Effective Warehouse Planning
Furniture World Magazine
By Dan Bolger
Hiring and preparing for a consultant is one way to put yourself on the path to becoming a “benchmark retailer.”
Many of my furniture store clients have grown rapidly and expanded into additional markets. In general, these entrepreneurs have a vision for the future. They have their arms around their businesses and are driven by a desire to build long-term relationships with customers. These retailers know that to be successful, they need to take a balanced approach to store management. They focus management attention on all areas of the business that affect customers directly and indirectly. This is in direct contrast to some retailing business failures based on the whims of Wall Street financiers and absurd business plans.
I recall a sketch showing a three legged stool with a dollar sign on top with the legs tagged “Sales,” “Product” and “Operations.” If any of the three legs is broken, the stool overturns and the dollar sign falls. Let’s face it, without Sales, something terrible happens... nothing! Yet to make sales happen, you have to have the Product the customer wants within the required time frame, and Operations has to do whatever is necessary to satisfy customer expectations. Sounds pretty simple, but it exemplifies the importance of each department doing their part in the total process.
I often refer to "Benchmark Retailers" in my work with clients and will use that term in this and future articles. Benchmark Retailers are those operations that have the best business practices. As one Benchmark Retailer said, "My golf pro helped me improve my game. Sales, warehouse and delivery consultants have improved my profits and ability to serve customers. When you want to improve, you find experts to get results faster." In many cases managers already have full plates and consultants acting as coaches can speed results. Benchmark Retailers see consulting as an investment rather than an expense. Some of these retailers have been featured in Furniture World articles over the years.
This month’s issue focuses on choosing a consultant and the information and data you need to get the most value from your consultant.
You should not use a consultant as a status symbol or to develop ammunition for an internal political battle. Your consultant should have recent related furniture warehouse experience and preferably should not be tied to a single supplier. The buyer of management advice has a right to expect that the advice given is both objective and independent. To meet expectations, the client and consultant must have a clear understanding of the issues to be reviewed before the study begins. Once a consultant is selected, you should make sure the appropriate people at your company are available to the consultant. Projects for updating existing operations or new facilities planned in this way are productive from day one.
The earlier the consultant is involved in the planning process, the higher the potential benefit. Ideally warehouse planning should start with site selection so preliminary layouts can be done that verify site functionality. Planning ahead and doing the job right the first time is always less expensive than re-doing it later. Some mistakes are very costly, if not economically impossible to correct.
Whether you have annual sales of two million dollars or two hundred million dollars, a pre-planning document provides an outline for any individual company’s review. There isn’t a cookie cutter solution for operations, so a specific document should be worked out for you, based on your unique business situation.
Keep in mind that positive results can be achieved within a few weeks in some areas... like cleaning up a backlog of service orders, changing the layout in the prep and deluxing area or having a clearance sale to convert dead and slow movers into cash. It usually takes at least three months and frequently much longer to implement systems to synchronize supply chain management.
A move to an existing facility, acquisition of racking and material handling equipment usually takes several months or longer. Construction of a new facility typically takes six months from the date foundations are dug. Planning before the first spade of earth is moved can take as little as a month on a developed site and much longer when environmental problems or fire protection issues relating to available water volume or water pressure are present. One year is the average time between the date you review alternate sites to the time you move in.
One final word. You may be able to become a Benchmark Retailer without building a bigger warehouse. Improved inventory management techniques can often significantly extend the useful life of an existing facility. You may be surprised what you discover if you examine for every sku where inventory exceeds sixty days and ninety days. Twenty per cent or more of total inventory tied up in these categories isn’t unusual. It is always cheaper to manage information than inventory.
Planning Considerations For Warehouse and Delivery Studies
1. Evaluate current inventory and consider whether you have been managing your inventory well or if more attention is needed to clean up non-saleable merchandise, obsolete merchandise, sold but not delivered items, return to manufacturer for credit merchandise, items to donate to charity, etc.
2. Review the rating form from the December/January issue of FURNITURE WORLD (can be downloaded from the "Operations Management" index on www.furninfo.com) and discuss the strong as well as the weak points of your current operation. Establish action plans to improve deficient areas.
3. Have any available facility and layout prints on hand for the consultant.
4. Have any available reports on labor and space usage on hand. Productivity is typically measured as labor per unit handled, overall and by function. Space reports may summarize usage by type of rack, product category or a combination of these based on height of opening.
5. What changes do you expect over the next several years?
•What is the anticipated growth in your business? Are you planning to open more stores or relocate current ones? If so, will these be located within the current area(s) or in new markets? Where?
•Changes in price points for merchandise sold? Same, up, down?
•Changes in product mix? More or less case goods, upholstery, carpets, accessories, appliances, RTA?
•Will the size of product sold remain about the same or change? If so, how?
•Are you primarily a special order store or a sell from stock store? What percentage?
•Will you be doing more special order or do more sales from stock?
•Describe your vendor sourcing strategy. Primary vendors? Quantities bought at a time? LTL, truckload, full containers? Future plans for vendor sourcing strategy, such as direct imports? Member of buying group(s)?
6. Think about any things that set you apart in serving your customers that have to be reflected in the warehouse, prep area or shop. Some companies deliver "in the box" while others do extensive prep work.
7. Evaluate whether you are using your computer systems effectively and how you use (or anticipate using) technology in the warehouse.
8. Consider strengths and development needed for warehouse and delivery personnel.
PLANNING A NEW OR RENOVATED FACILITY
1. Do you have a specific builder or architect in mind?
2. Are there any identified site challenges such as historic district, unique building codes, environmental issues, truck access routes, etc. to be considered?
Additional Information: An article outlining ways to go about choosing a consultant was published in the October 1998 issue of Furniture World and can be seen or downloaded in the “Operations Article Index” at www.furninfo.com.
The December/January issue of FURNITURE WORLD contained an article that outlined a method our readers can use to assess their inventory, warehouse and delivery operations. It also contained a checklist/ worksheet that can be found in the "Operations Management" index on www.furninfo.com. Benchmark Retailers have used this process to focus attention on areas of their operations that are less than outstanding.
Daniel Bolger of The Bolger Group helps companies achieve improved transportation, warehousing and logistics. Questions can be directed to Mr. Bolger care of FURNITURE WORLD at email@example.com.
Contributing editor Dan Bolger of The Bolger Group helps companies achieve improved transportation, warehousing and logistics. See many other articles by Dan in the Operations Management article archives on the furninfo.com website. You can send inquiries on any aspect of transportation, warehousing or logistics issues to Dan Bolger care of Furniture World Magazine at firstname.lastname@example.org or call him direct at 740-503-8875.
Read other articles by Dan Bolger