Modelling Lean Techniques in Warehouse

Operations
Class Exercise
We will use a Microsoft Excel spreadsheet model to convert distribution
variables and an inbound/outbound forecast into:
Inventory storage levels vs DC capacity
Labour and equipment plans
Staffing levels
Direct labour operating expenses
Direct equipment operating expenses
The modelling spreadsheet dynamically calculates new results as the
variables are modified. We will look at the results of the given variable data
set and then make adjustments to shift patterns, load levelling,
productivities, and worker efficiencies. Our goal will be to reduce costs.
The initial plan features a DC with:
1 shift work schedule, 75% worker utilization factor
$10 per hour wage rate, 30% benefits, $20 total cost of overtime or
temporary workers
80% of peak labour requirements hired as full time workers, balance
with overtime and temporary workers
Annual outbound forecast of 13,850,000 cases, high seasonality
Inbound production of 13,800,000 cases, also seasonal
Pallet and case DC operation, 100% pallet inbound, 50% loose case
pick outbound
DC Capacity of 32,000 pallets, utilization goal 87% maximum.
Starting with 19,200 pallets on hand
Equipment assumed Counterbalanced Lift Truck (CB), High Reach Lift
Truck (HR), and Walkie Rider forks (WR) , equipment lease and rental
charges as noted
Task productivities
o 30 Pallets / hour - unloading trailers CB
o 25 Pallets / hour loading trailers CB
o 20 Pallets / hour putaway pallets HR
o 20 Pallets / hour full pallet picking HR
o 250 Cases / hour loose case picking WR
o 15 Pallets / hour pickline replenishment HR
Results:
o Inventory over desired utilization 3 months, over 100% capacity
1 month
o Full time direct labour is 58 workers but results in $295,000
labour carry
o Equipment required, 13 CB, 20 HR, 19 WR plus 5 months of
rentals
o Direct Labour Costs $1,634,037, Equipment Costs $375,450
Workshop Tests:
Document the results of various tests:
Variables: Direct Labour Labour Carry
Equipment
Original Variables $1,634,037 $295,744 $375,450
Switch to 2 shifts, improve
equipment utilization
Optimize full time employees
(62 63%)
Reduce Indirect time to .5 hour
Increase loose case picking to
300 / hr
Fully Level forecast and 100%
FTE Staffing factor