Best practices in material han*ling

If IHEN I returned to the lumber V Y industry in 2000, after a hiatus of some 20 years, I don't know what I expected to see in terms of change. What I did see was business as usual with just a few exceptions. It is those exceptions that I would like to share with you in terms of better material handling practices.

My brother Jamie and I started the Lumber Buddy company in 2000 to sell a lumber-handling/portable platform that he designed for pulling packages together more efficiently. What he had observed in his 22 years of both retail and wholesale distribution of lumber was the amount of manual labor it took to get the job done. His portable platform wasn't rocket science, but then most good ideas aren't-at least that is what I found as I have visited lumberyards in some 46 states over the last five years.

The difference between sood and great (break even vs. making a profit) is just a few minor improvements in process. "Work saJe, work smart" was the motto we established for our company and that is the common thread behind the best practices discussed in this article. Safety is tied to productivity. Doing the job right the first time is the key to best practices. Hopefully, the following ideas will make your operations safer and more productive from start to finish.

Let's start with yard layout. How did you come up with the current layout of your opcration? How do you decide where new items or fast moving items are kept?

The first step in effective material handling is an efficient layout of materials. I have observed far too many yards that spend much wasted time and effort (and fuel) driving by dead stock or slow-moving items just to get to the product they need. I urge you to spend some time this winter cleaning up not only your yard, but also your yard design. If you have had the same yard design for several years or since you can remember, have either a yard consultant or even an independent third-party review the layout of your yard. A set of fresh eyes can spot simple changes that could have gone unnoticed for years.

If you find that you are in need of a major change, there are some great resources at companies like Sunbelt, Krauter Storage Solutions, Auto-Stak and others that will help you with a new design and product flow.

Now that you have an efficient design to store materials, let's talk about how you receive your stock. Do you have a designated receiving person or department? Are they as efficient as they could be? Do they have a system? How quickly does your stock become useable once you receive it? How much time do you spend looking for items? Competent people in charge of receiving and restocking material can more than pay for themselves in keeping organization in a lumberyard.

While we are on this topic, let me suggest that you set a policy for dealing with damaged non-salable goods once. I am always impressed when I see a yard that has empowered their workers to deal with unsellable stock and make it sellable or discard it. This is another area where you can reclaim wasted time in not handling items multiple times.

One final suggestion on layout: during your cleanup, do a red tag process. Simply issue red tags to your workers to place on items that they feel are no longer necessary, are in the wrong place, or items that are in the way of a productive workplace. Move all the red tag items in a specific location. After a month, have your foreman or a committee go through the items to determine whether they can be sold or discarded.

Now that you have a clean and efficient workplace, let's talk about how to handle materials more efficiently. The key is to not HANDIe materials any more than necessary. I emphasize the HAND or human part of the equation. How can we minimize labor costs to maximize efficiency? That's the goal.

Better forklifts, better racking, better layout, and better systems all play a part in efficient material handling, but so does better training. We must educate our workforce that speed does not equate to efficiency. If reducing or eliminating manual handling is key to being productive, let's look at how we can leverage technology to reduce labor costs.

Technology means working smart. I have observed several lumber operations that I would put in the smart category. One such yard is Cascade Lumber, Camano Island, Wa. Evan Holzknecht and his crew do more volume out of their 4.5-acre facility than seems possible. One of the innovative ideas Cascade employs is to load their truck beds on the ground. They use a fleet of roll-off trucks and beds to minimize the amount of time and space trucks take up in his no-nonsense attitude to pulling loads, one of the things that make them more efficient is their use of forklift-mounted dispensers for their woven polyester strap. By eliminating the need to take loads to a banding area, they reduced traffic and unnecessary trips in their yard. "The woven strapping has proven to be a real improvement in both safety and productivity." said yard manager Jim Lynch. "We switched for safety and got productivity as well." yard. There are a number of other advantages that I won't go into here. But I must say that Evan runs a great operation, and his best assets are his well-trained people.

At Hamilton Supply, Hamilton Township, N.J., Kim Coleman is a true innovator. He is constantly looking to improve customer service and his overall operation. Kim's challenge is familiar to many of you: he's landlocked in his 7 .S-acre location. So how do you continually produce more with less? Kim has employed many weapons in his fight against space limitations.

Kim points to the Auto-Stak end-stacking system and Sunbelt cantilever rack as essential to streamlining his material handling. He also employs many portable racks that work in concert with his stationary racking systems.

TRANSPORTABLE stacking platforms, such as Lumber Buddy's 14-ft. composite deck unit (foregro--uhd) and its standard 8-ft.

Another operation that I think is working smart is just down the road. OSO Lumber, Arlington, Wa., works off peak. John Fox has load pullers staying after hours to build loads when the gates are closed so that they don't need to worry about retail traffic. They can utilize all the equipment in the yard to reach their objective of having all the trucks loaded and ready to go in the morning.

One variation of off peak that I have seen is to not pay the employee by the hour but instead pay a flat rate, whether it takes two hours or four hours to get the job done, thus giving them the incentive to work smart.

OSO Lumber is also a strong believer in setting up their employees "to win" by providing them with the right equipment. Cantilever racking, portable workstations, and a paved lot all help their team to work more efficiently.

Plymart, Cartersville, Ga., employs two of the most efficient load pullers I have seen in the industry. Besides their fl ETURNS are. a problem for I\many organizations. Often returns are dumped in a pile to be "sorted out when time permits." Dust and dirt cover this material as workers have more important tasks to perform. During a physical inventory or warehouse cleanup, the entire heap of returned merchandise may be thrown outwhile management vows to process returned merchandise in a timely manner in the future.

New technology also brings with it new challenges. With the advent of engineered wood products came the challenge of handling materials up to 66' in length and beams that weight as much as 2,340 lbs. per beam. These new challenges require new thinking. Also the use of composite materials for siding and decking has added to the challenge. Many companies are working to meet these challenges by thinking outside the box. Multi-directional forklifts such as those from Combilift have changed the way we look at handling long-length materials. Cut stations and moveable platforms assist in handling beams and other products more safely and efficiently.

Here's the long and the short of effective material handling: although the lumber industry's basics have not changed much over the years, new materials and new technology have. Lumberyards that try to "stick with what's been working" will find themselves continually falling behind as they try to put new items in an already crowded or unorganized yard.

Lumberyards will spend hundreds of thousands of dollars on the newest, shiniest fleet of trucks but are reluctant to invest in new ways to improve storing, pulling and shipping material. There are companies that produce equipment to help you save time, reduce waste, and increase safety in handling material. Companies that address this safer system of receiving, storing and pulling material can realize substantial increases in productivity and employee safety and decreases in material waste and fuel use.

We have found that the root of many organizations' problems with returns lies in the lack ofa specific set of procedures related to these transac-

Reverse Logistics

Options for elirninati ng umwanted inventory

1. Return to vendor

2. Discount at retail

J. Sell at clearance outlet or to salvage outfit

11. Donate to charity j. Scrap tions. Use the following three-step process to design an effective returns program.

Step #r Detsrmi*s what can be returned.

Most organizations limit returns to goods that are currently stocked. Any special order or discontinued products usually are not eligible for return. Customers should be told what items cannot be returned as they order or buy the products. This information should also be noted on all packing slips and invoices. Only designated members of management can override this policy. These decisions should be based on the specific customer's contributions to your company's profitability.

Step #z Prcesss ret$rns tike any other stock receipts"

Returned material should not be dumped and forgotten. If possible, require and issue return material authorizations (RMA's) to customers. These documents list the items (and quantities of those items) that you have authorized to be returned by the customer. A copy of the RMA should accompany the physical return of the material. The RMA can serve as a packing slip to be utilized by your receiving people.

All material received should be divided into one of four categories: . Item can be resold or used in its present condition. Like any other stock receipt, this material should be put away in its normal stock location within 24 hours of delivery.

The item must be repackaged or repaired before being returned to stock. The item should immediately be sent to the department that will perform whatever is necessary to prepare the item for resale or use. In many organizations the cost of repairing or repackaging the item will be deducted from the credit issued to the customer.

The item will be returned to the supplier. The item should immediately be sent to the vendor or staged (with appropriate paperwork prepared) to be sent to the vendor at a later date.

The item will be thrown out or scrapped. The product should immediately be sent to the dumpster, the

"scrap pile," or a disassembly area so that any salvageable parts can be removed.

Step #3

Calcul*te what it costs t0 pro€ess a return.

How much time does it take a receiving person to check in a line item on a material return? How much time does it take to return the material to its normal storage location? How much time does it take the clerical person to issue the credit memo? You can divide an employee's hourly wage (plus benefits) by the average number of line items he or she can process or put away in an hour. For example:

Receiverts Time

Hourly wage = $20 per hour

Line items processed/hour = 30

Cost per line = $0.67

Stocker's Time

Hourly Wage = $15 per hour

Line items put away/hour = 20

Cost per Iine = $0.75

Administrative Time to Issue Credit Memo

Hourly wage = $18

Line items processed/hour = 6

Cost per line = $3.00

The total cost per line is $4.42 ($0.67 + $0.75 + $3.00). If we picked up the material or provided freight we would add an additional amount to the total cost.

Note that we calculate the cost of a return per line item. Why? Because it costs a lot more to process a return containing l8 line items (regardless of the actual quantity returned of each item) than a return with only one item. If a customer returned l8 different products and it cost us $4.42 per line to process the credit, the total cost to issue the credit would be $79.56!

Also note the relatively high administrative cost. This includes the time necessary to research if and when the customer actually bought the product from us and the price-per-unit they actually paid.

Many organizations try to recover the cost of processing returns by assessing a handling charge on the credit memo. Unfortunately it is not often practical to express this charge as a dollar amount. After all, if the customer returned a relatively inexpensive $2.00 item and it cost $4.42 to process the credit, we would end up

Unhappy *eturns ls your system broken?

Dr. Richard Dawe, ol the Fritz lnstitute of International Logistics, identified several symptoms of problem returns:

() Returns arriving faster than processing or disposal

() Large amount of returns inventory held in the warehouse

() Unidentified or unauthorized relurns

{} Lengthy processing cycle times

{} Unknown total cost of the returns process charging the customer $2.42 to accept the material back into our inventory. For this reason, handling charges are usually expressed as a percentage of the price the customer originally paid for the material. To determine the proper percentage for your company, divide the total cost of handling receipts for a specific time period (e.g. a month) by the value of the goods returned (at the sales price) during this time period. Let's look at an example:

Line items returned = 120 Cost per line item = $4.42 Total sales price ofgoods returned = $14,220.00

$530.40 + $14,220.00 = 3.7 7o

The cost of processing the return of an item is approximately 3.7Vo of its sales price. Note that the cost of repackaging or repairing a specific line item should be added to this cost. Even if you do not charge this fee to the customer. it should be considered in determining the customer's overall profitability.

Handling returns is not a pleasant task. But it can be kept under control by establishing some basic policies and procedures. By minimizing the time and effort necessary to perform this task, we can devote more effort to those activities that produce profits.

- Jon Schreibfeder is an inventory maximization consultant, president of Effective Inventory Management, Inc., and author of Achieving Effective Inventory Management. He can be reached at (972) 3043325 or via www.effectiveinventury. com.