Student Number: 267046

Word Count: 1910

MSc in Logistics and Supply Chain Management

2016/17

Module 2, Warehousing & DC Design

6/26/2017

This report is all my own work and conforms to the Universitys regulations on plagiarism x
1. Overview and evaluation of distribution centre requirements. Key requirements
identified (relevant sources) and application to the case context. Based on these
considerations critically evaluate the specific requirements for the NDC (10%)

According to (Rushton, 2017) the key requirements of warehouse design are derived from the
review of multiple strategic business requirements and factors: the wider business context
(market/industry trends), the organization`s corporate objectives or business strategy (its market
position, expansion potential, profitability/cost strategy or customer value proposition) and more
specifically its supply chain strategy (e.g. defining the warehouse`s role and position within the
supply chain or the customer service level). Similarly, (Baker, 2010) identifies four factors influenced
by changing business requirements that define the need for a new or redesigned warehouse:
growth, changing market conditions, cost reduction and service. Both authors also highlight the key
requirement for expansion potential and the degree of flexibility that should be allowed for the
business to develop in future possible directions. Accordingly, a detailed scenario planning should
take into consideration to accommodate the possible variations in the business plan.

The following key warehouse design requirements are derived from the strategic level business
requirements (Rushton, 2017):
i. warehouse role
ii. throughput levels and storage capacities
iii. customer service levels
iv. other added value services

Cranfield Business Supplies business strategy is defined by 2 key factors (a) the rapid expansion in
recent years and (b) the market leading position it wants to maintain in the future. The new DC as a
National Fulfilment Centre operates in a high-volume (with average 1,640 pallets inbound/2,049
pallets outbound throughput, 10,000 order-lines per day) and fast- moving operations environment
with a highly demanding customer service level commitment (next day delivery requirement for all
orders received till 5pm). The current warehouse stock storage volume (approximately 30,000
pallets), requires the new DC is to accommodate over 37,000 pallets (taking into consideration the
10% seasonal uplift and 85% capacity utilization level calculated for the new DC). The NFC serves as a
stock holding point (with the main role of a distribution centre serving as the decoupling point
between forecasted and real demand). Its main business objective is to provide seamless order
fulfilment against any demand seasonality, with 3-4 weeks stock holding of B2B consumables
supplied from a mixed supply based including UK, continental Europe. A specific feature of CBS order
profile is that over 70% of its order book is single-item orders requiring specific order fulfilment
operations similar to the order profile of e-commerce retailers.
2. Illustration of your distribution centre design. Include all information required to
fully illustrate the characteristics of your proposed design concept (15%)

Our group`s Distribution Centre design followed the design procedure given by (Rushton, 2017),
starting with the analysis of (1) the historical planning data (throughput/storage, order profile,
intake/receiving, dispatch), then reviewing (2) the requirements for the ancillary functions and
external areas (3) and finally the cost data based on which we created a plan of the internal and
external layouts. The planning horizon was taken for 3 years ahead, taken into consideration the
average throughput and planning levels defined by peak stock-holding with 10% above average
throughput.

Data analysis

Based on the ABC analysis of (1) volumetric storage data (quantity throughput by pallet and cubic
meter), the (2) order line analysis per day per size and (3) the product value per cube ratio, it was
identified that the major factors for warehouse zoning matrix were the size and speed. Product
value was chosen to be excluded from the final ABC zoning plan as the median value/cube ratio for
the 97.33% of the total pallet stock holding was approximately 400 (while the average product
value was around 200), therefore the small-volume high value (2000) Electronics products
(accounting only for 2.77% of the pallet stock holding) were planned to be stored in a secured
holding area. Also, as Janitorial products contain hazardous materials they were planned to be
stored in a separate designated area away from the proximity of paper products. The volumetric
storage data analysis implied that medium sized SKUs can be stored in bulk storage, while oversized
(over 1200mm) SKUs were to be held in a designated cantilever racking.

Figure 2.1 Warehouse zoning

Planning Base

The structured planning base for CBS distribution centre is presented as a warehouse flow diagram
as shown in Figure 2.1. This diagram represents a typical day in the operational life of the warehouse
in terms of major product flow segments and inventory quantities based on the average product
volumes (Rushton, 2017). As CBS operates its business with a relatively smooth customer demand
profile with only 10% uplift during the two peak months. The 10% uplift was taken into
consideration in evaluating the operations capacity and material handling requirements, and also
the warehouse layout. The warehouse flow diagram incorporates the considerations from the
zoning-assessment, with regards to the allocated pick-face configuration for slow/medium and fast
moving mid-sized products, the oversized product storage and also the small-size (<300mm)
products (that account for 55% of the total stock holding). Based on the initial automation
assessment, this product category proposed to be stored and handled via a dedicated AS/RS
miniload storage system.

Figure 2.2 Flow Diagram Day In The Life Of The Warehouse

Operational principles, Initial Equipment assessment and Layout decision

The DC operates as a National Fulfilment Centre in a high-volume fast, moving operations

environment with a next day delivery requirement for all orders received till 5pm. To effectively
realise the operational requirements the preferred DC layout was selected to follow a U-Flow with
(as in- and outbound proccesses can be coordinated without interference in different shift periods)
with an area of 108,000 sqm and 20 m operating height.

Based on the initial automation assessment and the equipment type analysis the common project
decision was made to segregate the fast/medium/slow moving items and implement the most cost-
efficient equipment types: (1) Small size products (Goods-to-Picker, AS/RS miniload); (2)
Medium/Large (Picker-to-Goods, non-automated) (3) Fast moving (dedicated location close to
despatch). The DC operations planned 24hours per 6 weeks to effectively utilise all potential idle
time outside picking rush hours for put away, pick face replenishment and the phased schedule of
despatches during the night shift.
3. Evaluation of the benefits/strengths of your design and how does your design
support the requirements (15%)?

Storage and throughput data analysis for the warehouse zoning and initial automation assessment
was one of the key focus areas for the current design. As (Richards, 2014) highlights, warehouse
zoning and picking area layout design are based on multiple factors that companies tend to simplify
at the initial stage of data planning: the number of pick-face visits per day (linked to order line
profile); taking into account the volumetric characteristics of the SKU (size and weight) and further
specific circumstances such as high-security items or health and safety regulations (e.g. storing
chemical products).

I believe the design rightly identifies the special operational requirement to efficiently handle the
small size products category that account for 55% of the total SKU pallet stock holding with an
automated parts-to picker system, as the preferred solution based on the order picking volume and
number of SKUs (8,500 order lines for small order sized SKUs and 16,000 SKUs following the Order
Picking system selection Model (Dallari, 2006)

Figure 3.1 Suitable areas for order picking systems, when order size is lower than 0.5 m3
4. Identification of potential design improvements./ Outline of opportunities for
design improvements, using clear and logical reasoning. Reflect critically on your
design choices. (15%)

The warehouse design involved only an excel-based data analysis and an initial automation
evaluation which can give only a partial solution and does not take into consideration the
requirement for a more detailed multiple-dimension ABC analysis of SKU characteristics that e.g.
(Richards, 2014) describes as a structured process for effective slotting and pick face analysis.

Another related point, requiring a more detailed analysis is to identify the optimal picking strategy
and related equipment. As 70% of individual orders are single line orders with over 55% of products
being small size, batch picking will be the preferred approach. However, further analysis is required
to identify the most efficient synergy of using a version of batch picking method (e.g. batch pick to
line or batch pick by line).

Although our analysis rightly pointed out that for the small size product category a Goods-to-Picker
is the right approach however in absence of a detailed movement analysis and business case
preparation based on detailed cost calculation it is difficult to decide the return on investment
period for such a high-capital investment requirement need for an AS/RS miniload system. A critical
point here is the question of future scalability in case of implementing an AS/RS system. Further
scenario analysis would be required to assess the different options for implementing more scalable
alternatives.

5. Reflection on operational issues./Identify and explain two potential issues that are
likely to be of critical importance when bringing your distribution centre design
into service. (15%)

Productivity of the picking process is the most critical operational issue, should be on the top of the
agenda of the warehouse manager at CBS. 70% of individual orders are single line orders and this
proportion is expected to increase. With this order-profile which is quite similar to the omni-channel
retailers CBS need to develop the most efficient picking process to keep costs down.

Another productivity related operational issue is the seasonality of demand within the week (with
the busiest two days of the week being normally 30% above average). With close collaboration with
suppliers CBS could re-allocate and reschedule inbound volumes from the peak days and also it
could review new fixed-day delivery schedules with major customers outside the peak days to other
days, effectively leveling out the peak day operational peaks.
6. Insights/knowledge gained and demonstrated in the design project. Has there
been a learning process? (10)

As the assignment was based on a group-work and then individual assignment part which included
critical evaluation and further development of the group design proposal, it gave an structure to
learn, discuss and develop ideas within a project-team environment. The team work also gave
opportunity to try out approaches on a project-based approach for a business case, e.g. plan
together, allocate special roles/tasks for the team members and also discuss together the ideas
proposed during the team work. The individual assignment gave opportunity for further research
and with a more detailed, and a deeper understanding of the specific concepts involved, it enabled a
more insightful review of the team project design. The combined assignment results in a more
effective learning process but also it is closer to the type of investigation and planning exercise a
business manager needs to undertake in the real word.
Appendix A)

Time Profile
Apendix B)
Bibliography
Baker, P. (2010). The Principles of Warehouse Design (3rd ed.). The Chartered Institute of Logistics
and Transport.

Christopher, M. (2011). Logistics and supply chain management: creating value-adding networks, 4th
Ed.

Dallari, F. M. (2006). Order Picking Systems: How to Choose the Right One? . Logistics Solutions.

Richards, G. (2014). Warehouse Management - A Complete Guide to Improving Efficiency and

Minimizing Costs in the Modern Warehouse . London: KoganPage.

Rushton, A. C. (2017). The Handbook of Logistics and Distribution Management. London: KoganPage.