1. W&L Warehouse and
Logistics
Presented By:
Engr. Abdullah Ali AlGhamdi, CSCP
EFQM Leader for Excellence – Level 1
Founder of Silver Service Co. Ltd.
Founder of Silicon Systems Est.
2. 2
Acknowledgments
The material used in this presentation came from a variety of sources,
foremost being the member of the following body of knowledge:
• APICS as International Member.
• Saudi Society of Engineer
• Volunteer Member of The Centennial Funds
• Aberdeen Group
The slides were extracted from various workshops offered by the above
organizations to address the holistic (strategic) issues of the supply chain
in addition to the functional constraints (tactical) frequently encountered.
3. Location Briefing
4/1/2016 3
Contains Confidential Information of Sadara Chemical Company
• Emergency Management
• Emergency Egress
• Normal Operation Room and Building Exits (not alarmed)
• Prayer Room(s)
• Bathrooms and Other Facilities (Lunch)
• Smoking Area
• Issues ?
• Room seating, lighting, Internet, power
• Special Needs
7. The water tank model of inventory
• The water tank model of inventory could clear and
simply figures of how much inventory to hold?
• Keep inventory (water in the tank) lower, by:
• Keeping the person controlling the input pipe in contact
with the person controlling the output pipe...,
• and with the persons knowing the demand for water.
• The previous figure show the balance between the input
and output in the water tank model of inventory
9. The fluid model of product flow
The Fluid Model suggests general guidelines to
warehouse design and operation, such as:
• Keep the product moving: avoid starts and stops, which
mean extra handling and additional space
requirements.
• Avoid layouts that impede smooth flow
• Identify and solve bottlenecks to flow.
12. Objective based on different view from
various factors involved in stock matters
• Stock Controllers “objectives”:
To achieve and report ‘’good performances’’.
+ To have minimum stock level.
+ Problem = Risk for Operation and Production.
• Buyers “objectives”:
To get unit costs as low as possible.
+ To purchase higher quantities to benefit from volume
effect.
+ Problem = Stock level increase. Possession cost increase.
13. Objective based on different view from
various factors involved in stock matters
• Users “objectives”:
To have no shortage of materials.
+ To have maximum stock level and high safety stock.
+ Problem = Stock level increase. Possession cost
increase.
• Finance “objectives”:
Departments have a problem with stock because it
consumes vast amounts of working capital and upsets
the cash flow.
14. Objective based on different view from
various factors involved in stock matters
• Quality management “objectives”:
Normally has the effect of slowing down the progress of
stock while the necessary checks are made. This means
that quality and inventory personnel effectively work in
opposition.
• General management sees stock control, rightly, as a
source of information.
15. Conclusion:
People involved in stock matters have different
views/objectives.
Challenge is : To find the right balance !
Inventory Control Keeps Balancing Conflicting Requirements
19. Understanding the Pareto Principle
(The 80/20 Rule)
• Originally, the Pareto Principle referred to the
observation that 80% of Italy’s wealth belonged to only
20% of the population.
• More generally, the Pareto Principle is the observation
(not law) that most things in life are not distributed
evenly.
20. Understanding the Pareto Principle
(The 80/20 Rule)
It can mean all of the following things:
• 20% of the input creates 80% of the result
• 20% of the workers produce 80% of the result
• 20% of the customers create 80% of the revenue
• 20% of the bugs cause 80% of the crashes
• And on and on…
21. So Why Is This Useful?
The Pareto Principle helps you realize that the majority
of results come from a minority of inputs. Knowing this,
if…
• 20% of workers contribute 80% of results: Focus on
rewarding these employees.
• 20% of bugs contribute 80% of crashes: Focus on fixing
these bugs first.
• 20% of customers contribute 80% of revenue: Focus on
satisfying these customers.
22. Simple Example
• I use this principle every day. It sets all my priorities, so
I’m not “spinning my wheels” knowing what to do next.
• When I scan my e-mails, I only look for those 20% that
are 80% of all e-mails I receive, and concentrate on
those e-mails first.
• This 80/20 principle can be used by any one for
anything in any type of business or personal endeavor.
26. ABC Analysis is excellent
technique for achieving
objectives.
27.
28. ABC Analysis
• The below table summarize the main point of
ABC analysis
Percentage of
Items
Percentage Value of Annual
Usage
Class A
items about 20% about 80%
Close day to day
control
Class B
items about 30% about 15% Regular review
Class C
items about 50% about 5% infrequent review
29. ABC Analysis (Example)
• A warehousing Dept. surveyed the ten most commonly
used components last year.
Item
Number 101 102 103 104 105 106 107 108 109 110
Unit Cost $ 5 11 15 8 7 16 20 4 9 12
Annual
Demand
(Unit) 48000 2000 300 800 4800 1200 18000 300 5000 500
30. 1) Calculate the annual usage in US$ and the
usage of each item as % of total annual cost
Item Number Unit Cost $
Annual
Demand
Usage$ =
Demand
X cost
Usage as % of
total =
Usage/Total%
101 5 48000 240000 32.50%
102 11 2000 22000 3%
103 15 300 4500 0.50%
104 8 800 6400 0.90%
105 6 4800 33600 4.60%
106 16 1200 19200 2.60%
107 20 18000 360000 48.80%
108 4 300 1200 0.20%
109 9 5000 45000 6.10%
110 12 500 6000 0.80%
Total Usage 737900
31. 2) Sort the items by usage as % of total, Calculate
the Cumulative % then Classify Items
Item
Number
Cumulati-
ve % of
items Unit Cost
Annual
Demand
Usage
in $ % of total
Cumulative
% of
total
Classifica
tion
107 10% 20 18000 360000 48.80% 48.80% A
101 20% 5 48000 240000 32.50% 81.30% A
109 30% 9 5000 45000 6.10% 87.40% B
105 40% 6 4800 33600 4.60% 92% B
102 50% 11 2000 22000 3% 95% B
106 60% 16 1200 19200 2.60% 97.60% B
104 70% 8 800 6400 0.90% 98.5% C
110 80% 12 500 6000 0.80% 99.3% C
103 90% 15 300 4500 0.50% 99.8% C
108 100% 4 300 1200 0.20% 100% C
32. 3) Report your finding
Items Items No.
% of
items % usage Action
A 107-101 20% 81.30% Close Control
B 109-105-102-106 40% 16.30% Regular Review
C 104-110-103-108 40% 2.40% Infrequent Review
33. The AAU Corp. is considering doing an ABC analysis on its entire inventory
but has decided to test the technique on a small sample of 15 of its SKU’s. The
annual usage and unit cost of each item is shown below
34.
35.
36. Replenishment
Decreased distance
per trip
Less lift time
per trip
+
Need for fewer
manned fork trucks
to complete work
Lower
equipment
costs
+
Reduced
labor costs
Order Filling
Higher percentage
of fastest moving
SKUs slotted in more
productive picking areas
Improved overall
picking productivity
Reduced labor
costs
ABC Benefits
37. Benefits Summary
• Total measurable savings, both in annual equipment
and labor costs, amount to approximately 26% of
annual Replenishment and Order Filling costs.
38. Advantages of ABC Analysis
i. The inventory control of different categories of items will be
better if costlier items are not stored for large period, which
reduces capital investment.
ii. The quantities of various categories of items are economically
ordered and stored as per need. It saves the cost of ordering
and carrying the inventories.
iii. The purchasing of various categories of items become easy and
discounts are also obtained on large purchase of items of C
category.
iv. Better record keeping of different categories of items helps in
good inventory control
The ABC is also referred as Always, best, Value Added, Control
analysis tool.
39. HML Analysis
In this analysis, the items are classified according to their unit value
or rate.
Categorization of items will be done using both ABC and HML
methods together.
• For example, items belonging to A and H category will be cared
most.
H-items: They are having highest cost per unit, for example, materials having the
cost more than US$ 10,000 per piece will be placed as H-item.
M-items: They are the medium-cost items per unit say the items having the price
between US$ 2000 to US$ 10,000.
L-items: They are the least price items say less than US$ 2000 per piece.
40. XYZ Analysis
In this method, the classification is based on value of
inventory stored.
• XYZ classification is either combined with ABC or FSN
classification for better analysis of items.
X-items: They are the items whose inventory value is highest. Maximum
capital is invested in these items.
Y-items: They are medium-value inventory items.
Z-items: These items have least inventory values and therefore not
reviewed frequently.
41. It is important to recognize that overall expenditure may
not be the only appropriate basis on which to classify
items. Other factors include the importance of
component part on the overall product, the variability in
delivery time, the loss of value through deterioration
and the disruption caused to the production process it a
stock-out occurs.
42. VED Analysis
It classifies the items as follows:
This type of classification is done mostly for spare parts
and equipment's and is used for a remarkable reduction
in inventory.
V-items: It refers to vital or most essential items. The production will stop
without them.
E-items: They are essential items. The production will be disrupted
without them.
D-items: They are desirable items. The production will not suffer without
them immediately.
43. VEIN Analysis
In this classification of materials,
V-items stand for vital items.
E-items stand for essential items.
I-items stand for important items.
N-items stand for normal items.
44. VEIN Analysis – Cont.’
VEIN classification is also done for machinery parts and
items required for maintenance purposes.
45. SDE Analysis
In this method of classification
S-items stand for scares items. They are either short-supply
materials or few suppliers manufacture them. They may be
imported items and their inventory must be in the store.
D-items stand for difficult to procure and manufacture
items. Its availability is less.
E-Items They are easily available and need not be stored.
46. FSN and MNG Analysis
Both these analysis are same and used as per issue of
items from the stores.
47. FSN and MNG Analysis – Cont.’
• FSN Analysis may be made to remove unwanted materials
and parts:
This method will automatically reduce inventory cost.
F-items stand for fast-moving items. They are consumed very fast.
S-items They are slow-moving items consumed slowly.
N-items They are non-moving items.
48. FSN and MNG Analysis – Cont.’
MNG Analysis has
M-items: They are moving items consumed
time to time.
N-items: They are non-moving items not
consumed.
G-items: They are Ghost items which have
no transaction and nil balance in the store.
49. GOLF Analysis
Classification where,
Local and open-market items are easily available in the
country.
G-items stand for Government items.
O-items refer to open market.
L-items stand for local items.
F-items stand for foreign materials
50. S-O-S Classification
Such items available or manufactured in a particular
season as per seasonal demands are classified as
• The seasonal items are purchased and stocked in that
season in which they are available and used.
S- Items Seasonal items and
O-S items are off-seasonal items.
51. FAN Analysis
• It is called Failure Analysis and is done for design and
reliability of products and inspection before purchase
is carried out.
54. 4 Factors to be considered when
designing warehouse
Flow:
• Each activity is located as close as possible to that
which precedes it and also the function that follows it.
Accessibility:
• Whether or not we can get to the product?
• Can we get to the required level of pack?
55. 4 Factors to be considered when
designing warehouse – Cont.’
Space:
• The maximum should be allocated to operational
storage and stock processing purposes.
• The minimum space given up for associated functions
such as offices and working areas.
Quantity:
• The nature of the product or material and its velocity
through the flow (in terms of volume and time).
56. • A survey by Cranfield University (Baker and Perotti 2008)
indicated that space out of the warehouse floor area is
typically used* as follows:
- 52% for storage,
- 17% for the pick/pack operation,
- 16% for receiving and dispatch,
- 7% for value-adding services,
- and a further 7% for areas such as battery charging, empty
pallet storage and other uses.
* This of course will very much depend on the type of operation envisaged.
60. Layout Design Exercise
• A company wants to store an SKU consisting of 13,000
cartons on pallets each containing 30 cartons.
How many pallet positions are needed if the pallets are
stored three high?
61. Solution:
• Number of pallets required:
13.000 30
= 434 pallets
• Number of pallet positions:
434 3
= 145 pallet positions
Notice one pallet position will contain only two pallets.
62. Control Analysis Exercise
A small warehouse stores five different SKUs in pallet
loads. If pallets are stacked three high and there is to be
100% accessibility.
• How many pallet positions are needed? What is the
cube utilization?
SKU A 4 pallets SKU E 5 pallets
SKU B 6 pallets Total = 37 pallets
SKU C 14 pallets
SKU D 8 pallets
63. Solution
SKU Pallet positions
• A: 4 pallets 2
• B: 6 pallets 2
• C: 14 pallets 5
• D: 8 pallets 3
• E: 5 pallets 2
Total = 14
In 14 pallet positions, there is room to store 14 X 3 =
= 42 pallets.
Number of pallets actually stored = 37
Cube utilization = ( 37 / 42 ) X 100% = 88%
64. Product flow
• Warehouse design should also allow for straight
product flow through the facility whether items are
stored or not.
• In general, this means that product should be received
at one end of the building, stored in the middle, and
then shipped from the other end.
• Straight-line product flow minimizes congestion and
confusion.
68. Fixed (dedicated) Location
• SKU assigned a permanent location, & no other items
are stored there
• Fixed-location systems usually have poor cube
utilization
• Usually used in small warehouses; throughput is small,
& there are few SKUs
69. Fixed (dedicated) Location
Three methods can be used to implement the dedicated
storage approach, including storing items by:
• Part number sequence
• Usage rates
• Activity level (e.g. grouping products into classes or families
based on their level of activity or throughput rates)
70. Fixed (dedicated) Location
• Advantages:
• Stock items are always in the same area.
• It is easier to find items requested frequently
• Strategy is easy to understand: “A place for everything and
everything in its place.”
• Disadvantages:
• There is inadequate capacity when excess material is
present.
• Some bin space is understand when stock items are low.
71. Random Location
• Goods stored wherever there is appropriate space
• Advantage is improved cube utilization
• It requires accurate and up-to-date information
• Warehouses using Random-location systems are
usually computer-based AS/RS to minimize labor and
handling cost
72. Random Location
• It means places items in the closest available slots, bin
or rack .
• Products are then retrieved on a First-in, First-out
(FIFO) basis.
• This approach maximizes space utilization, although it
requires longer travel times between order-picking
locations .
73. Random Location - Key tasks:
• Maintain a list of “open” locations
• Maintain accurate records of existing inventory and its locations
• Sequence items on orders to minimize travel time required to
pick orders
• Combine orders to reduce picking time
• Assign certain items or classes of items, such as high usage items,
to particular warehouse areas so that distance traveled is
minimized
74. Random Location
• Advantages:
• Stock can be stored in more than one location.
• Lot identity can be maintained much more easily.
• Picking orders can be scheduled based on FIFO.
• Bin Locations can be assigned to facilitate picking of
materials.
• Changes in variety and volume being stored can be
accommodated.
• Disadvantages:
• Heavy reliance on locating system
• Less efficient for high-velocity items.
75. The principal features of location
Method
Knowledge of the
locations
Utilization of
storage space
Best Use
Fixed location
Easy, as stays the
same
Poor Pick faces
Random location Ideally WMS control Good Bulk storage
76. Principles of Warehouse Layout
Design
Use One-Story Facilities.
Move goods in a straight line.
Use efficient materials-handling equipment.
Use an effective storage plan.
Minimize aisle space.
Use maximum height of the building.
77. Warehouse Aisles
Determining optimal aisle width is a critical part of an overall
storage/material-handling strategy.
Aisle width decisions must attempt to achieve the best
combination of:
• Productivity
• Space utilization
• Flexibility
• Safety
• Equipment costs for the specific application.
78. Warehouse Aisles
• Assuming you’ll continue to use the aisle widths “you’ve
always used” or “other warehouses use” could be a costly
mistake.
• The primary constraints to aisle width are:
• the type of lift trucks used and
• the characteristics of the loads being handled.
• Since you probably can’t significantly change the
characteristics of the loads being handled, you’ll find that
the aisle width decision is actually a material handling
equipment decision.
79. Storage and WarehousingStorage and Warehousing
Loss of Cube Utilization
◦ Aisle Example
Main Aisle
18' Clear Stack Height
Total Cube = 30,636 cubic feet
Aisle Cube = 19,620 cubic feet
Percentage of total volume allocated to aisles = 64%
10'
4' 4'
9'
10'
10'
36'
80. Warehouse Aisles
• the next step is to consider alternative storage
methods to wide aisle pallet rack.
• All options below are dependent on column spacing
and other fixed obstacles allowing for the design
changes.
• These options include:
81. Types of Main aisle
• Wide aisle
• Narrow aisle
• Very narrow aisle
82. Wide Aisle
• Wide aisle trucks are the most common type of forklift
trucks (also known as a counterbalance).
• Wide aisle trucks generally operate in aisles greater
than 4 meters
83. Narrow Aisle (NA)
• Narrow aisle truck operate in aisles of nearly 3 meters
and include reach truck.
• The reach truck is designed specifically for racked
pallet storage, lifting up to 12 meters.
• Reach truck is designed for working in racked areas
only and a counterbalance forklift is required, in
addition, to load vehicles.
85. Very Narrow Aisle (VNA)
• Very narrow aisles trucks generally operate in aisles of less
than 2 meters and work in conjunction with guidance
systems (wire, rail, optical) to travel safely within the
aisles.
• VNA trucks can be:
• Man-down (where the operator remains at ground level) for
moving full pallets.
• Man-up order pickers used to handle less-than-pallet-load
quantities manually, or
• Man-up turret trucks used to handle full pallets.
• Swing mast truck where the mast can swing 90 degrees to allow
access the pallets.
