Read THE LOGISTICS BUSINESS white paper on this subject…. construction-industry-logistics.pdf

There will be renewed interest in productivity improvements within warehouse operations, but companies will still be reluctant to release large capital projects in automation or similar.
THE LOGISTICS BUSINESS, a leading specialist supply chain and logistics consultancy, has experience in planning and developing supply chain, distribution and warehousing operations throughout the world. From supply chain and distribution strategy, to development of distribution operations, warehouse design and layout, as well as manufacturing logistics and IT systems design, its clients include many blue chip companies.

We have also worked on government initiatives on sustainable transport and waste minimisation.For further information please call:Helen Morris, THE LOGISTICS BUSINESS on +44(0)1527 889 060, email helen.morris@logistics.co.uk

THE LOGISTICS BUSINESS, a leading specialist supply chain and logistics consultancy, has experience in planning and developing supply chain, distribution and warehousing operations throughout the world. From supply chain and distribution strategy, to development of distribution operations, warehouse design and layout, as well as manufacturing logistics and IT systems design, its clients include many blue chip companies.

We have also worked on government initiatives on sustainable transport and waste minimisation.For further information please call:Helen Morris, THE LOGISTICS BUSINESS on +44(0)1527 889 060, email helen.morris@logistics.co.uk

Designing a warehouse has more parallels with cooking without a recipe.  To produce a good warehouse design a detailed knowledge is necessary of the requirements, the component parts and how they fit together. Whilst the design process is partly scientific with the data collection and analysis there are also those far more subjective issues such as the culture of the business and the ability to cope with complexity.

This is not to say that warehouse design is a black art and can’t be defined in a process, far from it and this article addresses this point.  There is however a point in all designs where the designer is faced with the blank sheet of paper (or screen) and has to start putting lines on it.  For every line drawn more questions are raised :-

• is the area large enough;
• what about peak periods;
• what about personnel and truck access;
• is the flow of goods logical.

This is the part of the process that can be most frustrating and most satisfying depending on the amount of preparation work undertaken up to this stage.  If every choice of how large to make an area or where to put it in relation to another answers one question but raises several others this is a clear sign that the early and essential design work has not been done.

Having been directly involved in warehouse and logistics design for the last 20 years and having spent a good proportion of these working as a designer or running a design department I’ve learnt to quickly spot when the design process has been followed and the people who make the best designers. One of the best indications of this is when designers bring their work to you and want you to challenge it.  The designer should have the confidence to want to explain and show what a good job they have done but more importantly they should be looking to get a different perspective on the decisions made when creating the design.  This not only gets commitment from all stakeholders but also makes the solution more robust to stand the scrutiny of other groups later in the process.  There is very rarely a single solution to the design of a Distribution Centre and others will bring different ideas and perspectives to it dependent upon their background and involvement with the project.

To stay with the philosophical theme a little longer, a good designer has to be honest with themselves.  You cannot design something well without a clear and detailed understanding of its intended use, the components from which its constructed and how it fits together.  Only by developing this clear understanding of these points for each project can a designer openly defend the decisions made in creating the design.  When questioned, if designers give defensive answers like; its down to experience, its too complicated or involved to explain or it’s a design that’s been successful for many other projects; these are clear warning signs that they may not be confident about openly explaining their work.

The Design Team

So far we have talked mostly about the designer.  A successful DC design requires a team of the main stakeholders.  The business and supply chain objectives, the operations and maintenance of the site all need to be included in the process.  The designer will include and represent these views in his solution but how these different and not necessarily complimentary objectives have been included, is best reviewed by the stakeholders.  It is the designer’s role to use and coordinate these essential inputs.

The Design Process

Let’s first of all deal with the intended function of the DC. The market, suppliers, products and inventory are usually defined during the design of the supply chain leaving the DC design to cover more practical matters.  The starting point can be the customer requirements; what they want, when they want it and how it should be delivered. Satisfying this eventually comes back to the suppliers; what they supply, when they supply it and in what quantities.  The function of the DC is to satisfy the customer requirements by holding and processing sufficient quantity of the defined products and stock.

Data Acquisition and Analysis

As many DCs are built to meet future demand criteria such as business growth, company acquisition, product growth etc. need to be defined and modelled. This is often one of the more difficult areas to accurately define and will include information from Sales, Marketing, Strategy and Management.  Hard data to support this growth is not often available and needs to be developed by factoring information from current operations. To do this effectively there is a need to understand the source of this data and to interpret it correctly.

As with all data analysis, having the technical ability to acquire, clean and manipulate large amounts of data from different sources is only half the battle. It is as important to define what information is required from the data and how best to develop or extract it.

Operational Models

With the future operations defined it is then a case of translating this into pallets, cases movements and areas. One of the most effective ways of doing this is to create an operational model of the DC.  In its simplest form this can be spreadsheet based and can define each operational area by function, size, products, stock and throughput. The key to the effectiveness of these models is to make them interactive, so by changing parameters such as throughputs, tote fills, pallet sizes, days of stock or operating hours, the total DC requirements will automatically change. This enables the model to represent many different operating scenarios that could be seen in the future.

Figure 2 - Example of a simple Operational Model

For more complex functions and data the model can be created in a database to enable more powerful data manipulation tools to be used. This allows more detailed analysis to be undertaken such as the definition of exactly what products will be defined as fast, medium or slow movers and the effects of including or excluding different products or product groups.  An example of the output from a database model called “i-flow” is shown in Figure 3. This technique is best used where existing data is used to project growth, flows and stock are required to be defined down to product levels.

Figure 3 - “i-Flow” database model

Concept Design

With the requirements clearly defined and analysed, a number of operating concepts can be investigated. Whilst this is a very creative part of the process the work done to date has often short-listed a number of possible concepts. Customer service levels can demand that each order is order picked and despatched rather than being handled more efficiently as part of a batch of orders; product shelf life may dictate that the item is not held in stock but flowed through the DC; or long lead times for supply from another country may dictate that high levels of stock are required for that product.

Working within these constraints, this is an area where the designer will use his experience to select different operating concepts that are applicable for evaluation.  At this stage we often use a combination of the operational models and simple cartoons from our library to describe the concepts to the stakeholder group for evaluation.  This way concepts can be easily evaluated and rated on how they meet the project objectives before developing full layouts.

Figure 4 - Examples of cartoons to describe concepts

Processes and Technologies

The choice of the optimum Processes and Technologies often runs hand in hand with the development of the operating concepts.

There are many options and technologies available from block stacking pallets on the floor to fully automated storage and picking systems. The choice of the most appropriate is largely down to analysis of the throughput, storage, product requirements, budget, costs and savings and the cultural fit of each potential solution.  This is an area where the experience of the designer is key in knowing which are likely to be most suitable for this particular circumstance and how to design the system using this equipment.

Depending on the technology, there may be benefits in obtaining information from suppliers during these stages. If solutions and dimensions are dependant on a specific technology or detailed pricing required for a business case suppliers can provide these details.

There may not be a single solution or technology that satisfies the objectives of the project so it is often a requirement to evaluate how each solution meets these and compare this along with capital and operating costs.

Producing Layouts

We can get to this stage in a project without putting our hypothetical pencil to paper.  This comes back to the earlier comments that the design must be built on a detailed understanding of the requirements and building blocks. If I use the analogy of painting an old window frame; if the frame has been rubbed down, filled, treated and the window areas masked; painting the frame is actually quite easy and enjoyable. Likewise if your DC design requires you to jump back to the requirements and analysis stages it can be like painting over the old flaked paint and wiping away the runs. If the preparation isn’t done its unlikely to stand the test of time.

Figure 5 - Flaking Paint

With the processes, technologies and individual areas defined the overall size, shape and physical material flow can be established within a building. It is at this point that we undertake the activity that most understand as the design process - putting the building blocks into the layout then developing the detail.  This is undertaken by CAD (Computer Aided Design) systems to give great flexibility to develop different layouts and options quickly and accurately.

Even with the preparation work complete the layout work is still an iterative process.  Only with the different elements being laid into their prospective positions to achieve the material flow can you fully evaluate the relationship between them and the effect on other processes.  External factors such as building columns and doors; operational factors such as personnel access, safety and truck manoeuvring areas are best detailed from the first layouts.

This is allowing time for more input from all the stakeholders on the team to challenge the design to ensure it meets the requirements in the design brief.  The designer should be able to provide detailed answers to questions such as :-

• How does it meet the volumes in the future?
• What if my customers want smaller orders in the future?
• How do people leave the building in the event of a fire?
• Are there any single points of failure?

Inevitably questions come up that are not in the design brief.  Whilst this demonstrates the importance of investing time in the brief, the purpose of the design process is to design and visualise the facility before its built and some requirements only come to light when the layout is reviewed. The time and cost of making changes at this stage are still minimal if compared to making these changes when the system has been built.

From an agreed layout the detail can be added that will allow any selected suppliers to undertake their detailed equipment design.

Three Dimensional (3D) Layouts

Whilst working with two dimensional (2D) layouts is fast and making changes and iterations is more immediate it takes practice to interpret these drawings.  There are therefore many benefits in producing three dimensional layouts when the design has been developed.

Designers, engineers and many others involved in the design process will find it perfectly adequate to work from a 2D but a 3D drawing will bring a design to life and provide a far better visualisation of the building and operation.  This gives a far better feel for the scale of the equipment, empty spaces in receiving and marshalling and the physical distances that operators will need to walk.  Additional time is required for 3D layouts but having already developed 2D layouts this is not a great deal of extra work.

Figure 6 - Example of 3D layout

Animation and Simulation

3D layouts bring a better visualisation of the project to technical and non-technical audiences.  For presentation purposes these 3D layouts can be both rendered and animated.  Rendering is undertaken by defining light sources that will create a shadowing effect on solid objects and animation is to have objects moving within the layout or viewpoint of the layout continually changed to achieve a walk-through or fly-through effect. Whilst this provides an excellent tool to explain the operation of a DC to the Board, Workforce or Investors it does require additional work to produce and change.

Figure 7 - Example of a rendered layout for animation

An animation does not however work from the full logic of how the system would operate behind the moving images.  As the function is to create a visualisation of the operation items moving on a conveyor can for example, be a constant stream or even a random stream.  To define the operating logic on how the final systems will operate will require a simulation.

The information that is put into a simulation is developed in the early analysis and modelling.  The different flows, peaks and bottlenecks should always be defined at the early stages of the project. The role of simulation is therefore a crosscheck or proof that the design work has been undertaken correctly as opposed to being the design tool or process.  Simulations become more useful as the complexity of a project increases.  Every part of a project should be able to be designed to the brief; where the interrelationships of different elements of the project, complex operating logic and time elapsed play a greater role, this is where a full simulation becomes more important.

An important consideration for simulation is that it will only represent the operation of a DC if the full operating logic and decision making within the DC is modelled.  If simplified logic is used and data sets are summarised or reduced, the results will reflect this.  How close the final simulation is to the eventual operation of the DC is therefore largely down to how this rationalisation or simplification was undertaken.

Summary

Whilst we have covered many aspects of the design process the following fundamental principles are required to make this successful.

• All stakeholders have to be involved in the design process;
• A clear and detailed brief needs to be developed;
• DC design is a process that starts with a detailed understanding of the requirements, concepts and processes;
• The company culture, operational methods and skill sets available need to be taken into account in the design process;
• The drawings or layouts are developed towards the end of the process where much of the work is complete;
• Open challenging of the design is essential and should be encouraged.  Good designers should not be defensive about their work;
• Tools such as 3D, Animation and Simulation are very useful to achieve specific objectives at the end of the design process but should not be used to replace the design process.

Whilst these points provide valuable guidelines on the design process they cannot be too prescriptive.  All DCs are likely to include some form of receiving, storage, picking and despatch but when you consider the complexity of different products, suppliers, customer requirements, operational constraints and company cultures, no two DCs are likely to be the same.

We are sure that automation does work for warehouses and distribution centres - it works very well - but it depends on more than good engineering design and application.  A successful automated system needs a change of culture and top notch management.

Take the example of one our clients - a major high street retailer.  Work on the specification of a new automated distribution centre stated in early 2003 and the facility went live in May 2005.  Initial results were poor with throughput well below design levels and operating costs well over budget.  In 2006 operating costs were still higher than those forecast in the business case.

There were certainly some technical problems in the first year but all of these were overcome.  It was only then that it became clear that most of the problems were not caused by failures in equipment or computer software but in failures to come to terms with the change of culture and management style that was needed for successful operation.  We worked with the client during 2006 and 2007 to address these change management issues and undertook a programme of continuous improvement.  The issues addressed were almost entirely operational and very few were related to the automation technology.

By 2008 operating costs had fallen dramatically and are now some 25% below the business case figure for the design throughput.

Our client could easily have pulled the plug on the automation in 2006 but with our help they identified the cultural and management issues and they put a programme in place to make the changes.

They persevered and now they are reaping the benefits with a system that has more than justified itself financially.

There were a number of lessons to be learned from this project.  Some of the more significant are :-

• There is temptation when preparing the business case to overstate the benefits available in the early years whilst understating the benefits that come later.
• Technical problems are not usually the main issue.  The system design team and maintenance staff knew what they were doing and could quickly put right the problems.  The real issue was that operations management and supervisors were used to operating a manual warehouse whereas an automated warehouse is much more akin to a manufacturing process - a quite different culture is needed.
• The system integrators who supply automated warehouse systems are not operators and indeed they have quite limited experience of operating the facilities they design.  Operations staff need to be involved in the specification and design process and need to take early ownership of the processes which will be built into the system.
• It’s no good simply duplicating manual processes.  The operations team need to understand that the processes used in automated warehouse must be adhered to and the facility must be run like a manufacturing process.  Processes can be changed as improvements are identified but they have to be introduced in relation to the whole system.

The experience and knowledge of the team of consultants and technical staff from THE LOGISTICS BUSINESS was valuable through every stage of this project, over a period of five years.  We helped ensure a good specification of requirements and selection of quality suppliers.  Most importantly we were able to understand the operational issues and help guide the client along a road to success.  Perseverance brought rewards and significant long term financial benefits.

This brings us to a major point in the design of automated systems - system flexibility.  As you progress through the warehousing process, the design of the system becomes more dependant upon the type and number of customers and the number of different products they order.  Changes to the numbers of lines per order and items per line can affect the operation and efficiency of an automated system and it is essential that these changes are taken into account during the planning stage.  Almost without exception automated systems are designed by technical experts and then run by operational experts; so we cannot emphasise enough the importance of understanding and defining the business and operational requirements of your organisation prior to considering if automation is the correct solution.

THE LOGISTICS BUSINESS employs experienced consultants and technical experts who have designed and implemented many of the major automated systems in the UK, others who have specified and developed warehouse management systems software and, equally importantly, those who have managed and run major warehouses and supply chains.  This has enabled us to develop detailed design and specification processes that have been very successfully implemented on many automated and manual warehousing projects.  Some of the milestones in these processes are as follows:-

• understand the characteristics of the future business of the company that the system will handle;
• analyse current operations and model future scenarios;
• develop a specification of business and user requirements;
• develop the most appropriate concepts in each of the operational areas taking account of factors such as throughput, inventory holding, seasonality, order fulfilment times, accuracy, capital costs and labour savings;
• identification of handling techniques that can meet the throughput and storage requirements cost effectively;
• definition of the operational requirements of the system, involving the operations teams;
• specification of the software and interface requirement of the system;
• develop concept layouts, specifications and business cases for the proposed systems.

The benefit of employing THE LOGISTICS BUSINESS to undertake this work is that we will work as part of the client’s team.  Our sole objective is to understand the client’s requirements and develop the optimum solutions that meet the long term business plans regardless of technology or supplier.

Because of the success of our work and depth of our practical experience we are usually asked to continue to support projects through the tender (quotation) process and supplier selection, implementation, system testing phases and handover into full operation.

Smaller configurations

• Zone Manager installed on a standalone laptop or desktop computer.
• Trade Contractors submit requests either on paper forms or by email. The logistics manager enters the booking on the system and prints the diary for weekly reviews.  Trade Contractor reports with details of delivery and crane or hoist times can be printed or emailed to them.  Daily or weekly diaries can be printed and displayed at key points on site.
• Zone Manager installed on one or more PCs with one or more display systems attached.
• This operates as above but with the advantage that the scrolling display systems make the diary visible to everyone on site.  The display systems can be local (LAN) or remote (requires broadband connections). More than one person can be given access to the system, each with their own login. ’No Shows’, unplanned deliveries and actual delivery times can be recorded for feedback to Contractors.

Larger configurations

• Zone Manager on a larger network
• All the features of the smaller configurations with the advantages of Zone Manager installed on the desktops of other Project personnel e.g. Project Managers.  User logins control what they can or can’t do.
  The Gate functionality allows real-time capture of movements on and off site.
• Multi-project site
• Zone Manager can handle multiple projects on the same site.  Each project can have their own logistics manager who only has only to his or her project.
• Web based
• Trade contractors can access Zone Manager in order to either enter Booking Requests or to directly make their own bookings (where permitted).  They have access to the project diary and can see when deliveries arrive.  Other features allow for remote gates, holding parks or at remote locations.

Hosted Service

• Full Zone Manager system with all features on an Internet based server
• Benefit of all Zone Manager features without the need to install software
• Available to anyone with Internet access
• Administrators get access to the full administrative system
• Trade Contractors use the Zone Manager Web site
• Support is centralised
• Fewer issues with internal IT requirements. PCs are required to have recent versions of standard Microsoft Windows software. Vista and Windows 7 are fully compatible.
• No local IT costs apart from Internet access
• System can be accessed from any PC or Laptop with Internet Access
• Available on a monthly basis

The mobile phone is fast developing into a hand held computer.  Mobile phones are already the default method of communication on and off site as they function from day one a green field site (usually!) right until hand-over.    Web based applications will gradually appear that allow access via mobile phone browsers or applets.

According to government statistics our 1,800 miles of motorways today carry 42% of all road freight despite accounting for no more than 1% of the total road length.  It would not be an exaggeration to say that modern distribution would be impossible without motorways.  Since the M1 was opened the UK population has grown by almost 10 million from 5.91 million to 61.4 million and GDP has more than trebled in real terms.  This has almost directly translated into a corresponding growth in traffic.

Plotting the growth in GDP alongside the growth in roads transport shows a remarkable correlation until recent years when services rather than manufacturing have become a more dominant part of the economy.  Indeed there is a close correlation between the take off in economic growth in the late fifties / early sixties and the development of the motorway network.  It is interesting to note that the UK was a late adopter of the motorway concept.  America had its first motorways before the First World War and famously Hitler started Germany’s motorway building before the Second World War.  Is it possible that these developments played a significant part in the UK’s relative economic decline during this period?

You may be thinking this is all very interesting but what relevance does it have for today’s economy.  Well, whilst the past is not a guide to the future, it is as unwise to ignore the lessons learned as it is to carry on doing tomorrow everything that we did yesterday.  In other words is it possible that the almost complete cessation of motorway building in recent years combined with the government’s aim to price traffic off the roads (fuel duty, congestion charging, road pricing, etc.) could become a constraining influence on economic development?

Believe it or not the UK does still have a manufacturing industry and as a percentage of GDP it is still similar to other major economies such as USA and France.  And we certainly haven’t stopped consuming, far from it.  All those goods have to be moved from the point of manufacture to the point of consumption.  Over the coming years we are going to have to make some difficult choices :-

Consume less.  Lots of people take the view that this would be a good thing but with a growing population and the aspirations for betterment that we all have this is definitely a case of pushing back the tide.  Even if its simply a case of helping more people out of poverty (which no one would disagree with) that still leads to increasing consumption.

An easier way to consume less is to reduce packaging, particularly its volume.  If we can reduce the amount of fresh air we move we will need fewer vehicles to do it.

Co-locate sources of supply and demand. Over the years relatively cheap transport has led to increasing centralisation and off shoring production.  In the majority of cases processed products take up more volume thank bulk materials and so are less efficient to transport.  Food accounts for around 40% of overall freight transport and yet is one of the easiest products to move production closer to customers.  We need to change the shape of our supply chains to reduce the requirement to transport finished goods so far.

Move more product by rail or water.  How long have we been trying to do this for and how much investment has gone into rail freight terminals, ports and the like?  Rail still only accounts for about 12% of total tonne kilometres although in fairness it has been growing.  Ten years ago in was just 10%.  The problem is that rail and water only makes sense for longer journeys and UK geography does not lend itself to this.  The average road freight journey in the UK is just 87km and only 4% of UK road freight travels more than 300km - the sort of distance where rail can be economic.  There is no doubt that rail can help and there is scope to increase rail volumes but it is not going to make a big dent in the road freight volume.

Improve the efficiency of road transport.  This is one that logisticians can really get their teeth stuck into.  There is still plenty of inefficiency in road freight both in terms of road capacity and vehicle capacity.  Except following accidents, roads are generally only congested during the morning and evening periods when people are travelling to and from work.  The rest of the time, and particularly at night, there is plenty of capacity.  More retailers for example are gaining advantage from ‘drop and lock’ operations where drivers have access to a secure drop area in store at night.

There are two ways to improve the efficiency of vehicles - use bigger ones and keep them full.  In recent years, although the number of articulated lorries has hardly grown the number of smaller vehicles and vans has increased considerably.  In part this is due to efforts to reduce stock and improve response times through smaller more frequent deliveries - great for overall supply chain efficiency but not good for transport efficiency.  Also in the UK we seem to have an aversion to large vehicles.  Each time the government suggests allowing larger vehicles onto our roads there is uproar from a public that imagines this will led to more noise, more road damage and greater pollution when in fact the opposite is true.

Keeping vehicles full is the other challenge.  In part it’s a similar problem to the previous one, transport operators don’t always have the orders to enable them to fill their vehicles and then there’s the return trip.  Big strides have been made in recent years to improve vehicle fill but it still only averages a little over 50%.  To make big inroads into this is going to be difficult because it requires the cooperation and determination of three parties - supplier, transport operator and customer.  Between them they have to aim for more full loads (so that the vehicle maxes out on either weight or volume) to single destinations on bigger vehicles and then find a backhaul close by.  There have been several attempts to set up intermediaries to broker arrangements between the three parties but none have been successful, failing to reach the scale where they could bring benefit to all participants.

Clearly more work needs to be done to educate stakeholders to improve efficiency.  The alternative is that pricing (road, fuel etc.) will be used to force the required efficiency improvement but in so doing increase costs to the likely detriment of the economy.

So is there a case for building more motorways?  The government certainly doesn’t think so.  In January 2009 it published its plans for investment in Motorways and Major Trunk Roads over the next five or six years.  This signalled a significant shift in thinking from widening schemes to what it has called the Managed Motorway Concept.  In short the use of the hard shoulder to provide an additional lane, as trialled on M42.  Twenty seven separate schemes have been identified for HSR over the coming years.  Their research claims that Hard Shoulder Running (HSR) improves average road speeds almost as much as road widening (17% for HSR vs 18% for widening) but without creating as much additional traffic (0.32% for HSR vs 0.38%).  Quite how they have arrived at these figures is not stated.  Also the document does not say whether the benefits of HSR are expected to apply equally to passenger and freight transport.  Whether even this level of public spending will survive the inevitable cuts when a new governent comes in this year is open to question.

Apart from the cost, the other argument against building more motorways, indeed undertaking any road development, is the impact on the environment.  The targeted reduction in CO2 emissions is not going to be helped by a steady increase in road traffic.

So, as we celebrate the M1’s half centenary and the economic benefits that it has contributed to, it is vital for all Logisticians to play a part in improving the efficiency of the way in which it and other motorways are used.  If we just leave it to the government they only have the blunt weapons of legislation and taxation to do it with and that’s not something any of us should look to encourage.

THE LOGISTICS BUSINESS, a leading specialist supply chain and logistics consultancy, has experience in planning and developing supply chain, distribution and warehousing operations throughout the world. From supply chain and distribution strategy, to development of distribution operations, warehouse design and layout, as well as manufacturing logistics and IT systems design, its clients include many blue chip companies.

We have also worked on government initiatives on sustainable transport and waste minimisation.For further information please call:Helen Morris, THE LOGISTICS BUSINESS on +44(0)1527 889 060, email helen.morris@logistics.co.uk