By utilizing an automated warehouse management system (WMS) and a unique inventory slotting plan, Valin Corporation gains greater inventory control and efficiency.

by Richard Vurva

When Valin Corporation moved into a new central warehouse facility a few years ago, Mark Tomalonis recognized it as an opportunity. The director of operations for the Sunnyvale, Calif.-based distributor of fluid handling, measurement and control products decided to rethink and reinvent how the warehouse worked.

In the old warehouse, products were grouped by supplier, with Manufacturer A’s products stocked in one aisle in alphanumeric order by part number, Manufacturer B’s products in another aisle and so on. When a manufacturer introduced a new product, someone would have to rearrange shelves to find a spot for it in that aisle.

Over time, warehouse workers got a feel for where to find products, but no one gave much thought to how quickly material moved in and out. Pickers wasted time walking on treasure hunts in search of that elusive product needed to complete an order.

So, Tomalonis decided to implement two changes that greatly improved warehouse efficiency and inventory turns.

No. 1, Valin purchased a computerized warehouse management system (WMS) that automated manual processes. No. 2, Tomalonis devised an inventory placement system that he dubbed “velocity class.”

Velocity class
The velocity class system is a simple, yet elegant putaway process that slots products according to their velocity — the speed with which they move through the warehouse.

Valin organized its new warehouse so items are put away based on how frequently they get picked. Each of Valin’s 6,000-plus stocked items and each stocking location has a two-digit velocity class number. The system places the most popular items at the most convenient storage locations and the slowest-moving items at more remote locations.

The smallest totes start at the far end of the warehouse and get progressively larger until reaching the pallet racks at the opposite end of the warehouse. Items picked most frequently are near the aisles and closest to the shipping and receiving area.

“We used to go up ladders and down aisles looking for a place to put a product,” says Tomalonis. “Now, we hardly ever climb ladders or walk down the aisles because the most frequently picked parts are on the front end of the aisles at ground level.”

The system also allows expedited orders to be picked first. At order entry, each customer order receives a “routing priority” number between 1 and 10. Each number represents a defined priority. For example, routing priority No. 2 might mean “ship today UPS Red.” The WMS simply sorts all available orders by the priority number, with lower numbers getting picked first.

The velocity class system also saves time during putaway. When a product arrives, it’s scanned into the system. The WMS searches for all locations within the same velocity class and enough space to hold the SKU and directs the stocker to put it there. If there’s not enough room in that tote, the system finds an empty tote of the same velocity class.

“We’ve essentially eliminated the treasure hunt, we’ve improved customer satisfaction by reducing stockouts, and we’ve rendered invalid the philosophy of ‘stock more just so we don’t run out’,” Tomalonis says.

The next generation
Early this year, Valin replaced its original WMS with the Latitude WMS from PathGuide Technologies.

Tomalonis says integration between Latitude and Valin’s enterprise system, Prophet 21 Commerce Center, is seamless. Using handheld radio frequency scanners, warehouse employees scan each item when receiving it into inventory. The data automatically gets updated into the Prophet 21 system, so customer service representatives have real-time information about what’s in stock.

“With our old system, it used to be a major quarterly project to resynchronize the two databases as to quantity in stock,” says Tomalonis. “Now, we get a report every morning that lists parts that are out of sync. It’s always fewer than 10 and it’s always due to operator error.”

Under the manual system in the old warehouse, cycle counts demonstrated inventory accuracy of just 82 percent. That is, for every 100 line items physically counted, 82 had actual quantities on the shelf other than what the enterprise system claimed. In other words, the computer’s quantity-on-hand values were wrong for nearly one in five stock items. With Latitude, the system is 98 percent accurate.

“So that means 16 out of 18 more line items are correct, which means our chances of satisfying the customer by actually shipping what our customer service people say we have has gone up dramatically,” he says.

Since inventory is more accurate, it also means Valin has greater control over its largest asset.

“I can’t afford to have any excess stock,” he says. “I’m in the process of tweaking down the inventory to the bare minimum. I can do that with confidence because I know what my computer says I have is actually in stock.”

Quick payback
Tomalonis estimates that Valin’s investment in its current warehouse management system will pay for itself in less than three years. He figures it has saved about six man hours per day, considering that handlers spend less time looking for misplaced stock and reworking undershipments caused by inventory inaccuracies.

More efficient product putaway and order picking, plus a better organized cycle counting process reduces training requirements, as well. Plus, tighter inventory controls enabled Valin to reduce the amount of inventory on hand and eliminate the annual weekend inventory counts (where employees racked up hours of overtime pay).

He estimates the annual savings to be at least $40,000.

Tomalonis estimates that at a typical cost of $150,000 to $175,000 for a warehouse management system that has the functionality and integration that a small- to mid-size distributor needs, it’s possible to see a return on investment within three years.

This article originally appeared in the November/December 2001 issue of Progressive Distributor. Copyright 2001.

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