The current trend towards larger warehouses has its downside. With dimensions getting bigger and bigger, efficiency on the shop floor is falling. This emerges from research by Erasmus University Rotterdam in cooperation with industry association evofenedex on efficiency in 131 warehouses in the Netherlands and Belgium. Researcher Christian Kaps cites as the reason that economies of scale decrease in very large warehouses. "So there must be another reason why warehouses get bigger, think of the size of the assortment or the agreed service levels."
That larger warehouses are less efficient is consistent with observations. If the distances in the warehouse keep increasing, at some point it comes at the expense of productivity. "Also, adding more and more automation, does not automatically lead to an increase in efficiency," concludes Kaps, who graduated on Thursday 13 July from his research on efficiency in warehouses. "A certain level of automation is necessary to be efficient. But continuing to add hardware and/or software does not directly translate into better performance."
Input and output factors
The 131 participating warehouses provided figures on square metres, number of FTEs, number of SKUs and degree of automation. Kaps calls these the input factors. The output factors consist of the number of order lines handled, the percentage of error-free order lines, order flexibility and special processes. Based on all these figures, efficiency is calculated. "That means, for example, that a warehouse with one employee and 10 order lines per day is as efficient as a warehouse with two employees and 20 order lines per day," Kaps explains.
Of course, not every warehouse has the same goals in mind. Some aim for the lowest possible operational costs, while others aim for the fewest possible order picking errors. "Therefore, each warehouse was allowed to assign its own weighting factors to the aforementioned factors. We compared the performance of each warehouse with the other warehouses with the same weighting factors, but also with all other warehouses," says Kaps, who refers to measurement as 'cross-efficiency'. "The results were then compared with the given data for 2012 to determine the development over time."
Comparison by sector
The study shows that warehouses in the consumer products, engineering/industry and pharmaceuticals sectors are the most efficient, while warehouse in the automotive and household appliances sectors score below par. "That automotive scores low is because these are often warehouses with parts. These are warehouses that contain many items with a low turnover rate. In other sectors, too, warehouses with parts tend to be less efficient," Kaps explains.
Another striking result is that it makes no difference whether the warehouse is run by a logistics service provider or by the shipper himself. And if the warehouse is outsourced, it makes little difference whether it is a dedicated warehouse or a public warehouse. "Based on this study, you can conclude that you don't need to outsource your warehouse because a logistics service provider can do it more efficiently."
Refrigerated warehouses are more efficient
The position of the warehouse in the supply chain, also makes little difference. Warehouses of manufacturing companies, wholesalers and retailers score about equally well. However, the study does show that cold-storage warehouses tend to be more efficient than other warehouses. "I suspect that in cold stores, processes are better structured and aligned to prevent products from spoiling and becoming unsaleable," Kaps states.
Another finding is that introducing the 5S method is associated with an increase in efficiency. 5S is a method for organising and structuring the working environment, derived from the lean philosophy. "In warehouses that have started working with this method, there is a culture of continuous improvement. Over time, this leads to small improvements in efficiency, which are visible in this study."
Marcel te Lindert - Journalist logistics and supply chain
