Product loss is one of the key areas of concern in distribution system design. One of the main reasons being critical cost concerns and financial waste through damaged product. Lean manufacturing or lean warehousing, simply put, is systematic reduction of waste in a process. A way that companies work to “Stay Lean” is managing the waste of handled product. It’s a tangible area where capital investment can lead to great returns.

As an independent integrator we work with a variety of customers across numerous industries and several functions that span order fulfillment, manufacturing, packing and shipping, pallet handling and more. It’s common to have conversations where customers have been able to maintain a consistent level of product loss.

For example, an ecommerce customer noted that product loss was maintained at one percent. One percent does not sound significant; however, if a facility is shipping out $10,000,000 a year in product, that amounts to $100,000 left on the table every year! Granted, not all of that is always fully recoverable, as there will be operator related issues or accidents, but if you could invest a small sum of capital to consistently reduce product loss by 50%, that could amount to a $50,000 return straight to the bottom line.

Let’s take a look at some methods for avoiding and reducing product loss.

1) Operator Training and Involvement

It’s not uncommon for there to be inconsistent training for new or veteran employees. A dollar investment into training is always a risk should your employee leave, but it shows your team that you take their positions seriously, and more importantly that you take them seriously.

Training does not need to always be complicated or lengthy. It should be consistent, easy to access, easy to remember and relevant to a position. Sometimes a simple onboard training program or a periodic operational review is enough to increase productivity and reduce inaccuracy.

For more complex machinery, it is even more critical that management considers a proper formal training program. Working with the system integrator for proper training can be simple and effective. Working with skilled trainers on your installed and integrated systems can help train your team and find other potential problems before they arise.

There is a reason people use the phrase “I know just enough to be dangerous.” Either way, if investing company money into a full-time training manager is too costly, one could always consider a consulting group or bringing in the machine manufacturers to run training sessions as a solid alternative.

A simple yet impactful approach is to leverage visual reminders. Visual reminders are a good method to keep employees reminded of training. It helps re-enforce items daily and keep them thinking about the process. Visual reminders may include simple to read and/or see instructions at the place of work, sharing common occurrences or damage, and what to do if an issue is experienced or found. Examples of visual reminders can often be seen at fast food restaurants, where images walk thru the process of assembling certain meals or reminders to add napkins, plastic cutlery, etc. for carryout meals, for example.  

2) Continuous Improvement of Process

Another area that is related to quality is that of Continuous Process Improvement or CPI. Entire programs are dedicated to the art of CPI such as the Six Sigma training programs and Kaizen methodology. CPI programs need to be built for long term successes, building off of data to prioritize and confirm effectiveness.

That said, you can start small. Design a set program, which can be simple and repeatable, with the objective to finish. The goal is to finish and not necessarily to make the process perfect. You can always come back and improve.

A way to dive in and start thinking in terms of continuous improvement is to take a look at your warehouse distribution process and ask yourself some of the following questions:

1. Does an employee touch the product more often than necessary?
2. Do multiple employees have to manage tracking the product manually?
3. Does the product sit on a cart unlabeled for extended periods of time?
4. Does the product have the proper labeling?
5. Does the product have the potential to be crushed, stacked improperly or hit during storage or transportation?

These questions and many more can help identify when you may need to consider process improvement to help reduce inaccuracy and damage issues. “Kaizen Supply Chain: 8 Focus Areas for Achieving and Maintaining High Quality” takes a deeper dive into target opportunities and creating the right conditions to help a CPI approach flourish.  

3) Correct Material Handling Equipment

How do you know what equipment is right for your application? What criteria should you use to determine whether a process should be automated? These are complicated questions which more often than not get replaced by “which solution is the least expensive?” Unfortunately, as with any capital expenditure, if the person with the buying power does not understand the solution in question, the purchase becomes an exercise in price rather than an exercise of application.

While I cannot cover the gambit of how and when to choose the right equipment in this article, I can say that choosing the right material handling solution is imperative to a successful system. Its importance lies in choosing the best way to move your product efficiently and safely. Additionally, you need to consider the lifetime cost of a system which, on top of upfront cost, includes maintenance costs, installation costs, future modification costs and a number of other considerations.

For example, line shaft conveyor is known to be one of the most affordable types of conveyor in terms of upfront cost. It is easy to forget, however, that in terms of installation, maintenance and operator hours, it far exceeds the cost of its counterparts such as the 24-volt DC powered conveyor.

If material handling is not a strong point for someone in your company, I highly recommend approaching an engineering firm willing to step up and take a close look at your application and data.

When it comes to a material handling integrator, anyone can hand you a quote. It is important you seek a partner for the project, not just a supplier with the lowest cost. A partner will understand your business process and design a system that can be scaled or modified to fit changes in your growth or product. Flexibility and forward thinking are key when it comes to choosing the right system and the right partner.

4) Reducing Manual Touch Points

While reducing manual touch points could be seen as a derivative topic of CPI and choosing the correct material handling solution, focus on “manual touch points” deserves a special focus because it specifically addresses reduction in product loss.

Every time someone touches a product, there is a danger of it being damaged. This can be from a drop, an improper placement or storage, or a variety of other reasons. There is also risk of product being misplaced or inaccurately packed. This can be from a misread of a label or forgetting where to place the carton. Finally, there is the inefficiency of manual handling.

Start by taking a look at the data. Charting the flow of product through either a process map or M&I (Material and Information Flow) diagram can help determine where gaps exist in the process. This gives you focus or target areas to address weak points. Adding a piece of technology doesn’t always solve the pain point. By reviewing the process, you can resolve trouble areas, potentially opening up efficiencies before investing in new technology. This can also help to confirm a need for a specific material handling solution or identify an opportunity for a completely different approach.  

Once a material handling solution is identified, people need to be trained, reminded and supervised. People also do not work at a consistent rate; they need time off and do not work 24/7. By transitioning the majority of manual work to material handling equipment, a company can save on basic labor and use that freed capital as a return on investment for the machine expenditure or to invest in more skilled labor for other areas of business. More importantly though, you remove much of the human element from the material handling and reduce your product loss.

5) Making the Decision to Move Forward

The final method to reducing product loss is to take the step forward and actually put together a game plan. There is a considerable knowledge base regarding material handling and product loss prevention available through educational articles such as this one and through system integration and engineering firms. This is your call to action to sit down and put together a plan, because reading about it and filing it away will not reduce your product loss.

Reduce Product Loss, Improve ROI

The long-term results and daily benefits from using these product loss methods often generates cost savings opportunities that not only benefit the organization but also result in the employees having a better environment in which to work. Our process is designed to identify opportunities to optimize your factory, warehouse or distribution center. If you're ready to find your solution, talk to one of our solution consultant experts today.

Author: Andy Eckerle