without indicating the delivery date, lot number and product code, or not labeled at all. The goods of the 3-4 tiers do not take part in the inventory. There is no principle of goods arrangement at receiving (FIFO, for example). 1/3 of the total volume of goods are actually turned around, 2/3 – take up space in the warehouse as “dead weight”. Spoilage is placed with all other goods, write-offs occur once a week. The warehouse staff works for 3 months – from inventory to inventory. Highly paid specialists in inventory management work in the head office, but they have never been to the warehouse and do not understand the algorithm of warehouse processes, no one is engaged in auditing and analysis.

There is a system of bonuses from the distributor for uncoordinated arrivals of batches of goods, the size of which exceeds the norms of arrivals. As a result, warehouse processes are slowed down or stopped altogether. The warehouse is overcrowded with “frozen”, poorly turnover goods. Goods are placed in aisles. Warehouse expenses exceed bonus income.

What to do? We need to audit and optimize the warehouse

There are many ways to optimize the warehouse, but here are the most effective ones.

Firstly, you need to analyze the location of the warehouse. The location
warehouse location should be optimal according to several criteria:

• that the goods can be delivered to the customer as quickly as possible;
• that the cost of renting a warehouse does not multiply the company’s expenses; for this purpose, it is better to look for several variants of premises at once.

Warehousing systems and cargo management techniques

The warehouse is the key place where all of a company’s most valuable immovable property – the goods – is based. And here, first of all, it is important to choose the unit of cargo in which the goods will be stored in the warehouse (crate or bag, pallet or tank, box or container). According to these characteristics, the storage method itself is selected. For example, pallets can be stacked on top of each other, boxes on shelves. In the process of arrangement, it is important to maximize the use of free space, while ensuring access of personnel to all goods. And for easier orientation in the warehouse, goods are usually stored according to a certain name, batch, grade, etc.

Reasonable layout

In order to avoid problems with storage of goods (especially perishable goods) and not to hinder the access of personnel and special equipment to this cargo, it is necessary to develop a detailed scheme at the stage of analysis and planning. It is also important to place goods in a certain order: those that are renewed quickly – in the part of the warehouse closest to unloading, those that are moved rarely – further away (according to ABC frequency of handling).

Warehouse equipment

An efficient warehouse, of course, must be provided with special equipment and technology. Do not do without a good ventilation system, well-thought-out fire safety, alarm system, because the quality of goods directly depends on it.

Organization of information flow system

An important aspect of warehouse processes is the maintenance of documentation, electronic, including that allows you to track the arrival of goods in the warehouse, its location. This is especially important for goods whose expiration date expires quickly.

Activity control and inventory management

It is important to monitor the performance of the logistics department on the following indicators:

• frequency of requests and the timing of their fulfillment;
• the volume of goods entering the warehouse and the same volume arriving at the customer;
• average stock level in the warehouse.

If the chain “warehouse-customer” is not interrupted and both parties have no claims to each other, it can be said that the work of warehouse management is at its best.

Of course, the classical methods of analyzing ABC and XYZ stock are good and can be used independently, but they will not show a complete picture of the state of affairs in the warehouse. For these purposes, warehouse optimization, analysis of warehouse operations, auditing of warehousing, personnel, procurement, and delivery are more suitable.

Of course, warehouse automation does not guarantee perfect business and super profits, but an automated warehouse with competent employees increases the chances of a successful business many times over. It is equally important to constantly analyze and control the real data of the warehouse. And it is much easier to do this with WMS warehouse management systems than “manually”.

Learn how ABM WMS works, its main functions and reports. ABM Cloud experts will analyze warehouse performance, warehouse optimization, and prepare a complete warehouse project.