Warehouse Design: the True Cost of Using Excel

I was speaking the other day with one of my old Supply Chain mentors, a man respected throughout our community of Supply Chain professionals. When I started managing supply chains more than 25 years ago I was in awe of his knowledge and his capacity to readily simplify what seemed to me almost intractable challenges.

When faced with the eye-watering complexity of where to site a new warehouse, how to size it, configure it, and fit it out, he would set to work with a demand forecast and an Excel spreadsheet. Knowing that demand and product mix would be constantly changing, the mantra back then was “good is good enough; perfect is impossible”.

I’m told that there are more conceivable outcomes in a game of Go than atoms in the observable universe. And now that computers can finally play Go more intelligently than humans, shouldn’t we consider harnessing their power to get better than good and closer to perfect?

Let’s consider for a moment how you might design a warehouse, considering your product mix, the characteristics (size, weight, packaging etc) of your SKUs, your demand forecast and your order history. Let’s say we want to minimize damages, build stable pallets and reduce the chance of back injuries for our pickers. For good measure, let’s add some other constraints like temperature zones, protection for hazardous materials and so on. Finally, let’s take account of your customers’ store layout and include all the appropriate family groupings too.

Excel is a marvellous tool, but do you think a purpose-built computer program might just have the edge?

The way to answer that question would be to evaluate existing warehouse operations, running historical data through such a program to compare the actual performance with what might have been.

And the result may surprise you.

Typically, we might see a 30% improvement in overall warehouse efficiency. That’s less distance travelled per pick, more picks-per-hour, fewer selectors and expensive FLT’s, and more stable pallets.

The computer model doesn’t use those old rules of thumb, like aiming to replenish your SKUs on an equal time basis (so many replenishments per day, week, month). Instead it optimises the replenishments for each SKU, in optimally-sized rack spaces.

And you can’t do that with Excel, no matter how many years of wisdom you have amassed.

So the true cost of Excel?

Tens, maybe hundreds of thousands of pounds on your bottom line.

Don’t settle for good, when so much better is within your grasp.

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