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Warehouse Layout Optimization Study Example Highlighting Space and Cost Improvements
Engineering Study for Any Company, Inc.
A site visit to the Any Company Inc. facility was made with the purpose of evaluating the potential benefit of performing a Warehouse Layout Optimization Study. The results of this visit and subsequent recommendations are summarized below. This report will include an executive summary, observations concerning space utilization, potential for capacity growth, a proposed implementation plan, and an updated cost Pro forma.
Executive Summary
Faced with escalating costs and lower efficiencies, successful companies are compelled to seek solutions with lasting results. According to data provided in the Policy Deployment Bowling Chart, Any Company is faced with just this challenge. The data illustrates a situation where costs have risen from $4.439 per 100 WT for Shipping to $5.841 per 100 WT over the last 10 – 12 months, and these costs continue to rise.
In addition to this, new business growth has increased pressure on existing resources requiring current operations to provide space outside, further complicating the matter. This report will recommend a solution to increase space utilization by 33%, grow capacity flow through by 20%, and reduce Shipping dollars per 100 WT for the facility while still maintaining the team’s excellent Safety record, focus on Quality, Service, Housekeeping and Continuous Improvement efforts.
Space Utilization
To perform a thorough storage space analysis requires a sku matrix listing the average receipts, average stored, average shipped, and handling unit characteristics (weight, dimensions, etc.) by part number in the warehouse. However, even without this level of detail, several observations that will significantly improve warehouse space utilization can be made as follows: (1) The mixing of raw material storage and finished good storage areas tends to be disorganized and inefficient, (2) The mixture of racking and bulk storage areas does not appear to be optimal and can be reconfigured to increase storage density, (3) Rack shelving does not appear to be set appropriately for the varying types of storage media and can be reconfigured to increase density, (4) Available warehouse height is not fully utilized, and (5) Temporary storage of waste, scrap, reusable totes, quarantined items, etc. is intermixed throughout the warehouse and can be managed more deliberately to free up additional space for raw materials and finished goods warehousing.
Based on these observations, it is recommended that the warehouse be divided into two departments: Raw Materials and Finished Goods. This will require 2 – 3 additional dock doors to be installed in the back corner of the warehouse opposite the manufacturing plant. A separate sku matrix table will need to be developed for each area specifying the storage characteristics necessary for each sku. From this an exact optimized layout solution can be determined. Figure 2 illustrates a conceptual view of this plan.
The estimate of storage capacity is:
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|
|
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Proposed Layout |
|
Floor Storage Raw Materials |
3,046,069 |
lbs |
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Rack Raw Materials |
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1,904,000 |
lbs |
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Floor Storage Finished Goods |
706,667 |
lbs |
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Rack Finished Goods |
5,700,000 |
lbs |
|
|
|
Total |
11,356,736 |
lbs |
This is using 1,700 lbs per raw materials pallet and 2,000 lbs per finished goods pallet.
Specific requirements for racking and floor stows will be determined from the sku tables which will then be used to refine the final layout for each area. Both areas will be zoned based on volume flow by sku and managed with a warehouse management system (WES). Additionally, a material handling equipment analysis will be performed to take advantage of the unused ceiling height. Estimates are included in the updated proforma for upgrading the fork trucks allowing for storage utilization up to 5 - 6 pallets high. Based on the changes outlined above, it is estimated that storage capacity will increase by 33% from 8.5 MM lbs to 11.3 MM lbs of available space in the warehouse.
Capacity Growth
In addition to improving space utilization, the optimized warehouse layout design in combination with a warehouse management system (WES) and upgraded material handling equipment will allow for an estimated increase in capacity flow through of 20% with the existing labor staff. The addition of one fork truck driver will increase this improvement to 80% over current volume flow through. Since this level of capacity increase may not be required, growth above the 20% level may possibly be absorbed with overtime or carefully screened temporary part-time labor. It is estimated that capacity flow through will increase from an average of 5.592 MM lbs per month to 7.087 MM lbs per month with the existing labor staff and an optimized warehouse. Using the current average labor hours of 1,815 per month, the current labor utilization would increase from 3.112 1k lbs per month to 3.905 1k lbs per month, an increase of over 25% in labor productivity.
Implementation Plan
To provide effective project leadership and execution, Kenco Logistic Services supports all start-up transitions with a dedicated Project Manager during the 3 month startup phase. A detailed implementation plan will be necessary to complete the transition as well as the warehouse optimization study. For purposes of this project, the dedicated Project Manager will serve both objectives. Although the details will be developed fully when the business is awarded, an implementation plan overview is as follows:
- Award Kenco the business with a letter of intent.
- Assign dedicated Project Manager to the site.
- Meet at Site with Start-up Team to organize and develop the detailed plan.
- Initiate the Start-up Transition Plan/SOP Review & Development.
- Initiate the Warehouse Optimization Study.
- Develop detailed Warehouse Reconfiguration Plan and time line with no service interruptions to Manufacturing.
- Complete optimization and bring operations to steady state conditions.
The implementation plan will be developed and administered while maintaining complete focus on Safety, Quality, Service, Housekeeping, and Continuous Improvement.
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