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Flow-thru warehousing: large-scale, short-term staging of inventory.

Dynamic flow-thru warehousing minimizes both handling equipment and inventory whether it is being used to support high-throughput manufacturing or finished goods distribution.

Flow-thru warehousing shares much in common with crossdocking. Both strategies support high-throughput manufacturing plants and distribution centers. Both are designed to maximize the use of real-time data to minimize the handling and storage of inventory in warehouses through the frequent deliveries of merchandise.

So what differentiates one from the other?

First is the unit size. While crossdocking may involve the reconfiguration of pallets and cases, flow-thru warehousing may see the break down of the contents of a case to manage the redistribution of individual SKU items.

The second differentiator is time. Crossdocked pallets move through the distribution center with a sense of urgency. Flow-thru warehousing allows for staging, processing, and the addition of value to a product. When merchandise arrives, it's delivered right to temporary storage at a pick face, where it will be held until processing.

If crossdocking could be summed up as "here today and gone today," then flow-thru warehousing might be thought of as "here today and gone sometime this week."

"Crossdocking is measured in hours while flow-thru warehousing is measured in days," says Bruce Strahan of the Progress Group. "With crossdocking you generally have a clean area at the end of the day. Your flow-in of material equals your flow-out. With flow-thru warehousing, your flow-in approximates your flow-out, but you never really clean out the staging and pick order changes."

"Let's say a store has ordered five pallets of product, and at the last minute, they decide they'd like seven," says Jim Apple of The Progress Group. "With crossdocking there's no chance to accommodate them because there's no residual storage. Flow-thru is crossdocking with a cushion. It's not as sensitive to errors on the supply side."

What will a flow-thru warehouse look like? The most common materials handling technologies will include carton and pallet flow racks, pick-to-light systems, pick-to-belt systems, carousels, and sortation systems.

Bar coding and label printers managed by warehouse software are also going to be an integral part of a flow-thru warehouse. However, since timeliness is less critical, the system won't necessarily be tied into the customer's or the supplier's warehouse management system as with crossdocking. Electronic data interchange (EDI) is used to manage the processing of an order once it arrives in the distribution center.

Flow-thru warehousing can also reduce the amount of inventory by allowing a distribution center to purchase in smaller quantities, says Hugh Kinney of Logistics Resources International, Inc.

"Suppose I'm getting one full truck load a week of five different items. With flow-thru warehousing I'd try to receive one truck load a day with a mixture of all five items. It's the same amount of inventory a week, but by receiving in smaller quantities I can continuously flow it through the warehouse and reduce my inventory."

But such a strategy works only if an organization takes a total view of its operation. It not only requires a sharing of data throughout the distribution center, but a sharing of data throughout the company as well as between supplier and customer. To optimize this strategy, the supplier must understand as well as its customer how merchandise should be shipped and received.

Flow-thru warehousing also works well in conjunction with a value-added service center, says Andersen Consulting's John A. White III.

In White's scenario, product is received on the receiving dock and placed on conveyers that move it directly to the value-added service area. There, pricing, labeling, ticketing, kitting, hanging, and other value-added activities take place. The conveyor system continues to move the product from the value-added area through sortation and loading onto outbound trucks for customer delivery. The product does not go into traditional reserve storage and pick slot locations, but rather flows through the distribution center. This way inventory leaves the facility with more value to the customer than when it arrived.

It is also precisely what happens at DSMI's value-added facility in Charlotte, North Carolina, where the company uses a voice data input system to process as many as 30 truckloads of inventory a day, 5.5 million cartons a year.

Typically, received freight is unloaded within a few hours of arriving on the yard. As cartons come out of the truck, workers read a series of order numbers into a head set microphone to generate bar code labels. The cartons then travel to work stations where units down to the individual SKU level are priced, placed on hangers, and picked into store quantities. Completed orders then flow to the shipping dock, where they are usually released to the stores on the same day. DSMI's system works efficiently even when it is used to process orders as small as two cartons of an item per store.

While flow-thru warehousing is common in the retail and grocery industries, the impediment to its widespread use has been the reluctance of manufacturers to be partners in this strategy. Most manufacturers want to manufacture and ship full truck loads of a product with minimal warehousing on their part.

But in looking to the next millennium, Soheil Rezai, director of warehousing and distribution logistics at Logistics Resources International, Inc., sees these roles changing in still other ways, especially as commerce on the Internet continues to evolve. While Rezai sees Internet commerce impacting all of the warehousing strategies discussed in this issue, he expects that it will play a particularly important role in flow-thru warehousing.

"The Internet seems destined to change the role of the middleman in most commerce," Rezai says. "Instead of warehouse distribution centers, I see information distribution centers."

The distribution center of the future, he adds, will be a clearinghouse for information as well as for products. Instead of receiving, handling, warehousing, picking, and shipping a product to a customer, Rezai envisions the distribution center of the next millennium as a combination of order assembly and value added services in a flow-thru environment.

Rather than shipping their product to a distribution center, manufacturers will hold inventory at their facility until an order has been received by a distributor. In fact, they may utilize a postponement strategy or adaptable manufacturing to reduce their carrying costs. Once an order is released, the material will be delivered to the warehouse, where it will be assembled with other inventory at a pick face, value will be added, and it will flow on out to the customer.

"We're already seeing this with internet grocery sites," says Rezai. "Their distribution centers are closely-monitored with an order from the manufacturer based on the profiles of their customers. When product is received, it goes almost directly to the pick face for processing."

Such warehouses are a reminder that strategies such as flow-thru warehousing will make today's expectations for more efficient operations a reality in the next millennium.


Operational characteristics:

* Frequent deliveries of inventory to warehouse

* Acts primarily as a staging center for large quantities of inventory for many customers

* Receipts go directly to the pick face

* Inventory on hand matches only expected demand for the immediate future, typically 48 hrs to 1 week

* Pick face is sized to that immediate future demand

* Able to support on-site manufacturing as well as distribution of finished goods

Prominent technologies:

* Carton and pallet flow rack

* Pick-to-light systems

* Pick-to-belt systems

* Carousels

* Sortation systems

* Electronic data interchange

* On-demand bar code label printers
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Title Annotation:Planning for the Millenium
Publication:Modern Materials Handling
Article Type:Cover Story
Date:May 15, 1998
Previous Article:Crossdocking: a common practice today, sure to grow tomorrow.
Next Article:Postponement systems: waiting to the last minute is a virtue.

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