Lean Warehouse + Inventory Optimization – Tacony

Results Case Studies

Case Study Snapshot

Results At A Glance

Fill Rate

88.5% to 94.7%

Daily Orders Shipped

800 to 2,000

Inventory Turns

3.3 to 4.8

Back-Order Value

$179K to $71K

Key Takeaways

  • Multi-criteria inventory classification set differentiated safety stock by SKU class.
  • Velocity-based warehouse layout with Center of Gravity design cut picking travel time.
  • Forecasting software (Planning Edge) integrated with ERP for automated replenishment.
  • SKU rationalization discontinued F-class items to free space and reduce complexity.

Where This Approach Fits

Best for ecommerce fulfillment operations struggling with order backlogs and fill rate performance.

Lean Warehousing Inventory Optimization

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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

ClassNumber%% Units% Profit
A1001%20,142$27,05
B121814%46,965$39,963
C194923%16,007$11,620
D188222%4,700$2,934
F343740%1,930$995

Spaghetti Maps:
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

Difficulties Encountered

  • 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.

Results

  • 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

Learn more about Lean Warehouse and Inventory Optimization

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