The Theory of ConstraintsMay 23, 2023
Operational Data Analysis: Analyzing Operational Needs in Warehouses and Distribution CentersJuly 6, 2023
SKU Velocity is Key to Understanding Inventory Behavior. Below Are Eight Steps to an Accurate Analysis.
If you aim to improve performance, build a new warehouse, or redesign an existing facility, conducting an analysis of your order and inventory profiles should be your initial step. By following the steps below, you can ensure an accurate analysis that yields actionable results for your operation.
- Define your goals: Before profiling your inventory, clearly identify the goals you wish to achieve through the exercise. Understanding these goals from the start helps you stay focused throughout the analysis. Some common goals include reducing order picking time, minimizing travel time within the facility, assessing the impact of adding new item lines, justifying equipment/system investments, and optimizing existing equipment and systems.
- Data gathering: Obtain the data required for your SKU profiling analysis. Key data points include inventory levels, SKU velocity, replenishment rates, and average order profiles. Depending on your operation, this data can be sourced from your warehouse management system (WMS), warehouse execution software (WES), and other business systems. Ensure the accuracy of the data, as it forms the foundation of the analysis. LD Systems can assist with gathering and analyzing your data.
- Evaluate available tools: If your goal is to understand the role of new equipment or systems in your operation, incorporate this into your analysis. After assessing your current performance, model different scenarios, considering various technologies and solutions. Focus on your storage/slotting strategy, picking strategy, and the characteristics of your products. Choose technologies that align with your operation’s specific needs and constraints.
- RightFIT solution: Select solutions tailored to the specific requirements of your operation and industry. Avoid adopting a one-size-fits-all approach, as it may yield suboptimal results and a poor return on investment. LD Systems emphasizes the importance of the RightFIT methodology, which ensures intelligent integration within your operation.
- Anticipate change: While historical data forms the basis of the analysis, consider forecasting future demand and changes. Include data related to promotions, discounts, featured items on e-commerce sites, product retirements, seasonality, planned additions or expansions to product lines, and acquisitions or sales of product lines or divisions. Such insights significantly impact the efficiency of your picking operation.
- Replenishment strategy: Ensure you have the appropriate storage types and locations within your facility based on the frequency of replenishment. Items with higher replenishment frequencies indicate higher demand and should be placed strategically closer to the dock or packing/shipping centers. This optimizes workflow efficiency.
- Change implementation plan: Once your analysis is complete, create a plan to transition from the current state to the desired future state. If you need to relocate inventory within the facility, ensure the plan maintains adequate inventory visibility during the transition. Determine the timing and strategy for implementation, considering factors such as departmental or phased migration, optimal timing (e.g., outside peak seasons), and space requirements for new equipment and inventory.
- Implement changes and analyze results: After implementing the changes, analyze the performance of your operation both before and after the changes. Select key performance indicators and metrics that align with your goals. By comparing the results, you can determine the impact of the changes and replicate successful strategies in other departments or facilities.
In summary, SKU profiling and the implementation of changes to inventory storage involve a complex process. While larger operations may have dedicated internal teams for such projects, LD Systems, a trusted systems integrator, can provide assistance. To schedule a free consultation, please click here.