A lot size of one - for distribution, too?

In many ways, this runs contrary to the classic definition of distribution in which we buy in pallets and sell in cases. Picking one or two pieces instead of a pack of 12 seems like suicide in the warehouse! 

Breakthroughs in process flexibility now permit manufacturing in efficient lot sizes of one. But, even though the lead-time has been greatly reduced from the past, the manufacturing lot size of one does not satisfy the immediate needs of critical service parts or the off-the-shelf impulse purchase at the retailer.  These needs require inventory at the point of sale.

Much has been done with faster information flow and more responsive transportation services to reduce these field inventories. But, for most products, in spite of these advances, we are still tied to purchase order minimums, price breaks, and packaging quantities that represent weeks, or even months of sales demand.
It isn’t all about inventory.

When we are able to replenish with a quantity of one, the downstream savings can be substantial. The new item can go directly to its place on the shelf. Double handling in the store is eliminated. There is no back room inventory to manage, more space can be dedicated to the selling floor, no extra space is required on the shelf for excessive minimum order quantities, and store staff can spend less time on restocking and more time on customer service!

Those of us who spend most of our time planning or managing warehouse operations often forget that the material handling costs in the branches or retail stores served by a distribution center are much higher than they are in the D.C. itself.

In today’s logistics networks, delivery within the week; often next or second day is almost a given. But, can we break the packaging quantity paradigm?

Piece picking may, in fact, be suicide in our warehouses based on our current practices.  But, re-thinking the processes to optimize the new each-picking tasks can potentially yield significant productivity improvement in both the warehouse and in the store.

The smaller store and branch orders created by increased delivery frequency can be further divided to match fixtures, aisles or back room layouts. Several of these “sub-orders” can be picked simultaneously in the same pick trip as an efficient batch. Loose pieces can be bagged and labeled with the pick ticket. The store, or the branch will receive products grouped and identified for easy receiving and put-away.

The pick path for the batch will be greatly reduced if the products are slotted to mimic the way that orders are received from the store. This will challenge us to choose pick face configurations that combine efficiency for the fast movers with close proximity for the slower movers. 

Back to the future.

Strangely, this may sound quite old fashioned. Warehouses and backrooms were often arranged by product family, or vendor; often in part number sequence, when we didn’t have sophisticated warehouse management systems to help us optimize DC operations. With a broader view of the supply chain, we can now use these same systems to optimize the flow all the way to the store shelf.

Your challenge is to provide availability of a broad selection of products, but at the lowest total cost, including that at the store, and with the least possible inventory. 

Some people are already profiting from this approach. Is it possible that a “lot size of one” will work for you, too.

ABOUT THE AUTHOR

James M. Apple, Jr. is a Director in The Progress Group. Prior to co-founding The Progress Group in 1991, he was a Partner with Coopers & Lybrand's SysteCon division. During 1992-1995 he served as a Senior Systems Advisor with Vanderlande Industries, a major conveyor and systems provider in Europe.

Jim is an internationally recognized thought leader in the area of facility design and integrated distribution systems. His contributions to the improvement of distribution practices have been recognized by his receipt of the prestigious Reed-Apple Award, which is given for lifetime contributions to the advancement of the material handling profession. Jim has also received the Institute of Industrial Engineers' Facilities Planning and Design Award. He has written numerous articles and handbook chapters on warehousing and logistics operations and is a popular speaker on logistics seminar and conference programs.

Prior to SysteCon, Jim worked as an Industrial Engineer with IBM, was Supervisor of Facilities Planning for the Oldsmobile Division of General Motors and was Executive Vice President for an automotive aftermarket parts supplier. He holds B.S. and M.S. degrees in Industrial and Systems Engineering from the Georgia Institute of Technology.