A Warehouse and Logistics Plan to Keep Pace with Growth
Your supply chain’s delivering consistently. Production is humming. Five-year projections look amazing. But where are you going to put everything? DPA recently helped a successful U.S. manufacturer work through its warehouse and logistics dilemmas.
Growth has been phenomenal for a leading supplier of tankless water heater solutions. The company expects sales to increase by 76% during the next five years. When the company’s warehouse reached capacity, forty-three trailers on the production site were leased; these became packed with finished goods and spare parts. The company urgently needed to re-configure their existing warehouse, determine additional space needs, and figure out transportation logistics to accommodate future growth.
The company had to determine its storage needs for the next three to five years while optimizing its current warehouse space. While employees have applied lean and continuous improvement techniques to the receiving, picking and shipping areas, they needed outside support to accelerate lean efforts for inventory management.
Tasks and Findings
DPA Senior Consultant Mike Beauregard worked with six of the company’s employees to analyze current warehouse needs and how they utilized storage. The team documented inputs and outputs for the three warehouse processes defined the processes and constructed workflow diagrams of activities in the processes. The team identified improvement opportunities in warehousing operations.
Then the team analyzed the sales and storage requirements both for current sales and for future projected sales. Based on their analysis and the company’s forecasted sales growth, the team calculated its current space needs at 710 pallets of storage, increasing to a projected 1108 pallets in the Year 2022. They examined the types and sizes of materials that are delivered from suppliers and from internal Manufacturing to determine the total cubic feet of storage needed.
With this information, the Kaizen team brainstormed ways to provide future storage functions, worked through their options and decided that setting up an off-site warehouse was the best choice. All trailer storage would be eliminated. The team decided that Picking and Shipping would remain on-site at the production facility; Receiving and Storage would be located off-site but near enough to transport pallets efficiently.
The team calculated that Picking would require two weeks of inventory; a new layout with improved workflow was created. The Picking area will be backfilled from the warehouse on a kanban basis with three to five ‘milk runs’ per week (dependent upon truck size). The milk runs will start with contracted trucking services and migrate to leased or purchased vehicles depending on future needs.
With criteria in hand (number of docks, restrooms, security, wifi, racking systems), the team researched and identified potential new warehouses. They re-worked product flow for current warehouse operations. They also recommended a longer-term adjustment to supply chain procedures that could reduce current inventory needs.
Once the company procures its new warehouse space, it will be able to store the 1108 pallets and the 162,500 inventory items projected based on its Year 2022 growth forecast. The freed-up floor space on-site will make room for additional production growth and expanded testing capabilities. A new, fourth production line will provide capacity for new product lines and expand manufacturing capacity by 33%. The new layout and workflow in the warehousing processes, along with the elimination of storage trailers, will increase labor productivity by an estimated 15%. Removing the trailers will also help the company more easily use First In, First Out (FIFO) inventory practices, improve inventory accuracy, and reduce damage from the weather and material handling.