ACME is expanding its distribution center due to increased demand that exceeds its current facility's capacity. A new warehouse design is proposed with increased storage capacity, equipment, and staffing to accommodate projected 7% annual growth in orders and 2% growth in stock keeping units through 2021. Key recommendations include replacing pallet jacks and manual order pickers with narrow aisle deep reach trucks, optimizing storage with 3-deep pushback racks, and increasing labor from 364 full-time and 16 support staff on average to 728 and 32 with a maximum surge workforce of 1,092. The new design aims to improve efficiency, flexibility and throughput to support ACME's growth.

1. CICMHE MATERIAL HANDLING
STUDENT DESIGN COMPETITION
2015-2016
ACME FOOTWEAR
OPERATIONS DESIGN

2. Introduction
• The aim of this project is to provide a new warehouse design to ACME as
ACME is looking to relocate its distribution center to a new location due to
an increase in demand which its current facility can no longer withstand.
• Taking current operations of ACME as baseline, new operational plan has
been recommended which is sufficient to meet the growing needs of the
customers.
• The new design touches upon the most important issues of labor,
equipment selection, and space utilization in any warehouse and gives an
efficient lay-out with optimum lane depth and storage policy.
• Economic justification has been provided for all the investments made and
guidelines for operating the warehouse safely along with a sound
implementation plan.
• While coming up with this new plan all the key assumptions recommended
by FORTNA have been duly taken into consideration.

3. Problem Statement
• ACME is a wholesale footwear distributor that has a distribution center (DC)
currently based in Outwest, AZ. They are experiencing an increase in
demand which the current facility can no longer maintain.
• The current facility is at capacity for both storage and throughput which is
restricting ACME’s growth. Expansion on the current facility is impossible
due to it being landlocked and so they are forced to relocate.
• While predicting an increase in annual unit growth of 7% and stock keeping
units of 2% based on current growth, ACME would like the new facility to be
able to accommodate the increase in demand through 2021.
• While satisfying the increase in customer demand is the main focus, ACME
is also seeking new, justified, alternative operational processes in order to
support the increasing demand.
• These alternatives need to make the operation more efficient, more flexible,
and less complex.

4. Equipment Selection
Baseline
• Currently ACME uses pallet trucks to pick from the forward reserve area and
order picker trucks to pick from the reserve area which is simply the higher
levels in pallet racks.
Recommendation
• Since about 67% of the orders can be fulfilled by A and B type of stock
keeping units (sku) and most of the picking is being done as eaches and
cartons, this means that pallet trucks will be mostly required for order
picking for A & B’s as they are stored on the ground positions.
• Also, restocking is always done only as pallets so we suggest using narrow
aisle deep reach trucks for restocking as our new storage policy is storing 3-
deep in push back racks (explained under space utilization)

5. Number of Pallet Trucks and NA Deep Reach Trucks Required
• Since a rule of thumb is that one restocker typically supplies five order pickers and
assuming that each restocker and order picker has his own equipment viz pallet
truck and NA deep reach truck, following number of equipments can be
recommended which will prove to be sufficient for ACME to operate till 2021
considering 7% order growth and 2% sku growth.
Number of projected employees
For put away = 23
For order fulfillment = 273
• Most of the order shipments received need to be put away in the forward reserve
area as about 70% of the product flow caters to A and B type skus. So, mainly
pallet trucks will be needed for put away along with few NA deep reach trucks

6. For order fulfillment (picking as well as restocking)
• Number of pallet trucks: 225
• Number of NA deep reach trucks: 45
For Put Away
• Number of pallet trucks: 16
• Number of narrow aisle deep reach trucks: 7
Total number of equipments required
• According to our recommendation ACME requires a total of 482 pallet
trucks and 104 NA deep reach trucks operate efficiently considering a
design factor of 2.
Order Picker Truck NA Deep Reach Truck

7. Space Utilization
Baseline
• Currently ACME uses pallet racks to store pallets and they must be
single deep as the existing equipment, which is order picker truck,
has no deep reach mechanism.
• Certainly, single deep storage policy is not the best as it will be having
considerable loss of pallet position years due to aisle accessibility.
Recommendation
• Assuming aisle width of two pallet positions and a stacking height of
4 we calculated optimum lane depth which will minimize the pallet
position years lost due to honey combing and aisle accessibility and it
came out to be 3.
• Hence, the recommendation is to use 3-deep push back racks to
store pallets. Though they are costly compared to selective pallet
racks, this storage policy has two and a half times less space lost due
to aisle accessibility than the earlier policy.
• Pallet flow racks can also be used but they’ll require separate aisles
for restocking and order picking which means more space required
for aisles decreasing space utilization.

8. Calculation for optimum lane depth (K)
• Let ‘qi’ be the order quantity for sku ‘i’ in pallets for A and B skus.
• Let ‘a’ be the aisle width in terms of pallet positions.
• Let ‘zi’ be the stacking height for sku ‘i’.
• Let ‘Di’ be the total pallet sold in a year
• Pallets ordered for A and B in a year = 94912.20
• Total types of A and B skus = 3130
• Pallets ordered per year per sku = 30.32
• Average waiting time for A and B skus = 0.285 years
• qi = 8.17
• a = 2
• zi = 4
• Optimum lane depth (k) = sqrt((a/2)*(qi/zi)) = 2.86 = 3

9. Pallet position years lost due to aisle space
Formula used:
• Pallet position years lost due to aisle space = (a/2)*((qi/zi*k)+1)*(qi/Di)
• Pallet position years lost when using selective single deep racks = 3.73X10-4
• Pallet position years lost when using 3 deep push back racks = 1.5X10-4
Selective Rack Push Back Rack

10. • Considering inventory turns of 3.71 (given for baseline) for all skus over the
complete planning horizon and quantity of pallets sold for each sku class,
pallet positions have been calculated.
• Since the types of C and D class skus are large enough compared to the
quantities shipped, some types of skus of these classes must have been stored
as quarter or half pallets.
• Half and quarter pallet positions have been calculated based on the number
of units shipped/year for each sku.
• 7% order growth per year and 2% sku growth per year has been taken into
consideration to come up with projected numbers for 2021.
• Out of the total skus, 29% of the quantity goes to the forward reserve area as
per the baseline operations and these positions are the ground positions of
push back racks used for storage which is assigned to A & B SKUs
Applying Little’s Law to Calculate Pallet Positions

11. Calculations
SKU
Type
2015 2021 Accommodating 2%
SKU Growth
Full Quarter Half Full Quarter Half
A 19084.37 28640.49 3843.42
B 11056.33 16592.57 2205.81
C 7437.25 83.14 163.45 11161.31 124.77 245.30 1539.29
D 4823.18 930.18 661.35 7238.29 1395.95 992.51 1013.06
E 1644 1644
Total Pallet Positions (A+B+C+D+E) 76636.77
Total A&B Pallet Positions 51282.29
Total C,D&E Pallet Positions 25354.48
Floor Pallet Positions Assigned to A&B 22224.66
Total Pallet Positions based on Floor Pallet Positions 88898.65
Space Utilization (%) 86.21
By this plan and storage policy of 3 deep with stacking height of 4 we can achieve
space utilization of 86.21 %.

12. Receiving Put Away Order Fulfillment Staging Shipping
Unloading
from trailer
Sort to SKU
level on
Pallet
Forward
or
Reserve
Pallet Put
Away
Case Put
Away
Customer
Demand
Full
Pallet
Forward
Reserve
Full Case
Stage on
Shipping
Dock
Pick from
Reserve
Area
YesNo
Yes
Qty. is
Less than
Safety
Stock
No
Pick From
Forward
Area
Replenishment
Case/Pallet
No
Place Carton
on
Extendable
Conveyor
Load on
Shipping
Trailer
Yes
Carrier
Pulls
Trailer
Product Flow

13. Activity
Capacity
Baseline
Year
Year
2021
UNIT
Unloading Trailer to Conveyor
Unloading (Conveyor) 150 225 CPH
Scan LPN to ASN 700 1051 CPH
Sort to SKU 150 225 CPH
Scan Case Label to Pallet 800 1201 CPH
If CrossDock
Cross Dock OB ContainerLabel 150 225 CPH
Put Away
Reserve Area
Put Away Pallet 15 23 PPH
Forward Area
Put Away Cases 30 45 CPH
Order Picking
Reserve (If Full Pallets)
Pull Pallet and Apply Label 10 15 PPH
Reserve (If Full cases)
Pull Full Cases and Apply label 65 98 CPH
Activity
Capacity
Baseline
Year
Year
2021
UNIT
Forward Area ( Replenishment)
Case Replenishment
Picking from Reserve 51 77 CPH
Putting Away 75 113 CPH
Pallet Replenishment
Picking from Reserve 20 30 PPH
Putting Away 51 77 PPH
Forward Area (Picking)
Apply LPN to Carton 150 225 CPH
Pick Units to Carton 55 83 UPH
Apply Ship Label & Palletize 150 225 CPH
Staging
Staging Cartons on Shipping Dock 150 225 CPH
Q/A 120 180 CPH
Loading in Trailer
Place Carton on extentable conveyor 400 600 CPH
Scan Carton to Trailer 800 1201 CPH
Load Carton to Trailer 350 525 CPH
Capacity Calculation
• Manpower needs to be increased by 7% per year.
• As Manpower increases, Capacity increment of each activity in every
operation is calculated for year 2021 based on Manpower growth rate.

14. Labor Allocation
By considering given growth rate,
• Average Total Full Time Non Support Manpower (Year_2021) =364.2
• Average Total Support Manpower (Year_2021) = 16.5
• Also batching orders while picking is done in the same way as baseline.
Recommendation
• Considering Design factor of 2, Total Support and Non Support
manpower is calculated by doubling the Average Projected Manpower
of year 2021.
• To fulfill the orders during the period of demand surge (Christmas to
early summer) more manpower will be needed which can be fulfilled
by hiring Contractual Temporary Manpower. Thus, maximum
manpower will be three times the average projected manpower.
Operational Plan

15. • Demand is expected to be increased by 7 % every year.
• Total expected Full time Manpower and Support staff for year 2021 is
calculated based on the 7% growth every year
• Calculated average Manpower is allocated to the different operations based
on the allocation in current year.
Operation Baseline Manpower
Average Manpower
Year 2021
Design Manpower
Year 2021
Maximum Manpower
Year 2021
Receiving 19.2 28.8 57.6 86.4
Put Away 15.2 22.8 45.6 68.4
Order FulFillment 181.7 272.7 545.4 818.0
Staging & QA 17.6 26.4 52.8 79.2
Shipping 9 13.5 27.0 40.5
Total Non-Support FTE 242.7 364.2 728.5 1092.7
Support Staff 11 16.5 33.0 49.5

16. Labor Cost
Assumptions
• Support Staff/contractual labor Cost per hour = $ 15
• Average Inflation rate per year = 3 %
Calculations
Full Time Labor Cost Per Hour Given for Baseline $22.50
Current Labor Cost Per day = 8 X (Full Time Labor X 22.5 + Support Staff X 15) $4,161.60
Projected Fulltime Labor Cost per hour for year
2021
= Current Full Time Labor Cost Per Hour X (1.01)6 $ 26.87
Projected Support Staff Labor Cost per hour for
year 2021
= Current Support Staff Labor Cost Per Hour X (1.01)6 $ 17.91
Projected Average Labor Cost per day for year
2021
= 8 X (Fulltime labor X 26.87 + Support staff X 15.91) $ 10048.57
Projected Design Labor Cost Per day for year
2021
= 2 X Average Labor cost per day $ 20097.14
Projected Max. Labor cost per day for year 2021 = Design labor cost + 15 X 380.7 $ 30145.71

17. Material Handling & Storage Equipment Cost
Equipment
Average Rates
Pallet Truck
Type Walkie Pallet Jack
Quantity 241
Capacity 4000 lbs
Cost Per Equipment $4,500
Total Cost $1,084,500
Total Design Cost $2,169,000
Cost For Pallet Trucks:
Equipment
Average Rates
Reach Truck
Type NA Deep Reach Truck
Quantity $52
Capacity 3000 lbs
Cost Per Equipment $28,000
Total Cost $1,456,000
Total Design Cost $2,912,000
Cost For NA Deep Reach Trucks:
Equipment
Average Rates
Push Back Racks
Type 3 Deep
Quantity (Total Ground Pallet Positions) $22,225
Cost Per Pallet Position (4 Levels High) $150
Total Cost $3,333,750
Total Design Cost
$6,667,500
Cost for Push Back Racks

18. Area Calculation
Assumptions
• Width of warehouse = 2 X Length of warehouse
• Space between two pallets = 10 inches = 0.83 Feet
• Aisle Width = 9 feet (Narrow Aisle)
• Shipping Area Width = 2 X Receiving Area Width
Total No. of Ground Pallet Positions = 0.29 X Total Pallet Positions 22224.7
Area Considering only Pallets = # of floor pallet positions X Area of 1 pallet (16) 355594.6
Length considering only pallets = SQRT(Area Considering only pallets/2) 422.0
width considering only pallets = 2 X Length considering only pallets 844.0
Total Width Due to 6 pallets back to back= 6 X Width of each pallet 24.0
No of Aisles = Width Considering only pallets / Total Width Due to 6 Pallets 36.0
No. of Pallet Rows Along the length = Length considering only pallets / Length of each pallet 105.5
Space between two pallets Assumption 0.8
Extra length due to pallet spacing = No. of Pallet Rows Along Length / Space between two pallets 87.9
Aisle Width Assumption 9.0
Extra Length Due to 1 Cross Aisle = Cross Aisle Width 9.0
Total Width Due to aisles = Aisle Width X No of aisles 324.0
Total Width = Width due to pallets + Width due to aisles 1168.0
Total Length
= Length considering only pallets + Extra Length due to pallets spacing
+ Extra Length due to 1 Cross Aisle
518.9
Total Area of Storage = Total Length X Total Width 606094.7
All units are in feet

19. Area Calculation
Receiving Section width = Total Width / 3 389.3
Shipping Section Width = 2 X Receiving area Width 778.7
Average Pallets Shipped Per day
= Average Units Shipped Per day /( No of cartons on each pallet X No of units
in each carton)
1059
Area of Shipping = Maximum Pallets Shipped Per day X Area of one pallet) 16944
Length of staging area = Area of Shipping Section / Width of warehouse 21.76
Total Length of Shipping Section
including area for movement
After Adding some length for movement to the length of staging area 45
Area of receiving and shipping = Total Length of shipping section X Total Width of warehouse 52560
Total Area of Warehouse = Average Total Storage Area + Area of Receiving and Shipping 658654.7
All units are in feet
• Total Area of warehouse = 658,654.7 Sq. Feet
• Design Total Area of Warehouse = 2 X Average Total Area= 1,317,309.4 Sq. Feet
• Maximum Total Land Area to Be Acquired = 3 X Avg. Total Area = 1,975,964.1 Sq. Feet
Since, we acquire land only once and we should acquire this in maximum quantity so this
will be 3 times the average area. The facility can be expanded as per the demands in the
future.

20. Pallet Positions Allocation of A & B Class Skus to Forward Area
Assumptions
• we have assumed that the warehouse works as a fluid model and since
storage containers are small with respect to the size of storage equipments,
continuous model is a good approximation
Model
• Let ‘fi’ be the flow in volume/year for sku i belonging to A and B class.
• Let ‘vi*’ be the optimum volume of sku i stored in the forward area.
• Let ‘pi’ be the number of picks for sku i
• let ‘pi/√fi’ be the labor efficiency for sku i which gives a metric to measure
the benefit of storing sku i in forward location.
• vi* = √fi/(∑√fi) for i 1,2,3……n
• (n is 3130 in our case which is total types of A and B skus)
Total number of pallet positions for A and B projected for 2021 (N) = 51,283

21. • We can now calculate the optimum number of pallet positions to be stored
in the forward area for each sku i falling in A and B class by multiplying vi*
with N, in decreasing order of their labor efficiency and location
convenience.
• This allocation policy even gives the flexibility to replace present skus
without effecting any benefits.
0
10
20
30
40
50
60
70
80
90
100
0
50
100
150
200
250
300
1 501 1001 1501 2001 2501 3001
LaborEfficiency
SKU Count
Labor Efficiency for Each SKU in A&B Class

22. • Following table shows the space allocation for top ten most labor efficient
skus.
Some Additional Points
• The products are of uniform shape and size, so this helps in achieving a high
space utilization.
• If there is a need to store a particular pallet quantity as safety stock (si) for
sku i, optimum storage quantity can be increased to that level to meet such
constraints.
• Also, ACME may think of storing some family of skus together based on the
order quantities and frequencies, a set of particular skus are ordered
together.
SKU Labor efficiency vi* vi* X N
762354731794 242.1868084 0.000712 36
762354731811 239.7921043 0.000825 42
762354731688 232.8944957 0.000821 42
762354731818 232.1726621 0.000943 48
762354731787 224.3853104 0.00055 28
762354731848 223.1549439 0.000896 45
762354846391 221.3143348 0.000885 45
762354846374 220.2086722 0.00101 52
762354731841 219.9835286 0.000842 43
762354846367 218.7804399 0.0007344 37

23. Schematic Diagram of Layout
Trailer
Pallet
Aisle
Shipping Area Receiving Area
Parking & Maintenance Area
Storage Area
Why U shaped Layout ?
• U shaped layout is more beneficial when we have ABC skew in product in
product mix as there are more number of equal convenient locations.
• There is flexibility to interchange receiving and shipping doors to meet
any uncertain surges.
• Task interleaving can be done in U shaped layout.

24. Ergonomic Guidelines for Manual Material Handling
• NIOSH lifting and liberty mutual table guide standards should be used as a
check point for the weights to be lifted.
• Job rotation, modifying time tables and work speeds should be considered
to prevent any impulsive loading on workers coming to work after long
absences.
• All weight lifting activities should be planned in such a way that enough
time is provided to relax the muscles. Also, much of the lifting should be
executed in the power zone of the employees.
• Aids such as slip resistant gloves, extra handles of suitable size, tools to
replace pinch grip with power grip should be provided to the operators.
• Hazard evaluation checklists and job safety analysis should be done to
identify problems and risk factors from time to time and while introducing
new tasks.
• Last but not the least, workers should be trained in safety procedures such
as work at height, fire safety management system, permit to work,
emergency evacuation etc to ensure safety at all times.

25. New Operational Plan (3-deep)
Total Pallet Positions 44450
Cost of 3 deep push back rack per pallet
position
$ 150
Total Cost of Push Back racks $ 6,667,500
Total Land Area (Design) 1317309.4
Old Operational Plan (single deep)
Total Pallet Positions 44450
Cost of selective rack per pallet position $ 62.50
Total Cost of Selective racks $ 2,778,125.00
Total Land Area (Design) 2029343
Economic Justification
• If we continue with the old existing plan which is the one with single deep
storage policy, the number of aisles required will be larger.
• Single deep storage policy will increase the number of aisles by 70.
• This will increase the overall area of the facility, will decrease the space
utilization, and will increase the utilities cost of the facility.
• Below two tables show the area calculations for both the cases.

26. Savings
Additional Investment Due to Push Back Rack over
Selective Rack $3,889,375.00
Saving in Area in New Operational Plan (Sq. Feet) 712033.6
Average Yearly Utilities Cost Per Sq. Feet $1.20
Total Savings in Year 2017 $854,440.32
Total Savings till Year 2021 considering inflation rate of 3% $4,536,339.70
854,440
880,073
906,475
933,670
961,680
820,491 845,106 870,459 896,573 923,470
0
200,000
400,000
600,000
800,000
1,000,000
2017 2018 2019 2020 2021
Dollars
Year Actual Savings
Target Savings
Assumption
Average yearly utility cost per square feet = $1.20
• Below graph shows the savings required considering 12% hurdle rate as the target line.
• Actual bars show the savings we project to achieve year on year.
• In addition to these savings we will be having some more benefits as the overall travel
and operating cost of the equipments will be less.

27. Implementation Plan
• Important key for any relocation plan to be successful is planning well ahead
of time, so that there are no last minute shipment/delivery issues. ACME
wants to move by the end of 2016 so the plan should be completely ready
well ahead of December 2016.
• Yearly growth rates in demand have been considered to have a good idea of
how much resources are required in terms of labor, equipments, size etc.
• ACME should order all equipments such as storage equipments, material
handling equipments taking into consideration their supply lead time and
the time it will take to assemble and install these equipments.
• ACME can think of hiring specialized agency for relocating the facility as
having expert in the team is always helpful in making right decisions at the
first step.
• ACME should pay attention to have all required permits such as occupancy,
building, fire, etc. in place because any flaw in the paperwork can cause
undue delays the relocation process.

28. • All concerned departments such as construction, operations management,
maintenance etc should go hand in hand to accommodate for the specific
needs of any one department.
• There should be a proper plan of meeting the customer demands during the
relocation period as during this transition phase order picking, shipping etc
might not happen as usual due to employees engaged in other tasks and
there might be facility constraints as well.
• The IT team of ACME should also play their part in this relocation process as
they should make sure that the computer system is functional during the
transition.
• Also, this will be a good opportunity for ACME to update the WMS and fix
for any existing bugs or problems.

29. Conclusions
• Material handling equipments ACME should use are Pallet Trucks and
Narrow Aisle Deep Reach Trucks. It has been recommended to purchase 482
pallet trucks and 104 NA deep reach trucks.
• 3 deep push back racks should be used to store pallets with stacking height
of 4 and two racks have been places back to back.
• Space utilization comes out to be 86.21 % with recommended storage
policy.
• Total design area of the facility should be 1317309.4 sq feet with width
double of the length built as a U shape facility.
• ACME should allocate pallet positions in the forward area to skus based on
their labor efficiency assuming fluid model for warehouse.
• During the period of shifting ACME should have a proper plan to meet the
demands of the customers and this time will be a good opportunity to
update the WMS or fix any prior bugs.

30. THANK YOU