Warehouse management systems (WMS) and modern digital warehouse technologies can significantly improve efficiency and minimize the impact of human factors in warehouse operations. This article discusses how a cement production plant can save over $200 k per year by utilizing these technologies.
What's wrong with warehouse logistics?
As an example, we will consider a cement production enterprise. In addition to production materials, the plant also stores spare parts for equipment repair, packaging materials such as bags and pallets, and other materials essential for the production process. Some of these items are stored in the central warehouse, while others are kept in workshops or storerooms.
The problem arises when plant managers and workshop masters lack precise information about the location of specific spare parts or packaging materials, their intended recipients within the enterprise, arrival dates at the warehouse, expiry dates, certification status, and other relevant details. These items can be scattered throughout the plant, making their retrieval time-consuming and often challenging, requiring manual searching through the warehouse to find what is needed. If the required item is not found, it needs to be re-ordered, paid for, and then awaited for delivery, resulting in additional costs. Subsequently, it may be discovered that the required items were present at the plant but stored in a different location, leading to additional expenses, production delays, and disrupted order shipments.
Inefficient inventory management at the production plant leads to obsolete and slow-moving inventory, tying up significant working capital. For example, losses due to the expiration of items or loss of their properties (due to not adhering to the first-expired-first-out principle) can amount to around $31-36 k.
The implementation of a Warehouse Management System (WMS) allows for better control of expiry dates and enables batch tracking of individual items, minimizing losses. In the case of the cement production plant mentioned earlier, the total positive impact can exceed $45k.
"The implementation of ERP-class systems is often not enough. Competent planning of purchases of raw materials and supplies required for the actual production of goods, of course, increases the efficiency of production facilities. However, problems in related circuits related to production logistics, equipment maintenance and repair processes (MRO), as well as in the management of warehouses of finished products and their shipment do not always disappear," comments Mikhail Nam, General manager, Awara IT Kazakhstan.
Warehouse problems in MRO
MRO processes, like many other functions that support production, are frequently overlooked by management, lacking dedicated attention, separate circuits, or sufficient optimization and automation. Consequently, issues arise, leading to idle machinery and equipment, such as:
· Spare parts required for repairs were not ordered and delivered in a timely manner to those internal customers who needed them;
· Parts were available, but could not be found in time;
· The necessary spare parts were available within the group of enterprises in another legal entity and due to the lack of transparency of all TCMs for the whole group of enterprises the spare parts were purchased repeatedly and the enterprise lost time waiting for the delivery of the necessary spare parts.
The key to solving the problems with inventory for MRO is optimization and automation of related business processes. The main idea is to centralize the provision of stocks and control over their consumption, and for this purpose to consolidate the processing of requests and inquiries from the field and to build a centralized procurement and delivery of inventory to internal customers.
Implementing a Warehouse Management System (WMS) with labeling, such as RFID or simple bar codes, in the finished products warehouse results in a significant time reduction for warehouse operations, including placement, selection, and inventory, by up to 30%. This improvement translates into substantial annual savings of approximately $160-170 k for the considered example of a cement plant.
Another example involves the use of storage sheets in combination with various types of labeling and mobile terminals. This system aids in the rapid and accurate distribution of spare parts and other inventory items, allowing them to be moved to warehouses closest to customers.
It is essential to ensure the seamless integration of storage processes with production and maintenance operations, as well as with information systems that automate these processes. However, even in this context, hidden pitfalls can arise. For instance, if the problem of inventory management is not adequately addressed, it becomes impossible to establish effective maintenance and repair processes.
External experts can play a crucial role in resolving production logistics challenges. It is vital to seek out professionals who can provide innovative solutions and recommend a diverse array of cutting-edge IT tools, including but not limited to:
· Microsoft application platforms (Dynamics 365, Dynamics AX, Dynamics NAV, Power BI, etc.);
· In-house developments;
· Innovative solutions from other manufacturers.
Problems in the storage of finished goods
Typically, many problems arise in warehouses of finished goods that require batch-by-batch accounting or tracking of expiration dates for the products themselves or for certificates that have a limited validity period. Such goods are usually discrete, e.g. shipped in bags, sacks, crates, boxes, pallets, etc. This situation is not uncommon in warehouses of finished goods and often occurs in various production facilities, including food industry enterprises, paint and varnish production plants, construction mixtures, and others.
"It is crucial for these enterprises to understand exactly which batches of goods have been shipped to each of their customers," says Konstantin Savergin, Director of Logistics Solutions Practice at Awara IT. "To achieve this, careful monitoring of logistical operations in the areas of finished products, including the direct shipment points, is necessary. Failing to do so could lead to a situation where the company mistakenly sends the wrong product or batch of goods to one of its customers. This mistake poses significant risks, including potential penalties, contract terminations, and reputational costs if the dissatisfied customer chooses to publicize the incident."
As a result of preparation and implementation of WMS in warehouses unclaimed inventory is necessarily identified, the amount of which can reach more than $22k, and this, in turn, can be a significant percentage of the total amount of inventory.
Depending on the specifics of the product, batch control schemes may vary. The FEFO scheme is most commonly used. If batch accounting is not required, FIFO is usually used.
The use of various types of labeling, including RFID tags and QR codes, can help solve the problems associated with batch accounting. If, for example, each package of goods (for example, a pallet or a box) is equipped with a separate QR code, then, having scanned it, the customer of this product will be able to get information about a particular batch of products, including expiration dates and other relevant data. This approach helps to strengthen interaction with customers and increase their loyalty.
To optimize and automate logistics processes covering finished goods warehouses and shipping terminals, companies usually engage competent professionals and experts. Their task is to offer the most effective experience in warehouse logistics management, as well as modern approaches and tools aimed at its improvement.
Awara IT has developed a special offer aimed at helping businesses achieve outstanding results and address the challenges mentioned above. This offer is tailored specifically for large warehouses seeking solutions to their shipment and storage issues while simultaneously reducing warehouse logistics costs. It is specifically designed to capture the interest of Directors of Logistics and Warehousing.
Our comprehensive offer includes the following benefits:
· Minimized personnel dependency and reduced staffing costs.
· A professional WMS system built on a modern ERP platform.
· Logistics consulting and expertise.
· Ready-to-use business processes, customizable to accommodate any warehouse complexity.
· Optimized warehouse capacity to make the most of available space.
· Enhanced warehouse operations, ensuring increased speed and service quality.
· Significant reduction in staff qualification demands, making operations more efficient.
· Minimized equipment costs with efficient layout planning, ensuring cost-effectiveness.
· Flexible process configuration without the need for complex programming, simplifying operations.
As a result, businesses can expect to enjoy the following advantages:
· 99.9% precision and timeliness of shipments, ensuring reliable delivery processes.
· A remarkable 30% reduction in warehouse logistics costs, promoting cost savings.
· Achieving 100% storage volume utilization, maximizing the use of available storage space.
Awara IT is committed to helping warehouses operate at their peak performance, driving success, and streamlining operations for sustained growth.
