Logistics Planning

June 7, 2002
Piecing Together a Distribution Center Operations Plan
By Tony Jaecques Space, labor, and throughput are invariable measuring sticks in distribution center planning. Warehouse managers constantly ask the questions, “Is the space inside my facility being used efficiently? How can labor costs be reduced? How can throughput be increased?” Whether a company sells pharmaceuticals, ketchup, or microchips, the importance of managing an efficient distribution center is undeniable.Most companies spend wisely in purchasing expensive software systems for their business. But some do not place the same emphasis on the design of their distribution center. “A frustrating, but apparent trend in the distribution center industry is the lack of logistics planning when it comes time to build or expand,” says Norman Saenz Jr., manager of logistics and industrial engineering for Carter & Burgess, Fort Worth, TX. “In planning distribution center operations, ‘To plan or not to plan’ should not be the question.” Instead, companies must know that failing to plan can have dire consequences, he says. “The lack of planning results in the distribution center’s four walls closing in faster than expected, causing a rush to build or expand.”If the entire site plan or expansion space is not considered, the result can be a maze of inefficient space in the future. “It is easier to build a distribution center around a solid process,” says Dave Kiel, a structural engineer and program manager with Carter & Burgess. “A distribution center’s purpose is to protect goods and products and house an efficient distribution process. It is better to build the facility around that.” To make planning more challenging, customer demands are continuously changing, but the demand for on-time delivery of orders has remained critical to the bottom line.The Importance of Integrated DesignDesigning a structure that will remain functional and efficient over a decade or longer is a complex task. Contributing to this complexity is the need to balance short-term budget and scheduling goals with the mission of developing a long-term facility operations plan. Logistics planning seeks to resolve these seemingly competing demands by recognizing that a building can be designed so that it is economical to build, efficient to operate, serviceable for decades, and easily expanded. As a result, logistics planning takes a long-term, multi-disciplinary approach to development that considers a building as a whole. The multi-disciplinary method means that every team influences important building elements. Logistics planning regards a facility as a totality that should operate in concert rather than as a collection of individual parts.Developing a Logistics PlanCompanies have two philosophical approaches in developing a plan for their distribution centers – biased and unbiased. The biased approach refers to using a supplier that represents specific equipment or systems. With this approach, the solution is based on the resources available to that supplier, and can result in a solution that may not maximize available universal resources.Developing an efficient and effective unbiased logistics plan involves developing what Saenz calls “best-practice solutions” and defining detailed future planning requirements. “The result of this approach is a future distribution center logistics plan that considers the full facility expansion capability on your available site, which maximizes your space, equipment, and labor resources.” The unbiased approach is available through consulting firms that do not have exclusive alliances with suppliers. Regardless of the approach used by a company, developing a logistics plan is a critical first step to design and build an efficient distribution center.Planning for GrowthThe first step in planning is understanding and analyzing operational data to build a foundation for a solution. Once a foundation is established, business growth factors are applied to the current operational requirement to project future requirements. A critical step in this process is to establish the planning phases. “Typically, each phase has a five-year planning horizon. That way, when your business grows after five years, you have a plan that allows you to efficiently expand,” Saenz explains.A typical distribution center solution starts with the reserve storage area, and includes an order picking area, dock area, returns area, material handling design, office space, battery changing area, and maintenance area. According to Saenz, the reserve storage and order picking areas are the critical spaces for future growth, but focus must be placed on all areas to ensure an efficient design that supports the required growth.Reserve Storage AreaThe reserve storage area should be designed based on specific future requirements. To select the most effective storage equipment, an inventory profile is performed to define the unit loads per SKU to be stored in inventory. Inventory profiling is used to define the location openings required to maximize the cubic feet of storage volume. The movement of inventory is calculated to determine if automation is required, the type of material handling equipment, and if it supports the slotting of SKUs.“Understanding the characteristics of the stored SKU, such as the load dimensions, weight, and special handling considerations, is essential to designing an effective storage system,” Saenz says. The consideration of first-in/first-out (FIFO) and last-in/first-out (LIFO) selection requirements should be addressed.The decision between fixed and random storage methods impacts how products are kept in the storage area. The fixed storage method assigns a SKU to a specific location. In a random storage method, any empty location in that SKU’s zone is available for storage. The random storage method is typically preferred, because it provides a higher utilization of empty locations.Forward Picking Area“The order picking area is the heart of most distribution center logistics plans,” says Saenz. Products flow into and from the picking area to satisfy customer orders. Typically, a product’s reserve storage location is the first option for picking orders. A breakdown of the customer order history into SKU line velocity and SKU cubic velocity profiles is required to define the best pick area solution. In addition, the customer order file is used to define the pick types, including piece, case, or pallet.Material Handling EquipmentThe application of industrial vehicles and conveyor systems is part of the overall logistics planning concept. The product load length, width, height, and the SKU throughput requirements determine the selection of material handling equipment. When comparing the use of conveyors to industrial trucks, the following conditions support the use of conveyors:·        High SKU line and cubic velocity.·        High material handling labor costs.·        Material moved between specific points.·        Material moved over fixed path.When planning for the future, the use of advanced automation including automated guided vehicles and monorails should be considered.DC Systems/TechnologiesThe application of warehouse technologies, such as voice and pick-to-light systems, should be evaluated to further enhance operations. In a radio frequency terminal system, the terminal is used to initiate and complete orders. The location and quantity for each product is displayed on the hand-held or wrist-mounted terminal screen. Voice recognition system terminals convert electronic text into voice commands that guide the operator during picking. In a pick/put-to-light system, the operator uses a tethered or radio frequency scanner to initiate orders. Bay and location displays on the storage equipment are illuminated to guide the operator.Developing a quality distribution center logistics plan may take six to 12 weeks, but the time is well spent. “The alternative to not planning is almost guaranteed to negatively impact your operation when your business requirements change faster than expected,” Saenz says. “Why not plan for the future, and reduce the expenses and inefficiencies resulting from an unplanned distribution center expansion or new facility?”Tony Jaecques is senior vice president and principal at Fort Worth, TX-based Carter & Burgess (www.c-b.com).

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