Warehousing Strategy

Client: Australian manufacturer of steel products with global markets

Background

The merger of two steel manufacturers led to rationalisation of several sites within the network and dramatically increased the demand serviced by the remaining facilities. In the case of the Sydney manufacturing plant and warehouse, the resulting demand increase created a clear imperative for the company to assess its warehousing strategy.

Challenge

To identify and address the four key aspects of warehousing performance, in terms of people, processes, systems and infrastructure, and develop solutions which would meet the needs of the business over the short, medium and long term. The tasks to be addressed included:

• change management issues in a mature, blue collar workforce environment
• developing streamlined operating processes, material and traffic flows in a 'safety first' operating environment
• understanding the impact of company operating policies on facility capacity
• identifying appropriate and cost effective warehouse automation technologies for improved operating performance
• developing effective performance measurement and reporting capabilities
• balancing the competing issues of increasing demand for its products and manufacturing capacity constraints
• developing design criteria for short, medium and long term solutions

Approach

Designed and built a detailed multi period capacity model based on forecast production and demand profiles to determine peak storage requirements over a five-year time horizon.

• collated activity based costing data and product volume data for all current operations. The data was from multiple sources that were standardised to ensure consistency across operations.
• derived existing capacity utilisation
• derived warehouse activity based costing models to profile existing operating productivity and processing costs
• mapped warehouse processes including: receipt/putaway, replenishment, order preparation, staging / despatch and returns / re-work
• prepared and validated various facility design options (in AutoCad), identifying short, medium and long term improvement opportunities. Design considerations included warehouse size, configuration and type of construction, material flows, storage and materials handling equipment, dock design, pedestrian and vehicle access, and office location and size
• prepare capital and operating cost budgets for recommended improvement items over the various time horizons

Outcome

Three facility designs incorporating best practice design criteria, infrastructure and technology improvements were recommended. Key benefits of recommended designs included operating cost savings of up to $2m pa. Payback was achieved with cost effective solutions requiring $0.5m-$5.5m in capital over the short, medium and long term time horizons.