Chris Elliott, Consulting Manager, Supply Chain
Helping companies improve their supply chains to drive greater business value through efficiency and productivity
Summer is here and you’re busting out the sunscreen, packing up the cooler with snacks and heading to the beach.
Know what I’m thinking about? The supply chain processes that went into getting all those products to you.
Those snacks in your cooler and your stash of sunscreen have something in common. They are all managed by controlled lots like expiration dates or batch numbers. Controlled lots give you traceability of the inventory that moves into and out of your warehouse.
In the past, SKU management was pretty straightforward, and you could design facilities around pallet in/pallet out or pallet in/case out strategies. But increasing SKU count and flexible order quantities makes lot-controlled distribution operations more complicated.
Designing a Facility for Lot-Controlled Items
With increasing SKUs, a facility designed specifically for lot-controlled items is crucial. What should be in your facility strategy? I have three recommendations.
1. Right-size the facility
2. Define the medium for picking and storage
3. Plan your location and replenishment strategies
Right Size the Facility
In the food and beverage industry, there are many lot-controlled items that require specific storage temperatures. The size of the facility quickly becomes important to the CFO, because each square foot of a new facility could cost $125 to $150 per square foot for cold storage.
Design your facility with proper storage, handling, and shipping in mind. For example, you may want to have narrow aisle. Will narrow aisles allow your existing machinery to fit? Or will you have to purchase smaller equipment.
This is just one example of key considerations that are easy to overlook.
Picking and Storage Medium
Historically, food and beverage distribution facilities were designed based on their the storage requirements for inbound shipments.
Unfortunately, when you can’t mix lots, you are left with many half empty storage locations when customer demands drop. This honeycombing effect greatly increases the space demands for products, costing you more money to store air than actual products.
It's important to correctly choose and layout the picking and storage medium - like single selective rack, multiple location deep, drive in, or flow rack. With the right storage and picking strategies within properly designed facilities, companies can see 15 - 20% improvement in efficiencies.
Location and Replenishment Strategies
Once your facility is properly sized and laid out, the next step is to configure your systems to allow for the location slotting and replenishment of lot-controlled items.
In the past, companies have relied on fixed locations for case picked items. However, if they are not allowing lots to be mixed, it adds a lot to the extra locations required so that multiple lots of an item can be ready for picking.
Storing your product in a combination of fixed and dynamic locations solves this issue. Lot-controlled items need flexibility in the picking areas so that new lots can be replenished to dynamic locations while the existing lot in the picking area can be picked.
Wondering how to deal with aged inventory when you are running more dynamic locations? Make sure that your inventory team is aware of the new importance of their role. They need to manage of aging inventory by moving it out of the picking area and disposing of it.
Picking cases of lot-controlled items can be difficult for many companies. When adding picking in temperature-controlled environments, both space and labor costs skyrocket quickly without the right strategy.
The right designs lead to lower cost and more efficient processes.