A warehouse is experiencing over 10% overtime. To minimize overtime, the document recommends: 1. Identifying which area - picking, packing, or shipping - has the highest overtime 2. Analyzing the zone within that area with the highest overtime 3. Engaging teams to exploit constraints and elevate capacities of constrained zones to increase the rate of shipments while reducing the rate of increase in operating expenses.

1. Constraint in Warehouse Shridhar Lolla 8/23/2011 1 Shridhar Lolla, lolla@cvmark.com

2. Fundamental Assumptions People are good Overtime is ‘apparently’, the result of overload. 8/23/2011 Shridhar Lolla, lolla@cvmark.com 2

3. Problem definition A facility is running over 10% overtime. What are 5 steps you take to minimize the overtime? The facility is a warehouse, which carries out picking, packing and shipping orders. The warehouse is laid into different zones, with each zone picking orders (in parallel?). Variety and size of orders vary between zones. The volume of orders picked between zones vary dramatically. Which is in the range of 40% to 5% of total orders in a day. A logic used in the warehouse is to place faster pickers in the section (zone ?) that has the most orders. 8/23/2011 3 Shridhar Lolla, lolla@cvmark.com

4. Picking - Packing -Shipping Zone-1 Zone-2 Shipping Bay Packing Zone-3 Zone-4 Picking Zone-5 Zone-6 Assumption: Different Picking Zones, converging into Common Packing Area and Diverging to multiple Shipping Bays Truck 8/23/2011 4 Shridhar Lolla, lolla@cvmark.com

5. Direction to solution If the flow is as given above, then find out, where the OT is high, is it in picking, or packing or shipping. If Picking has high OT, identify the Zone where the OT is highest. Right productivity measure, e.g. #picks per picker or is it per hour, must be used to objectively assess OT and load per zone. Engage teams to exploit the Zone. It may require closely monitoring the workflow from order receipt to assigning pickers to movements and unpicking at packing area. This exercise will reveal hidden capacity. Ones the most loaded zone is exploited and it still remains constraint, elevate the Zone capacity, by seeking help from other lightly loaded zones. Go to the other high OT zone and repeat the above process of exploitation and elevation. Warning ! : The constraint need not necessarily be in Picking; in one of the warehouses we had spotted constraint in Packing. 8/23/2011 5 Shridhar Lolla, lolla@cvmark.com

6. The Goal The Goal of Warehouse Operations is not to minimize overtime. The Goal is to maximize the rate of shipment from the warehouse. And in doing so, if it requires overtime, overtime should be taken only in doing those activities, where it is needed and not in areas where it is not needed. Generally, overtime is high because it occurs in almost all areas of the warehouse, not by design but by habit. The approach should be such that the increase in rate of shipment is higher than if any increase in the overall operating expenses (of which, over time is a part). 8/23/2011 Shridhar Lolla, lolla@cvmark.com 6

7. Global SolutionReducing Overtime is not the Goal of a Warehouse. On the contrary, Overtime may be required to achieve the Goal of the Warehouse. Specify the ‘single’ key performance measurement for the warehouse e.g. number of orders shipped (it can not be number of orders picked or packed). The Goal of the warehouse is then: Increase the ‘rate’ of number of orders shipped, while reducing ‘rate’ of increase in operating expenses, OE. i.e. % increase in shipped orders >> % increase in OE This is because the Goal of Operations in a ware house is to move orders ‘faster’ and not to ‘reduce’ operating cost. Identify which of the tasks i.e. picking, packing and shipping is the slowest (constraint). Slowest by the time taken per order or shipment. (Warning: Avoid falling into the trap of coming with an observation that all tasks take equal time !) Exploit the constraint. Engage people in finding simple solution. If required get into the detailed step by step working of the particular task. E.g if it is packing, identify how packing orders are listed and prioritized, how picked orders are queued, how actual packing activity is carried out (may involve, waiting time, palletizing, stacking, band wrapping, shrink wrapping, holding, documenting, inspection, moving to shipping area etc.). Brainstorm with the team to review the process, resources and policies. Identify and eliminate waste. Ensure that the constraint time is not wasted, which means that there is always work in front of the constraint and the step following the constraint does not have any work waiting. Hence, if packing is a constraint, picking always ensures that there are enough batches in front of packing, while the staff in shipping ensures that no batches are waiting in front of shipping bay longer than what is mandatory. Once the constraint is exploited to the extent possible, elevate the capacity of the packing area. Start working on the next constraint. 8/23/2011 Shridhar Lolla, lolla@cvmark.com 7