Hidden kinds of loss: time, space, attention
Not every loss shows in the books: time spent searching and space occupied cost money too.
A shortage shows up in the stock count report, so everybody knows about it. But there are many places where a warehouse loses money and none of them reaches any report: the time spent looking for goods, the space occupied by dead stock, the management attention spent "fighting fires". What is not in a report has no owner either, so it goes on for years. Below we show how to see and measure three hidden losses.
Time: searching and waiting
In a disorderly warehouse part of a worker's time goes on looking for goods, waiting for documents, rechecking errors and walking the same stretch twice. This is time that has been paid for in wages but has created nothing.
An example, with illustrative figures. 20 workers, each spending 30 minutes a day searching and waiting. That is 10 hours a day, 220 hours a month (22 working days), 2,640 hours a year. At 28,000 so'm an hour that is about 74 million so'm a year, the working time of one and a half employees. That is the direct sum. The main damage is elsewhere: delayed shipments, work after hours and an "out of stock" told to a customer only because the goods could not be found.
To measure the time, the work sampling method is enough: for three days, every half hour, record what 8 to 10 workers are doing: picking, walking, searching, waiting, reworking. The share of searching and waiting is your real loss.
Search time can be cut in three steps: a label on every place (rack, row, level, bay), the location number on the item card, and a rule of "one item, one place". Suppose searching is halved: in the example above 1,320 hours a year, about 165 working shifts, are freed.
Space: area taken by dead stock
Every pallet place costs money: rent, utilities, lighting, management. Dead stock occupies that place for nothing.
An example, hypothetical. A pallet place costs 150,000 so'm a month. 140 pallets with no movement at all in the last 180 days cost 21 million so'm a month, 252 million so'm a year. And that is only the price of the space. There are two more hidden effects: goods that are picked often end up in a distant, awkward place and the picking path lengthens; fast goods stand "temporarily" in an aisle or the receiving zone and block movement.
The report is simple: the date of last movement for each location. Group by age: up to 30 days, 31 to 90, 91 to 180 and over 180 days. The last group needs a separate decision: sell at a discount, return to the supplier, move elsewhere or write off.
If no decisions are taken on dead stock, there is more of it every year. A rule: each quarter give the manager the list for the last group, choose one of three options for every item, and write down the deadline and the owner.
Attention: a manager's limited resource
The hours in a manager's day are limited. If a manager answers "urgent" calls fifteen times a day and each, with the time to get back to work, takes 10 minutes, that is 2.5 hours, almost a third of the working day. No time is left for improvement, training and planning.
For a week write the "urgent" interruptions in a notebook: what happened, what was the cause. Usually three or four causes repeat: a wrong balance, a late receipt, goods that could not be found. Fixing the first three returns the most time to the manager.
Another invisible cost is delayed decisions. When the figures do not agree, the manager cannot decide and says "let us check first". Each such delay is also a loss of attention, and the time of a team waiting for a decision is one more loss.
A plan for the first week
- Days 1 to 3: work sampling and the search test.
- Day 2: the report on the date of last movement by location.
- Days 1 to 5: the notebook of the manager's interruptions.
- Day 5: turn all three losses into money and judge which is biggest and which can be fixed fastest.
Usually the quickest result comes from tidying labels and locations, and the biggest from freeing space from dead stock. The freed space also puts off the need for new rent.
Conclusion
Hidden losses are hard to assess, but recognising and measuring them makes them manageable. The OmborExpert specialists can help run work sampling, compile the dead-space report and analyse the interruptions, turning the losses into figures.