Tools and Techniques to Optimize

Warehouse Operational Performance

Using SAP Warehouse Management
Functionality
Thomas Klyvø
SBN
In This Session
•  You will learn how to improve your warehouse offerings using a Lean-inspired approach
•  The goal of the session is to give you a few concrete tools to bring back home so you can:
–  Deliver significant cost savings
–  Increase warehouse service levels
•  The main focus will be on concepts that drive warehouse operational performance and how components within SAP
ECC Warehouse Management can best be utilized to support the above

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What We’ll Cover

Let the customers set the bar for your warehouse operations

Know your cost drivers – and what to do about them

Tact and flow

Wrap-up

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Which Processes Should We Perform in the Warehouse?
•  The core task of the warehouse is to store and make goods available for delivery when the customer places an
order. But if we look more closely, we will often find more services offered.
–  Packaging to customer requirements (stacking to a certain pallet height or type)
–  Various forms of labelling (applying customer’s own labels or a customer brand name)
–  Light forms of assembly (putting together a tool-kit)
–  Special delivery (rush orders or special shipping conditions, i.e., fragile or cooled freight)
–  Apply light quality control procedures or other types of checks

•  “Extra” processes cost a lot of money and grow over time!

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Does the Customer Value Your Warehouse
Service Offerings?

Customers are different. Some value a good price, while others prefer superior delivery speed and certainty.

•  If a customer really values a service maybe he is •  Find out what really matters to which customers
ready to pay for it? •  Go through your service offerings and match your
•  A price tag is a good way to find out how important a services with the various customer types and
service is to a customer preferences

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Revise Your Warehouse Service Offerings

•  Your warehouse services must be determined strategically to fit into your

company’s overall value proposition!
•  Define – and agree on – fixed order deadlines between Sales and
Warehouse departments. If the deadline is not met, the customer will have
to expect later delivery.
•  In cases where customers ask for quicker delivery than what the deadline
dictates, offer this as a special, payable service
•  In cases where your customer asks for special services, like special
packaging or product labelling, offer this as a special, payable service

If customers value a service – they should be willing to pay for it

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Create Stability and Flow in Your Processes

•  Defining fixed rules for when you execute orders with “special
services” has the following advantages:
–  Ensuring stability around your main processes
–  Standardizing the execution of “special orders,” making the
execution closer to the stable “normal” orders
–  Only customers willing to pay will ask for faster delivery, which
will generate more flow through the main picking processes –
less time spent putting out fires

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How to Handle Customer-Specific Tasks in SAP
•  When met with a customer request for performing additional tasks during shipping, you should evaluate:
–  Is this request a small adjustments of an otherwise standardized product, and can these adjustments be done
after production?
»  In that case, use Value-Added Services (VAS) in the warehouse to structure the process
–  Is this a larger adjustment that should most optimally be performed during production?
»  Consider using a ”Make to Order” process, where the entire order is handled customer-specifically – already in
production

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Value-Added Service – Supported in Both EWM and ERP WM
•  An SAP solution that will let you handle specific customer requests
–  A VAS order is determined by condition technique in delivery
–  Picking order is created for delivery, destination storage type is changed by the system from Shipping Area to
Work Center
–  Products end up in Work Center bin after picking. Here, they can be repacked, relabeled, etc.
–  After processing, the VAS order is confirmed, which moves products to the shipping area where Goods Issue
is posted

Delivery Picking

Pick to Shipping
Stock
Work Area
Center VAS Work
Center

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Why Use VAS Functionality in SAP?

•  Guide the warehouse worker to a work center with the tools needed for
performing the VAS task. This also ensures that the special handling is
actually performed.
•  Gives you the possibility of creating a standardized flow around “special
processing”
–  Consider assigning and training a smaller group of warehouse employees
as “VAS Specialists”
»  Through warehouse “queue determination” you can make sure the VAS
orders are guided to these specialists only

You can decide to process VAS picking at a special timeslot each day and
think of the VAS orders as another picking wave

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Create Stability – Remove Rush Orders from
the Standard Picking Process

•  There are multiple ways of achieving this; for

instance, through a “rush” sales order type which
triggers a special delivery type being created
straight away when saving the sales order to the
system
•  This delivery type then can be singled out in VL06O
when looking over the picking workload

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What We’ll Cover

Let the customers set the bar for your warehouse operations

Know your cost drivers – and what to do about them

Tact and flow

Wrap-up

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Know Your Cost Drivers!
•  The largest part of your total warehouse costs comes from labor wages
–  In the developed world, depreciation of most equipment purchases in the warehousing area and even warehouse
buildings makes up a rather small percentage of the collective warehouse cost
–  Most of your collective warehouse cost is found in the wages of your warehouse workers
–  Your workers’ time is precious and should be prioritized carefully!

5
10

25

100

60

Labor, Equipment, Adminis- IT systems Total

Wages buildings tration warehouse
costs

Source: Implement Consulting Group studies

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Know Your Cost Drivers – And What to Do About Them!

•  Focus on the most time-consuming activities

•  Look for processes with many “hands” involved
•  The two most time-consuming activities in
most warehouses are:
–  Move from one task to the other within the
warehouse (idle transportation time)
–  Picking, packaging, and labelling

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Three Time-Saving Initiatives for the Warehouse

•  Your most work-intensive processes, picking

and packing, benefit from the below principles:
–  Excel with ABC
–  Reduce idle transport time with multi-picking
–  Reduce touch points with Pick & Pack

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Excel with ABC

•  To help reduce idle transport time, a good old friend

can help: ABC classification
•  Very often, a small part of your stocked materials
constitute a large part of your picks:
•  And a very large part of your materials are seldom
picked …
•  In a recent project for a global wind power
manufacturer’s spare parts warehouse, we found
that:
–  6% of the materials made up 70% of all picks
–  64% of the materials had not been picked within
the past three years

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Reduce Time Spent on Idle Transport Time
Within the Warehouse

•  Utilize your A, B, and C categorizing by placing

goods in the warehouse according to picking
frequency, thereby reducing the total warehouse
travel distance
•  The high volume A products (green)
are placed in the most accessible
parts of the warehouse, while B and
C products are given increasingly
inaccessible warehouse spots
•  Control your stock placement, and you will control
the distance each picker has to travel

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Identify Your “A” Storage Bins
For ABC categorization to be useful within the EWM warehouse, your warehouse bins must also be categorized.
Identify your “Fast” and “Slow” bins using bin sectioning data.

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SAP ERP WM Supports ABC for Warehousing
Usage – If You Are Creative!
SAP ERP contains out-of-the-box reports to evaluate your product usage and perform an ABC classification

Standard SAP MM reporting Material master data on plant level

The warehouse is controlled by specific Warehouse Master Data. Utilize mass-update tools in SAP standard to copy
the plant-specific ABC indicator into the Warehouse-specific data views.

Material master data on warehouse level

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SAP EWM Features the Powerful “Slotting” Tool

•  SAP EWM has a more integrated way of handling

the updating of stock placement indicators called
“Slotting”
•  Using “slotting,” you first set up rules for what should
affect your Warehouse Product master data
•  Hereafter you can, with regular intervals, run a
“slotting run,” which will automatically update the
parts of the product master data controlling putaway

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Rearrangement in SAP ERP

•  In SAP ERP, you again have to be creative

•  In a custom query (QuickViewer below), combine
the tables for current Stock Placement, Master
data, and your Warehouse Bins
•  Execute query searching for products
with sub-optimal placement
•  Moving the products to a better placement is a
“manual” process

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Three Time-Saving Initiatives for the Warehouse

•  Your most work-intensive processes, picking

and packing, benefit from the below principles:
–  Excel with ABC
–  Reduce idle transport time with multi-picking
–  Reduce touch points with Pick & Pack

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Reduce Time Spent on Moving Between Picking Tasks Using
“Multi-Picking”
•  Many warehouses still use the simple “one man, one order” principle
when structuring the picking tasks
•  This method is easily executed, but highly ineffective for picking smaller
orders in a larger warehouse
•  Consider 3 lines for picking in 2 different orders
•  The total travel time is made out of the green plus the red route

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Pick Smarter – “One Man, Several Orders”
•  Identifying orders with similar products and picking them on the same
trip through the warehouse will utilize the full carrying capacities of the
picker and greatly reduce the time used travelling through the
warehouse!
•  Consider the same 3 lines picked in 1 route through the warehouse
•  The total travel time is now made out of just one route – considerably
shorter than the two routes put together

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Greatest Impact Is Found in Single-Item Order Structure Warehouses
The below table shows the order structure of a mid-sized spare parts warehouse (~ 100.000 picks per year).
Left axis shows count of orders, right axis shows number of picking lines in each order.

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SAP ERP WM Can Group Several Orders
Together in a Consolidated Picking List
•  In ERP WM, you can group together deliveries and make a common picking list (TO) for multiple deliveries
–  This way, one Warehouse worker can pick products for several customers in one picking session
•  A handy way to do this is from VL06O, which can be configured to show the number of items in each delivery:

•  Same monitor shows you the weight and volume of the items you group together

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Three Time-Saving Initiatives for the Warehouse

•  Your most work-intensive processes, picking

and packing, benefit from the below principles:
–  Excel with ABC
–  Reduce idle transport time with multi-picking
–  Reduce touch points with Pick & Pack

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Reduce Time Spent on Packaging and Labelling – Reduce Touch
Points

•  It is part of Lean philosophy to avoid over-processing

–  Avoid handling materials more than needed in the
value-creation process
•  Lean consultants will normally do this by thoroughly
analyzing your work processes and identifying and
eliminating any extra, non-value adding process steps

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Handover Between Pick and Shipping
•  The standard SAP shipping process

Create Sales Create Outbound Pick outbound Pack outbound Post Goods
order delivery delivery delivery Issue

•  Looking closer at the process steps for Picking and Packing with a good knowledge of SAP reveals room for
improvement
•  Utilizing SAP standard, you can merge the Picking and Packaging steps

Create Sales Create Outbound Pick & Pack Post Goods

order delivery delivery Issue

•  Reduce handover. Avoid double processing. Save time.

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Pick & Pack Has Several Advantages

•  The Pick & Pack process is carried out using mobile

execution terminals with all the advantages of this
(in-process validation, accuracy, etc.)
•  With the warehouse “Pick & Pack” process, the
packaging into the final Shipping Units is performed
during the pick process
•  This way, the process step “Pack delivery” becomes
obsolete
•  The time used for double handling, double
registration, and carrying over information from
picker to packer is eliminated

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The Pick & Pack Process Explained

1. Picker starts the picking

process on mobile Picking
Terminal

2. Pre-created Handling Unit

label is scanned or a new
label is created and printed
from the terminal

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The Pick & Pack Process Explained (cont.)
3. The Picker is shown where
and what to pick.
Picking is confirmed by
scanning bin number.
Hereafter, the picker moves
on to the next product.

4. When finished or
packaging material is full,
picker confirms that picking
is done to the HU

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The Pick & Pack Process Explained (cont.)

5. In order to continue the

picking, picker is asked to
scan (or create) the next
picking HU

6. After picking is finished, the

delivery is packed with the
Handling Units scanned by
the picker

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Three Time-Saving Initiatives for the Warehouse

•  Your most work-intensive processes, picking

and packing, benefit from the below principles:
–  Excel with ABC
–  Reduce idle transport time with multi-picking
–  Reduce touch points with Pick & Pack

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What We’ll Cover

Let the customers set the bar for your warehouse operations

Know your cost drivers – and what to do about them

Tact and flow

Wrap-up

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Tact and Flow – Lean Principles to Increase
Your Productivity
•  Strive for an even flow through your warehouse
•  Tact can help you identify (and solve) bottlenecks and overload situations
–  Identify your average processing capacity per hour (the tact)
–  Try to even out your warehouse tasks to raise efficiency

Resources wasted

Overtime or missed deadlines

Too few Too few Too few Too many Too few
tasks tasks tasks tasks tasks

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Let the Shipments Set the Tact for Your Warehouse

•  It might seem obvious, but the finished goods picking

activities of your warehouse are very closely
connected to the shipments leaving your yard! For
every truck leaving, there is a deadline to be reached
– and potentially missed.
•  However, often, daily warehouse tasks are seen as
one big workload (day’s orders for picking)
–  This approach often results in general inefficiency in
the morning, followed by a very busy afternoon
•  Having only one common deadline will make it difficult
to see when you are running late, and will generally be
inefficient

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Let the Shipments Set the Tact for Your Warehouse (cont.)

•  By having a well-planned shipping schedule, you are

able to spread out your picking activities over the
entire day, thereby ensuring:
–  Even workload with a fast pace (short deadlines)
and, thereby, even utilization of picking resources
–  Clear and visible picking deadlines – ensuring that
delays are quickly identified and that the right
effort is put in to catch up

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SAP Can Tie Together Shipping and Picking
•  SAP ERP has an option for creating picking waves according to your transportation planning
•  This means you can create one picking wave per shipment and:
–  Initiate the picking (create TOs) for each wave simultaneously
–  Monitor total picking progress by the picking wave

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Plan Your Picking by the Shipment
•  Without picking waves, you can still orchestrate your picking by the shipment
•  Use Shipment List (VT11) to view the status of each shipment

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Execute by the Shipment
Create Transport Orders by setting shipment status

Initiate the picking for all deliveries

in a shipment by setting a status in
the shipment using “activity
profiles” for the status buttons

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What We’ll Cover

Let the customers set the bar for your warehouse operations

Know your cost drivers – and what to do about them

Tact and flow

Wrap-up

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Key Points to Take Home
•  Put a value on your warehouse service offerings, don’t let them grow over time (and don’t give away for free without
careful consideration)
•  Look primarily for improvements in the picking and shipping areas of your warehouse (most “hands on deck”)
•  Reduce warehouse idle transport time by utilizing ABC categorization and multi-picking
•  Explore the Pick & Pack transaction to reduce touch points
•  Tie together shipping and picking activities to create flow and “sense of urgency” in your warehouse operations

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How to contact me:
Thomas Klyvø
tkl@implement.dk

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Disclaimer
SAP and other SAP products and services mentioned herein as well as their respective logos are trademarks or
registered trademarks of SAP SE (or an SAP affiliate company) in Germany and other countries. All other product and
service names mentioned are the trademarks of their respective companies. Wellesley Information Services is neither
owned nor controlled by SAP SE.

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