The supply chain chaos of the past few years has shone a light on inventory and the need for shippers and third-party logistics service providers (3PLs) to get it just right in order to best manage their supply chains and maintain high service levels. Technology continues to be a key tool in addressing the challenge, and two recent projects illustrate ways in which organizations are using advanced software and hardware solutions to increase accuracy and optimize inventory levels. Here’s how.
AI TO THE RESCUE
Third-party logistics service company Barrett Distribution Centers was looking for a way to improve inventory monitoring across its warehouse network. The company operates more than 25 facilities nationwide, serving clients across a range of industries—including apparel and footwear, health and beauty, consumer packaged goods, and consumer electronics. Associates had been using forklifts and scanners to manually track and manage inventory, a process that was becoming increasingly difficult due to the 3PL’s growing e-commerce volumes, which require close inventory tracking to fill individual shipments. Managers wanted to augment the manual process with a technology-based solution that could reduce the company’s reliance on both equipment and labor.
The answer came from Pittsburgh-based warehouse automation company Gather AI, which combines artificial intelligence (AI), machine learning (ML), and analytics to create a drone-powered inventory monitoring system that is helping users improve inventory accuracy, boost productivity, and increase the bottom line. To launch the project, the tech firm digitally mapped Barrett’s warehouses so that the drones could fly autonomously and so that Barrett could use them to conduct regular inventory monitoring, a process that would cut back on the number of forklifts and warehouse associates required for cycle counting.
Under the new process, the drones photograph pallet locations in the warehouse, and Gather AI’s ML algorithms then decipher the barcodes and text from the images, comparing what’s read with what’s logged in Barrett’s warehouse management system (WMS). Warehouse managers can view results from a web dashboard.
Gather AI says the process is 15 times faster than manual cycle counting and provides real-time access to inventory data—which allows warehouse managers to more easily identify and address inventory exceptions.
Barrett is using the drone solution at six of its warehouses and is seeing strong results, according to Jim Rapoza, vice president of business process optimization. Since implementing the project in 2022, at one location alone Barrett has reallocated six cycle counters to more value-added tasks and has eliminated $250,000 in material handling equipment. On top of that, inventory accuracy has improved by up to 70%, according to both Barrett Distribution and Gather AI.
SLOTTING FOR OPTIMIZATION
Medical device manufacturer Boston Scientific needed a better way to manage the growing number of stock-keeping units (SKUs) at its nearly 600,000-square-foot distribution center (DC) in Quincy, Massachusetts. Upwards of 10,000 SKUs are housed in a variety of racking systems at the DC, including bulk floor pallet locations for the fastest-moving items, case flow racks, and wire deck shelves. DC associates primarily perform individual picks—also called “each picks”—to fulfill orders, which can require considerable travel throughout the facility. Company leaders wanted to create a more flexible inventory slotting solution that would address those issues and lead to more effective, efficient overall operations.
Boston Scientific turned to logistics automation and software company Fortna and its OptiSlot DC software to tackle the problem. But they had to put some initial slotting strategies into place first. A “slot” is a shelf or portion of a shelf where items sit in the warehouse. Slotting is the process of determining the best slot for all of the items a warehouse ships. For example, fast-moving items may be placed in easier-to-access locations—perhaps closer to the loading dock for faster loading.
Leaders at Boston Scientific began by splitting the DC into four areas and optimizing inventory zone by zone. Next, products were grouped and slotted for easier picking, putaway, and replenishment. They also looked for opportunities to improve overall picking productivity by:
- Optimizing pick paths to reduce travel throughout the DC;
- Reducing the need for workers to bend and reach by implementing “golden zone slotting,” a technique in which high-velocity items are assigned to locations at chest height, making it easier for associates to pick quickly while also supporting more ergonomic picking;
- Improving space utilization and reducing the number of overall replenishments by improving the slotted capacity in active forward pick and minimizing the overstock in reserve.
The next step was applying Fortna’s slotting optimization software, which allowed project leaders to factor in goals, rules, and constraints to meet objectives; weigh the importance of each objective; and compare potential scenarios. OptiSlot does this by the use of digital-twin technology, which allows managers to replicate their warehouse layouts and view or test potential results before dedicating the labor to implement a particular solution.
Ultimately, Boston Scientific selected an optimization scenario that grouped certain specialty items together; implemented golden-zone slotting to boost productivity and improve ergonomics; and moved its fastest “cube-moving” items to larger, prime locations that would reduce travel and replenishment. Cube movement refers to high-volume items that take up more space in the warehouse, according to Fortna’s vice president of software, Will King. Moving such items from a smaller space to a larger one—from a hand-stack area to a pallet location, for example—reduces the need to replenish those areas frequently, cutting back on work and raising productivity.
Applying the process to a portion of the warehouse in 2022 yielded immediate results, including:
- A reduction of 135 replenishments per week, or about 12% of the total;
- Improved space utilization, with an overall storage capacity increase of 1.6%;
- A reduction in travel distances that amounted to nearly 1 million fewer feet traveled within the DC per week.
Project manager Dan Hamilton, of Boston Scientific, touted the results in a statement describing the project earlier this year.
“Prior to [implementing] OptiSlot, our slotting tool was a very cumbersome, manual Excel-based tool—so we were limited with what we could achieve,” he said. “With OptiSlot, we’re now able to seamlessly layer in as much data (including custom data) from as many different sources as we want, and the flexibility and adjustability of the tool allows us to analyze as many different rules, goals, constraints, and ‘what if’ scenarios as we want. Slotting-move plans—spanning up to thousands of moves—and comparative reports come back in a matter of minutes, with planned out multi-chain move sets ready to go. We’ve only just begun to scratch the surface of the capabilities of this tool, and we are already reaping considerable operational benefits.”
More companies are likely to follow suit as inventory remains a key issue across the logistics landscape. In the spring of 2023, the Logistics Managers Index—which tracks industry performance across a range of measures—showed contraction in inventory levels for the first time in more than six years and predicted lower levels over the next 12 months—signs that companies are working through the glut of inventory that plagued the industry in early 2022 and are trying to get a better handle on it in the years ahead.
Editor’s note: This article originally appeared in the August 2023 issue of DC Velocity.
