WBSP018: Grow Your Business by Standardizing Warehouse Operations w/ Kevin Lawton

In this episode, we have our guest Kevin Lawton from the New Warehouse Podcast, who discusses why standardization plays a key role in inventory control and planning. He also discusses how to perform root cause analysis for any inventory control issues and how manufacturers and distributors can plan their inventory as they scale. Finally, we also had a chance to discuss some basic warehouse planning terms.

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About Kevin

Kevin Lawton is the founder and host of The New Warehouse Podcast and has been working in the distribution and logistics industry since 2012 when he began his career as a temp employee in the Inventory control at Simon & Schuster. From there he grew in the inventory department and moved into various distribution and operations management roles. He was able to be a key player in four different new distribution center startups as an integral part of the project as well as involved in multiple software update and transition projects. His passion is to continuously learn and also share that knowledge which was the driving factor for the creation of The New Warehouse Podcast.


Full Transcript

Kevin Lawton 0:00

People start to police themselves because they see a product that ends up in, say, I have a cotton ball in my q-tip location. Now the picker goes, and they’ll call attention to that to your inventory person and say, hey, there’s a wrong product.

Intro 0:16

Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority.

Now, here is your host Sam Gupta.

Sam Gupta 0:51

Hey everyone, welcome back to another episode of the WBS podcast. I’m Sam Gupta, your host and principal consultant at a digital transformation consulting firm ElevatIQ.

Inventory control and warehouse processes are the backbones of your operational effectiveness. Defining a standard for your key inventory processes from the get-go can help with scaling without going through operational chaos. Non-standard processes cause bottlenecks to other areas of the organization and could become an impediment to your growth.

In today’s episode, we have our guest, Kevin Lawton, from the new warehouse podcast, who discusses why standardization plays a key role in inventory planning. He also discusses how to perform the root cause analysis for any inventory issues and how manufacturers and distributors can plan their inventory as they scale. Finally, we also had a chance to discuss some basic warehouse planning terms.

Let me introduce Kevin to you.

Kevin Lawton is the founder and host of the new warehouse podcast and has been working in the distribution and logistics industry since 2012, where he began his career as a temp employee in the inventory management department at Simon and Schuster. From there, he grew in the inventory department and moved into various distribution and operations management roles. He was able to be a key player in four different new distribution center startups, as an integral part of the project, as well as involved in multiple software update and transition projects. His passion is to continuously learn and also share that knowledge, which was the driving factor for the creation of the new warehouse podcast.

With that, let’s get to the conversation.

Hey, Kevin, welcome to the show.

Kevin Lawton 2:43

Hey, Sam, how are you? I’m so happy to finally be on the show.

Sam Gupta 2:47

And I am super excited as well. Just to kick things off, do you want to start with your personal journey and what you’re working on these days?

Kevin Lawton 2:56

Sure. So what I’m working on these days, first off, is responding to all your LinkedIn notifications all the time. You’re always tagging me and always engaging with me, so I appreciate that.

Every time my phone is vibrating in the last two weeks. It’s always Sam. You’re staying on top of mind there. So yeah, my journey. So I work in the distribution, warehousing space, been doing that for about ten years, really focused on the inventory control aspect of that, also focused on safety as well, in recent years. And now, because of that, I got interested in learning more about the industry because this was not my formal education.

My formal education was in business, but entrepreneurial studies were my major, actually. So, I decided that I should learn more about what I am actually working in. I looked for what I like to learn from, which are blogs and podcasts and videos and things of that nature. And I was, I was not really finding something that I thought was, I guess, cool or interesting that kept my interest in the industry.

Kevin Lawton 4:19

So I decided that maybe I should start a blog and do this. I had done some blogging in the past. So that’s kind of where that idea came from. Then I quickly realized that man, a blog right now, super busy working on this project and my full-time job and just didn’t have the time to write and do all this stuff. And actually, my boss at the time was like, Well, why don’t you do a podcast because I was telling you about the idea?

And I said I don’t really know anything about podcasts and how to do them. But then I thought about it. And I was like, well, it’s a lot easier to talk than it is to type, and write takes more time, right? And so, yeah, so then I pursued the podcast started in March of 2019. It’s called the new warehouse podcast.

Kevin Lawton 5:19

I called it the new warehouse because I wanted to showcase everything. That’s cool. That’s happening in the warehousing and distribution space. And I think when I first started the podcast, I wrote an article on LinkedIn called Making warehouses sexy. And I talked about, how warehouses really, there’s a perception I guess, to the I call it the outside world, that it’s really, just as this concrete box with a bunch of cardboard boxes inside, but there’s so much more going on inside this, that’s really exciting with the technology, and especially robotics, and all these automation now, as well.

So I really wanted to get that message out there and get it out to younger people like myself at the time. Now, I think I’m bordering on getting older now. I think I’m feeling it. But I wanted to get it to younger professionals and have them more aware of what’s going on in the industry, and also learn myself as a way for me to learn more from guests that come on the show. So that’s really my focus now, but I also still work as a full-time warehouse manager focused on inventory control as well. I’m at a company, and that’s kind of where I’m at right now, Sam.

Sam Gupta 6:28

Okay, amazing. And I want to dig deeper into each of these topics, including how to make the warehouse sexy. But before that, I always ask one question to every guest that we have on the show. And that is going to be the perspective on the growth. What does growth mean to you, Kevin?

Kevin Lawton 6:49

Sure, I think growth is often interpreted as something that’s very large scale. But growth to me is progress and improvement. You know, I think even as you grow, if you’re better tomorrow than you were the day before, I mean, that’s growth. So I really think that growth is just taking the right steps forward. Sometimes you take a step backward, obviously, to go forward. But being able to grow is really, you know, just seeing a little bit of progress. That’s growth and those little bits of progress and improvement that add up to big-time growth over time. And that’s really the way that I feel about growth.

Sam Gupta 7:36

Interesting. And when we talk about making progress, and when we look at inventory control, inventory control could be all over the place. I mean, I have personally seen warehouses in different fashions, some smaller warehouses, they might not be as organized, the bigger ones may be slightly more organized. And you may call them sexier, I guess. So in your experience, what is the importance of inventory control? And what can smaller, let’s say the manufacturers or distributors can learn about the importance of inventory control?

Kevin Lawton 8:08

Right. So I’m a little biased, I guess, maybe, because I’ve been working in inventory control for almost ten years now. But I really think that inventory control is kind of the backbone of an operation. There are so many things that are tied to it that can go wrong if your inventories not in the right place at the right time.

So, being able to as a smaller manufacturer, more distribution, location or company in general. You know, there’s a lot of upstart e-commerce businesses, now people getting into distribution. And they’re starting out small, maybe a couple of SKUs, being able to establish good inventory control practices, and having good inventory accuracy when you’re small, will really help with growth.

I’ve certainly seen, and experienced companies where they’ve tried to grow, and inventory control was not quite in place yet. And it really kind of hindered them from getting to that next step. It was a big roadblock to overcome and try to get right. So if you’re able to get ahold of your inventory control, get inventory accuracy to a decent level, and be able to get those things to a place where you can confidently say that what you have in a location or in a building is what you say or what the system interprets, then you’re really kind of setting a foundation there to be able to start to grow and start to expand and it makes it a lot easier to upgrade your system. Go to different automation as well integrate with different systems as well. So I really think that’s a foundational key to building for a smaller business.

Sam Gupta 10:05

I’m not sure how you are calling yourself biased. To be honest, I’m in the ERP business. And whenever I walk to any manufacturing or the distribution facility, I’m typically talking to the eight stakeholders or the executives, and the guy I have to always please is going to be the inventory or the procurement guy, the statement that they make is, if you cannot please this guy, then the ERP is not happening. So you are definitely not biased. I just wanted to make sure we are aligned there.

Kevin Lawton 10:38

I said the biased part because I’ve been working in inventory control. But I definitely know what you mean. Because I think someone that works in inventory control has a certain particular mindset, right? Because they, they want things will be done a particular way because it affects their inventory. So that’s probably why you always get that message that you need to please that guy, right?

Sam Gupta 11:03

To be honest, inventory is the foundation. It’s the heart. If you don’t get your inventory right, the implementation is not going to be right. There’s no way to get the implementation if you don’t have the appropriate inventory procedures in place. Let’s say the steel numbering or appropriate organization of your parts, or BOMs or the inventory organization, so inventory is definitely the heart for the entire ERP.

And now that we are talking about the ERP, that means the entire organization as well. So yeah, so your inventory control is extremely important. I don’t think anybody’s gonna argue with that. Yeah. Okay, so the next thing that I really want to touch on the standardization of the inventory. So let’s say, Kevin, I’m taking you to a warehouse or the manufacturing facility, and they are experiencing that they have been having some problems, and they have no idea how to fix them. The problems are related to inventory accuracy. Obviously, the processes are manual. They are not as efficient as they would like, and you are going there as a consultant. So what is going to be your first, second, or third step that you will be taking in fixing this warehouse or the inventory?

Kevin Lawton 12:20

Okay, so, yeah, I mean, my first step would be, well, first, I would ask that you let me see your standard work, share your standard work with me, right. And if they’re having major issues that sound like which this imaginary company is, they probably don’t have standard work. So that’s the big first issue right there because the Standard Work is really going to dictate and ensure that every operator is doing every process the same way.

And when you have operators who are deviating from what the standard process should be, that’s really when you have a lot of errors occur. So that would be the first step. And then, you know, obviously, if they have standard work, then we’re going to audit that with shadow their operators and see how they’re actually executing the processes, and then identify any gaps there and see where their errors were really occurring. But the standardization of the processes, I think, is really where it starts. You may have some people that say like, well, we need to do a total reset. Let’s do a wall-to-wall physical.

Kevin Lawton 13:29

But if you do a wall-to-wall physical inventory, and then you just go right back to the processes you’re doing, you’re going to be in the same spot within three days a week, at least. So it’s really not going to help you need it. You need to kind of take a higher-level look, check out the processes, are then standardize if they’re not standardized. Let’s map them out. Let’s figure it out. Then as we’re figuring it out, you really begin to understand, like, there’s a gap in the process here.

Or every time the person goes to pick this type of item. Well, the barcode doesn’t scan, so there’s no confirmation, and they might take something else because you’re not actually confirming what they’re taking. So how do we fix those things, then really, that leads to kind of the root cause of it? So really going into that scenario that you described, Sam, I mean, that’s really the big major first step is to look at the standard work if it exists. If not, let’s create it. And as we’re doing so, that’s when you start to identify those gaps and where those mistakes and where those errors are happening.

Sam Gupta 14:36

Okay, so let’s say, if I have just one guy in my inventory, I’m a really small manufacturer or distributor, and whatever he or she has been doing so far, somehow it’s been working. Obviously, the processes are not really standardized. And I want to standardize them. So what will be some specific processes that I need to look at? Can you suggest some sort of list And a list of maybe a plan that you may be able to suggest in terms of creating these standard operating procedures that you are talking about with respect to the warehouse?

Kevin Lawton 15:11

Sure. So the processes you want to look at are any process that has inventory movement involved. So, I mean, basically, we’re talking about every process. But I think what you want to focus on first is you really want to look at what’s happening when that inventory is coming into the building, so in the receipt process, because if you identify issues that are happening at the beginning of your inventory lifecycle within your warehouse, that’s really where a lot of times, you can cut out a lot of errors that are happening, because it’s coming in and something wrong is happening from the beginning.

And if it’s not gonna go right from the beginning, then it can go through every single process within the warehouse incorrectly. And that’s really can multiply the number of issues that you have. So I would start in receiving, and then go through the entire process, so the actual receipt of the inventory, then you’re looking at the put away of the inventory, depending on how that happens. What are they doing during that process? Then the next would be replenishment, how are they replenishing, then you have the picking process.

And then, from the picking process, you’re going to have your shipping process as well. And you know, depending on the operation distribution, business model, you may have some other processes in between, but you want to, you want to pick those apart, essentially no pun intended there.

So take a look at the entire lifecycle. So you want to start at the beginning. That’s the first place that an error can happen. And if you can catch errors in the beginning, fix those, then you’re probably going to fix a lot of the errors that are happening downstream as well.

Sam Gupta 17:01

Okay, amazing. So when you think of the inventory or the warehouse and it’s almost like a library. And the organization needs to be similar to libraries as well because you have similar processes if you really think about it. And now you could organize your library in many different ways. So what would be your recommendation with respect to organizing the inventory? Let’s say if I am trying to streamline my processes in the bad house?

Kevin Lawton 17:28

So if we’re talking about organizing your inventory, so there’s a couple of different ways you want to do it. I think organizing your inventory, the first step to doing that, is making sure that you understand your locations. So there are lots of different types of locations that you can have involved with racking can have floor locations, all different kinds of things.

So you want to understand what do you have to work with? And sometimes, you have limited resources. So it’s not like you can create flexibility or you can switch things up, you can move racking around, do you have what you have to work with, you want to understand what is there, what types of locations do you have, and then you want to make sure that your locations are standardized in the way that they’re named, and their naming convention, there’s a couple of different ways to do that, depending on the layout of your warehouse, you would want to look at that, but you want to make sure that when you have people traveling to those locations.

They can easily locate them, and they know where they are. That’s especially helpful on the training aspect as well. If somebody can navigate their way through your warehouse fairly easily, then you’re reducing some of the training time there over top of it, unless, you know, you have those locations over here.

Kevin Lawton 18:45

And you have to know that when you get this location, you actually have to go over here, not here. It gets confusing, and things get mixed up then as well. So that’s really the first is understand the types of locations you have, then make sure that your location naming convention is standardized, and understandable easily to navigate. And once you do that, then you can take a look at the inventory that you actually carry, marry it to the types of locations that you have, because sometimes you have locations where you carry certain inventory and say you have a handstick and well he can’t fit a full pallet there right so you know this inventory comes in all the time and full pallets, so you need a full pallet location.

Once you start to do that, then you can kind of get a sense of where you’re going to start placing things and what can be placed where then you want to take it to another level. Once you get things established, then you can start looking at slotting and using certain zones, looking at golden zones for picking as well, which would all involve looking at the usage of your inventory. Understand what are my fastest-moving items, and as you look at your fastest moving items, You want to locate those in your warehouse closest to your shipping area?

Kevin Lawton 20:05

So it reduces the pick travel time, which helps improve your process. And it’s going to get it there faster. Now, when you look at that, there are two things you want to look at. Okay? What’s the number of hits that I have? So how many times is this picked in, say, a month or two weeks? It depends on the capacity that you have in terms of storage, but you want to look at the hits. And then you want to look at the actual usage, and you want to get an average usage.

So you can set up your min-max levels within the location so that you can ensure that you’re properly replenishing, getting those things into locations where they need to be so that when pickers are ready to pick or when orders come through when they’re going to drop, everything is good to go. And they can get those things.

Kevin Lawton 21:00

Now, as you start to identify that, you also want to make sure that as you’re locating these products, physically, you want to marry that in the system as well. So if you have a location and you say it’s always going to be, I don’t know, Q tips, well, you want in the system, you want that location to be assigned only to Q tips, so nothing else will ever go there until you decide to change it or do a re-slotting.

So really, in terms of locating and storage and filling out the library, as you mentioned, Sam, I think that that’s really the way to go. It’ll help you get more organized as well. And people will start to understand where a certain product is supposed to be. You can even identify the location with the SKU that’s supposed to be in there. And then people start to police themselves because they see a product that ends up in, say, I have a cotton ball in my q-tip location. Now the picker goes, and they’ll call attention to that to your inventory person and say, hey, there’s a wrong product in this location, and then the inventory person can check it out and see what happened there and fix the issue.

Sam Gupta 22:09

Okay, amazing. So you mentioned a couple of terms, and some of my audience may not be familiar with these terms. So let’s say if we talk about Slotting, okay, what do you mean by Slotting where it is going to be applicable? What are the implications if they don’t use Slotting?

Kevin Lawton 22:23

Sure, so Slotting is. I guess the way to break it down is by Slotting is the positioning of the inventory in the warehouse. As I was talking about assigning certain locations to certain products, like our Q tip example, that’s the Slotting. You would say, say you have 30 locations, and each one is assigned one SKU, you’d have 30 products, and they’re always going to be in that location until you decide to redo their location and the Slotting. So that’s really the Slotting.

And within that, you’re also identifying what is the best position in the warehouse for the product? So what’s the best location? So I talked about there having faster-moving items closer to your shipping area? That’s all involved in the slotting process. And that’s really, that’s really, I guess, the way to explain that.

Sam Gupta 23:24

Okay, and how about the golden zones? You mentioned the golden zones as well. How would you describe that?

Kevin Lawton 23:29

The golden zone is also it’s within the slotting realm or umbrella. But the golden zone, you’re really talking about? What’s the easiest pick location for a picker. So there’s a lot of factors that go into that. It depends you know what type of equipment you’re using, or the pickers on their feet, and how the locations are set up as I mentioned before, but if you look at an example, like some flow rack that’s set up if the picker is on their feet, and they come to a flow rack position, you’re going to look at the ergonomics of that pick as well, right.

Kevin Lawton 24:00

Usually, the location that’s probably about waist level, his or chest level is going to be the easiest pick for that picker. So you’re going to want to put your faster-moving items there because they can grab him more easily, as opposed to your bottom location where you know, they have to bend down, you obviously don’t want them as well from a safety and ergonomic standpoint to be bending down a lot as well.

You don’t want to put an item at the bottom that’s going to get a bunch of hits, and they’re going to be picking from all day long because then they’re just going to be bending over. And it’s not safe, it’s going to overtime, it’s going to be strenuous for them, and it’s not going to be good for their well being, and the operation overall and the business to especially if you’re running into all of a sudden people are getting back injuries because they’re straining themselves bending over all the time. So the Orange zone is really, what is that ideal best pick location that is going to get the product, fastest to the picker? And what are they going to be able to pick fastest as well?

Sam Gupta 25:13

Okay, and now let’s go back to your comment about making the warehouse sexy. So let’s say you had your dream warehouse. And obviously, my understanding would be, you would probably prefer a sexy warehouse, as opposed to a non-sexy warehouse. So what are some of the examples that you have explored in your past where you found a warehouse to be super sexy? How would you describe a sexy warehouse versus a non-sexy warehouse?

Kevin Lawton 25:42

Sure, so I think my initial answer actually may be surprised when people, but it’s not technology and automation. It’s actually cleanliness is I think, is the sexiest thing. So I think that’s really where it starts. And cleanliness as well, it goes hand in hand, I think with inventory, accuracy, and control, too, as well. But from there, I mean, there are so many things happening in the warehouse space.

And as I’m finding through my podcast the new warehouse as well, there’s so much technology, so much robotics, and automation happening. Those things are really exciting. And I think when you bring those technologies in, that really makes the operation sexy. I’ve heard from some robotic companies where they say they have employees who the pickers there on the floor, doing different types of warehouse operations and tasks, but all of a sudden, they bring in robots to the warehouse to help them kind of empower their jobs make their jobs easier, more of a collaborative setup.

And the employees get excited because some of them, they’ve said, like, Oh, I get to go home and tell my kids that I work with robots now. So that’s really, I think, the things that kind of make it sexy, and there’s, I wouldn’t say there’s like a model that I would say, like, Oh, this is my ideal warehouse, it has this type of conveyor and this type of robot, it really depends on the operation.

Kevin Lawton 27:00

But bringing in those technologies to enable people to do their job better and really make an operation flow a lot better is really what I guess define as, as sexy in the warehouse. It’s almost like a well-timed orchestra or something like where everything is kind of getting to the point it needs to be like at the right time.

It’s just flowing through the operation. And you can kind of tell that things are just moving through, and the people know what to do. They know where to be when they need to be there. And the job for them is to be there for them when they need it to be there. That’s really. I think the sexy part about it. And all these technologies and different systems as well are enabling that, and that’s really I think, I would say my ideal, sexy warehouses that have that, that operational flow that just works.

Sam Gupta 28:22

Yeah, I guess what you’re talking about is the smoothness of the operations, as opposed to technology, which could be enabled as well. But the primary factor has to be the smoothness of the operations.

Kevin Lawton 28:34

Yeah, it goes back to the standardization and then the process. I had actually interviewed the CEO of Rayment Forklift on my podcast, and he said something that always stuck with me since he said that, you know, if you automate a bad process, you just made a bad process faster. So it’s you need to take that step back. And I think that’s why that’s probably why I think that in terms of sexiness, having that great process flow first before kind of getting into the sexiness of robotics and automation and shiny things.

Sam Gupta 29:18

Okay, amazing. So we discussed the smaller warehouse. And now, let’s move on to the scale part. So let’s say if my distribution volume is growing, and I need to plan for things based on the volume that is going, maybe I need to have the second warehouse. So how are my processes going to change? How are my standardization needs going to change as my business scale grows?

Kevin Lawton 29:43

I think the important thing here is that if you establish the standardization in your processes, and you’re going to expand whether it’s to a bigger facility or a second facility, as you mentioned, there shouldn’t be many changes if what you’re doing is working for you. But if you don’t have the standardization, I think that’s where you run into complications, because now if you decide, okay, I’m going to do the process this way at my old warehouse, but now I have a new warehouse.

So I’m going to do it a different way. It doesn’t necessarily make sense. I know one thing that I’ve seen that is works fairly well is standardization across a distribution network. So everybody kind of does things the same way. And now, granted, there’ll be some, some little bit of nuances because the layout will be a little different. But for those nuances, you adapt, but your standardization from your small warehouse to your big warehouse should stay relatively the same. It’s kind of your foundation and framework to really set up the new warehouse.

Sam Gupta 30:53

Right, Kevin? So I think that’s pretty much it for today. Do you have any last-minute closing thoughts?

Kevin Lawton 30:58

Last-minute closing thoughts are first Sam, thanks for having me on the show. I really appreciate being on in the beginning here. I think it’s gonna be a big thing, especially, you know, like I mentioned, all your pushing on LinkedIn is really, really good stuff. And I’m happy, you know, getting me more engaged on LinkedIn, too. And I really appreciate that.

But yeah, I think in terms of growth, the podcast, I’m sure for you, is going to grow. And I hope that some people can get some great insights into this. And also, if they are interested in hearing more about what I have to say, are some of my guests in the warehousing space, you know, they can check out the new warehouse podcast as well, on all podcast platforms, and also on thenewwarehouse.com.

Sam Gupta 31:39

So on that note, I want to thank you for your time and insight. This has been a fun conversation.

Kevin Lawton 31:45

Definitely fun. Thanks a lot, Sam.

Sam Gupta 31:47

I cannot thank our guests enough for coming on the show for sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you learned something new today. If you want to learn more about Kevin or the new warehouse podcast, head over to thenewwarehouse.com. And listen to it on all podcast platforms. Links and more information will also be available in the show notes.

If anything in this podcast resonated with you and your business. You might want to check other later episodes, including the interview with Sarah Barnes-Humphrey from Shipz, who shares her knowledge of the international supply chain and trading. Also, the interview with Wayne Sadin, who brings a unique perspective on why business processes are more important for growth than individual business systems.

Also, don’t forget to subscribe and then spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure you get help.

Thank you, and I hope to get you on the next episode.

Outro 33:03

Thank you for listening to another episode of The WBS podcast. Be sure to subscribe on your favorite podcasting platform, so you never miss an episode. For more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.

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