Preparing Capital Budgets for 2009

Identifying and Defining Scope
Companies whose fiscal year corresponds to the calendar will soon be preparing budgets for 2009. If your boss’ memo or email hasn’t arrived yet asking for your storage and material handling budget items now is the time to prepare.

It is this time of year when Morrison Company is asked by a large number of companies to conduct facility assessments. It is during these assessments that potential projects are identified or projects under consideration are scoped for size. Here is what occurs in a facility assessment:

• Information Collection
  
  
  • Understand the storage medium (pallets, gaylords, super sacks, cartons, bags, drums, etc.)
    
    
  • Determine what equipment if any is being used to move product through the facility (fork lift, conveyor, pallet jack, etc.).
    
    
  • Know how many trucks, people, hours per shift, and number of shifts that are presently required to accomplish the daily, weekly, monthly tasks.
    
    
  • Understand the frequency of product changes that occur in a given period.
    
    
  • Determine causes of product changes: seasonal or market fluctuations, customer demands, and supplier restrictions.
    
    
  • Determine frequency and type of work-related accidents.
    
    
• On-site Observation. We’ll spend time observing the operation at different times of the work-day to see how things are handled presently.
  
  

An assessment usually takes between 30 minutes to an hour. The time spent is a worthy investment in your facility and will result in budgetary figures, timelines and depending on the level of detail of your operational statistics, a preliminary ROI discussed.

Contact us for a complimentary facility assessment for 2009 projects..

You Do That?

Demag Hoists and Cranes
Any operation that has a static weight to move is a potential customer for a crane or hoist. Customized load carrying devices, remote control systems and the utilization of adjustable frequency technology allows most companies adapt how equipment is moved.

Demag cranes include single and double girder overhead and under running cranes. Capacities for double girder over running cranes range from up to 700 tons and spans up to 200 feet. Single girder capacities and spans range up to 30 tons and 100 feet. Capacity and span range for single girder under running cranes are up to 15 tons and 80 feet.

Enclosed rail systems also provide customized material handling solutions. From simple cranes and monorails to completely automated systems Morrison Company has the solution. Whether the load requirements are 50 lbs. or 7,000 lbs., five different track sizes are available to exactly match the overhead system requirements.

Lift assists provide the perfect ergonomic solution and greatly reduce the effort required by the worker in today’s manufacturing environment. Less fatigue means higher means higher production, fewer injuries and reduced time loss, while providing safer working conditions.

Hoist units are the key components in many materials handling applications where loads are moved, lifted, transferred or positioned. Hoist units are available in capacities from 1 to 100 tons.

Justifying the investment of a crane or hoist must also be based on maintenance costs. Demag products are extremely reliable and a supported with a quick ship parts program through Morrison Company. Whether your application calls for a manual or robotic directed solution, Morrison Company has extensive experience understanding your manufacturing goals and recommending the components to provide years of trouble-free service.

To set up an evaluation of your facility, select facility assessment.

Workers Compensation Best Practices

What Not to Do When Rates Drop
When workers’ compensation rates decline, don't shift your attention to other parts of the business or become complacent.

Throughout much of the country, declining workers’ compensation rates are music to employers’ ears. After all, that seems like long-awaited good news, particularly since workers’ compensation is more often than not viewed as a necessity and a significant cost of doing business.

Yet, looking at workers’ compensation as a business necessity or a commodity is a major fallacy. Although most employers fail to recognize it, workers’ compensation is a core business practice and a means for improving the bottom line.

Rather than diverting attention and finances to other business priorities during periods of lower workers’ compensation rates, employers can benefit by taking steps to guarantee long-term savings. Here are eight mistakes employers should avoid so they can achieve long-term workers’ compensation savings.

1. Confusing Lower Premium Rates with Cost Reductions

Many employers are surprised to learn that a reduction in workers’ compensation rates does not always mean a reduction in costs.

Let’s begin with a basic understanding of what determines the cost of workers’ compensation insurance. Unlike other insurance, workers’ compensation functions like a credit line to finance the costs of injuries. As such, rates alone do not determine the overall cost. An experience modification factor (Mod) tailors the cost of insurance to the individual loss performance of an employer. A workers’ compensation premium is calculated by this formula: Rate x $100 payroll x experience modifier.

The Mod calculation is complex, but in general, an employer is compared with similar employers in the same industry classification and if past losses are lowers than average, a credit rating reduces the premium. Conversely, if past losses are higher than average, a debit rating can actually increase costs in spite of lower rates.

2. Becoming Complacent

Declining rates act as blinders for many employers. With lower prices, it’s easy to shift focus away from injury management and cost containment to other, more pressing business matters.

While increased attention to safety led to a decline in the number of workplace accidents, resulting in fewer claims and lower rates, claim frequency is only one part of the equation. The other part, claim cost including indemnity (lost wages) and medical care, continues to rise.

In many industries where there are tight labor markets, wage gains are expected to trend higher, suggesting further increases in indemnity severity. At the same time, medical care costs have marched relentlessly upward since the mid 1990s.

Even more disturbing is the fact that the growth in workers’ compensation medical costs has been much steeper than in the health care industry as a whole, indicating that it is not only medical inflation but a mix of services and over-utilization that are driving up costs.

If claims remain open and injury costs escalate, reserves (estimate of ultimate cost of injury) rise and adversely affect the employer’s experience modification factor, thus increasing costs. Employers need to understand what is impacting medical costs and measure key metrics such as cost per claim trends adjusted for diagnosis and severity.

3. Focusing Only on Direct Costs

Ask a business person how much he or she spends on workers’ compensation and almost all will respond with the price of the premium. Yet, the direct costs of workers’ compensation often represent only 20 percent to 30 percent of the overall injury expenses.

Indirect costs, including overtime, temporary labor, increased training, supervisor time, production delays, unhappy customers, increased stress and property or equipment damage represent several times the direct cost of the injury. A Safety Index report by Liberty Mutual tallied the direct cost of workplace injuries at $40.1 billion. The total financial impact of both direct and indirect costs was estimated to be as much as $240 billion.

Injury costs – both direct and indirect – will have a much greater impact on an employer’s overall costs than rate decreases.

Why not contact Morrison Company today for an ergonomic review of your warehousing or picking operations..

Warehouse Improvement Best Practices

Identifying Improvement Opportunities in Your Warehouse Operations

Three common methods for organizing and operating a forward pick area are: a straight pick line, a branch and pick zone, a serpentine pick zone. Each of these methods is shown in the figure below.

In a straight forward pick line/zone, the most popular items need to be at the start of the pick path. This reduces the likelihood of walking to the end of the pick line to complete an order.

In a Branch and Pick Forward Pick Zone, the more popular items need to be placed near the center aisle minimizing the time spent walking to the back of each cross aisle.

In a Serpentine Forward Pick zone, the more popular items are placed in the aisles at the start of the tour, thus reducing the chances that an operator will have to visit every aisle in the zone to pick an order.

It is quite simple (if there are no seasonal or promotional items in the group) to take item activity information from a warehouse management system or inventory control system and sort it in order of popularity. Using this information to rearrange SKUs on shelves or in flow rack, can significantly cut an operator’s walking distance and therefore, reduce cost. This is "Activity Profiling" in its simplest form.

If there are a number of promotional or seasonal items in your forward pick area, or you have introduced a number of new products, the analysis is a little more difficult. These items need to be isolated and decided on as to whether to include them in the "golden zone" within the forward pick area or not. Seasonal items tend to stick out like a sore thumb on these graphs. They will have high activity but the percent of days picked will be low. Seasonal/promotional items should be positioned towards the end of the line or not in the line when out of season.

Contact Morrison Company about developing the most efficient storage design for your warehouse's picking operations.