In some areas of logistics, there are certain tools and practices that are practically unknown in other areas. Audits are an example of this. In purchasing and supplier management, conducting supplier audits is very common. It is a common practice in the automotive industry in particular: potential suppliers are audited before contracts are awarded. And once the contracts have been awarded, they are audited again. And if any problems arise with the suppliers, they are audited again. Warehouse audits, on the other hand, are virtually non-existent.
Supplier audits are like quality control inspections on steroids. They are comprehensive assessments conducted on your suppliers to ensure they meet your standards and regulatory requirements. Think of it as a thorough background check for your business partners. And their purpose is, of course, to ensure that no problems arise that are related to insufficient practices at your suppliers. The range supplier audits cover is very broad. German automotive OEMs used to have their own comprehensive questionnaires for supplier audits but have converged on the VDA 6.3 standard some time ago.
Remarkably, the concept of auditing processes and suggesting (or more directly, demanding) improvements is virtually non-existent for warehouses, either externally (with suppliers or business partners) or internally (with organizations’ own warehouses). Some 3PLs have teams for continuous improvement or best practices, but my impression is that their approach is much less structured than what you find in the automotive industry.
That’s why we started carrying out warehouse audits for our customers some time ago. Warehouse audits are comprehensive standardized assessments of your warehouse facilities and processes to identify opportunities for improvement and ensure adherence to best practice. By scrutinizing warehouse operations, audits help uncover hidden efficiencies and identify areas for improvement. From inventory management to picking concepts and ergonomics to automation potential, every aspect of warehouse operations can be optimized. Warehouses are fertile ground for optimization, to say the least.
Problems – and Their Symptoms
An important point is that the problems observed in day-to-day business (picking errors, low picking performance, high sickness rates among warehouse staff, …) are in almost all cases I have ever experienced not the actual problems, but the symptoms of deeper problems. In a seemingly different life in a distant universe, I have been studying the measurement of sustainability performance. In reading about performance measurement models, I came across some work in the field of healthcare published by a gentleman named Avedis Donabedian. His performance measurement model, sometimes called the Donabedian model, sometimes called the Structure-Process-Outcome (SPO) model, is based on the realization that outcomes are a product of processes and processes are a product of structures. Often what we measure falls into the category of outcomes. But often we don’t examine the quality of the processes that lead to that outcome. And we almost never bother to examine the structure that leads to the actual processes.
This structured distinction between causes and effects is of crucial importance when it comes to lasting improvement. And it is very applicable to warehousing. Here’s an example: If you tell me that your company’s purchasing department is responsible for ordering products to be kept in the warehouse without the mandatory involvement of sales and warehouse management, I can tell you with a high degree of confidence that your warehouse is suffering from high inventory levels, low picking performance and a lack of space. I don’t need to visit the warehouse to make this high-confidence assumption, because it is a necessary consequence of the existing incentive structure. It is a well-known truism that structure determines outcome. Which is exactly what Donabedian claims, he just adds the category of process in between. Structure and process predict outcomes. That’s one of the reasons why popular performance management frameworks like GRI and EFQM (under other names) apply the same logic.
Our warehouse audits cover a wide range of topics. We examine warehouse management and control, ergonomics and safety, inventory management, organization and cleanliness, and the various process steps between receiving and shipping, including replenishment, picking and packing. Each category includes questions and observations relating to structure, process and outcome. The result of the audit is a comprehensive health check of a warehouse, which is why we gave it the name Intralogistics Health Check-up™.
Duration and Cost of Warehouse Audits
A comprehensive audit takes a full day on site with interviews and observations and is concluded with a concise assessment report and a (video) meeting to discuss the findings, suggestions for improvement and possibly more detailed data analysis if deemed necessary. The time and cost effort of an audit is therefore a joke compared to the benefits. We’re talking significantly increased productivity, reclaiming precious warehouse space, and dodging those hefty investments in fancy tech that you thought were inevitable. If you go to your trusted warehouse consulting company, they make it a 9-months project to get to basically the same results (no kidding).
Imagine you do a comprehensive assessment of your warehouse once a year, maybe every two years, and you follow the results and implement the improvements, or at least some of them. How much different will your warehouse look?