dea ware house

8/2/2019 DEA Ware House

1/18

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.


2/18

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


3/18

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;.


4/18

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


5/18

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


6/18

Single Product Factor Metric ( SPFM)


7/18


8/18


9/18


10/18

Resource/Input

P r o

d u c

t i o n

/ O u

t p u

t

DEA Efficiency Production Frontier


11/18

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


12/18

input

output

Efficient Frontier

Inefficient Frontier


13/18

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


14/18

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


15/18


16/18


17/18


18/18

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

dea ware house

Documents