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How to Record Warehouse Performance Using DEA
Traditional performance metrics simply don't contain enoughinformation to support comparisons over time or across various sites
DEA enables one warehouse to be compared to a cohort of "peer"warehouses, not based on averages, but based on "best performance
DEA has been implemented in an internet-based tool, iDEAs-W
DEA allows warehouse managers to compare their warehouseoperations to a large set of other warehouses.
iDEAs-W requires only a modest data input effort, and provides a
"system efficiency" score
As per DEA scores almost every segment of the warehousing industry,fewer than 20% to 30% of the warehouses are "efficient.
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Warehouses use resources (facilities, equipment, inventory
investment, labor, etc),to produce an economically valuable service(customer orders shipped)
Traditionally, warehouse performance has been measured using a hostof single factor performance and single factor productivity metrics
Single factor example - lines shipped and fill rate.
For example, the output could be lines picked and the input could belabor hours, yielding the labor productivity, or lines per hour
The issue : to interpret a particular single factor metric, or tocompare two values, one must have a considerable amount of additional information to draw a relation between them
Detailed Analysis
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DEA would allow a particular warehouse- candidate warehouse--to becompared to a large set of other warehouses.
DEA would construct a hypothetical composite warehouse from theinput and output data for all other warehouses, and this compositewarehouse would be compared to the candidate warehouse
The DEA "score" for the candidate warehouse would be reported as a
percentage and is interpreted as the composite warehouse used nomore than X % of any single resource used by the candidateWarehouse
DEA Analysis
Limitation The warehouses compared should be "similar enough" so that
they are comparable To work effectively, DEA requires a considerable number of
warehouses for comparison;.
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Hackman and Frazelle model (1993)
The data elements are: Total labor hours includes both direct and indirect labor that is
specifically associated with the warehouse function
Lines shipped is simply the total number of lines over all orders Accumulation is defined as the total lines shipped minus the total
orders shipped, and is a measure of the extent of sortation required
Involved 55 warehouses and the proposed DEA model had theresource inputs and production outputs
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The Storage Function: Storage function intended to characterize both the mix of storage
types and the space actually needed for Storage
S= a*sqrt(B)+(1-a)*[sqrt(25*P) + sqrt(floor storage sq ft)]
B = number of broken SKUP = Number of Pallet locationa = broken case line picked / total line picked
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Single Product Factor Metric ( SPFM)
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Resource/Input
P r o
d u c
t i o n
/ O u
t p u
t
DEA Efficiency Production Frontier
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O A B
Resource/Input
P r o
d u c
t i o n
/ O u
t p u
t
System efficiencyof warehouse B isthe ratio
OA/OB
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input
output
Efficient Frontier
Inefficient Frontier
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0
1
2
3
4
5
6
7
8
0 0.5 1 1.5 2 2.5 3 3.5
Data Envelopment Graph-Frontier Graph
B
A
C
D
Efficient-frontier with 100% relative efficiency
Note : DEA only gives you relative efficiencies - efficiencies relative to the dataconsidered. It does not, and cannot, give you absolute efficiencies.
P r o d
u c
t i o n
/ O u t p u
t
Resource/Input
BestPosition
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Calculation of efficiency of Warehouse D is as below 100(length of line from origin to D /length of line from origin
through D to efficient frontier) 100 x ( OD / OP ) = 100 x ( 2.3 / 6.26 ) = 36.7 % Similarly efficiency of B would be 43 %
Warehouse Relative EfficiencyA 100B 43C 100
D 36.7
A
Achieving the efficient frontier reduce its input whilst keeping its output constant (an input
target); or increase both its outputs, whilst keeping its input constant (an
output target); or
do some combination of the above
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Partial productivity is the ratioof one output to one input
Partial efficiency is theratio of your partialproductivity to the best
partial productivity in yourpeer group.
Lines picked
Total labor hours
Lines picked
Total labor hours
Lines picked
Total labor hours
Your
Best