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Confidently Committing to a DC Design
When Demand is Unpredictable
Introduction
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“The future ain’t what it used to be.”
-Yogi Berra
Introduction
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Factors Contributing to Supply Chain Uncertainty: • SKU proliferation • Increased levels of e-commerce • Changing retail compliance mandates • Changing regulatory compliance requirements
(food traceability, country-of-origin tracking, etc.)
• Increasing number of non-conveyable SKUs • Potential mergers/acquisitions • Customers placing smaller, more frequent orders • Or…large retailers that add regional DCs and
require larger orders
SKU Growth
E- Com
Retail Compliance
M & A
Regulatory Compliance
Introduction
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Action is Needed! The temporary measures companies have taken since the Great Recession of 2008 are straining to keep pace with recovery:
• Making due with over-crowded DCs • Leasing off-site space • Bandaging up aging material handling
systems • Making due with obsolete software
systems
Introduction
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Agenda 1. Number Crunching: How to develop an
analytical tool to design a DC with infinitely variable demand forecasts
2. Flexible Material Handling: Which distribution technologies are the most – and least – adaptable to changing conditions
3. Software Decisions: How to determine if this is the time to upgrade your WMS, or to sit things out for a while
Number Crunching
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1. Number Crunching: How to develop an analytical tool to design a DC with infinitely variable demand forecasts
Number Crunching
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Even if it not possible to know what the forecast is, knowing the range of potential forecasts is vital in order to develop a DC design that is flexible to accommodate all (or most) of them.
Number Crunching
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The goal: develop a dashboard to allow users to play “what if”, experiments with
different designs, and quickly see the implications of possible growth trends.
Number Crunching
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Variable 1 Variable 2 Variable 3 Variable 4 Output 1 Output 2 Output 3 Output 4
Expected SKU
Proliferation
(5 years)
Expected
Volume
Growth (5
years)
Inventory Policy,
Method A: Projected
change in weeks of
supply on-hand
Weeks of Supply,
Forward Pick
No. of bins
required:
No. of SKUs
slotted in
this bin type:
No. of units
stored in this
bin type
Single-
Location
SKUs
Health & Beauty 14.0% 21.0% -9.0% 2.0 Static Shelf, 12 x 12 x 14 12,376 10,456 900,163
Cosmetics 1.0% 14.0% 0.0% 2.0 Carton Flow, 102 x 12 x 10 17,823 12,861 2,854,327
General Merchandise 7.0% 5.0% -20.0% 2.0 Pallet Flow, 96 x 40 x 60 312 292 169,992
Seasonal 1.0% 5.0% -20.0% 4.0 Subtotal, Forward Pick Area: 30,511 23,609 3,924,482
Other 5.0% 14.0% -20.0% 2.0 Decked Rack, 42 x 24 x 24 7,086 7,086 958,674
Total 8.6% 14.0% Pallet Rack, 48 x 40 x 30 845 845 335,101
Pallet Rack, 48 x 40 x 60 2,538 1,766 1,736,664
Pallet Rack, 48 x 40 x 80 72 33 1,985
Subtotal, Overstock Area: 10,540 9,729 3,032,424
Grand Total: 41,051 6,956,906 16,558
Overstock
Area
Design Outputs
Storage Design Tool v3.0
Product Categories Bin Type:
Growth Variables
Forward
Pick Area
• True “dashboard” functionality • Sales forecasts can be uploaded • Variables can be manipulated • Outputs include storage medium
quantities and number of pick-faces
An ongoing design tool to be used each time the business needs change
Real-time calculation of storage medium requirements
as the forecast is changed
Number Crunching
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Compile the Source Data: Data requirements generally include: • Item Master • Location Master • Historical sales orders • Inventory snapshots • Historical purchase orders
Number Crunching
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Good Data Gathering Practices are Vital to Success: • Identify future scenarios • Identify the “Results” metrics • Identify variables which will Impact growth • Determine the data • Determine the baseline data range • Create a formal data request • Create replicable reports • Export the data • Validate the data…
Number Crunching
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Validate the Data: • Confirm fields: • Check formatting: • Check consistency • Check pack sizes • Summarize data and review ranges • Perform some basic “sanity checks” V1.0 • Manage outliers • Sanity checks V2.0 – step outside of the data…
Number Crunching
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Sanity Checks V2.0: Step Outside of the Data • Take the data summary and walk through the distribution center • Confirm actual storage positions with a physical site survey • Confirm actual throughput • Run the results by the people who are closest to the action:
managers and floor level workers
Number Crunching
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Deep Dive: Gathering and Maintaining Cube Data Cube data is a valuable pre-requisite to the following supply chain initiatives: • Distribution center design • Ongoing slotting initiatives • Bin replenishment calculations • Cartonization calculations (to enable picking
directly to the shipping container) • Directed put-away calculations
Number Crunching
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Deep Dive: Gathering and Maintaining Cube Data Companies fall into three categories with regards to this data: 1. Companies that have cube data and actively use it 2. Companies that have cube data but have not yet
used it 3. Companies that have not yet gathered cube data
Number Crunching
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Deep Dive: Gathering and Maintaining Cube Data Three methods for gathering cube data: • Hand-measuring: Good for fewer than 1,000
SKUs. No equipment involved, but very time consuming
• Cubing devices: Good for high volume cube-capture. Equipment cost must be factored in
• Manufacturer-provided data: May be deceptive: confirm accuracy!
Image: Cubiscan 100© auto-cubing device
Number Crunching
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Deep Dive: Gathering and Maintaining Cube Data Tips for using cubing devices: • Considering renting a device instead of buying to
defray costs • Mount the device on a cart with a portable power
supply - bring the device to the product, don’t bring the product to the device
• Pay attention to pack sizes • Pay attention to SKUs with alternate units of measure
(spools, reels, drums, etc.) • Use a small group of well-trained workers to gather
the data • Validate data after the first day of gathering
Image: Cubiscan 100© auto-cubing device
Number Crunching
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Creating the Storage Design Tool Basic structure of the tool should consist of three (3) worksheets:
1. Master Data Sheet
2. Storage Bin Definitions
3. Dashboard
Number Crunching
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Concepts to Incorporate… • Conservative inventory policy • Target supply • Re-order points • Minimum purchase quantity • Rounding to pack sizes • Bin break points • Bin utilization factors
• Pickable pallet locations vs. non pickable
• Carton flow • Shelving
• Conveyability fields • Longest dimensions • Weights • “Top-off logic” • The 95% rule • Target weeks of supply • Overstock rules
Number Crunching
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Creating the Storage Design Tool 1. Define storage tiers 2. Remove SKUs which will not be kept in forward
pick 3. Round to the nearest pack size 4. Define storage mediums
A. Define individual bins B. Determine break points – max number of
bins allowed for a single SKU C. Determine utilization factor D. Set maximum dimension length E. Set maximum weight F. Set other exceptions (product family,
temp control, haz-mat, etc.)
Variable: days of supply in forward pick area
Value 1: 1 day supply
Value 2: target supply in FP area
Value 3: target supply in FP, rounded
Value 4: cube of target supply in FP, rounded
Value 5: bin cube, total
Value 6: bin cube, utilized
Number Crunching
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Creating the Storage Design Tool 5. Determine storage medium, forward pick area
A. Determine smallest bin which can fit Value 4
B. Ensure maximum length and weight values have not been violated
6. Top off forward pick bin A. Determine the amount of empty space
left over in the bin after target qty. has been slotted there
B. Determine the number of pack sizes of the SKU which can fit in the empty space
C. Add this to Value 3 Value 7: topped off qty in forward pick area
Number Crunching
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Creating the Storage Design Tool 7. Determine total QOH targets
• Don’t be overly optimistic! 8. Determine overstock QTY
A. Subtract Value 7 from Value 12 9. Determine overstock storage medium 10. Total up number of storage mediums 11. Set forecast variables
A. Set family groupings B. % volume growth C. % SKU growth
• Define typical SKU for a given product family
D. Days of supply, forward pick area E. Days of supply adjustment factor F. Days of supply, flat value
12. Link variables to calculation tables
Value 8: Calculate current days of supply for each SKU
Value 9:capped days of supply
Value 10: calculate adjusted days of supply (% reduction)
Value 11:calculate fixed number of days of supply
Value 12: take largest of values 9,10,11
Warehouse Automation: Flexible MHE?
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Modular bay design for pick modules - the same 96” wide bay can be converted to:
Images: Easyrack, Frazier Industrial Company, 1stoprackservices
Static Shelving Carton Flow Pallet Flow
Warehouse Automation: Flexible MHE?
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The functional life of the facility or material handling system can be predicted with a good degree of accuracy…
Warehouse Automation: Flexible MHE?
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Overstock area capacity can also be forecasted…
Example
Layout – Forward Pick DC – Level 2
Spiral conveyor
from 1st level
Level 1“Early out” line to
buffer
Level 2“Early out” line to
buffer
Spiral conveyor to 3rd level
Conveyor buffer – 8
lanes x 225’
Recirc loop
Shipping sorter
8 lanes, ~120 carton per minute capacity
Decline from 3rd level
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Example
Transition Plan – Forward Pick DC
2. Construct new 26,000 sq. ft. addition
1. Demise existing cross
dock facility
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Example
Transition Plan – Forward Pick DC
3. Build material handling system in new addition
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4. Relocate product in VNA area to off-site storage
5. Disassemble VNA rack system in current facility
6. Manage more frequent replenishment to pick
module while VNA product is offsite
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Example
Transition Plan – Forward Pick DC
7. Construct new material handling system in former VNA area (shortened pick
module)
8. Test and debug new system
9. Load product in new system
9. Begin operating new system in parallel with old
(temporarily)
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Example
Transition Plan – Forward Pick DC
11. Decommission existing material handling system
12. Disassemble and/or modify existing material
handling system
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Example
Transition Plan – Forward Pick DC
13. Construct remainder of new material handling
system
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Example Transition Plan – Forward Pick DC
14. Load new system with product
15. Remove “short conveyor loops”
16. Begin using entire material handling system
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Example
Transition Plan – Forward Pick DC
17. Explore building modifications to open up
receiving dock area
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Example Transition Plan – Forward Pick DC
18. Potentially install VLMs, year ~7
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Example
Transition Plan – Forward Pick DC
Warehouse Automation: Flexible MHE?
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Very Narrow Aisle transition in the overstock DC…
Warehouse Automation: Flexible MHE?
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Which Technologies Are the Most Flexible Over Time? • Very flexible technologies
• Cart-based picking • Scalable • Inexpensive • Plan ahead to allow sufficient
aisle width for future conveyor • Conveyor-based picking
• Plan ahead for additional levels • Plan ahead for linear expansion • Modular bay design
• WMS/Voice • Kiva Systems…
Warehouse Automation: Flexible MHE?
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Less Flexible Technologies • Pick-to-light systems • VLMs • AS/RS • Carousels
Automated Packing and Shipping - Tips • Plan ahead for automated packing • Allowing buffering capacity for sortation – phased approach • Plan ahead for additional sorter diverts
WMS: Upgrade Time?
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Evolution of the Best of Breed vs. ERP debate…
• 1.0: Best-of-Breed solutions have a strong functionality advantage
• 2.0: Advent of better ERP solutions
• 3.0: RedPrairie/JDA merger…”super Best-of-Breed”
Reasons companies are implementing WMS today:
• Upgrade cycles • First-time WMS purchases
WMS: Upgrade Time?
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• Is it time to upgrade? • What new functionality can I achieve? • How supportable is the current platform? • How heavily has it been customized? • How painful will the upgrade be? • Is there a larger corporate strategy for IT
simplification? • How can I delay upgrading?
• Voice implementations • WCS • Targeted functionality upgrades (cluster picking,
directed put-away, scan confirmation, etc.)
In Summary…
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• We are working in uncertain economic times • Temporary solutions in distribution will not support the company’s best long-
term profitability, capacity, and customer service interests • Savvy companies who understand their data and the spectrum of potential
future sales scenarios can often find “less risky” solutions that are flexible and scalable to meet current and future needs.
• The time to act is now!
Confidently Commit
to a DC Design!
About Commonwealth
• Objective consulting firm: Commonwealth does not sell storage and handling equipment, or WMS software
• Extensive experience optimizing distribution centers
• Flexible approach – services range from basic validation assessments to detailed design engagements
• Broad experience with a variety of equipment and software
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About Commonwealth…
20 Park Plaza, Suite 400 | Boston, Massachusetts 02116
(O) 617.948.2153 | (F) 617.507-6112
www.commonwealth-sca.com
Distribution Optimization | Transportation Optimization | Supply Chain Planning
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