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k n d e H r e wa T b o s e o a r h e T a n u s e h a r o k n d e u s wak T b o a n o H h d h u w Th bo an ho re e ok Ha s eh w e db e ou eh Th bo an e r he ok bo a e ok d u h w T n e o ar w o Ha s o e o d Ha eh w T e re w T bo se o a he db Ha u e a ok n e u w k T b n o a he r T d H s a h oo db u r H h a h o H u r s h o n an o r e k a s e w o d e o e h bo a e r e k o s e w d u eh w T n e H ho a k T bo Ha u ho e o nd Ha eh w T o e h s a b s o a he db a u re h o n se u w k b n o a he k Ha e r o e u r o H s e w oo nd se h e k T db H se arTh oo db us re w Th n e H d a h k a e h a k b H ou w h o an H e e k o e h a e bo n o Th n H o r T o a a e ok d a h w Th ok H o r s d d o u h o b s e b a u eh h k n e re w T b n o a e T a u e e e k o e w o n s d H h a h o db u r w h n s b T d o o e o h waT h k H a o k b o H u wa h e o o a n o r e e k o o s e e h a e d b e H o r e T an r T o a s r d u s h wa T h k H o r wa o o k h h e e u n w H s e w e d h e k d H e a T bo e o r e T an us eh r k h a h u b T Th nd e Hho ar w oo ou w he bo an ho r e ok Ha s eh w e db e ou eh a w o H o a n e u e w u e a r e bo an s h r k T se r w k db s ho a Th db Ha ou re a o an se eh w o d e o eh h H eh a Th oo e u r e o n s h r k d a k bo H us o e a o r e k H s e w o d e o e Th b o H u re Th o an e u w nd u eh w T an e h a k b H u h e o o an se h e k T db H se a bo se o a he db Ha ou re Th oo an se ou w r o d a k b H o u wa h e o o n H e o k H u s r e w o o n d s e h o e wk T d b H a s e r Th oo an s r w k db an ho T an e h a k b H u a he oo n H s eh e k T db e H eh a Th oo db u he db Ha ou re Th oo an se r w k db e o w h o a o r e k o s n s h e k d H eh a Th o w e H n u o a s a e ok d u eh w Th ok H a ok db e o w Th bo a o r e o n e r w H u n s e e k d H e h a T h b o e o u a r e T h a n r e T h o o a n s ea r e wo k d b u s h w T h b o a o r e o k H a s e h wa e d b h e k d H e h a T h o e o s ar e ok nd us eh w Th nd e H o r w oo ou w Th bo an o re e ok Ha e o w d H e h a T h b o e o u a r e b o a n u s e h a r k T s e a r e w k d b u s h wa T h bo a o r e o H s e w o d e o e h H e Th o e ou r e k a a n h h h e o d u e w T n e o a k bo H u o e a o r e o H s e w k T b s ho a h db Ha u re Th o an se u w nd u e w k T an e h o e h ar he o e H u re w oo nd se ho e k T db Ha se ar bo se ho a he db Ha k a s h w h o o e o u r o d us h w Th nd e H o ar k T bo Ha us a e ok nd Ha eh k Ha s eh w ok bo o a e b a u e h ok n e re w T bo n o T n e o ar e d d H d h o H us re w oo n se h e Th bo Ha ho ar he ok bo us he bo an us e d e k a e h o w h w T h n d H o a r k T b o H a u s a e o k n d u e h w T h o k e H wa o k d b e H r d o u a r e b o a n u s e h h e o k n d e H e wa T h b o s e o u a r e T h a n r T h o o bo s e w o d e o w T b a h r e o H w e d eh e k e s h o o b k h a a e Th ok H o r k T o Ha u a e o nd u e w T n e ho ar w bo o w h e T an u eh he ok nd se re w k T bo se o a he db Ha u eh a ok us r w he d se o Th b H h ar he o H u re w oo nd se o re T e eh a w bo H u a e oo an o e k a se h a k b H u h he w u w Th nd H o r T o a s o H o re a o a se r w k d s h Th an us h r k T nd H e a Th bo e ou ar e bo an us eh he ok nd e H us T b a e e d e o e h b a h r e o H s e w o d e o

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Cover Photo: DIESL Warehouse in Kochi Information contained in this book has been obtained or collated by Hamburg Media Private Limited from sources believed to be reliable. However, neither Hamburg Media nor its own/contributing authors guarantees the accuracy or the completeness of any information published herein and neither Hamburg Media nor its own/contributing authors shall be responsible for any errors, omissions, in this information or damages arising out of this information. The work is published with the understanding that Hamburg Media and its own/ contributing authors are supplying information but are not attempting to render any professional services. If such services are required, the assistance of an appopriate professional must be sought. The copyright and all other rights of the material in this book are owned by Hamburg Media Private Limited and cannot be reproduced without permission of the company. All requests for licensing, reprints and other usage of material from this book should be addressed to DVV Media India. We will review your request, and provide you with an approval or rejection as soon as we have evaluated the request. CopyrightÂŠ 2011 Hamburg Media Private Limited. All rights reserved. Printed at Maoolee Prints and Art, 8, Byculla Industrial Estate, Dadoji Konnde Marg, Byculla, Mumbai - 400 027, India Published by Jacob Joseph Puthenparambil on behalf of Hamburg Media Private Limited

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Foreword Log.india presents the second edition of The Warehouse Handbook. our first edition was a scintillating success and encouraged by the enthusiastic response, we decided to publish a second edition of the Handbook. While the first Handbook was an attempt to introduce the fundamentals of the sector, this Handbook continues to explore in detail the various strategic issues that beset the industry. The logistics industry is often mired in problems which stymie its growth. We have endeavoured to focus on some of these grey areas, for instance, the parameters the industry needs to consider carefully while choosing the right design for a warehouse. The right design will not only aid quick and convenient throughput, but also optimize costs. Equally important, is correct location and the desirability, in an age of radical change, to metamorphose from single stocking points, into centres of multiple functions with various value added services. Similarly, another sphere where problems often surface unpredictably, is in the area of job security for this is an age of unprecedented job attrition. We have attempted to address these pressing issues with vim and vigour and our writers have tried to provide solutions to these recurring problems. at a time when the goods and Services Tax is well on its way to implementation, the logistics industry needs to streamline its processes and reinvent itself if it wishes to emerge as a winner in an increasingly frenetic and competitive world. This book will be invaluable for those who are fully invested in the cause of the warehousing and the logistics industry. We have worked strenuously and in tandem with our writers to produce this book. i would like to thank our writers, who put aside their work and tangle of commitments, to pen articles for our book. i also thank my colleague, Remya Philip, who has worked quietly and tied up all the loose ends! We have worked on The Warehouse Handbook sincerely and honestly, and hope you believe in the solutions that we have presented (as we do!) for an industry whose big moment has arrived.

Pamela Cheema Editor - Special Projects

Pamela Cheema Editor-Special Projects The warehouse handbook | 7

Enabling strategic moves Environment friendly solutions.

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c o n t e n t s State of the Industry ................................................... 12 By Abhishek Roy

Network Optimization ................................................. 38 By Nitin Rajagopal

Warehouse Design ....................................................... 50 By Padmini Pagadala

Case studies ..................................................................66 By Log.India Team

Human Resources ........................................................80 By Bhairavi Jani

Storage and Materials Handling ................................88 By Ashok Kumar

Benchmarking ............................................................102 By Pooja Dyal

10 | The Warehouse Handbook

1990s: Cost Centric, Narrow View of Logistics

2010: Increasingly Customer Centric, Broad Perspective about Supply Chain Management

State of the Industry ....12

Human Resources ......... 80

As the warehousing industry is undergoing radical changes, warehouses are becoming extensively sophisticated.

People are the foundation blocks and the support of the warehousing industry and must be considered as the pivot of all plans for growth.

Network Optimization ... 38 With costs going increasingly northwards, network optimization is crucial for cash flow.

Storage and Materials Handling ......................... 88 Intelligent design helps in increasing the picking productivity.

Warehouse Design ...............50 Well-planned warehouses not only enhance customer satisfaction, they also optimize costs.

Case Studies .................. 66

Benchmarking .............. 102 Organizations need to constantly benchmark their practices to grow and improve with the best in the industry.

Warehouse management is an essential art. Case stories culled from our past cover stories highlight how diverse corporates have handled their warehouses successfully. The Warehouse Handbook | 11

STATE OF THE INDUSTRY

Warehousing in India â&#x20AC;&#x201C; The Smart Way The warehousing industry is undergoing radical changes and warehouses too are becoming increasingly sophisticated. Abhishek Roy explains in a prolific industry report.

ABHISHEK ROY Senior Consultant, Miebach Consulting India Pvt. Ltd

12 | The Warehouse Handbook

ver the past decade, we have come across many philosophies on supply chain that essentially focus on eliminating excess flab in the chain, or stock, or inventory as it is commonly known, and therefore eradicate the need for having a warehouse. These philosophies have largely changed, and will continue changing in the years to come as can be seen with the changing nature of supply chain with the advent of e-commerce, Just-In-Time production and delivery, quick response systems and supply chain integration. These philosophies are further enabled by the changing business and regulatory scenario, which includes: a. Steady growth in Indiaâ&#x20AC;&#x2122;s economy and globalization which allows greater variety for the customer and in turn, fuels customer demand for even more variety of fresher, newer products.

b. Economic reforms, such as gradual rationalization of tax systems. c. Better transportation connectivity and improved communication infrastructure. Companies have gained a fresh perspective to supply chain. Maturing from a cost-centric approach, they have begun to view it as a profit driver and as an enabler to generate more revenue by providing the customer with more variety, better access, fresher products and an unmatched service experience. Changing Roles of the Warehouse Where does that leave us with the warehouse? Does it mean that companies have begun to revamp their entire supply chain and do away with all the inefficiencies that resided in the form of stock? In many cases, yes. Have they all moved from a multi-tier network to a direct-

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to-store or customer-to-door approach? In some cases, they have. In other cases, they are planning to. Has the need for having a warehouse, therefore, been entirely eliminated? The answer to the last question is a resounding no. In fact, the need for good quality warehouses has never been better appreciated and desired. From being just a stocking point, they have increased their utility portfolio and have become consolidation centers for multiple sourcing locations, a cross docking center for retail distribution, a sorting center for customer door deliveries and an assembly facility for final fabrication, kitting and bundling. The increasing initiatives in supply chain are bound to increase the importance of zero-defect, high speed warehouses which handle a high number of small transactions with more product variety, and more value-added services in far less time than they were doing a decade ago. There will be fewer warehouses, but each of them will be bigger, faster, and more technologically advanced than their prototypes in the past. The Ever-increasing Opportunity The warehousing industry in India provides a study in contrasts. The industry comprises both kinds of warehousesâ&#x20AC;&#x201C;the modern multi-purpose logistics centers as well as the traditional storage facilities, commonly known as godowns. More often than not, these two kinds of warehouses belong to two distinct types of warehouse providers as well. The modern logistics centers are provided by players from the organized sector, while the godowns largely belong to the unorganized sector.

Currently, the organized sector has only a minor share, approximately 10 percent or about 50 million sq. ft of the 500 million sq. ft strong warehousing industry, which is valued at an estimated `50 billion annually. However, when it comes to value, the organized sector claims a higher share of the pie, approximately 15 percent, or `8 billion because of the premium it could attract from customers on account of superior quality. Invariably, this sector is the preferred choice for investors, who are eager to know how it will turn out in future. The low presence of organized sector players in the industry is primarily due to two reasons: First, the Indian industry is yet to completely wake up to the outsourcing scenario. With nearly 40 percent of the warehousing space being owned by companies themselves, the entry of warehouse providers is restricted. Second, the Indian logistics industry as a whole is in a nascent stage of maturity and the shift from storage godowns to logistics centers has only just begun. While the transformation is in its early stages, it has been steadily picking up. The organized sector is expected to grow at 25-30 percent per annum, while the warehousing industry as a whole is estimated to grow at 9-10 percent between 2010 and 2015.

The Indian logistics industry as a whole is in a nascent stage of maturity and the shift from storage godowns to logistics centers has only just begun.

The Smart Warehouse â&#x20AC;&#x201C; Need Of The Day A major reason behind this growth is the changing perception of companies. An increasingly mature Indian industry is viewing supply chain not as a cost center, but as a profit centerâ&#x20AC;&#x201C;a strategic arm which could be leveraged to increase revenue and the overThe Warehouse Handbook | 13

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Fig.1 – Changing perspective of Indian companies

1990s: Cost Centric, Narrow View of Logistics

2010: Increasingly Customer Centric, Broad Perspective about Supply Chain Management

Source: Miebach Research

all profitability of a company (figure 1). In this supply chain, logistics is a crucial element holding the key to both better customer satisfaction as well as cost reduction. Modern logistics centers require better process-

es, technology, equipment, a trained workforce and of course, better infrastructure. But for Indian companies, all this also comes with a rider–the need to justify the investment, increase in rentals and other costs, thus boosting the need for smart warehouses (figure 2). THE DRIVING FACTORS So, what has changed the perception of companies? Is it the growing economy, increasing production or

Figure 1- Changing perspective of Indian Companies Figure 2 – What Is A Smart Warehouse?

Scalable: Customers are looking for warehousing solutions that can cater to their long-term needs–while being cost-effective for their current volumes and SKU complexity. According to most companies, the volumes and SKU proliferation is increasing at very high rates every year and they want stable warehousing solutions which can handle such needs over a period of at least five years. Many companies find it diﬃcult to migrate operations from one facility to another in short intervals and the benefits of supply chain integration are lost if due to the need for adequate space, the operations have to be spread across multiple facilities in the same region.

Mechanization-compatible: Many companies believe that if not immediately, most of their distribution centers should be mechanized and operated through sophisticated warehouse management systems, at least in the near future. Companies want high throughputs and high density warehouses in their supply chains which could perform the multifaceted roles of the emerging logistics centers, and mechanization is a crucial step forward. Supply chain directors are unanimous in their opinion that in order to handle the increasing volumes and complexity of products in the future, they have no option but to mechanize their operations, as otherwise managing the business will be next to impossible. Accordingly, warehouses need to be built with suﬃcient ﬂoor strength, column pitches, provisions for dock levelers, and equipped with adequate power supply and charging points.

Accurate: The customer today tolerates no mistakes, and companies can therefore afford none. They want their warehouses to be able to ship out the orders to absolute perfection. The increasingly large number of modern retail stores, combined with reduction in supply chain layers, puts the onus of handling a complicated upstream and downstream network on the warehouse and missed, damaged, or misplaced deliveries are not an option. As a result, warehouse processes have migrated from a simple put away or picking procedure to a much more complex, multi-step process which has sequential checks and balances, and which needs an entirely different approach to warehouse design. This design has to accommodate requirements such as adequate lighting and specific zones such as quality assessment, forward picking, or staging area. It also needs to provide for safety measures such as fire protection, and pilferage control as well as training staff about various hazards, protections norms and safe work practices.

Responsive: Not only does the customer not tolerate any error, but she also wants the products on her shopping list immediately and fresh, whether she buys it from her neighborhood supermarket or from an online store. Companies need their supply chains to be agile and their warehouses, more responsive than ever. Infrastructure has to gear up for extremely swift action, and the workforce motivated on the same lines. This, therefore, means that warehouses, from being the godowns of yesteryear, have to be turned into logistics centers of excellence. To take a step forward, warehouses need to attract, train, and retain staff to ensure responsiveness and good quality of operations, and accordingly, the work conditions and employment benefits have to increase in order to acquire a skilled workforce.

Transportation-friendly: Last, but not the least, is the need for warehouses to become conducive to emerging modes of transportation. Supply chain responsibility does not start or end at the gates of the warehouse; it is just as much a necessity to ensure that transportation operations are smooth. Modern warehouses, therefore, have to be designed keeping in mind the ever growing utilization of multi-modal transportation, of containerized loads, of longer trucks and trailers, and of material handling equipment such as forklifts being used for mechanized loading and unloading. The space outside the warehouse is as much an important aspect of warehousing as is the design within. Logistics centers need to provide adequate parking space for trucks, suﬃciently wide roads and turning area for trucks of the largest size, and as is becoming increasingly important, adequate facilities for drivers.

14 | The Warehouse Handbook

Source: Miebach Research

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higher volumes? The perception towards warehousing is changing because of all this, but also because of the increasing demands of the end consumer. The Power of the Customer The growing economy has resulted in a burgeoning, demanding middle class in India, the segment which is diversifying in their discretionary expense and is exposed to the huge variety of consumer products available in the Indian market due to globalization. An increase in incomes has been leading to more consumption and higher economic growth which, in turn, provides more employment opportunities and higher salaries. The members of this segment are becoming increasingly aware of new product ranges launched across the world and the importance of product freshness. They also have increasing access to modern retail formats, where

Source: Miebach India Warehousing 2010

The most critical drivers are an increasingly demanding customer, increased SKU complexity, increased volumes, and an increasing demand for quick response from companies.

16 | The Warehouse Handbook

manufacturers of consumer products across the world are at war with each other to gain the highest market share. The customer today asks for more variety, higher quality and availability, and is not ready to wait. The new increasingly aware customer has made corporates wary and eager to devise agile and responsive supply chains. In a recent Miebach study, Miebach India Warehousing 2010, close to 50 supply chain heads across different industries were surveyed on various warehousing decision parameters. According to them, the most critical drivers are an increasingly demanding customer, increased SKU complexity, increased volumes, and an increasing demand for quick response from companies. (figure 3).

Government Support Government initiatives have helped their cause to some extent and it will continue helping in developing a Fig. 3 - Triggers for the Need of Better Facilities supply chain which relies 0 2 4 6 8 10 on a short, compact supIncreasing SKU Complexity ply chain, with thorough information flow, and a Increasing Volumes from Demand Growth robust and swift transporIncreasing Demand for Responsiveness tation network (figure 4).

Increasing Customer Awareness about Freshness etc. Increasing Volumes from Consolidation of Supply Chain Increasing Importance on Safety and Hygiene Increasing Use of Bigger Trucks/Trailers The triggers for the need for better warehousing facilities

Indiaâ&#x20AC;&#x2122;s Emergence as Manufacturing Hub A major stimulant of the growth of Indiaâ&#x20AC;&#x2122;s warehousing industry has been the steady de-

Case study

case study

as/Rs at INtas Pharmaceuticals Ltd. The Client INTAS Pharmaceutical Ltd. is one of the major pharmaceutical companies in India, headquartered at Ahmedabad. It has been around in the healthcare industry for three decades with a turnover in excess of `15 bn. INTAS has expertise in a range of formulations, from tablets to injectables to newer Drug Delivery System and its global operations enjoy a respectable forte in contract manufacturing.

The Requirement To cater to the ever increasing demand for its products, INTAS Pharma decided to set up one of the largest pharmaceuticals plant at the Special Economic Zone (SEZ) in Ahmedabad. To support this plant, INTAS needed storage capacities of 3200 and 3500 pallet locations for FG/SPM and RM/PPM respectively. The input to the warehouse was 24x7 and the output was in one shift of eight hours. The throughput requirement of 80 pallets/ hour was derived from detailed input/output calculations for timely fulfillment of orders during peak dispatches.

multiple warehousing solutions, it was obvious that only Automated Storage and Retrieval Systems (AS/RS) could deliver the desired results. Hence, INTAS opted for AS/RS - the latest and best warehousing technology. Two AS/RS warehouses of 60m (L) x 7m (W) x 28m (H) were planned and built which accommodated 6,740 pallet locations and delivered a phenomenally high throughput of 80 pallets/hour with two dedicated Automated Stacker Cranes.

Selection of Right Partner INTAS selected Godrej Efacec Automation and Robotics Ltd. over major international competition, for the two AS/RS installations viz. FG/SPM and RM/PPM Auto Warehouse. Godrej Efacec, an Indo-European joint venture is the pioneer and leading supplier of AS/RS in India. The company has successfully designed, supplied, installed and commissioned AS/RS for many pharmaceutical domain companies. They are, thereby, well-versed with the Good Automated

Manufacturing Practice (GAMP) and offer customized software and control systems that are designed for adherence to US FDA validation norms which are of prime significance for pharmaceutical companies. Godrej Efacec Warehouse Management Software (WMS) works seamlessly upwards with ERP and downwards with Bar Code and the material flow system. A D Bhimani, Sr. General Manager - Plant Head, INTAS Pharmaceutical Ltd. said, â&#x20AC;&#x153;Godrej Efacec AS/RS provided the much needed dense storage and high throughput. The system meets all our requirements.â&#x20AC;?

Key Benefits l l l l l l l l

Very high storage density, allowing more space for production. Increased efficiency due to high speed operations. Consistent high system uptime. Real time and accurate inventory control. Error reduction through Bar Code tracking. MIS Reports. Ease of operations through integration with ERP. Manpower savings.

Solution Offered

Godrej Efacec Scope of Supply:

Since INTAS has been allotted land in a SEZ, the actual footprint available for development was less. INTAS planned to build a mega state-of-theart plant and faced major space constraints for its warehouse to support the desired inventory. Secondly, the throughput demand on the warehouse was significantly high and integration with ERP was a must to ensure a fast and flawless operation. After a thorough study and evaluating

l l l l l l l l l

Solution Conceptualization and Design. Two dedicated Stacker Cranes (28 mtrs tall). 6,740 Storage locations, double deep system. Mechanical and Electrical Aisle Equipment. PLC Control System. Warehouse Management System. Integration with SAP. Project Management. Training and Manuals. Case study provided by the company.

18 | the Warehouse Handbook

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Fig. 4 - Government Initiatives to Facilitate the Growth of the Logistics Industry

Source: Miebach Internal Research

Tax breaks and incentives to infra investors & operators

GST-uniform tax regimeRationalization of Warehouses



Privatization and Private-public Partnership in key Infra Sectors

Government Incentives for Development of Logistics Infrastructure

Increasing Government Spending on Infrastructure

Driving private participation in Infrastructure Development and Operation  Helping efficiency improvement and driving logistics for the future

velopment of India as a global manufacturing hub. Along with the increase in domestic consumption, there has been a sizeable increase in India’s Exim trade. With a stable GDP growth of 9 percent per annum, India has flourished in multiple industries, notably retail, auto, IT, telecommunications, pharmaceuticals and textiles. The volumes from these sectors have increased multiple times in the last decade and subsequently, their need for bigger and better logistics facilities has fuelled the growth of the warehouse industry. The Development of Infrastructure The recent policies and fiscal plans have focused 20 | The Warehouse Handbook

heavily on infrastructure growth, the backbone of the country, without which any dreams of becoming an industrial powerhouse can never be realized by the country. The development of some infrastructure in plans for the Dedicated Freight Corridor, the Golden Quadrilateral and the East-West Corridor, along with the new ports and terminals on both the east and west coasts of the country, has resulted in increased growth in the warehouse sector as well. Apart from the rising number of warehouses along these corridors, the developing infrastructure has also created a new sector– multimodal logistics parks. THE INDIAN WAREHOUSING MAP – SELECTING A LOCATION A very critical, if not the most critical decision, taken by a customer company during setting up or contracting a warehouse is the location of the warehouse. With the increased importance of each warehouse in the emerging consolidated supply chain scenario, a smart warehouse loses most of its inherent purpose if the location of the warehouse is wrongly chosen. A poorly chosen warehouse location can result in very high losses due to missed tax benefits, missed shipment deadlines on account of poor connectivity, unavailability of skilled workforce in a particular area or traffic bottlenecks, such as truck bans. In such scenarios, the losses incurred would undermine any gains obtained from the best infrastructure and world-class processes within the warehouse. For these very reasons, logistics managers from various manufacturing companies stress heavily on identifying

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the best location for their warehouses. The key parameters are listed in figure 5. Most companies place a lot of emphasis on the economy and infrastructure of the region before selecting a location. However, policy-related initiatives by the national and state governments have helped develop many non-traditional locations as probable hubs for logistics, especially warehousing activities. Such initiatives include policies like the Goods and Services Tax, the development of logistics-friendly infrastructure such as the Dedicated Freight Corridor, the Golden Quadrilateral and the East-West Corridor, the

Figure 5 - Key Parameters for Selecting a Warehouse Location

Fig. 6 – Classification of Major Warehousing Hubs in India Category Frontrunners

Economy Proximity to Consumption Centers and in certain cases, Production Centers

Characteristics  Existing logistics hubs  Primarily the major metros with a very large consumer base  Excellent connectivity  High availability of skilled labor and managerial workforce 

Infrastructure Connectivity by Road, Air, Rail, Inland/ Sea; Power, Water, Telecommunications



Challengers  

Favorable Policies Tax benefits, Political Risks, Facilitating Investmetns, Regulatory benefits Operational Benefits Availability and cost of labor, rentals and other cost of operations

 



Newcomers  

22 | The Warehouse Handbook

Mostly Tier I or Tier II towns Connected by existing roads and to be better connected by new corridors Location of major infrastructure projects such as ports A mix of rural and urban consumers Target of most consumer products and retail companies Growing pool of skilled, yet less costly workforce

 Mostly Tier II towns



Source: Miebach India Warehousing 2010

new ports, as well as new inland container terminals, container freight stations, and free trade warehousing zones across the country. As a result of the development of the logistics map of India through various policy initiatives, and the growing demand of customers from surrounding regions, a large number of locations could claim to be very good hubs for warehousing in India. They could be categorized into three groups–the frontrunners, the challengers, and the newcomers (figure 6). The job of the logistics manager, however, does not

High availability of labor but low on managerial workforce Linked to infrastructure projects Promising because of large development initiatives Existing infrastructure is not very conducive to logistics

Locations NCR, Mumbai, Chennai, Bangalore, Kolkata, Hyderabad, Pune

Ahmedabad, Surat, Vishakhapatnam, Nagpur, Chandigarh, Guwahati, Kochi

Vijayawada, Coimbatore, Jamshedpur, Lucknow

Source: Miebach Research

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Fig. 7 - Parameters for Evaluating Warehouse Location 0

Presence in a Major Warehouseing hub Proximity to Consumption Centers Accessibility from Main Highways Industrial Relations in the Area Local Taxation Rules Availability of Power, Water

Source: Miebach India Warehousing 2010

end at selecting the city. His job also requires going one step further, and selecting a site, typically on the fringes of the city and on a major highway, which will provide the greatest benefits in terms of the conditions stated above. Apart from the general conditions laid out before, logistics managers look for more specific details, the most important of which were covered by the study, Miebach India Warehousing 2010. According to the study, the critical criteria put forth by most managers are: presence of a warehouse within a major warehousing or logistics hub, the proximity to the main demand center, accessibility to major highways, and local taxation rules. Most of these are similar to the general location selection criteria. However, in addition to these, the other important factors governing the selection of warehouse location are issues such as proximity to local police stations, fire

Availability of Labor Proximity to Police and Fire Stations / Hospitals Distance from Schools / Places of Worship Parameters for Evaluating Multiple Locations Within a Warehousing Hotspot

Fig. 8 â&#x20AC;&#x201C; Segmentation of the Warehouse Industry in India Segment

Laggard

Leader

Niche

Business Characteristics

Low Volume, Low SKU complexity

Low Volume, Moderate SKU complexity

Moderate Volume, Low SKU complexity

Moderate/High volumes, High SKU complexity

High/Very high volumes, Moderate/High/Very high SKU complexity

Storage Systems

Floor storage

Decks or Floor Storage

Block Storage

Racks or Hybrid Storage

Dense racks /Hybrid/ Automated storage

Height (meters)

5-6

8-9

12 - 16

1,000 - 2,000

2,000 - 5,000

5,000 - 10,000

10,000 - 30,000

Current Supply

High

Low

Very Low, not readily available

Implication for Investors

High supply makes differentiation very difficult. The segment plays on cost and hence, value proposition is very low. Not an attractive segment to enter for new investors or service providers

Currently the SMART warehouse and preferred choice of many companies

May become the SMART warehouse of the future. At present, only build-to-suit

Source: Miebach Research

Size (sq meters) 1,000 - 2,000

The Warehouse Handbook | 23

Introducing Global Hi-Tech Logistics Infrastructure

LOGISTICS PARK OFFERS

Global Hi-tech Logistics Infrastructure

 Total Warehousing Capacity of more than 10 Lacs Sq. Ft  Ready to occupy / Build up facility 1 Lacs Sq. Ft.  Construction of another 1 lacs Sq. Ft is in full swing  Strategic location with good road, rail and air connectivity  Ample truck parking area with dormitory  Commercial complex featuring, ATM, bank,

restaurants, dispensary and stationery shop Sufficient office area on ground and mezzanine Computerized weigh bridge Fire hydrants for safety Battery charging area for MHE’s DG for 24 X 7 power back up Sky lights for minimum electricity consumption and Turboventilators to maintain temperature  High compound wall for safety.      

Site: Khasra No. 80, 81, & 82, Shivmadka, Village-Gumgaon, Tahsil-Hingna, District-Nagpur(MS), India Oﬃce: Sheikh Fida All Sultan Ali, Lohali, Itwari, Nagpur (MS) – 440002 Tel – 0712-2763079, Email: zafeer@ocpl.in & marketing@oclp.in Contact us at Zafeer Ahmed +919372636510 & Najmuddin Fidvi +91-9373102959 www.orangelogisticspark.com

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stations, and hospitals; distance from schools or places of worships, and most importantly, the environment of industrial relations in the area (figure 7). Hence, most Smart warehouses can be found along specific belts or in warehousing hubs like Manesar, Okhla, Ghaziabad, or Sonepat in NCR, Peenya in Bangalore, Bhiwandi and Panvel in Mumbai, or in Dhulagarh in Kolkata. THE MARKET DYNAMICS The current warehouse industry in India could broadly be classified into three segmentsâ&#x20AC;&#x201C;the Laggard or predominantly outdated categories of warehouses, the Leader or the Smart warehouse of today, and the Niche, specialized, high-investment, warehouses catering to very specific demands of certain companies (figure 8).

Source: Miebach India Warehousing 2010

Customer Demand The Laggard segment is no longer the piece of the warehousing pie that the customer companies want. Most of them fail to meet the Smart criteria by a long shot;

24 | The Warehouse Handbook

Fig. 9 - Demand Split - Height of Warehouse 30% 5%

5m. Block Storage 8.5m. Mixed Model 12.5 -14 m. High Rack >14 m. Automated

15%

50% Demand for Various Segments of Warehousing

while the Niche segment meets almost all the criteria to perfection, they come at a very high price. Many companies are yet to reach a position where they could justify the investments on a Niche segment warehouse if they were to build one, or the costs of operating it, as these warehouses also need very specialized material handling equipment. The Miebach India Warehousing 2010 study also revealed that a majority of customers want 8.5m high (Leader segment) warehouse for their operations (figure 9) as this fulfils their requirement of a Smart warehouse under the present circumstances. Companies which have become users of the Niche segment are generally companies with futuristic requirements or corporates with a trendsetting vision in supply chain. However, with the gradual migration of most companies towards the higher end of the warehousing value-chain, the Niche segment warehouses of today are destined to become the Smart warehouses of tomorrow, over a period of five to seven years. Money Matters In line with the demand-supply scenario for the three segments of warehouses, the risk and return portfolio also changes for the investors and the developers across the country, only varying slightly from region to region (see figure 10). As highlighted earlier, this industry is highly fragmented with a very low presence of players from the organized sector. As a result, a very large range of prices could be observed in the major warehousing hubs (figure 11). The lower end predominantly is quoted by

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players from the Laggard segment, while the higher end is charged by the Leaders. The Niche players, by virtue of the fact that most get into exclusive contracts and build-to-suit agreements, have a long term arrangement and are therefore not a part of the range, which is meant generally for ready-to-occupy or public warehouses. Typical occupancy of the industry hovers around 65 percent-85 percent, which could be explained by two factors â&#x20AC;&#x201D;seasonality, and the lean period between two successive contracts. For the Investors This industry, till recently, has been dominated by the Laggards, and hence, has been low on financial returns. However, the returns achieved by the Leaders and the Niche players have been much higher, and the shift of the industry from the unorganized to the or-

Fig. 10 - Risk-return Profiling of Different Segments in the Warehousing Industry

Source: Miebach Research

Category Risk Very high supply, gradually reducing Laggard demand. New entrants may find no customers or customers at very low rates

Returns Return on capital employed: Less than 10%. Requires very low investment and design know-how to develop.

Leader

Low risk, should avoid getting trapped by low rates offered by competitors from the Laggard segment

Return on capital employed: 10%â&#x20AC;&#x201C;15%. Requires standard investment and design know-how, should incorporate good logistics practices during development.

Niche

Very high risk if built without an agreement with a ready customer, risks of not finding replacement customers if a running contract ends prematurely

Return on capital employed: 15%-20%, can be higher for very specific requirements, but are generally developed by customer companies themselves because of high complexity involved.

26 | The Warehouse Handbook

ganized also correlates to a shift from the Laggards to the Leaders and the Niche. In the coming decade, this industry is poised to provide high and stable returns to the investors and developers who could provide the most required smart warehouses to customers. Simultaneously, investors and developers need to look beyond the four walls of the warehouse, and develop integrated logistics facilities. Instead of creating one Smart facility, they should create a park of multiple Smart facilities, sharing common amenities. The organized warehousing market is set to grow threefold in size in the next five years (figure 12). The business opportunity is not just in terms of the share of the total area covered by warehouses (the share of organized warehousing will grow from 10 percent to 20 percent in terms of square feet), but it is in terms of the share of overall revenue from the market. From a 15 percent share of warehousing revenues, the organized market now commands 30 percent of the revenues from this industry, and that is a key driving factor which is influencing many investors towards investing in this market. Logistics Parks Creating a logistics park is in many ways more beneficial than creating stand alone warehouses, both for the customer as well as investors and developers. While a logistics park allows the developer to create common utilities, thereby reducing cost and maximizing the utilization of the overall area, the customer company benefits by getting better facili-

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Source: Miebach Research

Hub

Price Range (INR/sq.ft/ month)

NCR (Okhla)

35 – 45

NCR (Manesar, Ghaziabad)

12 – 16

Bangalore

14 – 18

Mumbai

12 – 18

Kolkata

14 – 18

Chennai

15 – 20

Hyderabad

12 – 16

Pune

12 – 16

*June-November 2010 figures

ties such as a larger pool of trucks, guaranteed power backup from the park’s power station, and most importantly, a comfortable work environment to attract talent which would otherwise have been reluctant to join this industry because of the perception of a poor work environment. Many investors have already realized the benefits of developing logistics parks, and a large number of customer companies as well as third party logistics providers have started occupying warehouses in these parks. The more successful warehouses have been able to emulate the Smart warehouse closely, while those which have been unsuccessful, are facing the critical issue of low occupancy. Another marked difference between these two types of developers is also that the former have gone for a mixed model of logistics park development, while the latter have opted for a standard warehouse park, thereby highlighting the trend that customers

are more inclined towards a more integrated, mixed model of logistics park development (See figure 13). It will take some time, but by the middle of this decade, completely mixed model logistics parks will grow in numbers and by the end of the decade, they are expected to become the norm. Apart from customers and investors, even the government both at the national and local levels is interested in setting up logistics parks. The grounds for this interest is because of two predominant reasons: a. Boost trade and along with it, the economy of the country or the region. b. Solve traffic congestion and urban problems such as environmental degradation in densely populated areas. The logistics park, as a sector in the Indian logistics industry, is fast growing to become a sought-after

Fig. 12 - Warehousing in India - Organized and Unorganized 900 800 700 600 500 400 300 200 100 0

Source: Miebach Research

Fig. 11 – Rentals of warehouses across major hotspots in India*

2010 Size (Million Sq Ft)

2010 Revenues (‘00 Million Inr)

2015 Size (Million Sq Ft) Org

Many investors have already realized the benefits of developing logistics parks, and a large number of customer companies have started occupying warehouses in these parks.

2015 Revenues (‘00 Million INR) Unorg

Share of Organized and Unorganized Warehousing Revenues (Future revenues projected, correcting for inflation)

The Warehouse Handbook | 27

Established 3 decades ago, INDO ARYA group is today the fastest growing integrated Logistics Service Provider. With a dedicated workforce and well established systems, INDO ARYA provides you with a lean Supply Chain. Logistics

Transport

What makes INDO ARYA the first choice for its customers? l 285 Branches serving 600 destinations. l Proud owner of Indiaâ&#x20AC;&#x2122;s largest single floor warehouse. l 4.5 million square feet of warehousing capacity. l Over 900 vehicles engaged on a daily basis. l Largest RDC network.

Express Cargo

RDC

Cold Supply Chain

indo arya logistics

Corporate Off: Indo Arya House, 147, Transport Centre, Rohtak Road, Punjabi Bagh, New Delhi-110035 Tel: +91 11 43204500 Fax: +91 11 28316914, Email: ico@indoarya.com URL www.indoarya.com A unit of INDO ARYA CENTRAL TRANSPORT LTD.

An ISO 9001: 2000 Company

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Fig. 13 â&#x20AC;&#x201C; Models for Logistics Park Development Logistics Park Segment Entirely Mixed Model

First Level Mixed Model

Elementary Warehousing Park

Characteristics Integrated logistics facilities along with residential, community, and commercial facilities which could cater to most of the dayto-day needs of the employees at the park Integrated logistics facilities, comprising Smart warehouses, Niche Warehouses, multi-modal transport terminals, and a few commercial facilities to act as basic amenities for employees at the park Integrated warehousing facilities with basic amenities and almost no commercial facilities at all

Source: Miebach Research

sector for investment. Figure 14 shows an illustrative list of recent investments in this sector. Apart from the huge potential of this sector, a critical characteristic that attracts investors to logistics park real estate is the stability of returns from this sector when compared to other areas of investment. While the internal rates of return are similar from both the logistics real estate and other commercial real estate sectors, logistics parks offer a steady stream of revenue and hence cash flow, when compared to the highly fluctuating nature of the commercial real estate business. Ground Realities â&#x20AC;&#x201C; The Customer Need-Gap Arguably, most customer companies expect their Smart warehouses in the Leader segment. But many of them are not satisfied by what is being offered by a large number of warehouse service providers or developers today, even if they claim to be in that segment (see figure 15). 28 | The Warehouse Handbook

The Miebach India Warehousing 2010 study revealed that today, three-fourths of the companies are being forced to bear with either average or substandard warehouse infrastructure, and only onethird of the companies believe that these warehouses will fulfill their needs in the future (see figure 16). The majority of the respondents said that the crucial components of a Smart warehouse are lacking not only in the Laggard warehouses, but also in about four out of five of the so-called Leader segment warehouses. While few of the respondent companies have gone ahead and developed their own infrastructure, many are on the lookout for Smart warehouse providers who can meet their standards and for that, the companies are not averse to paying a higher rental. More than half of the companies agreed that they will consider an increase in rental prices (See figure 17), to the tune of 15-20 percent on current rates on a per sq. ft basis. They are, however, confident that the increase in cost will be covered by an even greater increase in storage and throughput capacity, performance and higher service levels. However, the warehouse providers beg to differ. The suppliers believe that they know the value of good quality infrastructure. According to them, the customers do not fully realize the value and are not willing to pay a higher value (see figure 18). Providing better facilities such as wider roads or truck turning areas, higher quality of flooring and sprinklers, leads to greater investment. Most custom-

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Fig. 14 â&#x20AC;&#x201C; Recent Investments in Logistics Parks in India Company

Based out of

Nature of Investment

When

Investments (Million USD)

Future Capital Holdings

India

Launch logistics fund for setting up warehouses through a JV with Realterm Global

Within three years, starting from February 2008

700

Arshiya International

India

Plans to set up five FTWZ

Announced in 2010, the first FTWZ operational in Mumbai since August 2010

560

Tata Real Estate

India

Tie-up with Jafza to develop logistics parks across seven major locations in India

Funding commenced from November 2008

537

K Raheja Group

India

Tie-up with Prolog to develop logistics parks in WB, Karnataka, Tamil Nadu, and Maharashtra

Work commenced from September 2008

515

Uniworld Logistics

India

Integrated logistics park

Opened in January 2009

500

Khaleeji Commercial Bank

Bahrain

Investment in developing Indiaâ&#x20AC;&#x2122;s largest integrated logistics park over 400 acres in Mumbai

Floated in August 2010

400

Everstone Capital Management

India

Raising new funds to invest in warehousing in India

First fund mobilized in Aug 2010, second part of fund to be raised by end of 2011

350

YCH Group

Singapore

Investment in next 5 years to set up 10 logistics parks across India

Announced in May 2008

225

Shree Shubham Logistics

India

Set up 41 agri-logistics parks across the country

Four parks completed by 2009, 11 more in 2010

135

Safexpress

India

Investing in 32 logistics parks

4 Parks before April 2010, 3 parks in south between April and December 2010, Plan to complete 2 more by February 2011 and the rest in 2 years to follow

135

SKIL Ports and Logistics

India

Raised funds to finance a port logistics project

Raised in October 2010

121

Vision India Real Estate

India

Planning to develop logistics parks

Commencing from April 2010

110

Aegis Logistics

India

Investment in oil terminals

Commencing from November 2010

100

DARCL Logistics

India

Investment in Project Logistics

Announced in July 2010

100

Shri Kailash Logistics

India

Launching new logistics park

July 2010

100

Source: Miebach Research

30 | The Warehouse Handbook

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20%

Source: Miebach India Warehousing 2010

Accessibility

It is Definitely Higher Cost is Important, but so is Quality Quality Gets Preference

Warehouse Buildings Development of Integrated Facilities Internal Roads Column Pitch Design Flooring Quality and Floor Strength Electrical Systems and Power Supply Parking Facilities Other Amenities (Recreational, Offices, Canteens Ventilation Systems Restrooms, Water Supply, and Office Space Docks (with platforms, provision for dock levellers) Drainage and Sewage Systems Sprinkler Systems Rain Water Harvesting Systems

35%

The importance of cost in warehousing

Fig. 16- Composition Warehouse Space - Present

Source: Miebach India Warehousing 2010

30%

20%

ers do not need such infrastructure and therefore will not pay for such futuristic designs. However, suppliers also hope that with the increased presence of multinational companies and the growing maturity of the Indian supply chain, the demand for good infrastructure will increase, which will lead to substantial investment in quality infrastructure.

Composition Warehouse Space - Desired 5%

30%

15%

45%

50%

Sub-standard Infrastructure

Good Infrastructure

Average Quality Infrastructure

Exceptional Infrastructure

Average Quality Infrastructure

Exceptional Infrastructure

Good Infrastructure

Sub-standard Infrastructure

Composition of Warehouse Space by Different Categories of Infrastructure (Actual vs Desired)

32 | The Warehouse Handbook

45%

Source: Miebach India Warehousing 2010

Fig. 17- The Importance of Cost

Fig. 15- Current Warehouse Infrastructure Supply Scenario

CHALLENGES FACING THE INDUSTRY â&#x20AC;&#x201C; OPINION OF THE STAKEHOLDERS Like any other emerging industry, the warehousing industry is not without its share of challenges. Some of the key challenges that are faced by the industry as a whole are: Availability of skilled workforce: The industry lacks trained personnel who can operate sophisticated material handling systems and warehouse management systems. Further, under the present working conditions, the job in a warehouse is not very attractive for skilled young people. Although with the changing mindset about the design of logistics centers and logis-

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Fig. 18 - The Suppliersâ&#x20AC;&#x2122; Perspective

Value of Better Infra

Cost of Better Infra

Source: Miebach India Warehousing 2010

tics parks it is becoming more attractive, there is still a long way to go. Availability of land: Procurement of land for warehousing is a difficult task, with the increase in real estate prices of land in and around major cities, most of which also happen to be mainly effective logistics hubs. Additionally, reclassification of land becomes a major concern when it comes to development of warehousing zones. Many industry players have raised a demand of relaxing land prices for logistics purposes and ease the rules on land classification for warehousing. Availability of an efficient, multi-modal transport system: India is yet to fully develop a multi-modal transport system which could essentially harness the full capabilities of road, rail, sea, and air transport infrastructure. Such a system will reduce the overall logistics costs and extend the marketability of Indian companies worldwide without them having to rely only on global logistics players. At the same time, such a system will bring economies of scale and facilitate the migration of companies from existing warehouses to SMART warehouses. Implementation of policy reforms: While the reforms are going to play a very large role in the changing scenario of warehousing in India, it is the constantly delayed implementation of these reforms which is holding back the growth of this industry at the same time. The GST implementation, for example, has been delayed due to disagreements between the central and the state governments, while the progress on the dedicated freight corri-

Customers Want Better Infrastructure Without Paying Extra

dor has been halted by various land-related issues. Unless the reforms are brought in expeditiously, the momentum with which this industry aims to grow will be lost. ROADMAP FOR THE FUTURE The transformation of the logistics industry, and specifically the warehousing industry in India, has already started to happen. The end customer has got the ball rolling, and the companies have been left with only one choiceâ&#x20AC;&#x201C;to put their supply chain strategy in place for this emergent, ever demanding Indian customer. The pull has come and will continue to come in the form of increasing consumer demand, the demand for better services, increasing product The Warehouse Handbook | 33

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The customers and the suppliers are yet to reach a model where the relationship ceases to be a buyer-seller one and emerges as a partnership.

34 | The Warehouse Handbook

variety, and higher responsiveness, and all of this at lower costs. While the companies must modernize their supply chains, they will be increasingly constrained by the availability of SMART warehouses which can support any modernization effort. The demand is poised to far outstrip the supply and companies will either need to invest, or the investors and developers have to come up with Smart warehouses to satiate the demand for the same. At the same time, a demanding market will mean that companies have to focus on other areas, their core competencies. Logistics, as a function, will be almost entirely outsourced with the advent of 3PL players. For the same reason, investments in logistics facilities will be made by warehouse providers as companies will reserve their capital for business expansion. The situation today is a classic example of an industry at crossroads: the two sides of this industry, the customers and the suppliers are yet to reach a model where the relationship ceases to be a buyerseller one and emerges as a partnership. While it is evident that the current state of available infrastructure is inadequate for the supply chains of the future, both parties are waiting for the other side to take the first step. The customers want developers to build high-end infrastructure and the developers want the customers to first increase their pay-offs. The situation does

provide a great opportunity for enterprising developers to get the early-mover advantage. However, the approach must lead towards a partnership model where the developer and the customer company enter in a trust-building exercise, sharing each otherâ&#x20AC;&#x2122;s long-term objectives and expectations. The government both at the national and the state levels has to play an even more proactive role. It needs to implement the policy reforms with an increasing zeal and it needs to complete the large infrastructure development plans on time. Unless an efficient infrastructure and a suitable set of policies is in place, the consolidation of the supply-chain will remain a distant dream, and the wider migration of companies, from Laggard to Smart warehouses, will get postponed by a few years. As the initiating entrepreneur, the developer needs to build or showcase a logistics park, consisting of Smart warehouses and added amenities, which facilitate an efficient supply chain. Subsequently, they need to engage the customers in relationship building, when the customers start appreciating the quality of the infrastructure and start looking beyond a cost-only approach to supplychain management. The onus is on the developer or warehouse provider to educate the customers on the need of good quality facility, the tangible and intangible benefits of the logistics park, and take the industry forward.

I n t e r v I e w

The 360 Solution Provider 0

S. A. MohAn CEO, Maini Materials Movement

What are the materials handling, warehouse and logistics solutions that Maini offers? At Maini Materials Movement, we offer 360° materials handling, warehouse and logistics solutions in the form of in-plant materials movement, outside materials movement and storage solutions. We offer technology comparable with global standards which maximizes operator safety, efficiency and eco-friendliness. Our in-plant materials handling solutions comprise: n A range of electric, semi-electric and manual stackers. n Hydraulic and electric pallet trucks. n Dock levelers and scissor lifts. n Tow tractors for all in-plant towing and tugging applications. n Industrial tuggers for tugging and hauling applications. To cater to the demand for complex outside plant materials handling, we forged an alliance with NACCO Materials Handling Group, USA. With YALE as a global partner, we manufacture European designed forklift trucks and warehouse equipment at competitive price points. Our product offerings comprise: n A range of Yale Forklifts, including the Yale – Maini CoBranded 3 – Wheel Electric RCF Truck manufactured at our facility in Bangalore. n High Reach Trucks for warehouse applications. Armes Maini, our JV with Armes Spa, Italy, manufactures storage and racking products. Our storage solutions comprise industrial racking, boltless multipurpose shelving systems, mezzanines, and decking. We also offer customized special storage solutions in the form of automatic storage and retrieval systems, automatic storage systems for light and heavy goods and multi-depth automatic storage systems. Who are Maini’s most prominent customers? A few of our prominent customers include: n Automotive Sector: AMW, Ashok Leyland, Bajaj, BMW,

36 | The Warehouse Handbook

n n n n

Daimler Chrysler, Eicher, Ford Motors, Hero Honda, Hyundai, Mahindra & Mahindra, Maruti, Skoda, Tata Motors, Toyota, TVS Motors, Volvo and VW. FMCG: IFB, ITC, Kelvinator, Moser Baer, Samsung, Unilever and Whirlpool. Info Tech: GE, Infosys, Reliance, Wipro. Logistics: AGILITY, Ceva Logistics, DB Schenker, DHL, EGL, Excel, Future Logistics, Lemuir and NYK. Pharma: Astra Zeneca, BIOCON, Cipla, Dabur, KEMWELL, Lupin Labs, Ranbaxy and Sun Pharma.

Could you expand on the end-to-end storage solutions that your company offers? Our end–to–end Logistics (e2e) solutions are designed to cover the entire value chain of logistics such as: n Planning – Projection of space, design and resources (storage, equipment and manpower). n Operations – Comprising manpower hiring and training, maintenance, service and spare parts management. n Consultation – To customize, innovate and optimize customer specific solutions. n Implementation – is land acquisition, civil work, materials handling equipment and manpower. Could you explain your industrial racking, boltless shelving, and mezzanines solutions? Industrial racking: Our industrial racking solutions are innovative and serve a spectrum of industrial storage requirements by expanding storage volume in minimum space. Boltless Shelving: Armes Maini introduced the Boltless Multi-Purpose Shelving (MPS) System in India, the patented design of Armes Spa. The MPS enables rapid assembly of highly structured and variable storage levels specific to one’s needs. It is made from one single piece processed exclusively by profiling,

with no requirement for welding or spot welding. This design solution adds strength, ensures high load capacities and eliminates any reachable sharp edges, making MPS much safer to use. Special shelf configuration permits the simple insertion of stiffeners in predetermined positions, to considerably increase load capacities. The number of stiffeners can be modified at any time due to their easy positioning. The shelf capacity can also be modified at a later stage, depending on their specific use. Mezzanines: Armes Maini, the pioneer in the development of Long Span Mezzanine floors LSM8 offers extremely versatile, standardized and codified modular Mezzanine systems. The mezzanines can be multi-tiered flexible stand alone systems which are completely bolted and easy to shift. We follow stringent European regulations to design and manufacture a complete range of standardized components. The fully self-loading structure is designed and built to comply with static loading requirements taking safety into account. The dynamic loading factor, including seismic events (disturbances), can also be considered. Please throw light on the Yale-Maini CoBranded RCF Truck. Also elaborate on Yale’s electric forklift truck series-VL. The unique partnership between Maini Materials and Yale Europe Materials Handling provides customers in India with an unrivalled range of forklift trucks and materials handling equipment. We manufacture Yale products in our stateof-the-art manufacturing facility in Bangalore. The Yale-Maini co-branded RCF range of 3 Wheel trucks are—economical, highly maneuverable and quiet while the forklift truck offers the driver comfort, coupled with

low purchase and lifetime operating costs. Available in 1000 kg, 1250 kg and 1500 kg capacities, the RCF Series means choosing a 3 wheel electric truck has never been easier. The VL series is the second phase of Yale’s next generation Electric Rider CB Forklift Trucks. They are ergonomically advanced CB Trucks in the capacity range of 2200 KG – 3500 KG. Please explain the explosion-proofed Yale trucks and how the various safety specifications are adhered to. Explosion proofing on all Yale trucks is done by PYROBAN® a world leader in Flame Proofing Technology. PYROBAN® is a specialist engineering company that converts standard forklift trucks, so that they cannot cause a fire or explosion when used within industries that process, store and distribute flammable materials. Yale’s explosion proof trucks comply with stringent European requirements of ATEX 94/9/EC. Almost all Yale Diesel and Electric Trucks can have the option of Explosion protection for Zone* 1, 2, 21 or 22. Zone 1 – Explosive atmosphere is likely to occur in normal operations. Zone 2 – Doesn’t occur normally, but if it does, it persists for a short period. Zone 21 & 22 – Where dust is hazardous. Describe the range of products used for stacking and how they differ from one another. Maini Materials Movement offers a wide range of stackers, comprising of manual, semi-electric and electric and electric counterbalance variants. The manual range of stackers is suitable for inplant operations. The semi-electric stackers are powered with electric lifts, essentially used where applications require intensive stacking. The

Electric Counterbalance Stackers are a perfect combination of forklifts and stackers. They are ideal for ‘One Vehicle Does It All’ operations. What are the aftermarket services offered by Maini? The aftermarket services offered by Maini Materials Movement are spare parts supply, annual maintenance contracts (AMC) and complete customer care (CCC). Spare Parts Supply : Maini offers a range of spare parts to all its customers over the useful life of equipment sold. The spare parts are sold directly and through a set of dealers across the country. Annual Maintenance Contracts: A team of well-trained company employees make regular visits to customer premises, according to the agreed schedule during the contract period. Complete Customer Care: We offer a one-of-its-kind proposition to customers through a special program called complete customer care (CCC). Under this program, we assume complete responsibility for maintenance of our customer’s materials handling equipment at their premises by placing service engineers on site. As an aerospace contractor, what are the mechanical accessories that you provide? As an aerospace contractor we provide economical and eco-friendly electric industrial tugs, which are ideal cargo / baggage handling tugs at airports. The advanced drive system ensures a powerful experience with strong initial torque and acceleration and smooth towing capabilities, yet it is noiseless. Interview provided by the company.

The Warehouse Handbook | 37

NETWORK OPTIMIZATION

The Right Distribution Network Design With costs exploding in the market, the location of a warehouse is crucial for an organization’s cash flow. With the sophisticated tools available today, a distribution network can be optimized says Nithin Rajagopal.

NITIN RAJAGOPAL Manager, Strategy Practice of Chainalytics

38 | The Warehouse Handbook

In a well-designed supply chain network location is of supreme importance. With ever expanding supply chains, explosively growing markets and rising transportation costs, I cannot emphasise enough that location matters. Selection of location impacts not only supply chain efficiency, but also has a significant impact on future cash flows. In this article I attempt to focus on how organizations can make warehouse selection decisions, given a set of locations to choose from. The questions to be answered are–How many to choose? Which ones? Even though this is fast becoming a typical distribution network problem which consultants are hired to solve using mathematical models, the selection of the right locations to stock and/or to serve demand from is hugely atypical. The management which is taking such decisions, also needs to consider their company’s

present and future business strategy and the practicability of proposed implementations. Real world supply chain expertise has been brought in to account for intangible elements. Optimization Enablers In a typical supply chain network-design exercise focused on distribution, organizations try to determine how many and which of these ‘potential’ warehouse sites they should use in order to meet the demand at specified service levels. Organizations are also concerned about the stability of such networks with varying demand forecast numbers (high vs. medium vs. low growth), freight costs and other macro economic factors. With the sophisticated tools available today, a given distribution network can be optimized to determine the lowest cost (or most profitable) design, even

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while considering the impact of taxes and duties in addition to all the other supply chain costs, (manufacturing, handling, inbound and outbound freight and warehouse handling costs). Moreover, this can be done over multiple time periods and the network Net Present Value for one design can be compared with the other. Despite the ‘optimized’ solution presented by these tools with their amazingly complex algorithms, mixed integer programming, binary constraints, heuristically determined numbers, feasibilities, integralities, tolerances and constraint equations, nothing beats sound judgment. Challenging The Status Quo Before one chooses a distribution network solution one should assess the current network or a ‘Baseline’, as it is often termed. This assessment should be a part of the costs that are significant to a supply chain distribution network, with the Baseline network costs presented with the various cost breakups. Typically, the costs that are taken into account are the manufacturing, warehouse facility costs (warehouse storage, handling, processing) inbound, outbound and transportation costs. Costs such as import or export duties and taxes can be included as well, if required. (For instance, international sourcing may make the network incur significant import duties which one might want to include in the network model). Though not the first step in a network optimization exercise, the assessment of the ‘as-is’ network serves

as a pivot against which all the optimized scenarios revolve and are compared against. But perhaps, more importantly, this assessment exposes hitherto undiscovered inefficiencies in the system and permits supply chain managers to take a fresh look at how they have been running things. The Baseline is a mathematical model of the ‘as-is’ distribution network and in addition to all the above, is the key in validating the data as well as the costs the business has incurred. This model is built as a representation of the organization’s supply chain network over the last ‘N’ years/months/weeks as desired. No matter what the time period(s) is, the idea that the model accurately maps the current systems and flows is of prime importance. Defining Strategic Objectives Get the data required by the tool, give it a few locations you want to choose from, model these in, click the lowest cost or highest profit optimization button and there you go! The results are there for you to see — check which locations the model is deemed best for your network. But despite the above solutions, the results for accurate predictions of network optimization may not be so simple. The reason is that the process of network optimization starts not just with tool selection or data gathering, but with a firm understanding of the strategic objectives of the exercise with respect to the business. In order to get an understanding of how the exercise aims to improve the profit model, top executive

The process of network optimization starts not just with tool selection or data gathering, but with a firm understanding of the strategic objectives of the exercise with respect to the business.

The Warehouse Handbook | 39

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Many arrive at the brutal realization that not only is valuable data missing in their systems, but there is also a generous sprinkling of errors in the data that they have.

40 | The Warehouse Handbook

level involvement is essential. For instance, people at the helm of affairs in an organization might see demand rocketing in the next few years and might be concerned if the current design and facilities (terms used interchangeably with the word ‘location’ in this article) are enough to meet the demand. An organization might want to redesign the network for a plethora of reasons—in anticipation of major changes in tax structures, or an impending acquisition (more potential locations coming into the network), or to dramatically improve market penetration, or as the flat world goes concave, to move facilities to cheaper geographies, etc. Data, Data, Data After defining the objectives of the exercise, which is an answer to the question ‘Why do we need to redesign the network?’ we need to get hold of supply chain network data. This is where many arrive at the brutal realization that not only is valuable data missing in their systems, but there is also a generous sprinkling of errors in the data that they have. However, data gaps can be efficiently plugged by experienced professionals by interviewing people in charge of the overall supply chain network, distribution centers, transportation and ERP systems. The success of optimization depends on the accuracy and completeness of the data and therefore, time taken in gathering and validating the data, is time well spent. Hence, analyzing and validating data is the next step and should not be confused with accuracy and

completeness. Of all the data that is gathered, only a small portion might be statistically significant for remodeling the network. Pareto charts often come to the rescue here, indicating how major expenditures are incurred in a corporate. Instead of using all the SKUs that the company offers, focus should be on SKUs that matter and/or are logistically significant (for instance, stones used for construction might be less in value, but weight might be of logistical significance for calculating transportation costs). Instead of noting all the demand regions or customers the company serves, taking into account only the ones with significant demand might be enough. ‘Necessary and sufficient’ is the key phrase in order to save time, effort and still ensure reliable results. As mentioned earlier, the ‘Baseline’ serves as the figure for validating various costs. Important questions such as the amount of money spent in manufacturing, the quantity of product moved from foreign sources, storage or rental costs at warehouses, the number of customers served within a couple of days, and the costs of outbound transportation need to be asked and answered to the satisfaction of all the stakeholders involved in the redesign effort. These numbers should match up (it may be a ballpark figure) to the actual supply chain costs. Be Realistic The opportunity assessment is primarily an analysis of the supply chain costs under various segments. Manufacturing, transportation, raw material procurement, distribution and inventory carrying costs

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are examples of such segments that are typically included in every analysis. However, these ‘costs in play’ need not be the costs available for optimization. For instance, the raw material costs could be largely fixed and not be included in the scope of the costs that could affect the network. Inventory carrying costs might again be determined primarily by the location selection in the distribution network and hence might not be the focus for optimization. The costs that the model uses to determine the locations to be used in the optimized solution are highly customizable within the model; this is where the strategic objectives defined earlier help the modelers. The optimization model is designed in such a manner that only the segments that need to be optimized are taken into account by the model (for instance, the model is not given a choice of sourcing raw material, but is definitely given a choice of locations to serve customers from). The ‘percentage in play’ in the figure is a subjective assessment of the proportion of costs in various categories that can be influenced by strategic design changes to the supply chain. Theoretically, the kind of cost granularity that can be included in such models is pretty good and costs like manufacturing line fixed and variable costs (by SKU), line switching costs (by SKU), handling costs by location by SKU etc. can easily be incorporated. More so, even if these costs vary by period (say quarters or months), the idea is to figure out during the analysis phase what kind of costs to model into the design –and this is the kind that impacts the strategic location design.

Creating a bulky, intricate model with detailed supply chain costs worked in may appear very exhaustive. Such a model without considerations to size may, to begin with, take a long time to create and more importantly, take an even longer time to solve. The parties involved in the exercise should make sure they include the cost segments that are essential to get a good picture of the overall supply chain once it has been modeled. While we are being realistic, we must also realize that an optimization exercise is not necessarily a cost minimization exercise for all the cost segments included in the analysis. Cost components are keys to understanding the newly-configured scenario (Baseline and others). More often than not, some costs are increased, while others go down to provide an overall decrease.

We must also realize that an optimization exercise is not necessarily a cost minimization exercise for all the cost segments included in the analysis.

Playin’ With Costs In Play Depending on the nature of costs modeled and the supply chain network itself, a vast number of possibilities exist to optimize the model with various constraints. Usually, optimizing the network with the existing facilities itself yields a cost lower than the Baseline, and quite eponymously, this is called the ‘Baseline-optimized’ or ‘best use of current’ model. This happens usually because of a realignment of flows in the model, use of cheaper transportation modes, optimum use of capacities etc. Every organization’s network is unique and has to be dealt with uniquely in the model. Therefore, selecting warehouse locations from a given set is also The Warehouse Handbook | 41

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house locations might provide transportation savings, but again, increasing the number of locations beyond a specific number might increase the inventory costs enough to offset the transportation savings. l Choosing certain locations might help you improve your service levels (reduced average distance to markets), but could increase service costs (handling and transportation). l Your model might favor one warehouse location over others purely for reasons of low space rental costs. However, should one have a warehouse with the capacity of a million square feet? Even if not a million, would it be prudent to put all your eggs in one basket? According to me, it’s necessary to put a realistic cap on the capacities of warehouses (‘candidate’ as well as ‘current’).

subjective to the organization’s chain. However, a few examples for correct selection can be provided. l If you are sourcing internationally and some of your major markets are outside India, you might want to look at setting up a warehouse there, since that could drastically reduce or eliminate your freight spends. On the other hand, costs incurred, import/ export duties on finished products and raw materials might alter the model solution. Another option would be to ship directly to domestic customers from the international warehouse. Of course, the choice is again specific to the kind of costs involved and the kind of service levels that need to be provided. l Usually for products that are tiny in volume, weight and value, increasing the number of ware-

Supply Chain Network Optimization: Opportunity Assessment Segment Raw Material Procurement

Source: Chainalytics Proprietary

Manufacturing Transportation

Distribution Inventory Carrying

Category

# of Periods Value (S)

Annualized (S)

Sub-total (S) % of costs

% ‘In Play’

Amount ‘In play’ (S)

Main Recipe

45.0

80.0

46%

6.4

Packaging

15.0

Others

20.0

Fixed

10.5

12.6

53.1

30%

90%

47.8

Variable

40.5

Inbound

2.0

26.0

15%

100%

26.0

Interplant

5.5

Outbound

18.5

Regional Warehouses

9.5

12.0

100%

12.0

Central Warehouses

2.5

0.5

0.6

3.9

0.1

Packaging

0.8

2.5

42 | The Warehouse Handbook

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l Often,

the result of the optimization exercise might be very different from the current network, with only a few or possibly, none of the current warehouses being a part of the solution in the model. Unless the organization is willing to make drastic changes in the network, this doesn’t make sense. The optimal solution would be the one which uses additional warehouses to augment the current network, and not replace it. This might increase the solution cost, but also takes care of the investment already made in the current infrastructure. l As markets expand and demand grows, the net-

work might change. This is primarily because distribution optimization exercises resemble the selection of weighted centroids (with demand being the weight) from which to serve the demand. Again, running different demand scenarios will provide a clearer understanding of which locations consistently appear in the solutions. In other words, the search is for a stable network that can cater to future demand projections as well. The figure ‘The Cost Facility Curve’ is a representation of how various costs associated with the supply chain move as the number of facilities in the network increases. The key in distribution optimization is the

Cost Assessment For Strategic Supply Chain Design Transportation $2600

120%

Manufacturing $4779

100%

Source: Chainalytics Proprietary

% In Pay

80%

Distribution $12.00

60% 40%

RM Procurement $640 Inventory Carrying $0.08

20% 0% 0%

Percentage of Costs

Source: The Warehouse Handbook | 43

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The Cost-facility Curve SC response line

Total cost

Inventory cost Cost

Facility cost

Transportation cost Number of Facilities Source: Supply Chain Management: A logistics Perspective by South Western Educational Publishing (Feb 2008)

tradeoff between inventory and transportation costs. More locations usually mean more inventory points, but for every distribution problem, there are a certain number of facilities where the inventory effects outweigh the transportation savings. The India Effect Being realistic and using your judgment carefully are qualities that I have repeatedly emphasized in this article. But perhaps nowhere is it more important than it is in India. What I have discussed below is something all organizations must take into account (and they do) while designing a distribution network. Let’s start with the warehouses in India, called ‘go44 | The Warehouse Handbook

downs’. It’s ironic how pessimism is already built into that word! Hence, I will stick to using the term ‘warehouses’! Warehouses in India are more like covered structures with dirt floors, and are usually fairly small (up to 25,000 sq. ft). The warehouse management system is usually a notebook in which warehouse personnel keep track of what comes in and what goes out, using a chewed-up Reynolds pen! Things may be changing, but few warehouses in India can boast of the sophisticated automation and behemoth sizes of American and European warehouses (up to one million sq. ft). Despite the fact that change in the warehousing sector is plagued by issues of availability of land and bureaucratic red tape, things are slowly changing. Organizations are increasingly becoming aware of the benefits of developing their own warehouses, but regional network models with partnerships with 3PL companies, who already own warehouses or land, are easier and faster to implement. One primary reason why warehouse automation and technology is usually neglected is the availability of inexpensive labor in India. However, with automation comes quality, which is an absolute prerequisite for any organization which strives for excellence. Warehouse management software can impose discipline and provide data for improving productivity, even improving the individual worker’s productivity. Another critical reason for the abysmal neglect of automation is high import duty on material handling equipment (fork-lifts, conveyor belts, etc.).

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The Baseline Effect

Source: Chainalytics Proprietary

Baseline Flows

46 | The Warehouse Handbook

5 WH Flows

4 WH Flows

6 WH Flows

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Having said enough about the pangs of warehouse automation in India, it can still be a significant factor for location selection. For instance, the presence of reliable conveyor systems at a warehouse might make it easier for goods to be loaded into and unloaded from smaller trucks. Locations with such amenities can be considered for demand regions that can be served using Light Commercial Vehicles or LCVs. Cities are the biggest markets in India and most warehouses are located close to (even within the heart of) cities. Scheduling trucks becomes an issue, since most city municipalities prohibit movement during daytime. In such cases, docking outside the city and using smaller vehicles to run the last leg is an option. In India where the bulk of freight moves on trucks, transit times can be huge. Add to that the state of our roads, which limit the average distance travelled in a day to just 300 kms (as compared to 800 kms internationally). India is still a little far from providing company cell phones to all drivers and monitoring truck movement with GPS tracking. The effect all this has on location selection pertains specifically to India and severely limits the choice of locations in the country. Organizations might want to stage goods at multiple locations within a geographical area to negate some of the issues mentioned above. Having smaller warehouses in each state (where they have markets, of course) might be better than having one big warehouse at one place to serve dealers/wholesalers/distributors across the country. True, one would have inventory at multiple levels, but in one of the world’s fastest growing markets, availability is the mantra.

A Cost Saving Enabler An optimized solution is not the last word, but more of a guide to achieving a stable and cost saving distribution network. Operational inefficiencies, demandsupply imbalances, freight issues, political turmoil, are realities that might change the transition path to implement the solution. The optimization tools are decision-support tools, not decision making ones. Several questions need to be asked like (a) the availability of labor in proposed locations, (b) will tax incentives make one location more lucrative than the other, (c) the impact on service levels of a low cost network, (d) would the network change if sourcing locations change? If it’s so obvious, why isn’t the competitor doing the same? (e) is expensive technology worth it? (f) how does the customer benefit from redesign? As supply chains continue to evolve under the umbrella of technological integration, there is enormous data being captured at every stage of the supply chain. And the tools that use this data, in all its forms and complexities, are increasingly becoming abundant and complex as well. These enormities are enabling managers to make more informed decisions, but are also putting them at a greater risk of making poorer decisions. A supply chain manager knows that his company’s business model, long term objectives, supplier and customer relationships and profitability of supply chain operations is affected by his decision, and he should know that this decision should not be left just to optimization models.

Having smaller warehouses in each state (where they have markets, of course) might be better than having one big warehouse at one place to serve dealers/ wholesalers/ distributors across the country.

The Warehouse Handbook | 47

I n t e r v I e w

Automation At Its Best

Samir GaNDHi Executive Director, Gandhi Automations Pvt. Ltd.

48 | The Warehouse Handbook

Explain the various door and loading bay facilities provided by Gandhi Automations. Gandhi Automations is Indiaâ&#x20AC;&#x2122;s No.1 entrance automations and loading bay equipment company. We supply, install and maintain highly sophisticated industrial doors and loading bay equipment. The doors meet various objectives like temperature control, dust ingress, noise control, maintain hygienic conditions etc. and at the same time allows seamless traffic of forklifts, pallet trucks etc. Our Dock Levelers also adhere to the most advanced concept of having the whole drive unit contained in a wall box which is installed on the wall inside the warehouse as against traditional ones which are installed under the platform. The other points of strength are the prefabricated solutions for the quick construction of loading bays free of the frequent risks of fractures of the pavement, allowing to cut the construction time of pits by 60 percent and dramatically reducing the need of local man labor. The product range includes Aircraft Hangar doors, High Speed Flexible Doors, Sectional Overhead Doors, Fire Doors, PVC strip doors, Flap Doors, Garage Doors, Revolving Doors, Sliding Doors, Swing doors, Dock Leveler, Dock Shelter, Scissor Lift, etc.

What is the equipment provided for loading and unloading? Gandhi Automations provides Dock Levelers, Scissor Lifts and Tail Lifts used for loading and unloading of material. Dock Levelers along with Dock Shelter and Sectional Overhead Doors together constitute a dock house that enables trouble free unloading and loading activity. The Dock Shelter surrounds the top and sides of a loading dock thus cutting off the inside environment from the outside, preventing loss of temperature. Is the labor involved specially trained? Where and how? Gandhi Automations has the most technically qualified personnel in the industry for installations and servicing of our products. We have a huge team of committed and diligent technicians; many of whom are trained at principal companies in Europe. Besides, the products supplied by us are user friendly and our customers are trained by our personnel in handling the equipment efficiently. In case of faulty installations/equipment, what is the procedure followed? We strive to import products that are quality tested and certified to the highest available safety standards in the industry. Gandhi Automations has a dedicated team for after-sales service. We have a commitment to our clients to ensure that every complaint is attended to within six hours in all the

In the imported Dock Levelers and Industrial Doors segment, Gandhi Automations has more than 75% market share in India i.e. 3 out of every 4 Dock levelers/Industrial doors have been sold and installed by us in the past 5 years. Performance in the last 5 years & future Projection 100

100

INR (Crore)

90 80 70

50 40

30 20 10 0

22 14 2005

2006

2007 2008

major cities and 24 hours in small cities and rural areas anywhere in India to resolve any problem encountered at a particular time. What is Gandhi Automationsâ&#x20AC;ş market share in the industry and its product USP vis a vis the competitors? In the imported Dock Levelers and Industrial Doors segment, Gandhi Automations has more than 75 percent market share in India i.e. 3 out of every 4 Dock Levelers/Industrial doors have been sold and installed by us in the past 5 years. Over the years, our company has earned a reputation of offering world-class quality

2009

2010 2011 (Projected)

products along with best of after-sales support. This is our USP and Gandhi Automations has today become synonymous with quality and service excellence. What are the new products/product line extension launches scheduled for the future? GAPL is continuously adding new products to offer to the customers, a complete package in entrance automations, loading bay and warehouse equipment. The products offered by us are imported from companies that are global leaders in their respective fields.

We have added aircraft hangar doors, taillifts, fire shutters and fire doors to our existing range of products. According to you, what do you foresee to be the future of the warehouse and MHE industry? Globally, the use of material handling equipment is common. There is an increase in multinational companies setting their base in India and these MNCs bring in their ways of moving materials. Thus the industry is seeing a change in the way materials are moved. The Indian warehouse and MHE industry is expected to grow steadily. The improvement in the Indian economy will result in accelerated demand for goods movement and create opportunities for suppliers of goods-handling products and services of all types. Can you please explain the road map of Gandhi Automations from the beginning and for the future? Since its inception in 1996 Gandhi Automations Pvt. Ltd has grown into a company of 300 employees with branches in most of the key cities in India. Today it stands at the No.1 position and is still moving on. Over the years we have added a number of products and have been able to achieve a high growth in sales. Our strategy for growth is to keep concentrating on the key areas that is, the latest product offerings in terms of technology. If you keep excelling and performing consistently in what you are good at, then growth and success will follow. Interview provided by the company.

The Warehouse Handbook | 49

WAREHOUSE DESIGN

< Column

Designing A Suitable Warehouse < COLUMN COLUMN

Warehouses which are planned and well-designed will not only fulfill customer expectations but will also optimize costs. Padmini Pagadala unravels the process.

oes one need warehouses? In an ideal world Size And Storage a warehouse would probably be redundant. The size of your building is a central warehouse deIf there was a mechanism whereby customer sign question. The square footage and area of the facildemand could be fulfilled within an acceptable time ity is difficult to change once the warehouse is up and frame, there would be no need for warehouses and that running. A good warehouse designer will design your would indeed be the ideal world! But alas, we don’t live warehouse in such a way that the growth potential of in an ideal world and thus some professions are created the site is factored into the concept, so that the design in which people get to make their bread and butter from of the facility can handle not just the current year’s designing warehouses. All the same, as redundant as a storage and handling demands or the demand of the warehouse may be in the ideal world, it adds value in year when the warehouse would be finished, but the the realMom world. AftPop er all,stores this isshould the world the threatened dollar- demand India’s and notoffeel with looking ahead by five to seven years based on the knock of multi-brand FDI at the door — not only do sutra! thethey growth pattern of the product that is stored in the haveWhy a home advantage, but they are formidable in the areas of It would be redundant to build a wareis designing a warehouse difficult? What are warehouse. customer service, delivery, and relationship. The of logistics expandedCentre over the become theidea core questions thathas a Distribution (DC)years de- to house only to think about expanding it in a year or the interesting, all-encompassing entity - supply signer needs to answer? The DC designer’s primary job chain two. - that the vegetable IS A general perceptionPagadala that Foreign DiitTHERE Padmini explores themarket. two Contrary terms.to the West, we isisInvestment totoday. make(FDI) sure he orretail shecould designs facility does one decide how big the warehouse should are a quite averse that to eathas mangoes in How December rect in that multi-brand or strawberries summer. threaten small retailers. Maybe so. expense, the minimum operating while fulfill-take place? be? Inasorder Why did theinchange we into answer this, one needs to decide what will What’s in a independent name possible one may ask? We may When a customer walks intoevolution store and But there adiscussion, few arguments thatthe india follow the supply chain path shrug the but here not so ex- customers. ing off theare service expectations ofcould its be astored inside the facility because this usually influences make the independent retailers (kiraana stores) asks for a product, he is expected to make do

My Pop Strongest

From Logistics To Supply Chain PADMINI PAGADALA Padmini Pagadala PADMINI PAGADALA GeneralManager, Manager, General General Manager, TPGConsulting, Consulting, TPG TPG Consulting, Mumbai Mumbai

Mumbai

50 | The Warehouse Handbook

T W

perts in our industry. Recently, i was at a feel better oncewith theysome know their ground.veterFor cocktail party international instance, at 10 in the night, I callstarted up my local ans from if our industry, and they talkkiraana shop to order a loafword of bread will deing about what the right waswho to refer to livers it in ten minutes, I wonder why they the industry we work in. they discussedhave the to fear the bigso MNCs. Having do I walk subject with much vigorsaid andthat, argued back through a supermarket to buy stuff? Of course and forth, that i thought it would be valu-I do. When I lived in Singapore, Mustafa Centre,

that the West has mapped, it’s worthy to confrom available. Compare thatthat to the sider what each is step and whether or not step promise of necessary the local kiraana storethe to deliver was really or relevant. biggest home an we out-of-stock product the heof mistake can make is copying forminute the sake procures it. This is of course possible because copying. it strikes me that sometimes even the the local retailer sources hisnot manpower from logistics terms used might transfer as well villages and sustains his profi ts by underpayas the practices. ing his employees. What would happen when

WareHouse design

the size of the warehouse the most. To do this, the designer must think about the total number of Stock Keeping Units (SKUs) that need to be stored and their inventory as well. The inventory targets for each SKU then need to be multiplied by an estimate of the itemâ&#x20AC;&#x2122;s cubic volume, to get a total cubic feet storage target for each SKU. Once you know how much product is to be stored at each SKU, you need to choose a storage mode big enough to hold the entire inventory of each item in one location,

if possible. There are several commonly used alternatives: l Floor storage l Pallet storage l Decked rack storage l Shelves l Or you may decide you need a specific storage mode for your needs such as an AS/RS (Automatic Storage Retrieval System) Once you know how many pallet racks, decked racks and shelving locations you need, in order to simplify implementation and the purchase of equipment, the designer will often eliminate one of those if there are only a few SKUs which need that type of storage (See table 1). Height Of Warehouse If the cost of real estate was the only factor to consider in deciding the height of your building, you could go as high as possible in order to save on the cost of the land. But if you start constructing buildings that are taller than 12m, you will pay a premium, not just on the construction of the building, but also on the material handling equipment and storage modes. So this

You need to decide all the trade-offs before you decide on the height of a warehouse building.

Fig 1. Decked Rack where each tier of the Pallet Rack gets divided into two levels with a mesh

The Warehouse Handbook | 51

WareHouse design

Table 1: Example Of Storage Mode Assessment Item

52 | The Warehouse Handbook

Max Inv Units 2010

Item Cube (Culn)

Total Cu Ft On Hand

Rec. Stg Mode

Sizr/ Location (CuFt)

# of Locations

123M

Men’s Shirt Blue M

1421

336

276

Pallet

123L

Men’s Shirt Blue L

540

336

105

Pallet

123S

Men’s Shirt Blue S

911

336

177

Pallet

147M

Men’s Shirt Pink M

336

Deck Rack

15632

Men’s 32” Pants Blk

595

Bin Shelving

15633

Men’s 33” Pants Blk

1400

595

482

Pallet

15634

Men’s 34” Pants Blk

595

Bin Shelving

footage afterwards if you have AS/RS ALTERNATIVE - 5000 Pallets & 1000 pallet moves/day not built enough to start with. There are various factors that Cost Component Unit Cost (Rs) Qty Annual Cost* influence how high you should go: Cranes 11,970,000 4 6,840,000 Aisle Equipment 1,054,000 4 602,286 l Cost of the land (The more expensive the land, the higher one Rack (Pallet Positions) 3,180 5000 2,271,429 can go). 9,713,714 l Construction costs (Above 12m, Total Cost over 7 Years 67,996,000 the cost of construction increases steeply). CONVENTIONAL PALLET RACK ALTERNATIVE l Cost of material handling equipCost Component Unit Cost (Rs) Qty Annual Cost* ment (equipment that is needed to Reach Trucks 1496250 7 1,496,250 retrieve pallets above 12m is more Rack (Pallet Positions) 2925 5000 2,089,286 expensive). Labor 112500 7 787,500 l Soil conditions (Loose soil can4,373,036 not support very tall buildings Total Cost over 7 Years 30,611,250 without great expense). *All equipment is depreciated over 7 years l Fire sprinkler technology. question needs some thought because it is nearly impos- l Weight of the pallets (With very heavy pallets, it sible to change the height of the building after you start would not be cost effective to go high). operating; however, you can usually build more square You need to establish the trade-off between all Table 2

For a 10m clear height building that stores standard 4 ft. high pallets, one could have five tiers of pallet racks.

Description

WareHouse design

these factors before you decide on the height of the building. For example, it is very typical to find buildings that are 20m high or more in Germany where real estate is costly. These buildings can only operate with automated equipment known as an automated storage retrieval system (AS/RS) that puts away and retrieves pallets. In table 2 is an analysis of using conventional pallet racks for storage against an AS/RS, to store 5000 pallets. The AS/RS solution costs twice as much, but it saves close to half an acre of land. In Indian cities this would easily pay for itself. In the Indian countryside, it would not. You will also find that in places like Hong Kong or Singapore where real estate is even more expensive, warehouses may have two levels to themâ&#x20AC;&#x201C;one 8m level warehouse stacked on top of another 8m facility. These buildings cost a great deal to build as their load bearing capacities need to be phenomenal. Pallet Rack Bay Configuration In most of the warehouse design projects that I have been personally involved with, the predominant storage mode used was pallet rack, and the quantity of pallets needing to be stored and the method of retrieval drove the square footage needed. Consequently, once the height of the building is decided, the next most important parameter, i.e. the configuration of the pallet racks, may be specified. There are two statistics that need to be determined: the number of tiers and the pallets per bay. For a 10m clear height building that stores standard 4 ft. high pallets, one could have five tiers of

Five Tiers, Ten Pallets per Bay.

The Warehouse Handbook | 53

WareHouse design

pallet racks. In industry parlance, this is known as G+4. Another relevant industry term known as a bay, describes the total number of pallets stored in one unit of purchased pallet rack. Usually pallet rack bays can store two pallets side by side. If you have five

One of the unchangeable aspects of a warehouse is the column grid used inside the building.

On the left you can see how the grid column sits in the flue and hence optimal. To the right, you can see how a pallet position is lost owing to suboptimal column spacing.

54 | The Warehouse Handbook

tiers, then a bay with this sort of pallet rack can hold ten pallets as shown on page 53 in the accompanying photograph. Note that the height of the pallet is not always standard. If products come in floor loaded and you have to stack them, then you can build a standard height pallet, but if products come in already on pallets, you should design it around the typical supplier pallet. Some warehouse designers even choose to have multiple tier heights to accommodate various pallet heights. The Column Grid Before you decide on the size of your warehouse, you have to consider how you will arrange the pallet bays you need into aisles. For example, if you need to store 5000 pallets in G+4 pallet rack, you could have one long aisle of 500 bays side by side, but this would be a very strange building indeed. It would require a very special piece of property to use the land efficiently. Consequently, designers try to organize the bays into aisles to create square or rectangular storage areas that match modern building methods and real estate shapes. Another reason to shape the building into a square or rectangular form is to provide enough dock doors around its perimeter. All these objectives lead to the next major design parameter for your building, the column grid dimensions. One of the unchangeable aspects of a warehouse is the column grid used inside the building. The grid is the span between the foundation columns of the

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WareHouse design

building. A good grid design should reuse the same span over and over again to avoid added construction costs. You shouldn’t use one grid that is 40ft x 60ft for 50 percent of your storage area and then another that is 25 ft x 60ft for the other half. If possible, you should use just one type of grid for the entire building. The exception to this rule is the receiving and shipping docks. Sometimes, a different column grid is used there. Next, a good grid design should be able to accommodate a rectangular storage area without having to lose pallet positions to columns as shown in the photograph on page 54. This means the grid needs to take into consideration the depth of the pallet rack and the width of the aisle so that columns regularly appear in the “flue space” between racks as shown in the photo on page 54. It should not impede traffic by leaving columns in the middle of aisles Docks will take up to 20 percent to30 percent of a wareeither. house’s space in a typical building. 56 | The Warehouse Handbook

The issue of grid leads to the question of how wide the aisles should be. Aisle width is driven by three factors: the width of the vehicle that will be operating in the aisle, its turning radius and whether or not vehicles must pass each other in the aisle. Different pieces of equipment require different aisle widths to operate. A designer should choose an aisle width that meets the acceptable operating characteristics of the vehicles that will be used there and at the same time minimizes square footage requirements. Aisles require space just like racks. A designer should seek to minimize them as much as possible, but be careful not to go overboard and create an environment that is very difficult to work in. Number Of Dock Doors Once the storage area in a warehouse is defined along with the grid, about 60 percent to 70 percent of the building’s square footage is known. The only significant space user that remains to be detailed is the shipping and receiving dock. Docks will take up to 20 percent to 30 percent of a warehouse’s space in a typical building. A warehouse is a building that is a temporary stop for products. One key design objective is to make this momentary pause as efficient as possible. This means the designer needs to ensure that the building is constructed in such a manner that products can get in and out as fast as possible. Often, this means making sure the building has enough dock doors to handle peak periods and that the dock space behind

WareHouse design

them is deep enough to stage and check-in material. There are a number of factors that one needs to consider when determining the number of dock doors required: 1. The number of trucks that have to be loaded or unloaded during peak hours. 2. The size or type of trucks being unloaded. This determines the time taken to load or unload them, i.e. a 40 ft. truck would take longer than a 16 ft. truck to load or unload. 3. The type of loads in each of the trucksâ&#x20AC;&#x201C;palletized or floor loaded. If the dock is designed properly, palletized loads are much faster to unload with a forklift than floor loaded trucks. 4. The time frame available in order to complete unloading or loading activity during peak hours is usually the most crucial element to be considered. If a warehouse receives products only from midnight to 4 am when it is easy to get trucks to the site, then the number of inbound dock doors need to be calculated allowing four hours to complete all the unloading. 5. The operating strategy of the building also impacts this calculation. For example, will receiving be done after shipping is completed? If so, you need fewer doors than if you intend to ship and receive at the same time or if your peak shipping period occurs during your peak receiving period. The area behind the dock door is important too. You need to have enough room to receive an entire load for check-in or shipment. In certain cases, you may want to store more than one load behind the door, for example, the load being loaded and the next load

being brought from storage. Earlier, a typical dock used to be 50ft- 60 ft. Now docks are getting as deep as 75ft-100ft to make cross docking easier. Once the storage area and docks are designed, the warehouse space needed is well understood. Of course, offices, value added service areas, forward pick zones, etc. will add to the space needed, but usually they are not as significant as the storage areas and docks. The Floor Factor Floors are one of the chief factors that impact a warehouseâ&#x20AC;&#x2122;s functionality. In India, floor design does not even remotely get the respect or emphasis that it deserves. Floors can crumble if not specified and then constructed properly. This can lead to the floor being unusable in places and expensive material handling equipment sitting idle or lots of extra labour being required inside the warehouse to go where the machines are unable to do so. Equipment maintenance costs, too, can be higher in facilities with poor floors. Floor strength and flatness (gradient) are the two most important aspects of floor design that need to be specified by the designer. The strength of the floor is most often dictated by the point of greatest force per square foot. This usually occurs at the foot plates of the pallet rack in most warehouses. The strength requirement is an easy statistic to calculate. Add up the total pallet weight in a bay and then divide it by four. Divide that result by the square area of a footplate. While the exact floor specifications can vary from site to site, a typical warehouse floor should

Floor strength and gradient are the two most important aspects of floor design that need to be specified by the designer. The strength of the floor is most often dictated by the point of greatest force per square foot.

The Warehouse Handbook | 57

WareHouse design

Bad floors affect productivity.

be able to support 3,000 psi (pounds per square inch) as in the US. Floor flatness is also important in warehouse floor design. Consider when a Reach Truck hauls a pallet off the fifth tier of pallet rack storage. If the floor is not flat, it is very difficult for the Reach Truck operator to be able to pull the pallet out. There is also the risk that he may push the pallet off the rack. Some material handling equipment used in very narrow aisles need especially flat floors or what are called “super flat floors” or they won’t operate. The construction of “super flat” floors needs to be overseen by someone who has done that type of construction regularly. These firms are rare right now in India. For the flatness, a reasonable standard to conform to 58 | The Warehouse Handbook

is the UK Concrete Society Technical Report No. 34, 3rd Edition, classification FM2. This is a British standard widely accepted throughout the world, including Asia. Shipping The Products Once the product is put away into storage, how does it get shipped? This is probably the question that consumes the largest amount of a designer’s time because it typically dictates most of the labour costs of the facility and the customer service levels that the facility can achieve. Usually, the outbound design begins with high level thinking about the customer service of the facility. A typical daily timeline or schedule is roughed out for the building. This schedule will highlight when various

Case study

caSe StuDy

Optimized Solutions For Dense Storage Case Background

handling and since there were only limited

constrained the replacement of the entire set-

One of the world’s leading food and beverage

SKU’s, maintaining FIFO became a must. The

up in one go.

brands that manufactures premier consumer

available space was very limited and so they set

products, felt the need to upgrade their supply

an objective to utilize 60 percent - 80 percent of

Proposed Solution

chain to world class standards. And to achieve

the available space.

Drive-In, Push Back Racking and Pallet Flow Racking were the solutions Godrej considered.

this goal, it partnered with Godrej Storage Solutions.

The Challenge

Drive-in was unable to score on throughput and

Since the customer was from the food and

Push Back on FIFO.

Requirements

beverage industry, seasonal variations had

Hence Pallet Flow Racking was the best option

The requirement was for dense storage of

to be dealt with. The cartons were stacked

for this kind of handling because they were able

the prime raw material. Godrej had to reduce

up to six meters high and hence pallet height

to achieve dense storage, FIFO and less handling,

was up to 1.8m. The maximum

to be achieved during

Benefits

peak

seasons

was

Dense storage – 70 percent of the space

15 - 2 0 p a l l e t s / h o u r /

utilized and nearly four times the existing

equipment.

capacity.

omer

was

using

Pallet

The

custalready

100 percent FIFO.

Selective

Elimination of plastic pallets reduced

Racking

investment cost.

(SPR)

system and the SKU’s

Box heights were standardized to suit the PFR system.

were

handled

both

wooden

and

Less handling of pallets – hence longer life time.

pallets

with

Throughput achieved to handle 15-20 pallets

plastic

using

different heights. Also, an inadequate budget

60 | the Warehouse Handbook

without compromising on throughput.

throughput

/ hour / equipment. Case study provided by the company.

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WareHouse design

The 24-hour clock is essential to calculate the number of personnel a warehouse needs in order to complete a certain operation. It also indicates the material handling equipment that you need.

62 | The Warehouse Handbook

important events occur in the facility. This schedule is known as the “24-hour clock”. The typical events covered in this schedule include: l Order download time l Replenishment periods l Receiving periods l Picking periods l Shipping periods These time periods are sometimes dictated by customers (shipping periods) or by technology constraints (order download times). In other instances, suppliers or government restrictions might dictate when certain events can occur (receiving periods). It really depends on the nature of the facility’s mission and the constraints that surround it. For example, if I were in the vegetable business, I would be joking if I planned to have ten hours in a day to receive all my goods. In the vegetable business, at least as of today, most of the products are sourced locally and would come into the DC at around midnight, and by 6 am the trucks should have left for the stores. So there starts the 24-hour clock by which starting at midnight and ending at 4 am, the DC should have received the entire product. The 24-hour clock is essential to calculate the number of personnel a warehouse needs in order to complete a certain operation. It also indicates the material handling equipment that you need. It shows the number of dock doors your warehouse requires and it also provides an insight into the types of outbound processes that might be needed.

Order Picking Methodology The most common analogy for how the outbound side of a warehouse works is the grocery store. A grocery store will hold products on various shelves until customers need it. Customers will come in with shopping lists and inspect all the merchandise in the store, picking items that they need and checking off their lists as they go. When they are done, they go to a cash register where the customer pays and receives a receipt for the items purchased. In this scenario, the grocery store is like the warehouse. It stores products. The customers are the pickers in the warehouse collecting merchandise for orders. The receipt is the bill of lading in the warehouse that goes along with a shipment, but the analogy does not end there. As grocery shelves are depleted, a stock boy will bring products out from the back of the store and replenish the shelves. This concept exists in warehouses too. The shelves are called “forward pick areas” and the back room of the grocery store is called the “reserve area”. Periodically, replenishment drivers using forklifts or order picker trucks will bring products from the reserve to the forward pick area to minimize the amount of walking and searching the pickers need to do. This analogy begins to break down when we talk about how customers pick their orders from a shelf. Grocery customers have only one order picking methodology and one picklist media. The order picking methodology they use is called single order picking by warehouse designers. This means the customer picks only for one order at a time and they pick the whole order, but in a warehouse there are lots of alternatives.

WareHouse design

A customer picks not only for his order, but for two or three of his neighbors at the same time using two or three grocery carts that he drags with him through the stores. This is called cluster or multi-order picking in warehouses. Imagine if the occupants of an entire building went to the grocery store together. Each person positions himself in one aisle. They pick all the items needed by neighbour X from that aisle into a shopping cart for neighbour X and then pass it on to their neighbour working in the next aisle. This process continues until all the items needed by neighbour X are in his or her shopping cart. This is called serial zone picking. Frequently, these methodologies require differing amounts of automation. Choosing Picking Media The other difference between a grocery store and a warehouse is what designers call picking media. This is the way in which the picker learns what he needs to pick. In the grocery store example, a customer picking his grocery off a shelf usually has only a paper pick list to guide his purchases. In a warehouse there are a wide variety of options: l l l l l

Paper picklists Radio frequency (RF) terminals Unit labels Pick to light systems Voice picking systems Each of these has different productivity and accu-

racy rates as well as costs. It is the job of the warehouse designer to weigh these and choose a medium that optimizes service and cost. Warehouse Management Systems Once you have a warehouse, it is practically impossible to exist without the aid of a warehouse management system (WMS). But, a WMS is not a panacea for all your warehouse software needs and often will not be the only software in your warehouse. Your warehouse could need any of the following: l Labor management systems l Interfaces with WMS l A time and attendance system l Voice picking system l Pick to light/Put to light system l Control systems for automation/conveyors l Load diagramming software A transport management system (TMS) could be another software on the list for your facility. A TMS determines the most efficient routing for a receipt or shipment in or out of your facility, according to given load characteristics. As I have said earlier, the warehouse designerâ&#x20AC;&#x2122;s job is to make sure that the overall capital as well as operational costs for running the building is optimal. While the central questions of warehouse design seem fairly straightforward and while it may be easy to answer the individual questions in isolation, a good warehouse designer has to have the skill to solve all the warehouse design questions in tandem so that no central aspect of the design is compromised. And ultimately this is the value that a good warehouse design can add to your supply chain.

Once you have a warehouse, it is practically impossible to exist without the aid of a warehouse management system (WMS). But, a WMS is not a panacea for all your warehouse software needs.

The Warehouse Handbook | 63

case study

Benefits Of an automated storage system FINCOMA Srl automated its warehouse storage system to achieve optimum organization of space and excellent customer service

INCOMA Srl is a family-run company dealing with the distribution

materials and an ‘intensive’ storage area for order picking and filling.

of industrial components. Founded in 1984 by the Maggi family in

This logic responds to FINCOMA’s need to have a warehouse that is

Stradella (PV), it has grown from a company operating solely in north

both spacious and in which goods can move fast at the same time. The

Italy to become a distribution business with an international focus. It

Campospinoso distribution centre currently has a ‘T’ layout: the newly-

specialises in the distribution of technical components for industry, ball

built mass store is connected to the intensive store, which is adjacent to

bearings and self-aligning supports. FINCOMA aims to attain objectives

the incoming goods, delivery and order filling areas.

such as long lead times due to products sourced mainly from China and increasingly complex market requirements as regards logistics.

The imposing new warehouse was lined with 19-metre blue polycarbonate panels in a honeycomb arrangement.

In a sector where optimum organisation of space and customer service are critical, implementation of organisational structures, storage

Logistics Process

systems and work flow are essential. These are the main reasons that

The logistics process starts with the arrival of goods in the goods receipt

led the company to install an automated storage system.

area, featuring four loading and unloading bays, accessible via heated ramps (to resolve any problems with ice and snow in winter), and two positions

The Automated Storage System

for smaller vehicles such as vans. FINCOMA generally receives three types

The FINCOMA automated storage system is located in Campospinoso

of loads corresponding to three different material preparation processes for

(PV), on a site covering around 34,000 sq.m. Until 2008, the store was

storage: containers, cases of bulk materials and EURO pallets.

managed at the company headquarters in Stradella (PV), in a warehouse equipped with traditional and vertical storage systems. Automation turned out to be the option that best fulfilled FINCOMA’s operational requirements in terms of storage capacity, flow management,

Around 85 percent of incoming goods at the warehouse are received in containers sent from China, each holding 33 pallets. To meet FINCOMA specifications, these pallets are wrapped in protective film and encased in wooden structures by the supplier, so as to avoid damage to the boxes.

warehouse control and safety, and promptness and quality in the order filling

The first stage in preparing the material for storage thus involves

process. The land the company purchased had an existing structure that was

removal of the wooden cage around the pallet. Pallets originating from

converted to enhance the company’s large automated storage system. The

China are not suitable for automated handling due to their variable

layout and operating logic of the current storage system are the results of

dimensions. The original pallets must therefore be removed and replaced

the detailed analysis of available spaces and possible alternatives in terms

by 800 x 1200 mm EPAL pallets.

of management and expansion, performed by the specialists at Promag, a

Materials in bulk cases account for around 10 percent of incoming

Ferretto Group company. A new self-supporting construction was thus built

goods. The remaining five percent of incoming goods flow is represented

alongside the existing structure, positioned perpendicularly so as to create

by single-code standard pallets originating from other European markets.

a so-called ‘cascading’ system, featuring a ‘mass’ storage area for stocking

During preparation for storage, incoming goods are also checked with

64 | The Warehouse Handbook

regard to quantity and quality. There are two loading stations in which the

which provided the customer design and supervision of the building

pallets, automatically recognised by the identification barcodes placed

work, self-supporting racking, automated handling systems and WMS.

on the boxes, are checked again for weight and shape to avoid placing

The FINCOMA distribution centre also includes an “intensive” storage

non-conforming pallets in the store.

area. The two parts of the warehouse are connected by an overhead

The ‘mass’ storage area is served by a 23m high stacker crane fitted

tunnel equipped with roller conveyors and turntables for correct pallet

with telescopic forks featuring two levels of extension, picks and places

orientation. The stacker crane in the mass storage area can transfer more

pallets from or on a self-supporting double-depth racking system, with 23

than 27 pallets/h to the intensive storage area (combined mission).

levels in height, giving a maximum storage capacity of 5,600 pallets.

The racking in the intensive storage area has been designed to house

The choice of a double-depth storage system, which maximises

800 x 1200 mm EPAL pallets with different load heights, with a maximum

potential, was made possible by the fact that the items in the warehouse

weight of 750 kg each in all storage locations, giving a maximum capacity

have relatively low annual stock rotation, without forgetting that the structure

of 1,480 pallets. This store is served by two 10m high stacker cranes, with

was designed from the outset to allow storage capacity to be easily doubled

telescopic forks that work in single depth. In addition, high order filling

already envisaged in the layout.

performance is ensured by integration of the warehouse management

The system was developed by the Ferretto Group (Armes Spa),

system processes the orders that are to be filled the next day, and ‘sorts’

STORE FLOW DIAGRAM

the stock overnight so that the product codes needed to complete the

RECEIVING AREA CONTAINERS from CHINA BOXES AND PALLETS

next day’s orders are available in the right quantities. CASES of BULK MATERIAL

EUROPALLETS

INSPECTION AND ACCEPTANCE

Once picked, the pallets are moved to the order filling area by the stacker cranes. A roller conveyor system is used to deliver the unit load to a 2-position loading/unloading shuttle that can handle 100 combined cycles/h.

PACKING AND PALLETIZATION

REPALLETIZATION EUROPALLETS

system with the company’s management software. Every evening the

EUROPALLETS

FINCOMA has placed its trust in Ferretto Group’s (Armes Spa) aftersales service.

EUROPALLETS

STOCKING IN MASS AUTOMATIC STORAGE SYSTEM

Critical Success Factor The benefits to the company in terms of storage capacity, quality and

RESORTING BY DAY AND NIGHT

productivity in customer order filling have been tangible. These should

STOCKING IN INTENSIVE AUTOMATIC STORAGE SYSTEM

also be added to further benefits derived from automation, such as increased materials handling safety and total control of the warehouse.

PICKING FOR ORDER FILLING

The solution adopted by FINCOMA does not stop here, however. In redesigning its logistics the company has kept an eye on the future,

PACKING

PALLET WRAPPING

CARTONS

FULL PALLETS OUT

SHIPPING AREA

deliberately implementing an oversized solution that in the coming years can respond to the rules of this eternal challenge: competitiveness. Case study provided by the company.

The Warehouse Handbook | 65

CASe StuDIeS

WAReHOuSe mAnAGement:

Lessons In excellence In the following pages we present lessons in warehouse management culled from our cover stories. These brief articles highlight how various corporates handle their Distribution Centres.

How HyperCity Does It H

yperCity Retail has seven stores across the country at Mumbai, Vashi, Thane, Hyderabad, Bangalore, Jaipur and Amritsar and a central Distribution Centre at Vadape, near Bhiwandi, Maharashtra. The warehouse spans 2,50,000 sq. ft and is the Distribution Centre for the entire chain of stores. It services 800,000 sq. ft of retail space spread out across its various stores in the country. “We are saving on expenses with this central DC,” remarks Nair. “End-to-end it is still beneficial for us to have just one central DC and with the implementation of GST, it will make even more sense.” To give an idea of the scale of warehouse operations, approximately 100,000 units are handled every day at the central DC. The supply chain team works on JDA supply chain management (SCM) solutions on the IBM Systems Lt COLOneL VIjAY nAIR platform. It uses a range of solutions including the merGeneral Manager, SCM, chandise management system (MMS), the warehouse HyperCity Retail (India) Ltd management system (WMS), the automatic store re66 | the Warehouse Handbook

plenishment module (ASR) and the automatic warehouse replacement module (AWR). For material handling, the DC uses battery operated pallet trucks which increase productivity considerably as opposed to hand jack pallet trucks which take 12-14 minutes for each use in the warehouse. The scanners HyperCity Fact File* used for picking Number of stores 7 at the warehouse Supply Chain 130 used by Hyper- Employees 66,000 City are integrated Live SKUs Total Retail Space 8,00,000 sft with the ERP. The Transportation Five transporters Centre does multi- Service including Gati and store scanner-based Providers VRL Logistics picking, where in JDA, IBM one visit the picker Technology Providers can pick products *All the facts in the box are culled from media sources and interview transcript for three stores, and are only indicative. For accurate thus reducing travel information, please contact the company

case studies

time within the DC and maintaining a lean labour force. “We are big believers in technology. That’s how we have been able to manage with a lean and efficient team for our stores!” says Nair proudly. HyperCity got a Silver Edge Award for its Distribution Centre Management System. This was awarded by the June 2009 issue of Network Computing magazine. When asked about whether the warehouse uses the RFID (Resource Frequency-Identification) technology, Nair minces no words. “We have put our thoughts to RFID. But it’s just not viable because of the costs involved. The larger products don’t get lost and for smaller products it (RFID) is just too costly. For the moment we are not even considering it.” About 80 percent of the operations at the warehouse are scanner-based which goes a long way in reducing all types of handling errors. Vadape, 65 kms from Mumbai is where the central DC of Hypercity Retail is located. The cavernous DC is inside Shree Raj Lakshmi warehouse park and has been configured with WMS. Chetan Rawat, manager, logistics, who overseas operations at the DC mentions that “100,000 units move into the DC every day, with a container load of products leaving for Hyderabad daily.” Significantly, the Hypercity Retail DC has also embarked on corporate social responsibility programmes. It has adopted a girl’s primary school and along with Kotak Education Foundation, the company is training local youths in warehousing techniques, thus enhancing their employment opportunities. It is also planning to green its supply chain by installing solar panels and introducing rainwater harvesting.

A Hypercity outlet in Malad, Mumbai.

the Warehouse Handbook | 67

case studies

How Spencer’s Retail Does It T

AmIt mukHeRjee Vice-President (IT and supply chain) and Group CIO, the RPG Group

68 | the Warehouse Handbook

he supply chain has two mother DCs —a modern 80,000 sq-ft mother DC at Gurgaon run and managed by a third party, and an import DC at Bhiwandi in Maharashtra. The 17 regional warehouses are managed in-house. The company has a strategy for movement of different kinds of products. For instance, at its Kolkata warehouse, based in Dankuni (40 odd kilometers from the city), FMCG products and staples are moved from the DC to the store, while perishables and frozen items are routed through direct supply model. Garments follow the hub-andspoke model and are directly moved from the mother DC to the store. Mukherjee says, “Our strategy for each region hinges on the vendor capability of that region. In Eastern UP, we have a warehouse in Lucknow, and stores are based in Benares and Gorakhpur. The strategy here would be unlike that adopted in Kolkata or Bangalore where distances are much shorter.” AFL offers warehousing and logistics services; Spear Logistics offers warehousing services, and there are also several other local players. The retail company has adopted the Japanese practice of 5S at some of its DCs. The 5S concept for retail would entail: a) Sort (Seiri in Japanese) – the first step in keeping stocks organized b) Set in order (Seiton) –Identify and arrange the goods on the shop floor c) Shine (Seiso) – Regular cleaning and maintenance d) Standardize (Seiketsu) – Allow quick access of goods

to buyers and e) Sustain (Shitsuke) – Maintaining what has been accomplished. It has also begun an ISO certification program for the DCs as well. Some common technologies in use are warehouse management system (WMS), ERP (enterprise resource planning), merchandise management system (MMS), automatic store replenishment model (ASRM), automatic warehouse replenishment model (AWRM), etc. Spencer’s warehouses use scanners and bar-coding at its Point of Sale (PoS) system. A mix of ERP solutions integrates all the functions from warehousing to distribution, front and back office store systems, and merchandising. Advanced Planning and Scheduling Systems (APS) are used for supply chain planning. It helps support decisions thus resulting in significant improvements to supply chain order fulfillment, cycle time and cost efficiency.

Spencer’s Retail: SCM Highlights No of stores: 200 (10,000 – 40,000 sq ft) No of warehouses: 17 No of distribution centers: 2 Revenue: `1,100 crore Employees: 300-plus Suppliers: 3,000 LSPs: L.G. Brothers, Quick ‘N’ Safe, AFL, Spear Logistics, and several local players SKUs: One lakh at larger stores; 10,000-14,000 at smaller stores Inventory Turn: 45-47 days Technology Provider: SAP IS Retail

case studies

Today one of the biggest problems in the DC is that vendors come in and bunching happens. The turnaround time of the vendor increases.

A Spencer’s outlet in Kolkata

Spencer’s continuing drive to keep costs low has, in fact, pushed up its warehousing space, with the result that it has 17 warehouses across the country, managed by the company. But it has reduced the long haul movement of goods to smaller distances with the help of the local service provider. For the future, Spencer’s plans to move to VMI (vendor managed inventory), thus automating DC 70 | the Warehouse Handbook

operations. Mukherjee says, “Today one of the biggest problems in the DC is that vendors come in and bunching happens. The turnaround time of the vendor increases. I want to move into a system that will be able to give him timely, maybe hourly, appointments. I want to be able to give him time at that hour so that I can evacuate. And this should be automated.”

ACE L

CO OW S ACE

AF80D

O LI

Action Construction Equipment Ltd.

Forklift Truck Division : Plot No. 7, Pocket-H, IInd Floor, L.S.C., Sarita Vihar, New Delhi-110076 Ph:+91-11-49390000, Fax:011-49390099, E-mail : forklifts@ace-cranes.com, Website : www.ace-cranes.com CRANES

LOADERS

FORKLIFTS

VIBRATORY ROLLERS

TRACTORS

case studies

How Dell India Does It A ll the components from suppliers are stored as Vendor-Managed Inventory (VMI) in the Supplier Logistics Center (SLC) facility, which is situated close to the main Sriperumbudur plant and is managed by the Singapore headquartered 3PL, the YCH Group. As the Dell manufacturing team receives the customer order, it accordingly pulls the specified inventory from the SLC. The title of the material is transferred to Dell only the material is pulled from the SLC. “Inside the factory we don’t have more than four hours

mR SunDAReSAn General Manager Operations, Dell India

72 | the Warehouse Handbook

of raw materials inventory at any point in time,” Sundaresan says. “DHL Supply Chain (DSC) provides customized warehouse management services to Dell India, supported by IT infrastructure for inventory management,” said Jyoti Row Kavi, Director - Corporate Communications & Sustainability, DHL Lemuir Logistics. DSC also provides transportation services for last mile delivery. Dell India uses Radio Frequency Identification Technology, but within the factory operations, to keep track of products, informs Sundaresan.

case studies

How tata motors Limited Distribution Company (tmLD) Does It L

PRem k VeRmA CEO, TMLD

ight, medium and heavy commercial vehicles are transported directly to various RSOs (regional stockyards), while the chassis of LCVs, MCVs and HCVs are driven by contractual drivers to their destinations. Tata Motors has established Distribution Centres (stockyards or RSOs) in every state of the country; vehicles are transferred from the plant to the stockyards and invoiced directly from the RSOs to dealers or customers. In the case of the Nano, it is invoiced from the plant and transported directly to dealers by rail or road. TMLD uses SAP for integrating its central and state stockyards as well as its plants. SAP integrates sales and planning with production. Order processing for the passenger and commercial vehicles is executed with the help of SAP and SIEBEL. Tata Technologies provides application support, while IBM assists with hardware and networking support. In addition, the company is developing a portal where the data of vehicles billed and allocated to specific trucks and trailers will flow in. TMLD’s transporters will track the progress of their vehicles till they finally reach their destinations and are unloaded. “This will help the dealers immensely,”

points out Verma, “as it will show them the progress of their trucks or trailers en route and also the probable date of reaching their destinations. On the basis of this information, they will be able to arrange the resources or space for their vehicles and confirm deliveries to customers.” The portal will also indicate delays that may occur en route and this will enable TMLD and the dealers to plan possible alternatives to fulfill customers’ demands.

Composition of Logistics Costs in India Losses 14%

Inventories 25%

Packaging 11%

Handling and Warehousing 9% Customer Shopping 6% Transportation 35%

Source – CRISIL & India Infrastructure Research

the Warehouse Handbook | 73

case studies

How Godrej Consumers Products Limited (GCPL) Does It A

DR.RAkeSH SInHA Chief Operating Officer (Operations), Godrej Consumer Products Ltd. (GCPL)

74 | the Warehouse Handbook

t the warehouse level, GCPL work with CFAs – the latter manage the warehouse – to optimize stacking patterns in order to reduce operational warehouse space and also to ensure first-in-first-out (FIFO). “We are also piloting some advanced stacking and racking systems for using them in areas where the rentals are high. In such areas, it makes sense to go in for vertical storage,” Sinha says, “while in areas where rentals are low, it doesn’t make sense to opt for vertical stacking. That would also require palletization, which would be an additional cost. It’s a question of looking at saving any additional cost we may incur.” Stacking doesn’t come cheap for an FMCG company. For example, boxes carrying GCPL soaps and insecticides typically weigh 15 kg each, so each pallet could weigh around 1.5 ton, which means high stacking and handling costs. “Only when palletizing makes sense for vertical storage, we go in for vertical stacking,” he says. Consumer product companies are big on automated warehouses. GCPL has similar plans. But like many companies in the sector, it is waiting for GST (Goods and Services Tax) to happen to put big bucks into large-scale automation. Sinha concedes, “To some extent, we are waiting for GST, then we could go for automation at some warehouses with full speed. Right now, we have some pilots in the works.”

GCPL encourages the warehouse owners – the CFAs—to use natural lighting. That not only saves costs, it brings down the carbon footprint as well. Thankfully, GCPL warehouses produce no effluents because of the type of the business. But the company puts a tight leash on forklift use – it has done away with diesel forklifts over those operated by battery.

GCPL Supply Chain: Highlights Net Sales (FY2010) Marketed Products

: `2041 crore : Cinthol, Godrej No. 1, Expert, Ezee, Fairglow, Jet, Snuggy, Protekt and others. GoodKnight and HIT (GHPL) : 1,200

Number of Direct Distributors No. of SKUs : (GCPL & GHPL) Inventory Turn Ratio : (GCPL & GHPL) Number of road : transporters engaged Technology Providers : Consultants

400 10 20 SAP, MFG/PRO, BOTREE, IBM, HP, WIPRO

: Accenture, Eliyahu M Goldratt (of Theory of Constraints fame)

Disclaimer: The case studies are based on interviews conducted during the last one year. Some of the figures stated in this section may have changed. Please contact the company for updated figures.

Case study

cAse study

Progressive And Pro-active Warehouse Planning G

odrej Warehouse Consulting Group helped a multinational consumer

time of launch.

electronics manufacturer in selecting the most suitable warehousing

models/systems as their volumes grew.

As the product’s technology life cycle was very short, in order to minimize the idle inventory, the client wanted the consultants group to ensure that the delivery systems were designed to manage 7-21 days of inventory at

The Background

the warehouse and eight hours of inventory within the assembly lines.

The client was a leading manufacturer of a consumer electronics product

The client also had plans to indigenize components and parts over a

with a wide range of variants. The client was setting up its operations

period of time and hence wanted to pro-actively plan for direct receipts

in India six years ago and wanted its material storage and handling

as well.

operations to be highly localized, yet meet very demanding global standards. The other mandatory requirements were: l

Accommodating and transacting a wide range of components, both

Current requirement

locally sourced and imported.

Future additions and

Have provisions for Static Discharge Preventions as the components

Possible residual, idle stocks to emerge

were highly sensitive electronic items. l

Godrej Warehouse Consulting Group and the client classified the stock needs into:

Have the warehousing systems which an Indian 3PL could operate.

Accordingly, the stock and storage requirements were derived at keeping only 85 percent efficiency level in mind, as it was intended for 3PL management at a later point of time. To meet the flexibility

Changing Scenarios And Solutions

requirements, standardization of warehousing systems were arrived at

Even though Godrej’s involvement was continuous over a period of

and a fully scalable layout was generated.

five years, for the purpose of this article this period has been broadly divided into two main scenarios.

2. 3PL-managed Period Based on the consultant’s flexible designs, the client on its own had

1. Self-managed Initial Period

gone about establishing a large warehousing facility and had handed

The Godrej Warehouse Consulting Group was to design a warehousing

over the management of the operations to a 3PL.

system that would be truly scalable and flexible to accommodate new

However, as the volumes had already tripled and quadrupled the

components as the client’s product was largely a lifestyle product at the

starting volumes and were further growing, the client wanted to revisit

the Warehouse Handbook | 75

Case study

76 | the Warehouse Handbook

Case sTudy

the warehousing systems and processes once again so that they didnâ&#x20AC;&#x2122;t

delivery sub-warehouse was designed with pallet, case and piece

have to think about a change till the volumes reached a level ten times

picking capability and minimal man-machine interventions for safe

the starting volumes. The demand was to see if minor re-engineering

and secure operations. This new sub-warehouse was also designed to

could offer that capability.

accommodate the direct delivered components/items.

Godrej Warehouse Consulting Group did a detailed study of the

The layouts were put to simulation tests to identify the zoning

clientâ&#x20AC;&#x2122;s current and proposed environments and developed a two-fold

requirements, manpower needed per zone, parts/labor to meet the

solution containing,

throughput need of delivering over 60 assembly lines with more than 1.5

Re-engineered systems for better, enhanced capacity handling and

lakh pieces of 200-plus component parts for every hour, continuously

A new delivery system that would ultimately meet up with ten times

for 20 hours a day.

the throughput needs. A concept of warehouse within warehouse was created to isolate the immediate assembly needs from main warehousing. This quick

Benefits And Insights With this design, the client developed the capability not only to meet ten times their starting volumes of production, but also manage with lesser inventory (reduced by five to seven days) both in the main warehouse and in the assembly lines. The most important pointers to note in the above case are: l

The clientâ&#x20AC;&#x2122;s commitment to pro-active planning for growing volumes.

Respect for idle inventory that is unavoidable for a product line such as theirs.

Planning for minor inefficiencies on the part of 3PL, and

Involving a consultant at an appropriate time to develop futuristic solutions and maintain a highly competitive infrastructure. If more and more organizations pro-actively plan their

warehousing operations, the Indian warehousing sector will see a large change in its delivery performance. Case study provided by the company.

78 | The Warehouse Handbook

Source: Ferretto Group.

The Warehouse Handbook | 79

HUMAN RESOURCES

People First An organization is built by its people and the warehousing industry must factor it into its growth plans, emphasizes Bhairavi Jani.

BHAIRAVI JANI Director, SCA GROUP

80 | The Warehouse Handbook

eople are the ‘start-up capital’ and the ‘returnon-investment’ of any business, especially those businesses that are in the service sector. Warehousing is about making infrastructure, technology, processes and people work in complete synchronization to deliver output. What is different about hiring, managing and retaining a talent pool in a warehousing business as compared to other service sectors, or even manufacturing sector companies? First and foremost, warehousing has unique people needs. There is the need to have a well-trained execution team at the floor level that is engaged in physical work. There is also the requirement of a management team with analytical capabilities that can drive the business and processes through Management By Objectives (MBOs) and Management Information Systems (MIS), and last, but not the least, there is also

the need of a large contracted personnel pool for value added or infrequent activities. Unlike an IT company where most people have some kind of engineering background, or a manufacturing plant where most people will be on-the-floor staff, warehousing needs all its diverse pools of people to work closely with each other, on a day- to-day basis and also deliver seamless output. People, therefore, are the most essential prerequisite in the delivery of warehousing services. Need For People Strategies Many companies in the warehousing sphere have strategies which comprise of expanding networks, introducing new technology, upgrading infrastructure, but very few have a people-strategy in place. What is a people strategy? It is a plan devised carefully by a company to build its human resource capacity, in terms of quantity and quality, to ascend

Human ResouRces

The Warehouse Handbook | 81

Human ResouRces

the growth curve that it so desires. Most warehousing players are not mindful of the fact that people planning is not an overnight process, and it takes weeks and sometimes, even months, to get human resources in order. Mapping of human capital needs with available supply, too, is critical. There is a lack of understanding today on what is the source of supply, how can it be accessed and also, how it can be enriched. The lack of standard qualifications for skills such as packing, picking, loading, etc. intensifies the problem of matching the potential of candidates to the job deliverables. Setting Standards Every organization is unique and has its own specific needs, but there are some standards everyone could follow when it comes to people management. If one is not sure of what one is searching for, then the chances are that the search will be futile. Therefore, it is important to have detailed job descriptions, with capability, education, experience, reporting relationships, physical well-being, ethical conduct, exact nature of activity and most importantly, a career path outlined. And this must be done across the gamut for the most junior as well as the highest position in the company. Even at the ware-

The lack of standard qualifications for skills such as packing, picking, loading, etc. intensifies the problem of matching the potential of candidates to the job deliverables.

82 | The Warehouse Handbook

house floor level, a Picking Executive must have this level of clarity about his job profile before he applies and gets selected for the job. We live in a country where most people take up jobs to make two ends meet and not necessarily, to

Human ResouRces

advance a career. This is especially true of people who work in the warehousing sector. Hence, the challenge is to convert the basic need for a job and survival into an aspirational need for a career. This must be done for all the different categories of peo-

Photos: Ramlath Kavil

ple working in a warehouse. The exciting journey of a Loader, who could not operate a computer, advancing to the position of a Floor Supervisor who files activity MIS daily through the warehouse management system is a glorious one. Imparting skills is the single most important thing a warehousing company can do. The people must be trained to deliver the expectations of the organization and that of the customer. The quality of skills deployed is also critical. Organizations must introspect on the motivation behind training programs they conduct internally. There needs to be a seamless connection between the training goals of a company and long-term plans. The strategic importance of having skilled staff who are completely integrated into the companyâ&#x20AC;&#x2122;s future plans is imperative.

Even more critical is the content. Who is being trained? And for what? What are the global benchmarks for these skills?

Training Benchmarks Even more critical is the content. Who is being trained? And for what? What are the global benchmarks for these skills? These are all questions the functional and human resource teams must answer. There should be a collaborative and constantly engaging model of skills deployment. In a sector like warehousing, where the educational qualifications of people in a company can vary from 10th standard fail to Masters degrees, it is important that training programs do not skew towards one section of employees. A fine balance should be achieved between ground training and conceptual enhancement. Ordinary people can deliver extraordinary results, The Warehouse Handbook | 83

Human ResouRces

When a company expects the best output from its people, it must also create a physical and emotional environment that is best in the business.

84 | The Warehouse Handbook

if given direction and a broad framework. Companies tend to overlook the need of process- based role allocation. In warehousing, the need for such a framework is mission critical. The activities and their outputs are interlinked and therefore, people have to be given the clarity of not just what they are to deliver, but also how that relates to the entire process and its outcomes. The process framework for most companies is only a simple process flow, with huge

ambiguity at each task level in terms of ownership and accountability of individuals. There are many methodologies available for companies to adopt and may be one model may not fit all, but the fact that it is needed cannot be overlooked. When a company expects the best output from its people, it must also create a physical and emotional environment that is best in the business. Most warehouses in India do not have proper sanitation, venti-

Human ResouRces

lation and even a good working environment. If the atmosphere at work is dismal in terms of facilities or even dignity of labour, then how can we expect people to deliver their best? If the warehouse has no canteen where its staff can have their meals, then people will fall ill. If the warehouse has no proper ventilation, then people will be constantly tired and less efficient. Many people in the industry mistakenly dismiss these as ‘fringe’ benefits, but in fact, they are essentials of

any job environment. Companies must commit themselves to creating an environment that is conducive to quality output. Safety of people is also a key factor in hiring and retaining talent. Warehousing jobs involve operating machines, packing loads and thus there is room for injury and accident. Companies that do not pay attention to the safety needs of their people, tend to have more accidents than others. Training lessons on personal safety, disaster management and accident prevention can go a long way in building employee morale and increasing productivity. A ‘People Plan’ The most crucial factor to consider is time. People are fragile in nature—they have emotions and wants. It is foolish to expect human beings to respond like machines just because a company is paying their salaries. People-strategies fail when companies loose patience with their own people. It is important to be prepared for short-term difficulties, drop in service levels, loss of revenue, increased costs, loss of customers and even loss of staff. People will have to be trained, will need to learn and it will all be at the cost of the company. But if there is an effective ‘people plan’, then all these failures can become the foundation of a great organization that can deliver best practices with speed and build an insurmountable competitive edge. In addition to their own employees, warehousing companies also engage contract companies to pro-

Training lessons on personal safety, disaster management and accident prevention can go a long way in building employee morale and increasing productivity.

The Warehouse Handbook | 85

Human ResouRces

‘People plans’ ought to be about people first. Their inputs and suggestions are critical.

86 | The Warehouse Handbook

vide services. The quality pool is, of course, different for different locations and companies. But companies must aim at bringing in some standardization. There can be different engagement and job allocation models, but it would be encouraging to see companies giving the same safety and process training to contract staff as they give their own employees. ‘People plans’ ought to be about people first. Their inputs and suggestions are critical. A company may think it is serving the needs of its people, but in essence, that is not how employees may feel. Therefore, communication is the cornerstone of building people-driven organizations. Organizations that have consultative HR processes tend to win in the long run. The challenge is even more when not all employees are formally educated and companies may need to have multilingual communication. Communication is a two-way street, and there should be as much listening as talking. The management must constantly innovate platforms for two-way engagement with all levels of employees. The primary objective of any business is to create wealth, and create it in a manner that is sustainable, innovative, ethical and inclusive.But how that business chooses to share this wealth with its employees is what makes it a great corporation to reckon with. The journey of a company from a business to a great corporation cannot be made without the humanistic metaphysics of making it democratic— an organization which is truly for the people, of the people and by the people.

Dock Shelter - Inflatable.

The Warehouse Handbook | 87

STORAGE AND MATERIALS HANDLING

Up To Speed Companies can enhance picking productivity through intelligent design says Ashok Kumar.

ASHOK KUMAR Headâ&#x20AC;&#x201D;Consulting, Godrej Storage Solutions

88 | The Warehouse Handbook

oday the nature of warehousing is shifting from storage maximization to transaction maximization. While consolidation of warehousing to bare minimal facilities is still a distance away, storage maximization demands still linger on. So it is important for an organization to have warehousing that offers l Maximum capacity to store and l Minimal transaction times for loading, put-away, retrieval and dispatch operations. The more you ship out, the lesser the need for storage inventory and hence lesser working capitals, but much better customer satisfaction levels. Most companies approach storage maximization demands by bringing in taller racks. However, this creates an accessibility issue and increases transaction

times as India still lacks properly trained material handling equipment (MHE) operators. The result is additional hours put in to meet the clientâ&#x20AC;&#x2122;s demands. We need to recognize that techniques that maximize space utilization tend to complicate picking and render it inefficient, while large storage areas also have the issue of longer travels and hence reduced picking efficiency. Ideal picking requires smaller stocks in closer locations. This works against storage efficiency. Automated storage, picking, handling and information management can compensate for these opposing requirements to a degree. However, automation is expensive to install and operate. As shown on page 90, with varying transaction and storage volumes, different technologies and design concepts become applicable.

sTorage and maTerials Handling

Photos: Ramlath Kavil

Most companies approach storage maximization demands by bringing in taller racks.

The Warehouse Handbook | 89

sTorage and maTerials Handling

Transaction & storage volumes dictate tech & design concepts Storage Requirements

High

Low

Source: Author

Picking Activity

High

Picking Dominates AS/RS Mini Loader High Density Storage Automatic Handling Storage Dominates Drive in Racking

Pallet Flow Racking

Radio Shuttle on Racking Random Location Dense Storage Manual Handling

Shuttle System Verticle Carousel

Multi Tier Shelving System

Floor Storage

Self Stackable Frame Storage

Organizations must make a choice between maximizing throughput and maximizing the cubic space utilization, when it comes to determining their warehouse system design strategies. Given below are methods to enhance picking productivity. Profiling Of Your Products And Their Transactions 1. As warehouse productivity is all about transactions, it is imperative that we profile the SKUs to be managed by the warehouse in terms of the volume of transactions 90 | The Warehouse Handbook

Dedicated Location Low Density Storage Automated Handling

Dedicated Picking Location Dual Storage Low Density Storage Manual Handling

(both in and out) besides the stock volumes, the SKUsâ&#x20AC;&#x2122; shape, size, physical nature, specialized storage needs, etc. 2. Subsequently, it is important to assess the frequency of the above transactions to have further classifications, such as fast-slow-medium. 3. Use the classifications very judiciously in revisiting stock needs, selection of storage and handling systems and in allocation of space. Appropriate Storage And Handling Systems From the above analysis and classifications, products having similar characteristics in size and transaction volumes need to be identified with the most suitable storage and handling methods and systems. Typical storage technologies used for pallet, case/carton and piece picking are shown in the table below: The handling systems which have been chosen need to suit the storage systems which have been selected as well as the transactional volumes.

Identifying Storage & Handling Methods Picking Need in

Medium/Slow Moving SKUs

Fast Moving SKUs

Pallets

Block Stacking

AS/RS

Single Deep Pallet Racks

Drive-In Racks

Double Deep Pallet Racks

Pallet Flow Racks

Push Back Racks

Radio Shuttle Racks

Cases/Cartons

Decked Racks - Medium/Heavy Duty

Pallet Flow Racks

Multi-Tier Shelving

Case/Carton Flow Racks

Pieces

Single Tier Shelving

Case/Carton Flow Racks

Decked Racks - Light/Medium Duty

Horizontal Carousels

Vertical Carousels/Shuttles

Mini Load ASRS

Source: Author

sTorage and maTerials Handling

Validate The Need For A Forward Pick Area: If the stock volumes of the fast moving SKUs are high, then it would be worth investing in a forward pick area exclusively for them. This concept is called ‘creating a warehouse within a warehouse’. This zone could have either simple pallets on ground arrangement or be fitted with light/medium duty decked or carton flow racks, depending on the size and transaction volume of the SKUs. Create An Operation Flow Optimized Layout Having identified the most suitable mix of storage and handling systems, it is imperative that they are laid out in a manner which creates a seamless flow of operations. The shape of the building and plot will have a larger role to play in deciding if we should opt for a ‘U’ flow or a ‘Through’ flow. While a cross docking need is easier to accommodate in a ‘U’ flow, it requires additional movement space in a ‘Through’ flow design of a warehouse (See fig. 1 and 2). It is even more critical to assess the space needs for the various value additions in the warehouse such as kitting, re-packing, bundling, labeling etc. Intelligent time window planning could help in using a common area for multiple value added functions. In India, providing space for value additions is still largely a neglected area. If we are to achieve high levels of productivity, we need to critically focus on the same. Selecting Suitable Location Slotting Slotting is allocating a location to a specific SKU, so

Fig. 1 - ‘U’ Flow Design Of Warehouse

that the transaction time for that SKU is minimum/ optimum. Normally, fast moving/delicate and fragile/ heavier SKUs are allocated to nearer and low level locations, so that operation ergonomics and product safety is ensured. Having mentioned this, we also need to keep in mind that business is dynamic and hence the nature of an SKU could change at a later point of time. So it is important that a warehouse manager is equipped to assess the patterns of movement

Source: Author

The Warehouse Handbook | 91

sTorage and maTerials Handling

Fig. 2 - ‘Through’ Flow Design Of Warehouse

Source: Author

92 | The Warehouse Handbook

in his SKUs, so that he could change the slotting plans from time to time. Selecting Suitable Picking Strategy In order to further facilitate efficient picking, the suitable picking strategy needs to be decided. Selecting a picking strategy will need comprehensive analysis of your client demand, such as l Orders/Day l Order Lines/Order l Qty/Order Line l Skew Patterns in Demand l Value/Order etc Also, it calls for consideration of your pickers’ pick rates and targets, time window for responding to a client demand, etc. A suitable picking strategy needs to be evolved and necessary manpower and equipment needs to be planned for. More importantly, this decision subsequently needs to be incorporated in the layouts conceptualized and the overall operations layout needs to be fine tuned to deliver effective operations. As is evident, achieving an effective picking rate in a warehouse not only depends on a selection of the correct systems for storage and handling, but also on selecting the appropriate processes in slotting and picking. If done properly, a warehouse management team will be able to deliver a superior performance, while still operating with lower inventories and also help the organization’s supply chain, in the process, by reducing working capital blocks.

ImprInT feaTure

Emerging Trends In Warehousing D

uring a recent visit to a materials handling

As an example, a warehouse manager is planning a warehouse to store

to speak with a number of customers and

2,500 pallet locations. The majority of businesses would handle pallets

operators and was enthused by the level of

approximately 1,200mm deep and anything from 800mm to 1,200mm wide.

technical knowledge they demonstrated.

Ron FaRR VNA and Warehouse Systems Manager, Yale EMEA

available storage space.

exhibition in India, I had the opportunity

Typically, this would be a wooden pallet with a load of no more than

The discussions were in-depth and the

1,500kg. The pallet would generally be handled in a conventional way, i.e.

topics discussed included storage density

with petrol, diesel, LPG or electric counterbalance forklift trucks and a clear

utilisation, narrower aisles, increased lift

working aisle that would need to be approximately 4,200mm. If the top

heights, productivity, improving the logistical

beam of the warehouse racking was 4,775mm high, and the forklift was also

layout of a warehouse, integration of

required to drive into the back of a lorry, a three stage (triplex) mast would

warehouse management systems and the

be required.

use of warehouse simulation in the process of warehouse design. However, one of the questions asked most often was, ‘How are other organisations around the world handling similar logistics

projects and what are the emerging trends in warehousing?’ As specialists in VNA and Warehouse Systems for Yale Materials Handling, we have first- hand experience of ideas, philosophies and emerging

This solution would provide one pallet location on the ground and three in the racking. This type of application would typically be a ‘single command’ system, suitable for loading and unloading trailers, racking and pickup and delivery to and from manufacturing areas. A ‘single command’ system is when a machine is tasked with a duty such as emptying a staging lane, e.g. picking pallets from the staging area and perhaps taking them to a racking storage area and then returning empty to the staging area.

trends in warehousing from practically every corner of the globe. From our

The opposite of this would be a ‘dual command’ system, often achieved

experience, we can confirm that the world is indeed a small place. With the

using a warehouse management system via a radio data terminal. When

reach of mobile communication rapidly expanding and internet connection

dropping the pallet into the racking, a radio data terminal will instruct the

becoming faster, we frequently receive a request from one part of the world

operator to take a pallet from the racking area to the staging ‘out’ area. This

one week and in the next week, receive an almost identical request from

means that the truck’s productivity is increased as a higher percentage of its

another country.

time is spent travelling with a pallet. Moving back to our counterbalance example, the truck would normally

Storage Density Utilisation

spend 80 percent of its time travelling and 20 percent lifting, handling around

As a starting point, let us consider an example of the trends in storage density

12-15 pallets per hour. In this imaginary warehouse of approximately 3,200

utilisation. One of the most common is how to minimise the footprint (size)

square meters of floor space, by calculating the ratio between the amount of

of the warehouse, while at the same time, maximising the amount of

space used for storage, compared to the amount used for aisles, we see that

The Warehouse Handbook | 93

ImprInT feaTure

an incredible 66 percent of the warehouse is dedicated to providing enough aisle space for the truck to turn. Using a narrow-aisle electric reach truck in place of a counterbalance truck would significantly improve this ratio. This is a battery operated machine with a compact frame, complete with a reaching mast and forks. The compact dimensions and increased manoeuvrability allow the truck to operate in a smaller aisle, while performing the same function as the counterbalance truck in the warehouse. A typical clear aisle dimension for a reach truck would be 2,700mm. A ‘dual-command’ system would be more common in this type of operation. Reach trucks typically spend 60 percent of their time travelling and 40

CONVENTIONAL SYSTEM

NARROW AISLE SYSTEM

VERY NARROW AISLE SYSTEM

Gas, LPG or Electric Trucks

Electric Reach Trucks

Electric Very Narrow Aisle Trucks

Clear aisle 4200mm

Clear aisle 2700mm

Clear aisle 1650mm

Top beam 4775mm

Stack 4 high (1 on the ground; 3 in the air)

Single Command System

Dual Command System

The truck loads & unloads trailers, loads and unloads rack plus pick up & deliver to manufacturing

The truck pick up & deposits loads from staging and pick and deposits loads in the rack systems

80% Travel. 20% Lift

60% Travel. 40% Lift

50% Travel, 50% Lift

66% Aisle

51% Aisle

39% Aisle

percent lifting. With the same number of pallets to be stored as with the counterbalance, a warehouse of 2,500 square metres would be required,

applications would not be limited to a 4,775mm lift height that we have used

with 51 percent of the space dedicated to aisle space for the machine to turn.

in our example. In reality, the height of the warehouse would be more than

There is a third solution for this imaginary warehouse; a Very Narrow

double this figure, so that the available storage space can be doubled without

Aisle system. VNA or ‘Turret Trucks’, like the Yale MTC series, are also battery

increasing the floor space required, generating even more savings. Using

powered machines. They incorporate lateral fork movement, which allows

the Yale MTC VNA series, a reach height of up to 17,000mm (top of forks) can

the truck to operate within racking aisles which are fractionally wider than the

be achieved.

size of the pallet. Therefore, with a 1,200mm deep pallet, a suitable clear aisle would be just over 1,600mm pallet to pallet. These machines typically travel 50 percent and lift 50 percent during their operational time. This immediately delivers a significant increase in truck

Warehouse Simulation Simulation allows us to look at the pattern of growth for a warehouse. Here is an example to consider.

utilisation and productivity. However, these machines have an additional

When it begins trading, a small business may initially only require a small

advantage in that they have been specifically designed to travel and lift

warehouse, housing only 100 pallets and a single counterbalance forklift truck

simultaneously.

to handle them. As the business expands, the footprint of the warehouse

This solution enables the size of the warehouse to be reduced to below 2,000 square meters, with only 39 percent of the floor space wasted as aisle space.

expands, increasing the number of pallet locations. Furthermore, an additional forklift truck may need to be acquired. After ten years, the business has grown significantly, which has resulted

The VNA machine therefore delivers a 40 percent saving in the floor space

in the construction of a warehouse with 2,000 pallet locations and the

required compared to a conventional counterbalance truck, which equates to

operation still uses counterbalance lift trucks, stacking to a height of only

over 1300 square meters of expensive floor space.

4,775mm.

At today’s costs this equates to over `2,500,000 (40k Euros) savings per year on a leased property. However, there are still more potential savings to be made. Most VNA

94 | The Warehouse Handbook

When times are good and businesses are doing well, there is a tendency to grow the business by duplicating the same process, but on a larger scale. It is easy to understand why, as this is a tried and tested method, however

ImprInT feaTure

most professionals in the industry would advise that a much better solution

optimum warehouse layout design. A good proportion of the projects with

is to reconfigure the space available. This is of significant importance when

which we have been involved to date have not been limited to businesses

there is a downturn and the economy contracts —businesses find it difficult

in the warehousing industry, but in more complicated production line

to afford the excess empty warehouse space and are forced to operate their

processes, which form an integral part of the product flow of components

business with an inefficient warehouse design.

and raw materials in and out of the warehouse environment.

Businesses often find it difficult to know what or how to change, in

The Yale simulator has been used not just for business growth and

order to make their warehouse system more productive or to help reduce

expansion, but was also an invaluable tool during the recent global recession.

operational costs.

It facilitated the study and analysis of companies’ material handling methods,

The Yale Warehouse Simulator allows a client to look at various ‘what

often enabling them to eliminate costly off-site storage and helping them

if’ scenarios, by experimenting with different layouts, configurations and

to consolidate their operations into a more cost-effective and productive

timings. It is possible to visualise the simulations on screen in both two

solution. It provided businesses with a tool that made it easier to eliminate

and three dimensional views, as well as analysing the results and cost

any excesses taken on during the growth period and allowed them to be

implications on graphs and charts.

more flexible and intelligent about their processes. In some cases this

One of the main differences in using this simulation software compared

resulted in a reduction in their materials handling fleet size.

to a complex excel document is the ability of the simulator to calculate throughput in conjunction with considering congestion. Excel can’t handle

Warehouse Design Trends

the interaction between materials handling equipment. For example, ‘if the

One of the key areas of development in warehouse design is lift height. An

number of lift trucks is doubled, would our expectation be to see double the

increasing number of companies are looking to go higher with the height of

throughput?’

their warehouses and we are seeing some material handling manufacturers

There is a significant difference between the Yale simulator and other

responding by offering increased lift heights. At Yale, we are seeing more

systems, in that it is built on top of a simulation engine. The simulation

requests for Reach Trucks lifting to heights over 11,500mm - simulations have

engine was originally designed to simulate production lines for automotive

shown us however, that simply doing more of the same and going higher

companies.

often fails, as we explained with our 100-pallet example warehouse earlier.

In time, consultants began to use the engine to provide

additional services, however the programming of the simulator would

The way a reach truck is designed to operate means that when the

mostly be quite complex and timely. The clever part of the Yale simulator is

truck reaches the required pallet location, it needs to slow to a stop, turn 90

that the user interface actually automatically creates scripting and simulation

degrees, lift the forks, adjust the tilt, drive forward, reach forward, then do

code - writing the software previously written by the consultants – and loads

it all again in reverse and whilst doing this, the aisle is blocked. This means

it into the engine.

that, in a productive warehouse, you may need more trucks. Unfortunately

When the Yale simulator was launched in 2008, it was expected that

this also means that the chance of a blocked aisle or congested staging

the majority of simulation enquiries would be from European customers.

area holding a truck up might increase. As a result of the volume of truck

Surprisingly, there have been an increasing number of requests from other

movements, they might struggle to cycle efficiently.

parts of the world and we have assisted in projects located in Nigeria, the

With a VNA machine it is possible to work in smaller aisles, but more

Middle East, South Africa and Indonesia, helping clients to achieve the

importantly, these machines are designed to travel and lift at the same time,

The Warehouse Handbook | 95

ImprInT feaTure

generating massive improvements in pallet throughput. A simulation is a perfect tool for testing and comparing these solutions and avoiding what could be a costly oversight. Lift heights for VNA machines up to 17,000mm are today being requested not only in the European and US markets, but increasingly, in installations in South Africa, the Middle East and South America. With land becoming a premium around the world and businesses wanting to stay close to ports and cities, the construction of warehouses is becoming progressively more costly. One solution therefore is to go up and to go narrow - the ultimate in cube utilisation efficiency - and with the possibility to lift a load of 800kg to 17,000mm high at a 600mm load centre, this is often enough to accommodate most applications. I’m frequently asked what it’s like

Schuon 17m VNA.

96 | The Warehouse Handbook

Bus-Bar System.

to be operating a machine at these lift

VNA. For some, a 3-shift working system will be in operation – the better

heights. Not being the most confident

to eliminate downtime to get costly equipment, manpower and buildings

at high heights, I have to say the most

earning money for the business. These facilities will then require spare

frightening experience is being at the full

batteries, a battery charging area. Battery maintenance such as checking

lift height of one of these VNA machines

water levels will need to be rigorously performed and of course, changing

when it is outside the warehouse.

batteries over at the start or end of a shift is never as quick as we’d hope. This

Looking out of the elevated cabin,

is where in-aisle charging comes into its own.

seeing the clouds moving and the mast

The in-aisle charging system on a VNA machine utilises a power rail fitted

narrowing down to the base, the visual

to the racking, normally around 3,000mm from the ground. When the truck

effect can be quite disconcerting. In

enters the aisle, it automatically engages with the power rail and activates

the racking, however, it is a completely

the on-board chargers, allowing the machine to run 24 hours per day, 7 days a

different experience as the aisles are

week, non-stop. Another great benefit of this type of system is that because

narrow and the pallets are only 200mm

the battery is never being fully discharged, the battery is not cycling, therefore

at most from the sides of the cabin.

increasing the life of the battery.

With the operator sitting down, it’s really

When operating a super fast, highly productive VNA machine lifting to

no different to sitting on a hotel balcony.

amazing heights, what happens if a person steps into the aisle whilst the

A facility that requires 17,000mm

machine is in movement? There’s no space to step out of the way and avoid

lift will always want to get the most

the machine, and with a top speed of 12 km/h, it’s also a challenge to try and

out of their forklift fleet, particularly the

outrun this 10 tonne machine.

ImprInT feaTure

One solution that is becoming increasingly popular is a laser human detection system. The system comprises of a safety scanner that is fitted to both the front and rear of the machine. Each scanner projects an invisible laser beam, which can detect something as small as a tennis ball from over 8,500mm distance, whilst the truck is moving. The laser moves like a high speed radar system, but much faster and more accurately. The areas in front and behind the truck are then mapped out into zones, so anything breaking the safety zone will decrease the speed of the machine to creep speed and anything entering the danger zone will stop the truck. The system is intelligent enough to know when it is approaching a wall and not a person or other piece of materials handling equipment. The last major emerging trend is high level order picking, in particular for the furniture industry. As with turret truck applications, we are being asked

Custom Order-Picker.

more and more about lifting to higher heights and designing solutions to handle interlocking trolleys or offering fully enclosed cabins.

flaps out from the sides of the cabin to bridge the gap whilst simultaneously

Interlocking trolleys are designed to allow an operator to pick furniture

releasing the locks on the doors. This allows the operators to open the cabin

items, which when completed, release the trolley from the truck and collect

doors and step out on to the decked racking area. Here, the operators can

a new empty trolley to then repeat the cycle.

safely lift products from the racking into the truck. During this operation the

An alternative to the trolley system is a completely enclosed system

truck remains immobilised whilst the doors are still open and the flaps are

where two operators are lifted up together. The truck automatically stops level

out. When loading is completed the truck then travels to the end of each aisle

with the selected rack, the operator then presses a button which extends

to a pick and drop location, where it can load or off-load its goods. These are just some of the emerging trends in warehousing. Yale is always looking forward, to be in a position to be able to offer customers the best possible solution. This means being fully ‘au fait’ with warehousing trends and working practices.

What The Future Involves Materials handling equipment designers based at our product development centres in the Americas, Asia Pacific, Europe and indeed in India are continually developing exciting new ideas to satisfy our customers’ appetite to increase space utilisation and productivity and to reduce cost. So ‘watch this space’. Laser Scanner.

The Warehouse Handbook | 97

ImprInT feaTure

Godrej StoraGe SolutionS:

a tradition of innovation W

hen it comes to getting the best mileage

range of pallet racking solutions:

handling solutions, they have offered Indian

out of planned investments, organisations

l Selective

shop floors and service/maintenance units an

often face the critical question of what

l Double

technologies, systems and processes would best

l VNA

deliver the desired performance result.

l Drive-In

Pallet Racking

Deep Pallet Racking

Racking

unmatched range of solutions that are very high on ergonomics, efficiency and aesthetics.

Racking

Godrej Storage Solutions are pioneers,

l Pallet

Flow Racking

The series of offerings include:

visionaries and market leaders in India for the past

l Push

Back Pallet Racking

l Storage

50 years, with world class design, manufacturing,

l Pallets

project management, distribution and a sales

l Cantilever

systems for tools, accessories,

consumables and WIP Racking

l Advanced

work stations

l Trolleys

support system to service and support the needs Shelving Solutions

l Anti

Godrej is well-known in the field of racking

Industrial shelving systems are ideal for storage

l Bin

and storage systems with products ranging from

of non-palletized materials. Shelving systems are

Slotted Angle Shelving, Selective Pallet Racking

custom-made considering the SKUs to be stored. A

Consultancy

to integrated intelligent warehousing solutions.

wide range of shelving solutions exists to utilize the

The Logistics Engineering Consultancy Group

Being leaders in the racking/shelving solution

available horizontal and vertical space. These are:

(LECG) is the consulting arm floated by Godrej

business in India for the past four decades, they

l Multiflex

Storage Solutions. LECG operates out of Chennai

possess proven credentials with more than 10,000

l Longspan

installations.

l Heavy

of its customers.

Shelving Shelving

Duty Shelving

l Mezzanine

Product Solutions Offered

l Column

Pallet Racking Solutions

l Frame

Material Handling Equipment forms an integral

l Library

part of the pallet racking system as they are

l Digital

Floors

based mezzanine floors

based mezzanine floors Shelving Picking Solutions

usually required to place the loaded pallets on the racks for storage. Pallet racks are an essential and

Shop Floor Solutions

ubiquitous element in most modern warehouses,

Godrej gave India the worldâ&#x20AC;&#x2122;s widest

manufacturing facilities, retail centers, and other

variety of shop floor solutions. By

storage and distribution facilities.

tying up with Fami of Italy, one of the

Godrej Storage Solutions provide a wide

98 | The Warehouse Handbook

world leaders in shop floor storage and

static work benches and seating

storage systems

and has over the period of six years executed

projects for more than 40 clients across various

These roll formed profiles offer better strength and

activities are well supported by advanced software

logistics intensive industry segments.

load bearing capacity.

packages like AutoCAD, etc.

The companyâ&#x20AC;&#x2122;s services encompass: l Facility Audit l Facility

and Certification

and Operations Design

Once these components are roll formed, they

Continuous

product

improvements

and

are finished on an automated powder coating line.

new product developments utilizing exclusive

This is a four-step, eight-zone process which is

prototyping facilities and academic industry

l Operations

and Process Re-Engineering

subjected to pretreatment before the final finish of

partnerships are undertaken.

l Operations

Simulation and System

the powder is obtained. For long life and protection

Implementation Support/Coordination

from corrosion, all steel components are given a

Project Management

thorough anti-rust treatment.

Godrejâ&#x20AC;şs

Automation

enterprise

software

helps

them

make the entire project management activity

Godrej partnered with Efacec of Portugal, in

Quality Assurance

order to offer the Indian industry with the latest

Godrej has well-established in-process and

They have a dedicated service team at every

in automated warehousing solutions. Efacec is

final quality test methods to ensure that all the

branch, which takes care of installations and

a leading manufacturer of Automated Storage

products manufactured conform to standards of

after sales services. Each branch has highly

and Retrieval Systems (AS/RS) with over 125

quality, benchmarked with international offerings.

trained manpower for the most complicated

installations worldwide. This joint venture firm

They also have a Quality Management Certificate

installations. This makes their responses faster

Godrej Efacec Automation & Robotics Ltd. offers

of ISO 9001:2000, certified by KVQA.

and the delivery of installations exact, as per

automated and precise.

solutions for all warehousing needs that ensure

The steel used is certified for its chemical

enhanced efficiency in storage and material

composition by respective chemical analysis and

handling. These include:

the mechanical properties like yield-strength are

Reach And Distribution

l Automated

certified using standard physical testing methods.

Godrej has a well-established presence in regions

l Mini

Load Systems

The powder meant for the finish is tested for its

like SAARC, South East Asia, Middle East and

l High

Bay Narrow Aisle Stacker Cranes

chemical and physical properties for every batch.

Africa with their network of branch offices as

The fasteners also undergo random sampling

well as reputed local distributors/partners in all

tests for its dimensions.

the countries in which they operate. They are also

l Automated

Storage and Retrieval Systems

specifications.

Guided Vehicle Stacker

l Baggage/Cargo l Warehouse

Handling Systems

Management Systems

represented by about 600 distributors, who cater

Design Excellence

to customers in the remotest parts of the world.

Manufacturing Expertise

All the components are designed to best quality

The company has an established state-of-the-art

standards conforming to current Indian standards

industrial

global manufacturing facility at Chennai, India, to

and are also in line with the guidelines/standards

applications, Godrej Storage Solutions holds the

cater to the domestic and overseas market. They

enumerated in RMI and SEMA. The solutions are

requisite knowledge, expertise and infrastructure

have multiple roll forming lines to form various

also tested through FEA for structural rigidity and

to conceive and implement efficient and cost

components. The uprights are roll formed with

safety thus providing designs, which are safe and

effective end-to-end solutions for all storage and

a contemporary and international design profile.

efficient. The design analysis and development

material handling needs.

Thus having worked with all possible and

institutional

segments

and

The Warehouse Handbook | 99

PRODUCT WATCH

Door And Dock Solutions G

andhi Automations Pvt. Ltd is a pioneer

n Folding vertical rapid doors

in supplying, installing and maintaining

n Rolling vertical rapid doors

entrance automations and loading bay equipment.

n Rolling horizontal rapid doors

Given below are brief descriptions of three of their

n Sectional overhead rapid doors

products.

The first three consist of plastic curtains opening upwards or horizontally,

Rapid Doors

at a speed of up to one meter per

Rapid doors are designed for the quick opening

second (there are also super quick doors

and closing of rooms in order to divide them as

with openings up to 3m per second).

well as isolate them either climatically, acoustically

The fourth type is a special application

or in some cases, to create a physical barrier

of the sectional overhead doors with

against the passage of people (for example, to

an opening speed that can reach 0.7m

avoid the unpleasant entrance of salesmen from

per second, with adjustable lowering

public roads).

speeds. All of them automatically close

At the loading points rapid doors fulfill the

after a preset, adjustable time, which

following functions:

gets counted from the moment all the

n Thermal and physical separation between the

security devices, (photocells or others),

loading bay and the interiors of warehouses,

are free.

Folding Vertical Rapid Door.

especially in the case of cold warehouses for the creation of a ‘pre-room’ or a ‘pre-cell’. It enables a

Dock Shelters

physical separation of the loading bay, connected

Dock shelters are equipment which

to the inside with an opening kept closed for as

seal the space between the building

long as possible.

and the vehicle, like small tunnels,

n Physical and thermal separation (against water

which adhere to the rear of the

conditions and against persons) for the loading

vehicle. The commonly used dock

bays at ground level and for the carriage way

shelters are:

doors both internally and externally.

n Retractable dock shelters for room

There are currently four types of rapid doors in the market:

100 | The Warehouse Handbook

temperature: They seal the space between the building and the vehicle,

Rolling Vertical Rapid Door.

PRODUCT WATCH

adhering to these with two lateral and one

Some

important

points

superior armored rubber leaves (in some case

consider under this norm are:

made of PVC). These are kept at flag position

n Carrying capacity of the dock leveler.

by the structure of the dock shelter which is

n Width of the dock leveler.

protruding from the wall, and is covered at

n Maximum working slope.

the sides by a generally clear fabric (yellow

n Walking surface of the dock leveler.

or light grey), through which daylight filters.

n Blocking in rest position.

This obliterates the necessity of turning on the

n Side inclination: the lip of the

lights.

dock leveler laid on the truck-bed

n Dock shelters for cold stores: In these, the

must follow the side inclination,

front part of the vertical cushions are provided

thus ensuring that the lip does not

with

lose contact with the truck-bed.

small

overlapping

anti-friction

flags,

floating up and down with the movement of

n Foot guards must necessarily be

the vehicle during the load, to absorb friction

Inflatable Dock Shelter.

and give long life to the dock shelter.

Dock Levellers

n Dock shelters with horizontal fixed

Dock Levellers are devices used to bridge the

n Side step evidence should be highlighted

cushion: This is used for vehicles with a

gap between the dock and the truck/trailer during

with yellow-black strips.

sufficiently constant roof height. The excursion

loading and unloading. They must be built to

n Usage instructions and/or ideogram indications

between minimum and maximum cannot

conform to The European Norm EN 1398.

should be provided.

provided to cover the gaps between dock and lifted dock leveler.

overtake 30cm.

n Maintenance/safety

n Dock shelters with adjustable horizontal

emergency switch and emergency

cushion: This is suitable for vehicles with roofs

stop facilities should be provided

of different heights, generally up to 3.5m. The

on the dock leveler.

horizontal cushion can be lifted or lowered with

n Instructions

ease and balanced by a counter weight. The

and inspection of the dock leveler

light between the cushion and the lintel can be

must be provided.

removed by a curtain fixed at the back, between

n Inspections:

the horizontal cushion and the lintel.

leveler must be inspected by a

n Inflatable dock shelter at dock level: This

competent person before beginning

consists of a roof and two sidewalls made of

the operations, after which, it must

rubber fabric which are generally inflated by

be inspected at least once a year

a fan to seal them against the sides of the

and also after any major repair.

vehicle.

Dock Leveller.

for

the

crutch,

maintenance

fixed

dock

Information provided by the company.

The Warehouse Handbook | 101

BENCHMARKING

Seeking The Best! Organizations need to improve to survive in these frenetic times and Pooja Dayal recommends observing benchmarking practices for growth.

POOJA DAYAL Head, Business Excellence Function, DIESL

102 | The Warehouse Handbook

n business, as in life, improvement knows no limits. Something that was the very best today, may cease to remain so the very next day. Every individual, team or organization has to redefine its practices and approach to continue to survive, sustain and eventually, grow. To be the best-in-class, we need to first identify the best-in-class, observe their methodologies, if possible, imbibe them and replicate their success. To be precise, we need to â&#x20AC;&#x2DC;benchmarkâ&#x20AC;&#x2122; ourselves. Benchmarking as a tool is fast gaining wide significance to create a competitive edge by excelling in the chosen field of endeavour. Identifying and scientifically adopting the best practices have known to reap rich dividends. Supply chain and its associated activities are a few of the recent spheres in which these practices

have been adopted. Recent times have seen a lot of research and thought processes being put forth by supply chain planners in adopting ideal methodologies for warehousing practices. In the absence of proper management, the vast expanse of storage space which plays a critical role in the distribution channel may at times spin off uncontrollably on the cost front, thus squeezing the bottom line. Traditional performance measurement techniques may help warehouses to achieve their best, but may also significantly fall short of delivering best-in-class performance. Best-in-class Metrics DIESL (Drive India Enterprise Solutions Limited), a Tata Group company, computes and delivers through CALIPER*. To be profitable, warehouses must be run

BencHmarking

Benchmarking as a tool is fast gaining wide significance to create a competitive edge by excelling in the chosen field of endeavour.

The Warehouse Handbook | 103

BencHmarking

at optimum capacity in every possible aspect. This can be achieved firstly, by internal benchmarking by conveying the metrics of the best performing warehouse to other warehouses and secondly, by including industry metrics in the guiding procedures itself. This exercise not only conveys the expected best-inclass metrics, but also puts proper processes in place and in turn, derives the best possible performance from warehouses. As far as warehousing is concerned, the minutest storage and material handling processes must be examined in great detail. Every process has an associated set of guidelines, which are devised in such a manner that a rigorous follow-up of these procedures automatically ensures high performance. As far as the operational process is concerned, any

Table 1: Example Of Benchmarking Parameters And Their Specifications Parameters

Specifications

Warehouse set up

Warehouse layout is present near entrance area and depicts emergency exits, fire extinguisher locations, and other important areas. Proper signage and demarcation is visible in the warehouse. Warehouse ensures electrical fittings and sockets are in proper condition. Sufficient UPS back up is available in warehouse for all systems.

Warehouse maintenance and security

Pest control is done at predetermined frequency for the warehouse as well as wooden pallets.

Source: Author

All the assets in the warehouse are codified as per SAP/SOP. The secutiry frisks all persons going in and coming out of a warehouse using a metal detector. Warehouse practices

All the material received at the warehouse is kept on wooden pallets as per the stacking norms. Proper Bin cards are maintained for all SKUs including non-inventory items.

104 | The Warehouse Handbook

warehousing procedure broadly consists of the following activities: Receipt/Inward : Goods are received at the warehouse. Put-away and storage: Areas are allocated to stock goods in the warehouse. Inventory control: Accuracy is ensured in terms of the number of goods in the warehouse. Issue/Dispatch : Goods are sent from the warehouse to the intended locations. Traditional performance measurement systems have focused purely on operational or transactional parameters in gauging a warehouseâ&#x20AC;&#x2122;s performance. But measurement systems must also include those parameters which may not directly impact operations, but which indirectly impact overall warehouse performance. These include statutory parameters, legal obligations, workforce parameters, number of process improvement projects, resource usage parameters, supplier obligations, risk mitigation and safety parameters, to name just a few. Basic Performance Parameters The three broad sections which comprise of different performance parameters are Foundations which ensure a strong base, Operations which streamline core activities and Essentials which focus on bare necessities. Foundations: This section deals with areas concerning the working environment, safety compliances, asset management and risk management. Table 1 lists benchmarking parameters and the various specifications which meet them. Operations: This section deals with the core ware-

BencHmarking

Table 2: Example Of Benchmarking Parameters And Their Specifications

Table 3: Example Of Benchmarking Parameters And Their Specifications Parameters

Specifications

Parameters Specifications

Cycle count/reconciliation

There is a cycle count process conducted on all working days as per a cycle count plan approved by state supply chain head.

Receipt

Goods receipt checklist is filled for all incoming consignments.

Warehouse verifies the cycle count sheets and SAP plus book v/s physical verification report which is signed by supply chain and finance representatives.

Shortage/damage during receipt is informed to the concerned on the same day. Storage

Goods invoiced are not kept in the warehouse for more than the cut-off time.

Record maintenance

Data backup is taken on file server with important files uploaded on the server at the end of every day.

Stacking of individual SKUs is done separately for proper identification. There is space allotted for storing empty cartons used for repacking. Dispatch

Source: Author

Record management

Statutory compliance

Service provider and staff

housing activities of receipt, storage, stock count, dispatch and record maintenance (Refer table 2). Essentials: This section deals with the fulfillment of statutory obligations, employee welfare, expense controls, service level agreements (SLA) adherence for customer and supplier satisfaction etc. (Table 3). As depicted in the specifications above, benchmarks have been created by defining either a process methodology or a value associated with a quantifiable performance metric.

The payment to service provider is made within certain days of receipt of invoice or as per payment terms. Internal and external trainings on procedures and systems are conducted at least once in a quarter or as required from time to time.

The warehouse space utilization sheet is sent to the customer at predetermined frequency. The month-end reconciliation report is sent before the first week of every month to the customer and corporate office.

Warehouse registration to be done within certain days of commencement of work and renewal on expiry to be done before cut-off. All necessary certificates to be displayed in warehouse (LST, CST & Service Tax Certificate, additional place of business etc.).

The transporter logbook in SAP is maintained and updated with respect to all the dispatched goods. Partial billing with the transporter is done only with the approval of HOD finance and HOD distribution.

All files containing records are serially numbered and stored properly for easy retrieval.

Customer Management

Customer satisfaction score as set forth by the organization. Customer queries to be attended to within certain hours of receipt. State SCM head to conduct customer meets at pre-determined frequencies.

Service Provider Management

Review meeting takes place between corporate and service provider at pre-determined frequency. Supplier satisfaction rating as set forth by the organization. Source: Author

Sharpening Performance Edges The field of supply chain is highly volatile as far as process improvements are concerned with new methodologies being virtually adopted on a daily basis, changing the way the industry operates. This has resulted in the need for continuously bringing various other performance parameters within the gamut of measurement and control.

The Warehouse Handbook | 105

BencHmarking

Photo: Ramlath Kavil

Table 4: Example Of Benchmarking Parameters And Their Specifications Parameters

Specifications

Process

Inventory accuracy is maintained. Percentage space utilization is ensured at maximum. Average dock-to-stock time to be less than certain cut-off. Vehicle clearance for outward to be within stipulated time.

Documents and Compliance

Average time to retrieve any data to be less than stipulated time.

Workforce

Attrition rate to not go beyond set targets.

Average working time of warehouse to not exceed cut-offs. Accident rate in warehouse to be nil.

Growth

Warehouse profitability to be maximized.

A select number of trees are planted on a periodic basis.

Apart from this, the bar of benchmark metrics for the existing parameters is raised as a better means of facilitating the processes that are adopted by the industry. Table 4 shows a select set of focus areas and the associated checks put across for best-in-class outcomes. These benchmarking practices are a continuous process and will help organizations to maintain their competitive edge and deliver best-in-class services to their customers. New approaches are expected to be devised while old ones get modified or shelved altogether to best suit the business needs of the company. Benchmarking practices help companies to constantly evolve and attain the goals they have set in the hugely competitive world of business.

Water conservation initiatives are implemented in all the warehouses.

*Project CALIPER@ is a copyright property of DIESL.

Warehouse to cover at least certain portion of all pin codes that can be catered. Pollution Control

Vehicles used for transportation not older than four years. PUC certificate is maintained for all vehicles used. Carbon footprint is mapped and targets for reduction on periodic basis are set.

Energy Conservation

LEDs are used in place of conventional lighting systems. Adoption of Bio diesel for use in warehouse generators.

Source: Author

Natural ventilation is incorporated in warehouse design. Environmental Growth

106 | The Warehouse Handbook

Benchmarking practices are a continuous process and will help organizations to maintain their competitive edge.

DIESL Bangalore warehouse.

The Warehouse Handbook | 107

case sTudy

The Transformation Of IFB I

FB Industries Limited, originally known as Indian Fine Blanks Limited,

The IFB Work Flow

started their operations in India in 1974 in collaboration with Hienrich

Once orders were placed, IFB, in turn, raised orders for raw materials

Schmid AG of Switzerland. The product range, which originally consisted of

from its suppliers. The procurement cycle was repeated six times a

fine blanked components, tools and related machine tools like straighteners,

day, following a continuously monitored milk run or a dedicated delivery

decoilers, strip loaders etc., today includes home and kitchen appliances too.

approach depending on the size of the cargo. DIESL also streamlined the

The engineering divisions are located at Kolkata and Bangalore. The

work flow between the different tiers of suppliers to IFB.

Bangalore unit, apart from fine blanked components, manufactures the motor machinery for white goods as well as automotive applications.

What IFB Had To Provide

The Challenge For DIESL

provide resources in the operational, communication, management and

In order to streamline processes at IFB, DIESL had to do the following:

management information systems (MIS) domains.

To enable DIESL to successfully implement their strategy, IFB had to

1. Organize collection of parts from 110 suppliers in and around Bangalore

On the operational side, DIESL suggested an implant employee during

and feed the IFB store.

every shift to co-ordinate operations. Sufficient tolerances were also put

2. Collection of parts from IFB and delivery to vendors for job work and

in place with careful considerations of Sundays, holidays and vacations.

delivery back to IFB. 3. Integration and tracking of various suppliers collections and delivery schedules as per the Just-In-Time window timings. 4. Optimizing round-the-clock operations which run seven days a week for 365 days a year, with shifts with three-shift per day operations. 5. Optimize four-hour operations with two and a half hours of physical

IFB needed to deploy laptops with connectivity to the internet and a printer for better order visibility and timely execution. Also, drivers and coordinators needed to be provided with cellular phones to ensure seamless work flow. The MIS system implemented by IFB had to provide daily reports for analysis. This would enable tweaking of day-to-day processes for better

transportation.

efficiency. Moreover, the MIS would also be expected to provide monthly

6. Enable reporting and monitoring from various fields.

and quarterly business reviews and continuous process improvement

7. Provide flexibility to accommodate variation in capacity requirement

plans. This would ensure well planned strategies which would also cater

due to original equipment manufacturerâ&#x20AC;&#x2122;s (OEMs) special projects.

to the future and enable IFB to simulate, formulize and re-engineer their

8. Creation of a single window for dedicated operations.

supply chain processes.

108 | The Warehouse Handbook

DIESL also ensured that IFB provided dedicated account managers, industry managers and regional management support to ensure streamlining of processes from the management side of operations.

The DIESL Solution For

streamlining

and

optimizing

operations

for

best performance, DIESL suggested changes in infrastructure, people and process control. On the infrastructure front, DIESL offered dedicated vehicles for logistics operations and the use of voice and data connectivity for transparency of operations. With respect to personnel, DIESL offered the solution of having in-house staff which would be responsible for logistics operations along with sufficient blue collar staff, drivers and helpers. This would enable smooth transition between processes and also avoid disruptions due to shortage of labor.

a strong MIs can help tweak day-to-day processes for better efficiency.

To optimize process control, firstly it was necessary to standardize operation processes. This would ensure minimum uncertainties and

taken for unforeseen events. There was also careful circumvention of risky grey areas that could disrupt crucial processes.

keep plant managers prepared for most uncertainties that they would face due to any disruption in the process chain. The milk run, a process followed in the case where multiple stops are

The Result Collaborative resources and the combined efforts of IFB and DIESL

scheduled during a routine trip, was required to be well planned. In supply

resulted in:

chain, the milk run enables efficient procurement and distribution of parts

1. Dedicated and well planned operations.

or goods. DIESL provided IFB with a customized milk run. This has enabled

2. Scalability to suit IFBâ&#x20AC;&#x2122;s production demand.

better transportation strategies and streamlined the supply chain.

3. Spending based on volume.

DIESL also increased the overall visibility of the processes followed

4. Deployment of safety equipment for employee safety, thereby

at IFB by extensively using MIS (management information systems).

improving employee working conditions.

Management information systems is a subset of the overall internal

5. Last, but not the least, the experience and valuable knowledge of DIESL

controls procedures in a business. MIS covers the application of people,

in the logistics domain helped in boosting overall productivity at IFB.

documents, technologies, and procedures. Employing MIS extensively implied that transparent processes with sufficient precautions were

Case study provided by the company.

The Warehouse Handbook | 109

About The Authors Abhishek Roy Roy is a Senior Consultant with Miebach Consulting India Pvt. Ltd. After pursuing a Bachelor’s degree in Production Engineering and an MBA from Indian Institute of Management, Ahmedabad, he has been consulting in the fields of third party logistics and Logistics Realty. Some of his areas of interest are business strategy and planning and contract logistics solutions development. Roy has been advising companies on supply chain process improvement, logistics facility design, and logistics business strategies in India and in the Middle East. The author can be contacted at abhishekroy@miebach.com.

Ashok Kumar Ashok is a mechanical engineering graduate with a Post Graduate Diploma in Management (Marketing) from IIM Kolkata. He has over 17 years of experience in techno commercial selling and project management in various industry segments like consumer durables and electronics, engineering, foods and FMCG, financial institutions, information technology, etc. He currently heads the logistics engineering consulting group of Godrej storage solutions division. The author can be contacted at ashokk@godrej.com.

Bhairavi Jani Bhairavi holds a Bachelor of Science degree in Business with Magna Cum Laude from Miami University, Ohio, USA. After her graduation, she worked with KPMG Consulting in Washington D.C. She returned to India and began her foray into business by setting up a fourth party logistics company. In 2005, after completing the MyGlobe Executive Education Programme at INSEAD in France she moved to the role of Director for all the companies under the SCA Group. The author can be contacted at bhairavi@scagroup.in.

Nithin Rajagopal Nitin, an electrical engineering graduate with an MBA, is currently 110 | The Warehouse Handbook

Manager in the Strategy Practice of Chainalytics. He has managed and conducted transportation procurement events for multiple clients in the US. His experience pri< Column or to Chainalytics includes demand and replenishment planning (statistical forecasting, promotion modeling and new product modeling), forecast optimization and setting up a Total Channel Management service. < COLUMN COLUMN The author can be contacted at nrajagopal@chainalytics.com.

Padmini Pagadala Padmini has a dual Masters degree in Supply Chain from Georgia Institute of Technology, USA and from National University of Singapore. She is one of the founding members of TPG Consulting Pvt. Ltd, the Indian arm of The Progress Group, USA. TPG is a supply chain consulting firm specializing in retail and wholesale distribution. Padmini is a regular speaker at organizations such as CSCMP, at Mumbai business schools, and PADMINIPagadala PAGADALA regularly writes for Log.India about issues concerning Padmini GeneralManager, Manager, General TPGConsulting, Consulting, TPG Mumbai Mumbai the Indian warehousing industry. The author can be contacted at mp@theprogressgroup.com.

My Pop

India’s Mom and Pop store the knock of multi-brand F have a home advantage, b customer service, delivery The idea of logistics has e the interesting, all-encom IS A general perceptionPagada that Fore itTHERE is today. Padmini

From Logisti

T W

rect Investment (FDI) in multi-brand retai threaten small retailers. What’s in a independent name one may ask? Ma W But there few arguments tha shrug off are theadiscussion, but here not so make in the our independent (kiraana perts industry.retailers Recently, i wa feel better oncewith theysome know their groun cocktail party internationa instance, at 10 in the night, I callstarte up m ans from if our industry, and they kiraana shop to order a loafword of bread ing about what the right waswho to rw livers it in tenwe minutes, I wonder why th the industry work in. they discuss to fear the bigso MNCs. Having do subject with much vigorsaid andthat, argue through a supermarket to buyitstuff? Ofbc and forth, that i thought would do. When I lived in Singapore, Mustafa able to recount their conversation. Mo which must undisputedly be the world that, it’s important because i think it est store, was one of my favourite haunts how the field has evolved. able to see rows of tiny bottles of salad d What’s interesting for me as a relativ never ceased to warm my heart. Will this comer to this field is that we haven’t alwa foreign capital take away the business fro called supply chain professionals. acc local retailers? Does the entry of foreign to these “veterans,” our profession has in the multi-brand market mean the end changed its name three times over in the kiraana shops? Will the lessons that the years or so. it wasn’t until the beginning learnt help them survive and hopefully e new millennium that our recent name better than their foreign counterparts? to supply chain professionals took place this inevitable epic battle is complete, w consumers rejoice? Although we will like to wait years for the answers, I believe it’s INDIA | December 2010 | www.logisticsweek.com looking at the Indian customer behavior to who might have an advantage.

Pooja Dayal

Pooja has a PGDBM in Operations Management from Symbiosis, Pune. She has 12 years of experience with 7 years in the field of logistics and hands-on experience in the area of supply chain management. Currently working with Drive India Enterprise Solutions Limited (DIESL), she heads the Business Excellence function. She 22 also contributes to company strategy which includes competitor analySoft Customer sis, industry services offering, identification of core competency and The Indian consumer is very tolerant to outs. We buy from what is available, mor competitive advantage. She is credited for envisioning and executing | February 2011 | www.logisticsweek.com program CALIPER© for internal benchmarking. The author can be contacted at pooja.dayal@driveindia.co.in. 18

INDIA

(Authors’ details given in alphabetical order)