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1. "WOULD AN AUTOMATED GUIDED VEHICLE SYSTEM

IMPROVE YOUR OPERATIONS?"
AGVS Advantages
- Reduce Manpower
- Increase Productivity
- Eliminate Unnecessary Fork Lift Trucks
- Reduce Product Damage
- Maintain Better Control of Material Management
An Automated Guided Vehicle System (AGVS) can be an integral part of a conventional warehouse
characterized by long distances and "same path" movement. It offers an alternative to fixed-path
conveyors and overhead materials handling equipment for this type of facility.
A wide range of vehicles move pallet loads of materials and perform various functions such as liftlowering, towing carts, transferring loads to and from high level pallet racks, and precision
placement of loads in pickup and delivery stations. Loads of varying weights (including several
thousand pounds each) can be handled.
AGVS Systems are now controlled by flexible, on-board microcomputers. Intelligent terminals and
radio frequency controls are incorporated into the system to track and direct vehicles.
Vehicles can move both forward and backward at various programmed speeds. Following a guide
wire in the floor, some vehicles can even execute commands off-the-wire or "free range" when
required. Sensors mounted throughout the guide path control can direct vehicles in motion. AGVS
is frequently utilized in receiving materials into the warehouse and transferring pallet loads from
receiving dock areas to pallet rack areas for putaway.
Warehouse areas are best served by an AGVS in two ways. First, when pallet loads are removed
from warehouse storage racks, loads are transported to shipping or other warehouse areas.
Second, an AGVS can be used to pick up loads from the warehouse and deliver them to work in
process areas or to redistribute loads to other manufacturing functions.
Safety sensors and devices are installed on the vehicles to "warn" the vehicle of objects and
people. Bumpers and stopping devices, warning horns, lights and other audible sounds can also be
provided.
If your distribution center or warehouse is a potential AGVS user, Gross & Associates can design
your system as a single component or in conjunction with layout or design plans for modernizing
your operation
2. "AUTOMATED MATERIAL HANDLING EQUIPMENT
HOW DO I DECIDE IF IT IS RIGHT FOR MY OPERATION?"
One of the members of the board of directors or a principal of your firm has just visited a
competitor's automated facility and wants to know if automated material handling equipment is
appropriate for your firm. Would you know how to help top management decide?
Automated material handling equipment systems have been around in one form or another since
the 1950's. Different degrees of automation success have been achieved in a variety of
applications. Horror stories as well as truly excellent installations abound, sometimes within the
same company. How do you go about the process of evaluating automation?
GETTING STARTED
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2
First determine which material handling operations should be considered for automation.
- Receiving?
- Putaway?
- Replenishment?
- Picking?
- Shipping?
After you have decided which material handling operations are candidates for automation, develop
a database of operating histories and requirements for the operations you are considering.
Automation should only be considered if the stability of the following factors is predictable:
a. Corporate structure
b. Operating requirements
c. Order characteristics
d. Unit load size
e. Carton size
f. Location network configuration
WHEN PROPERLY ANALYZED AND IMPLEMENTED, AN AUTOMATED MATERIAL HANDLING
SYSTEM CAN GIVE YOUR COMPANY A COMPETITIVE EDGE.
If you cannot project a "stable state" for the operation, automation becomes much riskier.
DEFINE SYSTEM REQUIREMENTS
The process of defining what you want the system to accomplish is probably the most tedious task
in the process. If you cannot define the system requirements for a particular task you are trying to
automate, stop and reconsider automation. You cannot automate what you cannot define. Include
your managements payback hurdle rate as part of the system definition.
VISIT SIMILAR APPLICATIONS
When you have defined the system, approach three or four qualified material handling equipment
vendors. Familiarize these vendors with your system requirements and ask them to arrange for site
visits and telephone conversations with installed users. If a vendor cannot arrange for you to visit a
satisfied user, reconsider using this vendors system.
OBTAIN DETAILED BIDS
After you have "qualified" the appropriate vendors, request detailed bid packages from them. In
addition to prices, these bid packages should include detailed drawings, information system support
requirements, system capacities, installation schedules, start-up assistance required and provided,
acceptance test procedures, service agreements and warranties.
EVALUATE THE BID PACKAGE
The process of evaluating the bid packages must be approached very carefully. The vendors will
have spent considerable time, effort and money preparing these packages. Your company is going
to spend considerable time, effort and money implementing the automated material handling
equipment system if it decides to proceed.
A system that does not work properly will not only not improve your operations, but may, in fact,
impede them. Therefore, selecting a vendor based solely on price is asking for trouble.
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3
The financial stability and reputation of the vendor and of any subcontractors they plan to use
should be high on the list of evaluation points. Before making a final decision, the system should be
thoroughly tested using computer simulation. The simulation should be prepared by an independent
party - not by the vendor.
IMPLEMENTING THE AUTOMATED SYSTEM
When the process of choosing a vendor has been completed, the real implementation work begins.
Insist on close coordination between your project team, your software development team, and the
vendor's team. Treat the vendor's team as a partner. Establish a detailed implementation schedule
immediately and monitor it closely during the entire process. Insist on definable milestones for
hardware and for any associated software development.
Prior to start-up, detailed procedures must be written and your software must be documented and
tested. Detailed procedures will be the basis for training the personnel involved in using the new
automated system. Proper training is the key to success at this point.
Documentation and testing of your software should focus on the elements which drive the
mechanical controls as well as those which provide information to the system. Make sure you
receive complete system documentation from the vendor. Prepare a good test plan with clear
predicted results. Allow sufficient time to complete adequate testing procedures.
After the acceptance test and shakedown period are over, an assessment should be made of how
to make the new automated system more effective for your operation. Note any changes needed
and obtain vendors agreement to make them.
SUMMARY
Automating material handling operations is high risk/high reward situation. When properly analyzed
and implemented, an automated material handling system can give your company a competitive
edge. When not properly analyzed and implemented, an automated material handling system can
become your worst nightmare.
3. "A POWERFUL TOOL FOR EVERY DISTRIBUTION MANAGER"
Most distribution/logistics managers have heard about benchmarking in one way or another
probably mentioned in the same breath with Xerox, Motorola, AT&T and other leading-edge
companies. They've read about how this powerful tool helps such corporate giants maintain
competitive advantage. Unfortunately, they're also likely to believe that benchmarking applies only
to "the big guys" such as Fortune 500 companies with the money and resources to fund huge
efforts.
Nothing could be further from the truth. Benchmarking isn't just for the Xeroxes and AT&Ts of the
world. It's for any company interested in improving its processes on a continuous basis, regardless
of size and sophistication. It's a process that can be implemented at any levelnot just at the
executive tier. People at the distribution center manager level can and should be looking at
benchmarking.
Why is benchmarking important to everyone in business regardless of their title? If you don't
become a better operator, you may lose out altogether. Your competitors will use benchmarking,
and as a result, may be able to take away your customers. So it comes down to a matter of
corporate survival.
Given this information, how can distribution managers apply benchmarking to their operations? One
way is to follow the step-by-step approach outlined in the following paragraphs.
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4
"Ultimately, the biggest benefit of benchmarking is greater customer satisfaction".

BENCHMARKING EXPLAINED
Before getting started, let's define exactly what we mean by benchmarking. AT&T's Benchmarking
Group offers a good working definition: "Benchmarking is a continuous process of measuring
current business operations against 'best-in-class' operations to improve quality and drive
performance that meets or surpasses current industry standards."
According to an article in the March 1992 issue of Distribution magazine, most benchmarking goes
on at the functional level. Companies use it to analyze and improve specific functions or processes.
However, benchmarking also can occur at the strategic leveli.e., top management asking what
their companies should be doing to remain competitivealthough this type is far less common.
Robert Camp, manager of benchmarking competence at Xerox Corp. and a pioneer in the
discipline, reports that one of the hottest areas of activity right now is warehousing. "It's a natural
because it's such a quantitative area", Camp observes. Other functions getting a lot of
benchmarking attention include inventory control, order processing and customer service.
THE RIGHT STEPS
The benchmarking process follows a logical sequence of steps, the first of which involves deciding
which process to benchmark. One way to do this is to identify which function causes the
organization the most trouble, or which has the greatest impact on the customer.
Next, identify the key performance variables for the selected function. These include such items as
efficiency (time, cost, productivity), and quality (meeting customer requirements).
Then, document current processes and flows, looking at both the physical activities as well as the
supporting information system flows. In the receiving area, for example, look at receiving functions
like scheduling. Ask yourself,
How do I schedule my deliveries?
What advance information do I have?
Do I know the incoming SKU numbers and quantities?
Or, do I just get notification that a truck will arrive from vendor X, with no data or content?
Worse yet, do inbound shipments arrive at my dock without notification?
Knowing exactly what's on incoming trucks allows the distribution center manager to pre-assign
warehouse space and schedule labor in advance. The manager can print barcode labels ahead of
time and have them waiting for the goods when they arrive. He also can balance the workload so
there are fewer peaks and valleys in terms of labor demand.
This kind of individual process analysis is very valuable for companies because most have only a
sketchy idea of how things work. They frequently are surprised at what they find going on in a
function. But it's important to keep the analysis at a summary level. Don't get bogged down
documenting every detail. Management isn't interested, and you don't need the detail for
benchmarking purposes.

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5
The fourth step in the benchmarking process is to identify competitors and best-in-class companies
with which you want to benchmark. In the interest of learning how to improve, it's useful to look at
competitors and non-competitors.
The thing to watch out for with competitive benchmarking is that managers tend to get defensive
about their operation. The point with competitive benchmarking is to avoid finger pointing, and use it
as a learning tool with no blame attached. Otherwise, your results will be disappointing.
Best-in-class information is relatively easy to come by. Many such companies are willing
benchmarking partners, pleased to host site visits, and provide pertinent process information.
Competitive benchmarking data, on the other hand, may not be so readily available. If you can get
it, it may mean more to your management than best-practice information because you can say,
"Computer X is doing it this way, and we're doing it that way. We need to improve to stay
competitive."
Competitive information doesn't have to be proprietary information, and you don't need to hire a
corporate spy to get it. The best sources for this information are industry meetings, professional
organizations, equipment and systems vendors, and business publications.
Benchmarking step five involves deciding which competitor or non-competitor practices would most
benefit your organization. Look at practices from a strategic quality and customer satisfaction
standpointnot just from a cost cutting perspective. Labor savings and cost cutting are not the
main reasons to do this.
In the case of the receiving function, assess what benefits you'd gain if you started scheduling your
incoming shipments, and receiving detailed information about contents from your vendors. If you
supply retailers for a spot sale, for instance, you may be able to improve your delivery timeliness by
getting more complete inbound shipment information and using it to schedule outbound deliveries.
You may find out you need to expedite a shipment in order to meet a sale date. You can make such
arrangements ahead of time and notify the stores.
One note of caution when reviewing others' practices for your company: Don't just copy what others
do. The way another company does something may not exactly fit your situation. Instead, evaluate
the practice and modify it to suit your needs.
At times, adopting another company's "best practices" requires a capital investment. If that's the
case, the distribution manager will have to go through the justification process. If the changes are
merely procedural, no such justification is required. In many cases, the distribution manager has the
authority to institute the changes immediately.
One of the keys to successful benchmarking is to find partners within your company to support your
efforts. Look for partners in other departments whose performance will be improved by your efforts.
If you prove to the vice president of sales that a capital investment in radio frequency and bar
coding technology will help the company service customers bettera fact that sales can use as a
marketing tool--he may be willing to go to bat for you in the justification process.
SATISFYING CUSTOMERS
Benchmarking is a time-consuming and often difficult process, but can pay big dividends if
successfully implemented. It forces companies to take a long look at their current practicesan
analysis that often leads to immediate process improvements. If the distribution manager takes a
lead role in championing benchmarking, he gains new visibility in the company. This visibility can't
hurt, particularly in this environment of corporate downsizing.
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6
Ultimately, the biggest benefit of benchmarking is greater customer satisfaction because it improves
processes and allows companies to meet customer needs better. In the words of one benchmarking
expert, "Benchmarking seeks ways to meet customer needs, not just produce some percentage
improvement over the last few years. It will assure the continuous positive change needed to get
ahead of the competition and stay ahead."
4. "EFFICIENT HANDLING STARTS WITH GOOD PLANNING"
Efficiency in material handling operations has become one of the most important factors in the
success of the manufacturing or distribution company entering the nineties. Customers demand
more services and stiff competition means more and more cost cutting. A company's success or
failure can depend on its ability to do both of these things simultaneously. Although increasing
services while decreasing costs seems contradictory, it can be done, and two planning tools are
especially helpful in making it work.
Computer aided design (CAD) and computer simulation used in planning material handling
operations can help to minimize the number of handlings, reduce distances that materials need to
be moved, and facilitate movement to increase speed, prevent damage and reduce labor.
CAD's principal use in material handling planning is for developing alternative layouts for
warehouse and manufacturing operations. CAD has several features which make it more
convenient than conventional mathematical calculations and drawing by hand. CAD is accurate
enough to produce drawings which can be used for rack installation or parts assembly. It provides
visual representation of material flows in a manufacturing or warehouse facility in plan, elevation,
isometric or animated views.
Computer aided design and computer simulation used in planning material handling operations can
help to minimize the number of handlings; reduce distances that materials need to be moved; and
facilitate movement to increase speed, prevent damage and reduce labor.
Drawing is faster and neater with CAD than drawing by hand. CAD programs use a layering system
which is much like using transparency overlays on a drawing done by hand. Groups of drawing
entities are organized together on different layers and can be turned on or off individually or in
groups. For example, in a warehouse drawing, one layer may contain the walls, a different layer will
have columns, and there will be a third layer for pallet racks in one configuration and a fourth layer
to show pallet racks in a different layout. This means that all of the alternatives can be drawn and
stored in the same drawing file.
One of the time saving features of CAD is its ability to load the contents of a drawing into a
database program. This allows the computer to generate bills of materials or to list the storage
capacity of various alternatives. A manufacturer with CAD capabilities can create CAD drawings in
exactly the same manner as actual assemblies are made. By drawing a set of uniquely identifiable
parts, and giving names or code numbers to each part, a set of symbols is created. These symbols
or parts can be used to create higher level drawings consisting of a combination of the parts and
each unit within the whole composition can be identified and counted automatically for a bill of
materials. With some programming, a CAD program used in this way can be made to provide the
component parts information needed for a materials requirement planning (MRP) system.
COMPUTER SIMULATION
Computer simulation makes a mathematical model of an operation. A simulation is created by
describing to the simulation program all of the known or assumed data about the physical
characteristics (such as the number of stations or steps, the traveling distance from one part to
another, the space in which the action is occurring, etc.), and the times involved (how long it takes
to get from one point to another; to load and unload material from a conveyor, lift truck, or shelf) to
perform a specific task. After entering all of the information, the simulation is run. It keeps track of
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7
how much has been done, the elapsed time, how much material has been used, whether any
queues have been formed, how much accumulation of material there is, and where and when
crowding may occur. If the simulation program includes animation, you can see a representation of
all of this action occurring while the program generates the statistical information you need.
The supermarket checkout operation is one example of a function that might be simulated. Almost
everyone has been in a grocery store on some occasion (usually a weekend morning) when there
are not enough checkers, and the lines extend from the registers into the food aisles, preventing
people from moving from one aisle to another or from reaching items on the shelves or from
identifying which line is the shortest, or even from getting to that line if one could see it.
Coincidentally, unless the store is open 24 hours a day, this is also typically the busiest stocking
time, so cartons and pallets and carts are likely to contribute to the general congestion in the aisles.
If we were designing a new supermarket, and wanted to try to minimize the crowding effects at peak
shopping times, we could simulate the proposed activities. We would tell the simulation program
information such as how many checkout lanes our design contained, how many customers could be
expected to enter the store in a given time period, how long it would take them to get through the
store and make their selections, what paths they would be most likely to follow, how many items
they might buy, how long it would take to unload an item from a cart onto the register conveyors,
how long it would take for the checker to scan and bag each item and total the sale, collect the
money and make change.
By changing those variables one at a time which could realistically be changed, we could find the
best solution to the problem. For example, we might try adding an extra checkout register, or we
might see what would happen if we increased the aisle space, or added baggers to the operation.
Simulating these operations under any of the conditions we might consider would tell us which
changes would be most effective.
TESTING A DESIGN INEXPENSIVELY
The greatest benefit of simulation is that it allows you to test a design inexpensively before
committing time and money to the implementation of new operations. In material handling
operations, simulation is especially useful in showing staging space requirements, accumulation
conveyor lengths, potential aisle contention - that is, two or more things needing to be in the same
place at the same time - the number of vehicles needed to meet a particular quota, the number of
cars in an AG system or lanes in an AS/RS. These are areas that can cost an operation in lost
efficiency for many years. Once equipment has been bought and installed, and employees have
been hired and trained, it is difficult to change.
Of course, any of the information that can be obtained from CAD or computer simulation can be
calculated mathematically, but because of the number of calculations and the tremendous amount
of time involved in doing these things manually, they are often inaccurate, or simply not done at all.
CASE STUDY: A PROBLEM FOR CAD
A chemical distributor built an 11,000 square foot warehouse, with 25' by 39' 6" bays. In this
building they had to store approximately 1,000 pallets. They wanted the most cost effective layout
that would meet their storage requirements.
GROSS & ASSOCIATES laid out 16 alternatives using CAD. There were four different layouts to
accommodate each of four different types of lift trucks: counterbalanced, narrow aisle reach, double
reach, and very narrow aisle. Then GROSS & ASSOCIATES compared the one best layout for
each of the four trucks for capacity and cost per pallet stored. The counterbalanced truck provided
the best cost per pallet, but the layout only had a capacity of 912 pallet positions, because of the
wide aisles required by this vehicle. The narrow aisle reach truck alternative was more expensive
because of the cost of the truck, but it could only store 914 pallets because the minimum aisle width
for this vehicle did not work well with the building's
column spacing. The very narrow aisle truck had
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8
the highest cost per pallet but was able to store the most - 1,164 pallets. However, the double reach
truck alternative had a capacity of 1,103 pallets, which was enough to meet the company's
requirements, and the cost per pallet was less than the very narrow alternative. The client chose the
double reach alternative.
What this shows, particularly in comparing the counterbalanced layout to the reach truck alternative,
is that it is not always easy to mathematically calculate how much space various alternatives will
require. Because of column spacing or other building characteristics, it is more accurate to draw
each layout of the building. CAD makes it feasible to design and view possibilities that would have
been too time consuming to draw by hand, permitting more thorough analysis.

5. "HOW TO CHOOSE THE LIFT TRUCK THAT'S RIGHT FOR YOU"

Choosing the right forklift truck can save a company money. Unfortunately, however, that's not
always a simple task. With costs for a single truck ranging from $15,000 to $100,000, many buyers
are tempted to select a truck on the basis of the sticker price. Yet by choosing a certain model
without thought to the costs of maintenance over the vehicle's life, they may end up paying more
than the initial cost just to keep that lift truck at work on the docks or in the warehouse. What follows
are some general guidelines to consider when burying a lift truck. Because individual applications
may vary considerably, it's best to discuss any specific work conditions or plans with the dealer
before making a purchase.
OUTDOOR EQUIPMENT
The first factor to consider in purchasing a lift truck is whether it will operate outdoors or indoors. If
the truck will be used outside the warehouse, then it's necessary to choose an internal-combustionengine model powered by gas, liquid petroleum, or diesel fuel. If the truck will operate primarily
outdoors in a cold climate, a gasoline-powered truck is the most logical choice. This is particularly
true if the operations call for constant engine starts and stops.
Diesel-engine lifts, on the other hand, are designed to perform in more rugged conditions and
terrain. The diesel truck should be used constantly so the engine doesn't have to be shut off. You'll
kill a diesel truck if you have to crank the engine every two minutes. Frequent ignition starts spray
excess fuel into the engine crankcase, thus contaminating the oil. For that reason, we recommend
that owners of diesel lifts change their oil regularly.
The other type of lift truck designed for outdoor use is powered by liquid petroleum, commonly
dubbed LP, and competes for the same market as gasoline-fueled models. LP trucks, however, are
generally favored for operations that call for both indoor and outdoor use because their fumes are
less toxic than those of gasoline trucks. Fuel costs for operating LP or diesel lift trucks are about
equal, but maintenance costs for diesels tend to be lower.
Users sometimes equip LP trucks with a hood or heater to volatize the gas in a cold climate. If that
isn't enough to ensure trouble-free operation it is easy to convert LP trucks to gasoline fuel.
Not only does the outdoor terrain help determine the choice of internal-combustion engine, it also
will dictate the type of truck tires used. Pneumatic tires are designed for bumpy surfaces. Cushion
(airless) tires are used outdoors on smooth, hard surfaces as well as for most indoor purposes.
WIDE RANGE OF INDOOR TRUCKS
When it comes to loading and lifting indoors, such as in a warehouse, electric trucks make more
sense. Unlike internal-combustion-engine trucks, electric-powered models are quiet and nonpolluting.
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9
Though electric trucks are more expensive to purchase than internal-combustion models, they
boast a lower cost per year of operation over the life of the vehicle. Electric lift trucks save money
because they don't require fuel, oil changes, or replacement parts like points and plugs. The cost of
maintenance for an electric vehicle runs from 40 cents an hour to $1.80 an hour in a normal life
cycle. (A truck in a single-shift operation is typically used about 1,700 hours a year.)
Still, electric trucks aren't headache-free. Companies using electric lift trucks have to pay attention
to their batteries and check their water levels frequently. Letting the battery go dry is a very
expensive mistake. A battery can be worth several thousand dollars alone.
Once they have settled on an electric truck, buyers must then choose from a number of models.
The most important factors to consider in lift truck selection are the intended application and the
warehouse design. If the lift truck will be used to load and unload trailers, for instance, then a frontwheel drive, sit-down rider counterbalanced model is preferred. (The term "counterbalanced" means
that the truck is weighted in back so that it won't tip over when lifting a pallet in front.) Threewheeled counterbalanced models offer more maneuverability, while four-wheeled vehicles can
handle larger loads.
If lift trucks are used to shuttle loads into trailers, another factor for consideration is the amount of
"free lift". Free lift refers to the amount of height forks can be raised without causing the mast to be
raised. Forklifts working in trailers need a great degree of free lift. Otherwise, if the mast were to rise
to accommodate the rising of the fork, the mast could poke a hole through the trailer's roof.
Warehouse aisle width is another major consideration in selecting a type of truck. A three-wheeled
sitdown counterbalanced truck requires 10-foot-wide aisles. A four-wheeled version, on the other
hand, needs more space; it requires aisles between 12 and 13 feet wide.
For operation in narrower aisles, buyers often favor reach trucks. A reach truck equipped with
outriggers for retrieving pallets can function in aisles about 8 feet wide. Double-reach trucks
designed to handle pallet loads two deep require aisles that are 8 feet, 9 inches wide.
For even smaller workspaces, there are turret trucks, which are generally steered by wire or rail
guides on the warehouse floor. Although expensive, turret trucks can rotate loads 180 degrees and
therefore negotiate aisles as narrow as 4 feet, 6 inches. It's important to note, however, that if
slipsheet attachments will be used, the aisles must be at least 8 or 9 inches wider.
Capacity is another factor that lift truck purchasers must take into account. Most experts
recommend buying a truck with more capacity than ordinarily required. For example, if the lift truck
will move mostly 2,000-pound pallet loads, then a truck with 3,000-pound capacity would be
appropriate.
When purchasing a truck that will handle loads of combustible or hazardous materials, the buyer
should check its safety rating. If an electric truck carries an E designation, it may spark. If the truck
has an EE designation, it contains more safeguards and therefore is apt to spark less. The safest
rating is an EX, which means that model is built with no metal parts to cause sparking. Diesel
trucks, in general, are even safer than an EX truck. Diesel trucks specially designed for safety carry
a DX designation.
PRICE VS. EFFICIENCY
Once they have determined which type of truck to purchase, many buyers then make their final
decision based on the sticker price of a particular model. But most experts say price should be only
one factor. The ability of the dealer to provide parts and maintenance services is as important as
the truck price itself. If the nearest authorized dealer is located 250 miles from the plant, you would
do better to select another brand with parts 10 miles from your plant even if it costs more initially or
the make doesn't perform as well.
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10
It is recommended that buyers look at the overall cost of the vehicle over its life and not just the
purchase price. The buyer can obtain an idea of the lift truck's overall cost from the dealer's
preventative-maintenance service charge. Generally, that charge indicates the truck's reliability and
its "real cost of ownership" in the dealer's estimation.
Most experts advise against buying a used forklift truck, unless the equipment will be used only as a
spare for supplemental work. If the lift truck still had life in it, the dealer would recondition it for
resale. If you only need one truck, you can buy a reconditioned one, but make sure it's a good one.
A smart strategy for determining the right lift truck is to rent it before buying it. Most reputable
dealers will rent a lift truck for 60 days and apply the rental money toward the vehicle's purchase.
TAKE THE LONG-TERM VIEW
In short, although a lower-priced truck may seem attractive at first, its lifetime maintenance and
operational costs could ultimately exceed the initial price. For that reason, buyers should consider
the efficiency of the truck, the amount of dealer support, and future uses for any vehicles. Smart
buyers are the ones who consider both the long and the short term in purchasing a lift truck.

6. "HOW TO IMPROVE PRODUCTIVITY IN MANUAL PICKING"

If you haven't examined your warehouse in the last several years, chances are excellent that you
could improve productivity substantially and perhaps even without the outlay of capital funds. Our
experience indicates that a 10% reduction in costs is easy and that 20% to 30% is not unusual.
Depending on the type of warehouse, 30% to 40% of the labor cost can be in the picking operation.
We will examine this area below and suggest where improvements could be made.
First of all, we do not think that going from an inefficient manual system to a sophisticated
automated system is necessarily the answer. If you want to justify switching from an ineffective
operation to a sophisticated one, it can sometimes be done. However, you should first consider inbetween operations that don't cost much money and are easy to install and control.
Several years ago, we studied an operation that had three warehouses. The company decided that
it wanted one warehouse for its 60,000 items. The three operations had 32 pickers in total.
We designed one efficient warehouse which required six pickers and used a manual system of
picking.
Using stacker cranes in this warehouse would have required four people. However, these stacker
cranes would have cost $3.6 million and taken two years to implement. This sophisticated system
would have saved 28 people. Instead, the traditional warehouse with shelving, racks and picking
equipment cost $495,000. This was easy to justify with a reduction of 26 people. The manual
system took much less time to install, and provided flexibility the stacker crane could not match.
For a warehouse picking operation to be efficient, the office must prepare helpful picking lists.
Getting an order from a customer and rushing it to the warehouse for picking may give the
impression that something is happening fast, but in the long run, this approach usually wastes time
and, in fact, slows up the handling process.
The office should go through a number of steps in processing paperwork as outlined below. We
omit consideration of credit checking, bills of lading and labels in this article.
STEPS FOR THE OFFICE
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11
The first step in improving the warehouse is to deduct each item from inventory. If an item is not
deducted from inventory, the picker may spend time looking for it. Our experience indicates that an
out-of-stock item may take up to 30% more time to look for than one that is in stock. Not only does
the picker spend his own time searching, but he may ask other pickers or a supervisor for help or
information.
The second step provided by the office should be to prepare a legible picking list with an exact
location for each item. Third, each item on the picking list should be printed in the same sequence
as it is located in the warehouse. If there is split picking for broken lots, full cases and full pallet
items, the sequence should be broken out separately for each area.
The standard time to pick each order should show on each picking list. In this way the supervisor
will be able to schedule the pickers, and the pickers will know the predetermined standards which
they should meet or exceed.
When the picking list is prepared, all out-of-stock items should be deleted. This will keep the picker
from reading extraneous material and will save time.
There is no one right way to pick. Every situation has to be examined for its peculiarities and special
requirements. In a warehouse there are many variables which have an impact on picking. These
effects may be positive or may slow up the operation.
ELEMENTS OF PICKING
A number of elements must be considered for effective picking. Generally the first element is to pick
up the order. The second element is to read it. The third element is for the picker to go to the first
item to be picked. This may either be riding on equipment or walking. The picker then picks that
item. The next element might be to make a notation on the pick list. Then, he reads the next item,
walks to that location, picks the item, makes a notation on the pick list and repeats this sequence
for the balance of the items. After they have been picked, the items are brought back to a central
point, laid down, and the order form might be signed or initialed by the picker.
In most manual picking operations, 80% to 85% of the time is spent either walking or riding. The
balance of the time is spent studying the order, making notations and doing the actual picking. If we
eliminate a good part of the walking or riding we can reduce overall picking time.
ITEM LOCATION AND PLACEMENT
Travel (walking or riding) time is dependent upon distance. One way to reduce distance is to slot the
fastest moving items near the shipping point. If we follow Pareto's Law or the 80-20 rule, and we put
20% of the items close to the shipping point, they may account for 80% of picking.
Item placement is also an important factor. If a picker has to reach over six feet or below one foot,
the work becomes more difficult. Items in deep bins or racks require reaching and perhaps climbing.
These motions take time. Items that are wedged in or difficult to pull out also require time. For
example, if two pallets are next to each other and they have material overhanging and touching, a
fork truck driver trying to remove one pallet will have unnecessary difficulty, take more time and
perhaps damage merchandise.
STANDARD PACKS
Standard packs have an impact on time required to pick. If items have to be weighed or counted by
the picker, additional picking time is needed. It is desirable to have pre-packaged, standard packs
which need not be broken for picking. (This is a marketing decision which can help the warehouse.)
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12
A related problem is that units or pallets may not have the same count for similar items. If this is so
and the picker is aware of it, it takes more time to pick. If the picker is not aware of this situation,
there will be picking errors.
PICKING METHODOLOGY
Picking methods can be different for different operations. For instance, one picker can make one
pass to pick one order. This method makes sense when there are a few line items per order and the
picking path distance is short.
Several pickers may be used for a zone pick with each picker picking in a finite area. Zone picking
is suitable for orders with many lines to reduce travel time.
Batch picking may be used when many orders have the same items. In this situation, orders are
totaled or batched, and the product picked as a batch. It is then brought to an assembly point for
individual pieces to be separated for each order.
Split picking is when different kinds of picking equipment are required to pick an order. For instance,
in one area a cart might be used, in another area a fork truck, and in a third area the pick may be
made to conveyor. Line items for an order are merged before or during shipping.
PICK LIST
The pick list has a decided effect on the time needed to pick. The list should be designed to be easy
to read. It should have a location, an item number and a description of each item. In some
instances a batch number or lot number is required. Printing these lot or batch numbers on the pick
list will save the picker's time.
Item size also has an impact on picking. It generally takes less time to pick small items than to pick
large items that are bulky or hard to handle. Using the correct equipment helps to improve this
situation.
MARKING AND LABELING
Proper marking or labeling makes a difference in picking. If an item is not marked at all or marked
incorrectly, it takes time to determine if it is the right item. If there are several markings or labels on
the item, confusion occurs and time is wasted determining the correct nomenclature.
EQUIPMENT
Equipment has an important impact on picking. This is a major subject by itself. For example,
pushing a cart is not as quick as using an electric pallet jack.
Equipment attachments also have an important effect on picking. A fork truck with a side shifter can
maneuver quicker than one without.
WORKER ABILITY
What about the worker's ability?
Can the worker read well enough?
If the worker uses a fork truck in an operation, has he or she been instructed in its proper use and
been authorized to drive it in accordance with OSHA regulations?
Is the worker capable of doing what he or she is supposed to do, and is the worker properly
motivated to do an effective job?
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13
LAYOUT
Warehouse layout has an effect on picking. If the aisles are not properly laid out, considerable
walking may be required to go from one item to the next. There are substantial differences in the
time needed to pick from shelving, the floor, flow racks, pallet racks or drive-in racks.
If there is a forward picking area, replenishment is an important factor in the picking sequence. If
the forward picking slots are not replenished adequately and the pickers are required to pick the
complete orders, must they go to other areas to complete their orders?
EQUIPMENT MAINTENANCE
Proper equipment maintenance has a tremendous bearing on picking, as breakdowns must be
avoided. The impact of a conveyor which stops with 20 or 30 people working it, can be disastrous.
UNIT LOAD INTEGRITY
Load integrity has an impact on picking. Moving a pallet load of full cartons or bags of chemicals
that are unstable or slide off can be disconcerting and time consuming.
What would happen if these items were stretch or shrink wrapped, glued or contained in some
kind of unit load?
HOUSEKEEPING
Another time consumer is poor housekeeping.
How fast can you move when there is merchandise or trash on the floor or in the aisles which slow
down a picker from moving - with or without equipment?
Just trying to move a pallet jack over small pieces of debris in the aisle can slow up an operation.
TRAFFIC CONGESTION
How about traffic congestion?
What effect is there on a picking operation when too many pickers are in the same area or an aisle
is too small for one picker to go past another?
TRAINING
What effect does training have on picking?
Do pickers know the location system?
Do they know how to use their equipment?
Do they know, or are they trained to put items into containers with the markings up so that the
checkers don't have to re-handle them?
Do pickers know how to check and sign their picking lists?
MEASUREMENT
How about a system of measurement?
Are there predetermined standards which tell you what you are measuring?
Should you be measuring weight, lines, orders, pieces or dollars per hour?
If you have a measurement, is it analyzed to determine productivity for the total operation and for
each picker?
Does this analysis tell you where to look for ways to improve picking?

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14
SUPERVISION
Supervision is probably the most important element in a picking operation.
Is the warehouse laid out so that the supervisor can see the pickers?
Are there standards which can be used to measure the pickers?
Does the supervisor watch to see what they are doing and if they are doing it correctly?
As we've noted, many factors influence the picking function, which is itself only one of many
elements to be considered in productive warehouse management.

7. "GRAND OPENINGS: PLANNING A NEW DISTRIBUTION CENTER"

This five-step process helps ensure a new distribution center maximizes supply chain effectiveness.
By Donald J. Derewecki, CMC
When a company properly plans and executes its plan, a new distribution center will be a major
contributor to the effectiveness of its supply chain. But a rough start-up, with cost overruns and
delays, has the opposite effect. Heres how to ensure a smooth process.
Step One:
Determine the requirements the new facility must satisfy.
To prevent numerous additional capital outlays, think in terms of requirements five to seven years
into the future. In most facilities, the primary space drivers are how much inventory needs to be
contained and what are the associated pick facings. Profile the projected inventories as accurately
as possible; a 20 percent deviation on a 200,000 square foot storage area results in a 40,000
square foot shortfall or surplus, for example.
The planned number of stock keeping units (SKUs) along with the associated cube, velocity,
seasonality, and handling characteristics of the inventory are all critical design elements as well. If
operating requirements include lot number control, consider this in the projected profiles. If a
company is implementing an enterprise resources planning (ERP) system, the requirements of the
system must be considered.
Dock operation is another critical design factor. Shortfalls in dock capacity can significantly affect a
companys operation. Key elements to determining the required number of docks and the
associated operating space include the timing of the arrival of receiving and shipping vehicles, wait
times, true unloading and loading times, the number of SKUs, and breakdown and handling
requirements. Opportunities to improve the operation through better scheduling and reduced
handling may appear. A new distribution center may present opportunities to balance receiving and
shipping peaks with a common dock area, for example.
Projected order statistics also must be factored into design. Because almost all business segments
are experiencing a shift to smaller, more frequent orders, projections for the number of orders per
day, lines per order, and pieces per line must be calculated. Coordinate these projections with
marketing executives to account for anticipated customer needs.
Before proceeding to the next step, get the design criteria approved at the highest management
levels. This will allow top executives to provide input and guidance relative to future operating
requirements. It also will minimize second-guessing from the Monday morning quarterbacks
lurking in every organization.
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15
Step Two:
Determine the feasible alternatives to satisfy the projected business requirements.
These alternatives typically involve varying levels of technological sophistication and may be limited
by several factors including the availability of capital, information systems resources, acceptable
levels of risk based on management policies, requirements for flexibility, and uncertainty about the
future direction of the company.
The alternatives should address material flows, picking and storage modules, material handling
equipment, information systems support, building configurations, and layouts. Some of the best
ideas may originate in other industries that may have similar operating requirements.
Give the alternatives a quick evaluation to make sure they are sensible before moving on to a more
detailed analysis. This quick evaluation should test payback, or other investment hurdle criteria, as
well as practicality. Some very technologically interesting concepts may not pass this initial test, but
dont assume the answer will be found among the low- and medium-tech alternatives.
Step Three:
Analyze the viable alternatives, including both quantitative and qualitative aspects.
The quantitative analysis requires that operating methods and the resultant layouts be developed in
sufficient detail to permit proper analysis (see illustration). For more sophisticated alternatives, this
process may require computer simulation to properly evaluate the relative productivity and
throughput capacities. If simulation is not used, thorough static testing will be necessary to
determine which alternative best meets design requirements within corporate financial guidelines.
At a minimum, the analysis should include the following:
Flows. How well do materials move into, within, and out of the facility? Are there bottlenecks in the
process or layout that will restrict movement or throughput?
Picking and storage modules. Do the picking modules hold enough inventory to avoid excessive
replenishment? Are the storage modules appropriately sized for the inventory profiles? Special
consideration must be given when lot number control is an issue.
Mobile equipment. What are the right types and capacities for the various functional requirements?
Is there enough equipment to meet peak requirements?
Conveying and sortation equipment. Are the right types and capacities in each zone? Will the
system satisfy design requirements?
Staffing. How many people will be required to run the operation?
Capital budgets. Include facility-related costs, equipment, and information systems software and
hardware.
Comparative annual operating budgets. Include staffing, maintenance, utilities, and information
systems costs.
In too many projects, qualitative analysis is not given enough emphasis. Elements to be considered
in the process of qualitatively analyzing alternatives include:
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16
Is it flexible? How well will the operation adapt to changing operations requirements? Can the
mechanized and/or automated components of the system be upgraded and/or modified at
reasonable expense?
How difficult will implementation be?
How difficult will maintenance be?
How much training will be required at startup and ongoing?
How well does the warehouse management system work with the mechanized and/or automated
material handling system components?
How user-friendly are the information and material handling systems components?
Step Four:
Make and document the rationale for decisions.
This documentation will come in handy when preparing the rationale and justification presentations
for the management committee. Committee members rarely are convinced to part with the
companys money based on justifications such as Bob and I thought it was a good idea. The
numbers also will be required for the capital authorization request forms.
Step Five:
Implementation.
The biggest problem most companies have during this stage of the project is failure to plan
adequately. Depending on a business industry group, the distribution center may be a companys
biggest capital investment. Regardless of the type of business, keep in mind that the operations in
the distribution center will be the last physical contact with the product before it gets to the
customer.
Securing a facility for the new distribution center typically is the first step because of the long leadtime involved, especially when new construction is needed. Coordination among several
departments including real estate, legal, finance, and human resources is necessary.
The available occupancy date of the new facility is the milestone date for planning equipment
delivery and installation and other critical path project tasks. A project scheduling program will be
essential to ensure the proper documentation and control of the project. The time invested in
developing and maintaining the plan will be well worth the investment. It also will give management
a higher level of comfort than a back of the envelope plan.
Performance specifications must be written for the required equipment and information systems.
Bids must be evaluated and vendors selected. Coordination with vendors during the detail design
and development phases of both equipment and software will be necessary.
The effort and energy required for the last step of actual startup and debugging is inversely
proportional to the quality of the planning. The better the plan, the less time will have to be devoted
to putting out fires and making last-minute field adjustments.
8. "SIMULATION AND THE ADVANCED PERFORMANCE WAREHOUSE"
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17
Before purchasing an automobile, it makes sense to take it for a test drive. Likewise, before
spending millions of dollars on a new distribution center, it would make sense to take it for a test
run. Fortunately today, computer simulation makes this possible. Simulation can recreate a
warehouse design in the computer and allow warehouse managers and supervisors to determine if
changes should be made to the layout or equipment before investing any capital.
In the past, computer simulations were too expensive and time-consuming to justify for material
handling operations. Now, faster, less expensive personal computers and more powerful simulation
programs have dramatically reduced the time and cost. Combined with the increasing costs, service
demands, and complexity of warehousing operations, simulating material handling systems is now
an advisable and indispensable step in the design of warehouses and distribution centers.
What is Simulation?
Formally defined, simulation is the process of developing a mathematical model that will duplicate
the performance of a design or operation. The running model produces statistical outputs that
provide timely measures of system performance. Most simulation programs include graphic
capabilities that allow the user to view the model as an animation on a video display terminal. Until
recently, simulating a system involved programming lines of code in special simulation languages.
Current simulation programs are easier to use and more concise with ready-made subroutines for
conventional material handling equipment. The actual programming involves dragging and dropping
graphical programming logic in the layout and entering the correct information.
Simulation in the Changing Warehouse
The prevalent use of automation and real-time information technology in warehousing operations
has increased the need for this analytical tool. High initial capital costs of some of these material
handling systems can produce skeptics in upper management who want to see the operation
demonstrated before investing any capital. Simulation can provide them with the data to validate the
effectiveness or ineffectiveness of the system, including an animation of the actual operation.
What would happen if sales suddenly shot through the roof, or if an automated picking device broke
down, or a new product dominated the picking area? By programming these scenarios into the
simulation model, the analyst can see first-hand the different possible effects. The animation may
reveal orders stuck in a conveyor bottleneck, increased congestion in manual picking areas, or idle
pickers in unbalanced zones. Contingencies and allowances can then be readily integrated into the
design.
Use and Benefits
Simulation of warehousing operations has been concentrated mainly but not solely on testing
proposed material handling system designs. Simulation can actually clarify concerns such as:
-Will this design satisfy projected throughput requirements?
-Can it handle unexpected surges in the business?
-Which areas have the potential to cause system failure?
-What aspects of the equipment, operation, or software need to be corrected during the design
phase before encountering them in the actual operation?
-What portions of the operation should be modified to improve throughput and/or productivity?

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18
If multiple design alternatives are under investigation, each alternative can be modeled, simulated,
and the statistical outputs compared to determine the most feasible design. In some cases,
simulation may be worthwhile for studying an existing operation. There is a two-fold objective to this
approach. First, it allows the simulation analyst to validate data to be used in future simulation runs.
Actual operating statistics can be compared to the results of a simulation run of the operation.
Deviations can be corrected by the analyst until the model closely replicates reality.
Secondly, it provides a basis for testing different scenarios to determine if the existing system is
capable of overcoming projected business surges, unexpected anomalies in the operation, or
proposed changes to the operation. All this testing can be done without disrupting existing
operations. Simulation also allows us to investigate proposed operational strategies that do not
necessarily require any equipment or layout modification. For example, work dispatching and
scheduling alternatives can be tested and monitored to determine the best scheduling plan and
improve worker utilization. Different order batching and wave picking strategies can also be
modeled to identify the scheme with the highest throughput results.
Warehouse management system (WMS) logic alternatives can also be evaluated and compared to
detect each alternatives effect on the operation. Simulation is useful in developing benchmarks to
measure against actual performance. If a simulation run has determined that a distribution center is
capable of processing 2,500 orders per day under certain operating conditions, management has
provided itself with a statistical goal to achieve under similar conditions. Deviations from this
statistical goal can prompt management to investigate their current system. Perhaps certain
programming logic that was incorporated into the simulation model may not have been incorporated
properly into the WMS.
With simulation, the concept of value engineering also becomes easier to implement. Value
engineering involves the replacement of high cost components with more economical options that
do not compromise a systems efficiency but can significantly lower costs. Simulated throughput
values of the hybrid system can be compared to the simulated throughput values of the more
expensive alternative. In addition, other replacement options can be modeled and investigated.
It is not necessary to have a highly mechanized or automated material handling system to justify
using simulation in design analysis. Simulation is often used to investigate the manual processing of
orders and the operation of conventional storage systems. In a typical distribution center, simulation
can help answer the following basic questions:
-Does the conveyor system have enough accumulation?
-Are there enough dock doors in the facility?
-What is the optimum number of lift trucks based on projected through-put requirements?
-How many order pickers does the system need?
-How should products be zoned and slotted?
-How should workloads be balanced?
When is Simulation Unnecessary?
With all the advantages of simulation, there are also conditions when it is NOT the answer to all
design problems. Generally, simulation allows warehouse management to study various interacting
systems with a wide range of conditions, over a period of time. If the design merely consists of one
system, a simulation study may be excessive. The analysis may require simple spreadsheet
calculations or a layout drawing, especially if there is a high predictability to the operation.
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19
You cannot use simulation if you are looking for results in a day. To do it right, the entire process
requires a generous amount of time for the development of the model and its programming logic.
Depending on the software, a simple conveyor system from picking to shipping may require three
days to a week to program. This does not include the time to gather and analyze data for input into
the model.
The collection of good information is essential to a successful simulation study. It defines the
parameters of the model. Unless good information is available, simulation should not be attempted
because it is likely to produce incorrect results.
The Process
A typical simulation project consists of four major steps:
1. Data Collection and Analysis. This first step is the most important and sometimes most timeconsuming of all the steps. Here the analyst gathers relevant information regarding the system to
be studied. The data request may include layout drawings, procedures, time standards, throughput
data, product characteristics, etc. Mathematical distributions of the raw data, (i.e., order profiles,
production outputs, and product movement) should be obtained over a significant time period to
provide an accurate picture of the operation. Most simulation software is equipped with statistical
tools that will automatically analyze raw data and provide an appropriate distribution. Avoid the use
of averages. Warehouse managers know how much day-to-day operations can deviate from the socalled average.
2. Model Development. This step involves creating the programming logic and animation of the
model, preferably using an object-oriented graphical simulation program. However, any simulation
software can be used. The model is written to follow the structure and decision points required by
the operation. Once complete, a preliminary model is run on the computer and general statistics are
collected.
3. Model Verification. The collected statistics are analyzed and compared to actual operating data
or projections. The analyst investigates deviations and checks the model for logic errors, unrealistic
assumptions, and faulty data. The model is repeatedly refined and modified until the simulation
analyst and other involved parties are satisfied with the base results.
4. Sensitivity Analysis. This part of the study involves running the model with different variables and
operating parameters to test responses to fluctuations and utilization. After each run, statistical
results are collected and analyzed. A comparison of results for different simulation runs will
determine the optimum system design. The analyst will then recommend changes to the design.
Case Study
A new Very Narrow Aisle (VNA), paperless distribution center was designed for a manufacturer.
Before management would invest millions of dollars to construct the facility, they wanted to test the
interaction of all the system components under projected average and peak conditions. They also
wanted to verify the equipment and labor requirements for the facility to ensure its efficient
operation. A simulation model was developed and alternative runs were tested.
From the simulation, it was determined that only three turret trucks would be required for putaway
and replenishment operations from the time the facility would open in 1994 until 1996. The facility
would require a fourth truck for peak conditions in 1996. A fifth truck would be required for peak
conditions in the year 2000.
In the proposed system design, multiple orders for one wave are batch picked in full cases from a
four level pallet flow rack system to conveyor belts. These conveyors fed an automated sortation
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20
system where each box was scanned and diverted to a designated order lane. When the entire
order was completed and palletized, the lane was used for a new order.
Preliminary runs showed that it was critical to maintain proper timing between the batch picking and
palletizing operations. The simulation revealed the following problems:
1. Cases belonging to later waves started accumulating on the recirculation loop until the system
came to a halt.
2. Because pickers pick ahead of the palletizers, cases belonging to large orders from older waves
would end up behind cases belonging to newer waves. Thus, orders from older waves could not be
completed. Consequently, a lane could not be freed for a new order and a new wave.
3. Although pickers were effectively utilized, palletizers were idle as they waited for the system to
sort through cases belonging to multiple waves.
To alleviate this problem, all pickers picked one wave at a time. No picker could start on the next
wave until the previous wave was completed. Picking one wave at a time, however, resulted in the
inability of the system to ship the projected number of cases per day. Actually, only half of the
required number of cases could be processed.
Bearing these in mind, the model was repeatedly refined and different wave strategies were tested
and evaluated. Picking two waves at a time produced the best throughput results.
The simulation also pointed out the need for more accumulation on each divert lane and suggested
conveyor speeds, labor requirements, and the number of divert lanes required for a smooth and
efficient operation.
Without simulation, the company would have installed millions of dollars of sophisticated equipment
only to realize that the system would not be able to perform at the desired level. With simulation,
necessary equipment and WMS software logic modifications were identified before any physical
implementation. In addition, management was assured that the facility would be able to deliver the
projected order throughput. The capital for the project and the WMS software specifications were
approved and the facility is now operating and operating efficiently.
Perhaps the most significant result common to most simulations is the reassurance that
management gains from visualizing the design. Simulation is no longer a mystical tool for use solely
by the likes of rocket scientists and nuclear engineers. Easier programming techniques and more
powerful personal computers have made it accessible to everyone. In this age of computer-driven,
increasingly automated, complex warehouses and distribution centers, simulation cannot be
overlooked as a valuable design tool.

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