A warehouse is a significant investment and on-going expense. How do you know how well your warehouse is performing? Today's warehousing systems can be judged on a number of performance measures, from output-based measures such as orders shipped and order accuracy, to input-based measures such as total labor hours and total space used. With such a variety of performance measures, how can one warehouse be compared to another using a single efficiency score derived from a science-based methodology?
During the week of February 11-15, 2001, a team from the Keck Lab set out to show how this can be done at ProMat 2001, the biannual material handling trade show sponsored by the Material Handling Industry of America (MHIA). Team members included Dr. Leon F. McGinnis, Dr. T. Govindaraj, Dr. Paul M. Griffin, Dr. Gunter Sharp and Ph.D. student Wen-Chih Chen. As part of ProMat's IT Village, they presented a new systems-based approach to assessing warehouse performance, as well as an on-line self-assessment tool.
ProMat 2001 at Chicago's McCormick Center
The basic model looks at system inputs (the resources applied or consumed) and system outputs (good or services produced) for each producer in a population or sample of producers, or in this case warehouses. For a given firm the model identifies, based on the actual members of the sample, the theoretical best performance and provides a score relative to that theoretical performance. For firms who do not receive a score of the "best in class," the model identifies opportunities for performance improvement. The benchmarking tool uses the methodology of Data Envelopment Analysis, a mathematical modeling technique that was pioneered over twenty years ago by Charnes, Cooper, and Rhodes.
"We're open for business!" The team prepares to show their stuff (left-to-right: Dr. T. Govindaraj, Dr. Paul Griffin, Dr. Leon McGinnis,
Wen-Chih Chen)
All told, several dozen conference participants lined up to use the benchmarking tool. Each participant was asked to enter data from his or her warehouse. The next step was to perform analysis to see how efficient this warehouse is compared to everyone else's. For example, is my warehousing inefficient in its use of labor or space, compared to other warehouses? An important feature is that each user has access only to his or her data and to the aggregate efficiency information of the rest of the warehouses in the database. A user cannot query data specific to another user's warehouse. Hence, proprietary information is maintained by the benchmarking tool.
Users to our left.
Users to our right. The benchmarking team was kept very busy!
The benchmarking tool was co-sponsored by MHIA, the Order Selection, Staging and Sorting Council (OSSSC) and the Logistics Execution Systems
Association (LESA). In addition, the development of the benchmarking tool has been funded by the Keck Virtual Factory Lab and The Logistics Institute at Georgia Tech, and by The Progress Group. It is on-line and available for use at http://www.isye.gatech.edu/ideas.
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