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Redesigning Esschert Design: how to tackle capacity problems

Vunderink, W.A. (2009) Redesigning Esschert Design: how to tackle capacity problems.

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Abstract:The Master Production and Logistics Management of the study Industrial Engineering at the University of Twente (UT), is to be completed with a master thesis project. This project was carried out at Esschert Design in Enschede. Esschert Design develops, manufactures and delivers unique garden gifts. Ideas are developed in-house and manufactured worldwide exclusively for Esschert Design. Esschert Design operates as a wholesaler and wishes to have the complete assortment of products on stock in the warehouse in Enschede, to sell them worldwide. The capacity of the warehouse is insufficient to keep pace of the rapid growth of the company. Four years ago the company owned a warehouse of 2,500m2. Currently, the company has 9,000m2 and even this appears to be insufficient. The current warehouse is completely filled. Some aisles are used for bulk storage. The purpose of this research is to analyze the capacity of the warehouse and to develop a solution for the current problems, taking into account the future growth of the company. Relevant literature has been consulted in order to find out how to design a warehouse. It was concluded that the Systematic Planning Warehouse Roadmap - a stepwise approach (SWP) developed by Ir. Mantel of the Faculty CTW at the UT appears to be a good choice. The model of Mohsen and Hassan and the model of Baker and Canessa were also reviewed but they are not suitable for this project. Therefore it was decided to make a plan of action based on the SWP. Never before SWP had been used in a practical situation. This research offers an opportunity to review this approach in practice. Also the structure of the report is based on the SWP approach. First describing the data collection procedure as well as the current situation. Next, we give a description of the literature, including a description of the SWP. The management of Esschert Design formulated a number of constraints to the solution. More storage capacity is appropriate and the management was considering an extension of the warehouse. This research answers the question whether an extension is really necessary, or whether there are opportunities within the current warehouses. If there is really not enough floor space, including for the future, then the best solution to get more capacity should be determined. The current I / O point is too small with regard to the peak number of trucks.A solution to this problem must be found. vi Ten research questions have been formulated: 1 What is the definition of bulk and pick locations? 2 What is the current storage capacity? 3 How much capacity expansion is necessary now and in the future? 4 How much capacity can be extended within the current warehouse? 5 What is the current layout and what are the logistic flows through the warehouse? 6 When a new warehouse behind the current warehouse is the best choice, what is then the best layout for this new building? 7 What is the best choice of a warehouse facility in case of enlargement? 8 How are the new logistics flows through the warehouse? 9 What is the ROI of the solutions? 10 Are there recommendations to the literature? The investigation started with the mapping of the current situation, the layout of the warehouses and the collection of data. Questions raised are for example: - How many pallet locations are available? - How are the orders collected? - Which products are kept in stock? These questions have been answered. The steps of the SWP are the following - Collect Data SKU data Order data - Determine Order Profile Pick frequencies of SKUs Order frequencies - Select organisation / control policy/ concepts Items to picker / picker to items Zones Batching - Select Technologies - Determine capacities - Generate layouts - Evaluate layouts The first two steps have been carried out through data acquisition and data mining. The step “determine capacities” is not deeply discussed, because the management would like to build as large as possible and not how much there is needed. Later when the decision about the layout was taken, the capacity was calculated on the basis of the layouts. Eventually, various layouts were put forward and it was determined which layout is the best. This solution has been further developed. Finally, the realization of the solution was also part of the job, this goes beyond the SWP. vii With the data of the current situation and the theory, several solutions have been developed. There are several options to increase storage capacity. The management preferred to build a new building behind the current building. First it has been investigated whether sufficient additional capacity within the existing warehouses could be created. There was extra capacity, but not sufficient. Other options such as relocation or a new building have also been considered. The most appropriate solution for Esschert Design turned out to be: create an extra warehouse behind the existing building, with the least possible disruption to the current work process. Once we knew what type of warehouse facility was to be used - on the basis of the steps of SWP - we could examine what the best layout was and what type of building would fit best as warehouse facility. The solution had to be obtained while taking into account a lot of constraints from various stakeholders. This was a process of trial and error, until all possible solutions were identified. All solutions were considered on the basis of different criteria, varying in importance. After that the best design was chosen. The Centre of Gravity method was used to get insight in the distance between the theoretical I / O point and the practical I / O point in the layout. On the basis of this calculation the average travelling distance in the warehouse was calculated. Different storage systems were compared. It followed that the best choice for Esschert Design were moveable racks. These racks are normal pallet racks placed on wheels side by side. Because the racks are mobile, they can be moved to create a lane. Total 5,500 pallet places were created with these systems. In another proposed warehouse, which is also suitable for order picking places, around 1,220 pallets can be stored. In one of the halls a new door must be created to the outside. Then it is suitable for storage of exhibition materials. Now the columns of the building are on the wrong place for a good layout of the racks. The exhibition hall where the materials are now stored, can be used as warehouse space, about 750 additional pallets can then be stored extra in the current warehouse. In total Esschert Design has then over more than thirteen thousand pallet places. As for the payback period of the property: it pays itself back within seven years. If we take into account logistical or administrative savings, then the payback period becomes even shorter. The realization of the new warehouse was also part of the project. Contractors were selected and they submitted bids, then the best contractors were chosen. Five suppliers of mobile racking systems were selected and asked to make a tender. The comparison between the bids was not easy because only the best producers were asked, which offered similar systems. Ultimately, the advice is given to visit the systems of the cheapest two or three producers. Then choose the system in which the management of Esschert Design has the most confidence. One of the questions was: "How much capacity can be expanded within the current warehouse?" The answer to this question would be the answer to the essential question whether the space within the warehouse of Esschert Design is big enough to develop a solution without a new warehouse. Research has shown that, within the existing warehouse some capacity can be created, but that this capacity is not sufficient. A solution was found in the building of a new warehouse behind the current. A detailed plan for this store is created. viii A concise definition of Pick and Bulk stock is given: The picking stock is the stock from which the orders are collected. The rest of the stock from which no orders are collected is bulk stock, this stock is to cope with changes in the forecast demand and to buffer delivery times. The capacity of the warehouse after the extension is 13,000 pallet places. This is a growth of 7,500 pallet places. Within the current warehouse, there is still the possibility of additional capacity created by the movement of positions and departments. But it is not enough for the approximately 2,500 pallets in warehouses of others. How much expansion is necessary, is not calculated. This is because there are too many variable factors and the wish of the management, to build as much as possible. The logistic flows within the new buildings change. In the current situation, all goods arrive at the front of the building and also leave the building through the front. After completion of the new warehouse, all goods arrive at the back of the building and the orders gathered leave in front of the complex. The third step of the SWP is to determine the working methods. It is considered that the current working methods are also the right ones in the future. For building the warehouse facility, several companies were approached and asked to make an offer. Out of the various offers, the best bids for the building and the warehouse facility are chosen after a thorough consideration. The investment for the whole project is about two million euros. SWP is used during the project, some recommendations have been passed. The main recommendation is that no account is taken of the building. References to helpful literature on this point would be useful. SWP prevents that any steps are being overlooked or that a specific step is not made. There are a number of improvements possible to be developed when this project is finished. One possibility is the implementation of a Warehouse Management System. With this system, empty pallet locations are registered. The system could also be asked what the best location is to store a specific product. For example, products with a high velocity in a bulk warehouse can be put together so that the mobile racks move as little as possible, this saves time and money. All the advantages, disadvantages, costs and revenues should be examined to understand the usefulness of such a system. The warehouse will be operated on the basis of picking lists. It may improve by barcode scanners or similar systems. For the new warehouse, a new truck must be purchased. A computer on the truck is a useful tool. A location of a pallet, which is placed according to the free location storage policy in the warehouse, could then directly be stored in the ERP system. Nowadays, first one notes on a piece of paper in which location what is being stored and then the location is stored in the ERP system. If it could directly stored, it saves time and errors.
Item Type:Essay (Master)
Clients:
Esschert Design
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Industrial Engineering and Management MSc (60029)
Link to this item:http://purl.utwente.nl/essays/60763
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