The Ideal Size of Warehousing - Term Paper Example

WAREHOUSING AND DISTRIBUTION As the size of distribution centre increases, the operating costs and capital expenses also increase because itoffers a number of storage racks, lift trucks, which increases operating costs because there are more workers who have to travel much distances to store items. The travel costs is a part of overall distribution centres but in the case of Marmitou, France the distribution centre is planned to be located at Angers, which is not far away from the company’s manufacturing facility. The paper examines the characteristics of warehouse and distribution centre to suggest the most suitable features in the new warehouse to allow storage as per the future demands of storage volume, mainly, determined by the volume sales to fast food clients and the size of boxes. The paper also examines the ideal size of warehousing ahead of 2015, considering various elements needed for calculating the capacity characteristics of the warehouse such as surface area, product movement, human and material resources to estimate the costs of different alternatives. Introduction A warehouse reorganizes and repackages products, which typically arrives on a large scale and leaves packaged on a smaller scale. The distribution centre is a collection of machines, spaces and people, which is designed to store and deliver goods on request and traditionally, the storage role was more emphasized and the design goal for the distribution centres was to reduce the cost by reducing the size of facility. A warehouse can serve differently but it shares the same pattern of material flow and these warehouses involve receiving bulk shipments, stacks for quick retrieval, responding to customer’s requests, retrieving and sorting skus, and shipping to the customers. Warehouse is mainly divided into reserve storage, cross docking, forward picking, shipping, receiving, assembly and special handling lines, and quality / inspection area. But with new changes distribution centres are measured depending in on the future performance and service measures (Maltz and DeHoratius, 2004), which suggests the firms have more strategic role in distribution to be competitive and hence, distribution centres are now a factory of service economy. The products manufactured by the company Marmitous includes goods and seasoning products such as tomato, mustard, sauces, condiments, spices and mayonnaise, and the standard pallet size is 80 cm X 120 cm by 180 cm high . The factory is Nantes which is equipped with automatic pallets and the products are aims towards clients ranging from major distribution stores such as super-markets and supermarkets to convenience stores such as mini-markets. In any distribution centre, there are several components subsystems which include the receiving, order picking, storage and shipping. The most common building block of any system is the pallet storage area, which consists of racks and aisles. In the modern times, the term “warehouse” can be used for entire distribution centre because all the products are stored for some time and in pallet quantities, pallet warehouse consumes the highest space in a distribution centre. Strategic Role in Warehouse Design In the past few years, production has been upgraded and now warehouse and distribution needs to keep pace with future demand and processing. Mostly warehouse is shown in the inventory triangle or shipping which hinders evaluation of waste in warehouse. Issues related to inventory control and management are increasing. The strategic role of warehouse space has modified and there is an increased need for warehouse space. Operating costs is rising as compared to throughput and labour costs have changed. The space available is now reduced and congestion is increasing, which raises shipping errors and other service measurements have also decreased. The order cycle time has also decreased and many companies are using outside facilities or short term fixes for warehousing. The need for appropriate space utilization, material handling and data citation arises in planning the design of a warehouse. The companies are increasing labour to handle warehouse requirements and the concept of lean warehouse was introduced, in which warehousing provides many opportunities to reduce the lead time and processing time. There are other advantages of appropriate warehouse design - 1. Reduction in material handling time for picking, palletizing and put away 2. Reliability issues related to metal detection machines and strapping 3. Reducing the time spent on checking the inventory location and ageing 4. Reduction in the truck loading time The process for designing warehouse should include 1. Ergonomics to reduce errors 2. Provide accurate labelling and zoning of warehouse racks which can reduce the time spent on products 3. Promote use of barcode labels to track pallets 4. Ensure easy organization and reorganization of the rack storage 5. Using Radio frequency bar code scanners 6. The warehouse management system can be used for real time inventory data and pick sequence which reduces error and order packing time 7. To reduce the overall warehouse job categories Warehouse Design Plan To design any new facility, the projected data on the activities should be considered such as material handling type, style of racking, special handling etc. The reorganization of products may take inbound processes such as receiving and put-away, and the outbound processes such as order picking, checking, packing and shipping. Generally, designing a storage area to increase the storage density neglects the operational costs of accessing the items from the space and in the new design; products should flow continuously through a series of processes in such a way that it can be scanned to give a total visibility of assets to ensure quick and accurate response of demand. At Marmitous - 1. The demand is seasonal 2. The overall volume of sales has been increasing in the 3 years. The main factors involves in design criteria are the number of stories, height utilization and product flow. The warehousing operating principles should be examined to design the warehouse which includes 1. Principles of design criteria handling technology and a storage plan. 2. An ideal warehouse has one storey building which reduces the issue of moving products up and down. A good amount of time and energy is needed for moving the products from one floor to another. 3. Regardless of facility size, design should maximize the use of available cubic space and make full use of the height of each floor. Most warehouses have 20 to 30 foot ceilings and modern warehouse have ceilings up to 100 feet. Maximum effective warehouse height is limited by the safe lifting capabilities. Unit Load Warehouse The distribution centres are of two types - case picking and unit load. Unit load warehouse are used for storing items, primarily pallets which can be easily towed or retrieved in a single trip. It is commonly used in two ways at distribution centre - in order picking is where the products are shipped and received in pallet quantities. A reserve area is created which is the fast pick area (Bartholdi and Hackman, 2006). The unit load warehouse can use two methods for distribution - order picking wherein the products are shipped and received in pallet quantities and reserved area, which restocks fast pick area (Bartholdi and Hackman, 2006). Unit load can also use cross docking method. Unit- load warehouse are generally double deep pallet racks or single; they are put in order in picking aisles which are parallel. The traditional design includes the unit load warehouse which does not include the cross aisles and it provides two benefits 1. The construction cost is less 2. The smaller picking regions reduce the overall cost of travel. The case picking distribution was depicted by Ratliff and Rosenthal (1983) where a routine worker could pick up several items from the given rectangular space. Roodbergen and de Koster (2001) provided an extension to the theory by explaining the results of the condition where rectangular picking area was designed in cross aisles style. Although cross aisle is a common practice but it was found that it is not beneficial when a single item was needed because the cross aisle moved half the pallets away from the pickup and deposit (P &D) point at the bottom. Vaughan and Petersen (1999) used the technique of heuristic routing to find out the number of cross aisles from the pricking area. Rectangular Warehouse Shapes Francis (1967) investigated the shape of warehouse and found rectangular warehouse shapes minimized costs of picking and construction. Bassan et al.(1980) designed models which determined the best way to align picking aisles, vertically and horizontally in warehouses. Berry(1968) noticed the floor stores pallets can be arranged in lanes with various depths on the basis of demand and the different lane depths can be arranged in the diagonal gangways in the storage space. Key Assumptions and Findings 1. To calculate the capacity characteristics of the new warehouse - First the number pallets to be stored in the warehouse in 2015 will be assessed, and the stock targets are calculated to be 0.6 of monthly consumptions. 2. Finding out the number of tonnes of products for each procedure (which will be sold in 2012 from the sales forecast) 3. Assumption of the same seasonal sale pattern is made and it will be used to determine the number tonnes of each product which is likely to be consumed in the month with the highest level of sales. 4. From the quantity of tonnes, the number of pallets of each product is determined. 5. The target stock level is assumed to be 60% of the monthly sales and it is used to determine the number of pallets for each product and it is also used to calculate the total amount. 6. The sale forecasts for 2010 - 2015 (in tonnes) are -The total amount of sales forecast in tonnes in 2010 is expected to be 28,674 tonnes and in 2015, it is estimated to be 41,250 tonnes which will rise by more than 44%. 7. The highest number of boxes per pallets is 96 of A7 size which weigh 4608 tonnes and the gross weight per pallet is expected to be 510 tonnes. As per the data on monthly sales pattern, the highest sale is recorded in Decembers and the stock (in net tonnes) is highest in June. 8. The time needed for personnel - the working week is 38 hours per week and 5 days per week, and the labour utilization target is 80%. Steps to Calculate the Characteristics of Warehouse Steps 1 - The capacity characteristic of warehouse is calculated Step 2 - Calculating the surface area Step 3 - It involves product movement where we consider the quantity of pallets and orders for storing, packaging and processing. Step 4- Human and material resource requirements Step 5- Calculate the total capital cost Step 6 - The annual operating cost is calculated We determine the number of employees and items for equipments needed in 2015, and we employ operators to ensure the business grow in the years. For speed, we consider the operators that are theoretically required n 2015. The data is derived from material handling and motion stands developed by ISTIM in France (Institute of Tanning in Installation and Handling Techniques). Evaluating Warehouse Design The elements of principal concern are movement continuity and movement of scale economies. According to the principle, warehouse design should consider the characteristics of the product i.e. volume, weight and storage. High volume sales should be stored in location to reduce the distance from where it is moved i.e. primary aisle and lower racks, and low volume product should be stored in location, which are higher in storage racks and at a distance from primary aisle. The location analysis should be conducted to assist in selecting the general area. The cost of procurement of the site, services and cost should be examined. The main principle of warehouse design is to focus on efficiency of material handling and the various stages followed in the design plan. Conclusion Marketing managers often quote the benefits of a local warehouse and market presence is also dependant on the fact that the local warehouses are more responsive to customer’s needs and are quicker to deliver products as compared to distant warehouses. Having a local warehouse generally enhances the market share and increases potential profitability. Due to the rise in sales and a change in physical distribution strategy, the central warehouse of Marmitous has been shifted to Angers, which is not far away from the company. The location of new warehouse is advantageous and its design has been made from a scratch. The design plan process requires an estimation of future storage plan and technology. Furthermore, the design of a warehouse should include facility characteristics and product movement. References 1. Bartholdi, J. J. and Hackman, S. T. (2006). Warehouse and Distribution Science. Version 0.80. 2. Bassan, Y., Roll, Y., and Rosenblatt, M. J. (1980). Internal Layout Design of a Warehouse. IIE Transactions, 12(4):317–322. 3. Berry, J. R. (1968). Elements of Warehouse Layout. International Journal of Production Research, 7(2):105–121. 4. Francis, R. L. (1967). On Some Problems of Rectangular Warehouse Design and Layout. 5. The Journal of Industrial Engineering, 18(10):595–604. 6. Maltz, A. and DeHoratius, N. (2004). Warehousing: The Evolution Continues. Research Report, Warehousing Education and Research Council. 7. Ratliff, H. D. and Rosenthal, A. S. (1983). Order-Picking in a Rectangular Warehouse: A Solvable Case of the Travelling Salesman Problem. Operations Research, 31(3):507–521. 8. Roodbergen, K. J. and de Koster, R. (2001). Routing Order Pickers in a Warehouse with a Middle Aisle. European Journal of Operational Research, 133:32–43. 9. Vaughan, T. S. and Petersen, C. G. (1999). The Effect Of Warehouse Cross Aisles On Order Picking Efficiency. International Journal of Production Research, 37(4):881–897. Read More