Despite the rise of automation, modern day warehouses still rely heavily on manpower, which can lead to diseconomies of scale in periods of heavy demand. As such, we learn more about how decisions can be prioritized and why smoothing warehouse operations is so important when it comes to managing fluctuations in activity.
Why are we talking about “smoothing” and not “streamlining” warehouse operations? We can say that smoothing refers to the day-to-day warehouse operations, for example the amount of manpower needed remains pretty constant from one day to the next. Streamlining, on the other hand, would apply in the case of buying a new conveyor belt, which would improve overall warehouse productivity. Yet, once this investment is done, you’d be back to the initial situation where you’re looking to “smooth” those daily operations that require accommodating variations in demand.
The reality of the market is that flexibility is always an option during periods of high demand, by hiring contractors for example, but this doesn’t change that it’s an expensive option. By being relatively inflexible, you can lower your costs. Therefore, whenever you diverge your warehouse from your optimal, nominal schema, it results in diseconomies of scale.
Currently, it is practically impossible to achieve an efficient smoothing of warehouse operations with classic supply chain paradigms. These classic approaches place too much importance on time series and glorified Min/Max reordering policies, which places focus on the wrong elements within the supply chain.
The main problem lies in not looking at things from a network perspective, as often formulas just isolate one single SKU instead of acknowledging the rest of the network in place and how it all reacts together.
To conclude, we discuss replenishment challenges, how to increase ROI and go into more detail about why Lokad’s approach is so different from the classic approach when it comes to warehouse operations optimization.
00:22 What are the characteristics of modern day warehouses that make them so challenging to manage?
02:38 Why is the word “smoothing” so important?
04:12 How can manpower cost vary?
05:27 When working in an ideal regime, how well does the classical approach work?
07:51 How much control can warehouse managers actually have?
10:39 How would you smooth out the activities and reduce the spikes?
11:20 What would be an example of a synchronized event?
13:34 How can you smooth out promotions?
16:37 Where do you decide to end the list?
19:38 How do you decide how much workforce to apply on a daily basis?
24:13 For Supply Chain Directors, why should smoothing be so important? Is it something they could easily implement?