In the previous issue of MHD a warehouse case study was described together with salient issues and concerns raised by the author. Readers were asked to comment and offer their views to resolve The Choice’s operational woes. Many thanks to those who offered comments, tips and creative ‘back of envelope’ layouts.
In this article, the case study is repeated together with the recommended solution. Note that there are numerous solutions to every project and certainly far too many to discuss here. However, the proposal detailed utilises both the available land and buildings in an economical way. At the same time it includes advances in materials handling and site logistics which will help The Choice achieve a low cost per order supplied.
The Choice – Case Study
The Choice makes a range of durable household products which are supplied to retail, wholesale and internet customers. Major customers include large retailers. However, sales over the web have lifted substantially in the last 18 months due to acquisition of a kitchen fittings business, Kitflix Pty Ltd and the company’s new web site.
With growth, the company has been experiencing a number of issues:
- Poor work flow is proving dangerous to employees. Five accidents have occurred in the last 12 months. Although minor, they have resulted in 10 days lost time.
- Truck drivers complain about loading and unloading delays.
- The Council has sent three letters complaining about semi-trailers parking on the street and blocking local traffic.
- Large amounts of overtime are being worked by staff.
- Customers used to order by the pallet or cartons by pallet layer, but are now ordering by the carton, and inner. On line customers are ordering eaches. This is causing bottle necks in supply as staff struggle to get orders out in time.
- About 15% of orders are inaccurate and result in many returns.
- Fork truck drivers complain that there is never enough pick face positions from which they can pick eaches and inners.
The current distribution centre was an old tyre factory built in the 1950s which was been converted to a warehouse in the late 1990s. It’s a 5,000 sqm square building with a saw tooth roof design. The warehouse has 4 sunken docks, a ramp and a small awning for loading one vehicle space outside. There are remnants of a vulcanising machine in the warehouse, and the floor needs repair around it. So this prevents storage to no more than 2 pallets high in this zone.
Solution: Take out the vulcanising machine remnants and repair the floor. Extend the Awning and add an extra sunken dock.
Okay we are now getting warmed up…
Then, plan to receive vehicles fully onto the site upon arrival.
Re construct the warehouse design to allow for adequate pick faces and a low number of times that goods are touched. Sounds easy, but how?
Lastly, take your friendly councillor to lunch and politely inform him, that the trucks will be soon off the streets!
The clear height under the saw tooth roof is 6.5m. The Choice also owns adjacent land of 9,600 sqm adjacent to a river.
Solution: Use the existing building as much as possible but add a new portal frame extension of 4,500 sqm to 10.5m high. A portal frame means no or very few, columns in the middle of the building! Yay, that’s a relief, compared to the existing building.
Maintain the nest of rare blue ducks on the vacant land by stepping in the building. What if the ducks get scared off? Don’t worry a leading Duck Expert insisted that if we take the right precautions the ducks will remain. (Let’s trust the expert).
Picking and Packing
Staff pick goods by hand off block stacked pallets. To do this they often have to shuffle stock around so that full pallets, cartons and eaches can be picked. 2.5t diesel counter balanced forklifts which were purchased at a bargain price by the procurement manager are used for order picking. Recently one of the staff members was accused of pilferage as some valuable stock went missing. However, the hapless employee was vindicated when the stock was later found buried amongst obsolete pallets of goods.
A constant complaint by staff and customers is that orders are being picked too late for delivery.
Solution: The picking profiles of The Choice have changed to include a large number of cartons, inners and eaches. Driven mainly by the ‘on line’ internet and Kitflix business. So, things have changed, and in the new design, The Choice will not pick goods from block stacked pallets.
The Procurement Manager’s 2.5t forklifts will be quickly retired and electric reach trucks and order pickers (which can be used in smaller aisles) will be introduced.
The innocent employee can rest easy, knowing that The Choice has raised its ability to manage inventory more accurately.
Receiving and Operations Manager
The receiving team, checks incoming goods against manifests. They only allow incoming goods to be put away after they have been totally checked. This can take anywhere from 2 to 3 days. A bottle neck is that 90% of deliveries are in side loading taut liners, while the sunken docks provide for container unloading. This causes staff to unload off the taut liners on the road or in the yard, before loading pallets up to the container docks one at a time.
An additional issue is the constant movement of staff vehicles in and out of the common entry/exit as they access the car park and office. There have been many near misses between cars and trucks on the site. The old disused silo adjacent to receiving does not help as it crams the area into a traffic ‘funnel’.
Solution: No more accidents on this watch! So let’s provide separate access points to the property for both office and warehouse vehicles and re direct traffic in a one way flow across the site.
Demolish any site constraints, blow up the silo and install plenty of hardstand (concrete driveway). (Okay I know it’s expensive).
Use sunken docks for end loading rigid vehicles only, and plan for extra loading bays for both semi-trailers and B Doubles which are loaded from the side. Install doors strategically placed along the building to facilitate this process.
Finally allow space for truck parking and a bypass traffic lane for through traffic and to prevent site congestion.
In the front of warehouse, stage goods ready for dispatch in the appropriate areas after order picking and consolidation has been completed.
Staff is under pressure, as there is simply not enough room to store all of the stock they need, let alone pick it. Consequently 1000 pallets are stored at the bakery across the road at a bargain price of $2.50/w per pallet and $1.50 per pallet movement in and out. Although, the kindly neighbour’s first priority is bread delivery, not The Choice. This has exacerbated the supply delays.
Solution: Retrieve the 1000 pallets from the uncooperative bakery by providing storage systems on site. A mix of drive in and selective racking is recommended.
To include the necessary storage, expand the building with a portal frame extension, and separate receiving and dispatch using a ‘U’ flow design. I.e. receiving on one side of the warehouse and dispatch on the other.
As much as possible plan for one way flow and separation of receiving and dispatch operations. This relieves traffic congestion and any danger within the warehouse.
Because of the current warehouse configuration, staff wander all over the warehouse carrying out various functions. Extra supervisors were hired to make sure their work was done.
Solution: In the new DC, staff will not wander aimlessly; they will be directed with purpose, by the new WMS and voice and/or bar code equipment to undertake tasks in good time.
Confine picking of cartons, inners and eaches to a consolidated pick area or module. Consider using pallet live storage, carton live storage for faster moving lines and long span shelving for slower lines.
We are getting close to achieving a hot operation.
The recently installed warehouse management system (WMS) is working well, but location management is yet to be used due to the chaotic layout of the store. If not for the oldest employee, who knows where every SKU is stored, the place would grind to a halt. This was brought to a head recently when the unfortunate staffer fell from a ladder and was off work recuperating while other staff spent weeks trying to find stock.
Solution: Retrieve from the ladder victim all his available knowledge of stock locations and management.
Then, let’s apply the same logic that applies to your house number, and decree that every warehouse location has a location address. Then, why not apply a label with a bar code and person readably number to each location. Hey presto, we can now track stock!
Now get a handy IT tech, to put the locations on the WMS and, guess what? We can use barcode scanning and/or voice technologies for both put away and picking functions.
When configuring, ensure that the WMS verifies that the operator is at the right location before put away and picking, and then relax knowing that you have just improved stock accuracy by a factor of 4. Discard the ladder.
An additional problem is the reshuffling required with the drive in racking system. Many of the products have use by dates on them, but the constant moving in an out of goods makes it a nightmare to keep track.
Solution: Only use drive in racking for high volume arrivals of the same product and batch. Never, ever attempt to mix products or batches in drive in rack. Use selective racking for lower numbers of pallets or to clear drive in lanes of pallets when quantities get low. The same will apply to carton live storage.eg if multiple batches of a product are to be stored. Allocate separate locations for each batch.
But what really drives operations staff crazy, is the time taken to load in frequently picked stock that is due out the next day, because it is currently allocated a fixed position at the back of the warehouse. The manager heard of a concept called ‘first in first out’, but jokes that the Choice method is ‘last in, last out and lost in space’.
Solution: Check the frequency of picking and allocate stock to storage and picking modes according to the volume at which it moves.
Desist with the practice of arranging stock in fixed positions, but plan annual reviews of stock movement data, to ensure that each product is placed in an appropriate location that minimises materials handling.
Eliminate the ‘last in and last out’ situation, by changing to the ‘first in first’ out philosophy. Add to that, minimal materials handling, low touches, and one way flow. Now The Choice is ‘cooking with gas’.
Dispatch Manager
The dispatch manager oversees outgoing orders and consignments. Due to the growing number of orders, she is short of room. Often staff is unable to load trucks, without double handling of stock in dispatch. So they regularly store picked orders on external hardstand. However, this has been less than successful, due to numerous orders suffering water damage as a result of thunder storms.
Solution: Keep things dry! Makes sense doesn’t it, and lowers wastage.
Provide for an awning for loading and unloading in inclement weather.
Additionally, make sure that there is plenty of staging space for both received pallets and outgoing orders.
The Dispatch manager is under pressure from the Transport Company due to delays loading delivery vehicles. The transport company manager has threatened to increase rates unless The Choice reduces from the current two hour loading time, to no more half an hour.
Solution: Phone the Transport Manager and tell him your new plans to reduce delays, and provide fast and dry loading. Moreover, that there will be no rate increase.
Then re-design the traffic flow around the site for one way flow, schedule deliveries and pick-ups to avoid peak traffic loads.
Pre picking of orders and consolidation of same with paper work will aid the loading process and minimise truck cycle times.
Returns Manager
Returns have increased by 300% after The Choice’s internet sales increased. Returns staff spend most of their time identifying miss picked SKUs and matching the SKU numbers with what should have been picked. Data revealed that 95% of the mistakes are because of wrongly identified product. Mainly due to difficulty in telling the difference between some of the Kitflix SKU numbers.
Solution: Don’t you hate returns. Let’s try and avoid them completely! The proposed layout features a pick module with site addresses and voice picking. This along with an automatic sortation system and packing checkers should substantially eliminate the accuracy issue.
Managing Director
The Choice has been a vibrant and proactive company and has increased its market share to be a major supplier of space age fittings for the modern kitchen. However, its costs have increased at a faster rate than its revenue. This occurred following the acquisition of Kitfix Pty Ltd, two years ago.
With its healthy range of snazzy household goods, The MD was hoping for big profits, but instead noticed expenses rising. He examined warehouse costs and notes they are around 25% of revenue. He received some benchmarking advice and discovered that warehousing costs should be around 8-12%. So he wonders what can be done to:
- Strip costs out of her warehousing operation,
- Improve the flow and layout,
- Remove obstacles to supply,
- Make the whole operation more efficient.
Solution: A revised layout in a newly designed building, together with more appropriate materials handling equipment will make a difference in organisation, labour resources, accuracy and timeliness.
While there is a capital investment attached to the change, with growth of the business, there is potential to achieve excellent pay back within a few years. Especially when savings could well be as much as 25% of warehousing costs.
Check out the layout changes on the following drawings and enjoy seeing the future plans of The Choice!
Best Regards,
Mal Walker
Email: [email protected] or call: 0412 271 503
Mal is Manager Consulting with Logistics Bureau where he leads the Warehousing and Distribution Centre Design Practice. He works with local and international organizations and has over 35 years’ experience in warehousing and supply chain, 20 of which have been in consulting. He is a Life member of the Logistics Association of Australia, Member of Council of Supply Chain Management Professionals. He holds qualifications in Engineering, Logistics and Business Administration.