Warehouse Re-Design Reduces Labor Cost per Unit by 10%


Kenco Logistic Services manages a 485,000 square foot distribution center for a major manufacturer in the kitchen and bath industry, employing 44 permanent employees and 11 contracted labor employees. The average daily thru put is 30-40 trucks per day. The site also includes an added postponement packaging production department that packs 900-1,100 units per day.


Kenco’s management team and customer agreed there was an opportunity to re-design the physical layout of the distribution center to improve efficiency and reduce labor cost per unit.  The hope was a re-design could lead to improved labor productivity, better storage density, improved quality control, better overall flow, and increased aesthetic value within the distribution center.


Kenco began by validating the need of a redesign by undergoing an engineering study. The study confirmed that completely redesigning the facility was the only solution to get the desired results.  Using the study as a baseline, a team embarked on a facility redesign effort.  One main focal point of the project was to reduce picking times. The team created a detailed map of the current picking process and used this to determine run rates of individual tasks and pin point where improvements could be made. The next step was to draft a plot map of the facility and identify SKU velocity and product placement. The plot map helped identify that top moving SKUs were scattered, causing extensive travel times. Change in customer order patterns, WMS constraints, and improper bin sizes were a few variables leading to longer picking times. Picker travel time and distance had to diminish to reduce labor cost per unit.


The team was able to complete a comprehensive facility re-design and execute a multiple phase implementation plan. The redesign included a high velocity pick zone which condensed the top 90% highest velocity SKUs from 480,000 sq. ft. into approximately 80,000 sq. ft. The picking time was reduced from 6.18 hours to 5.95 total cumulative hours with a realized savings of $.10 per unit and a net result, annualized for 2010, of $314,134.92. Other highlights included a 10% reduction in Labor Cost Per Unit (LCPU) and recovery of over 40,000 square feet of warehouse space now available for future growth.