Lean Warehouse + Inventory Optimization – Tacony
PROBLEM / CHALLENGE
Tacony’s Nancy’s Notions (NN) sewing supply ecommerce division was struggling with order fulfillment to its consumers, while Amazon was increasing its penetration to the sewing and quilting consumer market. NN was 8 days behind on shipping orders and when orders did ship it had an 88% fill rate due to items not being in inventory. During the busy season orders shipped averaged 800 per day while orders coming in averaged 2000 per day.
IMPLEMENTATION DETAILS: Inventory Optimization
- Used multi-criteria inventory classification (MCIC) to classify all SKUs (see table below)
- Set safety stock levels by SKU Class (A, B, C, D) to improve in-stock of high-performing items
- Created SKU rationalization plan to immediately discontinue F items
- Taught the Inventory & Purchasing Team how to use their Forecasting Software (Planning Edge) plus their ERP to update Reorder Points and Reorder Quantities monthly to align with in-stock targets and deal with very seasonal demand
NEW SKU CLASSIFICATION
|Class||Number||%||% Units||% Profit|
Old Warehouse Layout on Left, New Warehouse Layout on Right
IMPLEMENTATION DETAILS: Lean Warehouse
- Process flow mapped how the ERP system and Inventory Planning System integrated to process customer orders, planned inventory and executed POs
- Conducted extensive time studies and spaghetti maps to understand the non-value-added work in the current warehouse layout
- Did velocity analysis to classify all items by number of times ordered (lines) to create V1, V2 and V3 velocity codes to support slotting by velocity
- Moved low velocity cloth cut-to-order and light assembly operation out of the warehouse reoriented racking to the center of gravity
- Multiple small retail spaces joined together made a difficult footprint for facility flow improvements
- The Supervisor of the warehouse could not understand the concept of Lean and the benefits of the Lean analysis and layout. He eventually left the company.
- The Inventory Planning team had operated on gut-instinct in setting inventory levels and purchase quantities. It took significant coaching to get them to trust forecasts and safety stock calculations
- The warehouse had to be transitioned to the Lean Layout over one weekend, requiring significant planning, buy-in and use of an industrial moving company.
- Improved fill rate from 88.5% to 94.7%
- Increased orders shipped from 800 to 2000 with 10% fewer warehouse employees
- Increased inventory turns from 3.3 to 4.8
- Value of orders on back-order reduced from $179,000 to $71,000