Storage Media Selection A Roadmap Introduction Racking and shelving in its various guises is one of the most ubiquitous of equipment types found in businesses today. This is as true for manufacturing facilities as it is for distribution and service operations. You are equally likely to find this equipment in the finished goods warehouse of a computer chip manufacturer, a retail distribution centre or the spares store of the local bus company. Predictably, this familiarity has given rise to a degree of complacency with regard to the process of choosing and selecting storage equipment. Unfortunately, this complacency has led to costly mistakes for businesses in on-going operating costs. To some extent, it is understandable that this has been so, given that racking and shelving is generally viewed as a low-tech, steel structure with little or no science attached to the selection process. If we add to this the fact that warehouses and stores have traditionally been the Cinderella departments of many companies, it is not surprising that this unsatisfactory state of affairs has come about. The Influence of Supply Chain Management In recent years, the advent of Supply Chain Management (SCM) has begun to change all of this. The warehouse has now risen to prominence as a key element in the logistics and distribution chain. There is a growing appreciation of the impact on customer service and competitive advantage that can be derived through the activities that are carried on within warehousing facilities. Appropriate racking and shelving, in terms of type, configuration and flexibility, is one cornerstone of excellent warehousing performance. Consequently, the appropriate selection from the vast range of types and configurations on offer has become a task requiring due consideration. It follows, that for all but the very simplest of applications a well-structured, systematic approach is needed. This type of approach will yield long-term benefits well in excess of the effort expended to get the choice right first time. This article takes a look at the key points to be considered when selecting a racking system or indeed deciding whether one is needed at all. It then goes on to outline a methodology or road map for carrying out the selection process focussing on the comparative importance of acquisition costs as relative to operating costs. Page 1 of 9
Storage System Selection A Roadmap The start point for the selection of racking and shelving systems is to understand clearly what role is to be performed by the system and what service levels need to be achieved. For example, if our business is the distribution of imported pumps and valves to the civil engineering industry on a long supply lead time, our needs for storage space, pick face and layout configuration are going to be very different from those of a company distributing perishable goods with same-day delivery service to high-street retailers. Nonetheless, it is still common to see warehouses like those mentioned in the example, laid out is a very similar manner with the same type of equipment. This can be traced back to the maximum-pallet-spaces mindset that is common both among suppliers of racking systems and their customers. Therefore, it is crucially important to consider more than just how many pallet spaces can be squeezed into a given cube if you are to get your selection right for your particular application. Goals and Objectives In the first instance we need to determine what it is that we expect the warehouse to achieve in terms of: Stock availability Number of product lines or SKUs Order cycle time and order picking strategy Timing of activities (receipt, put away, order pick, replenishment, pack and dispatch) Frequency of replenishment Cycle counting Distribution channels serviced Information management and control Manning levels and headcount Health and safety and ergonomics Environmental policy Capital investment policy These are strategic business issues and it is essential to understand their implications if we Page 2 of 9
hope to specify the storage media that will help the business to achieve its goals. Due consideration of these elements will allow a detailed specification of objectives to be established. These specific objectives will be drawn out from the higher-level strategic goals but the must be specified in very concrete terms if they are to be useful. This is often done implicitly without thinking, but here we are advocating that this be done explicitly as part of a structured process. In this way, we can be sure that all the pertinent issues will have been considered. This then is the first destination on our selection road map - a clear statement of objectives. Typically these objectives will be stated in terms of: Number and size of storage locations Number and size of picking locations Volume throughput Picking rates Space allocation by activity (storage, picking, checking, quarantine, returns, staging and marshalling etc. Frequency of replenishment Frequency of cycle counting Type of materials handling equipment Warehouse Management Systems (WMS) requirements Level of technology required (automated systems, barcode scanning, pick-by-light, RFID etc.) Manning levels Flexibility vis-à-vis future scenarios Ergonomics and safety Constraints In all but the most idealised situations there will be constraints that will condition the selection process and the freedom of choice that can be exercised. Examples of the typical constraints that will impinge on the selection of storage media are: Site and building location, dimensions, layout and design Planning and regulatory framework Information technology capabilities (e.g. WMS functionality) People skills and training needs Physical characteristics of the stock (dimensions, weights, hazardous, perishable Page 3 of 9
etc.) Product traceability requirements Unit load characteristics (pallets, totes, containers, cages etc.) Investment capital availability Time constraints Again an explicit statement of the constraints is another crucial destination on our selection roadmap. Skipping over the constraints at this point in the process will result in wasted effort and costly mistakes when we inevitably come up against the reality of the constraints further down the line. Options It is often tempting to jump straight into the selection process at the Options stage without giving due consideration to the objectives and constraints as discussed previously. If you find yourself doing this, please stop, think and go back to work out your objectives and constraints before proceeding any further. As a matter of fact, this is the most common mistake made in the selection of storage equipment. Again, this is an understandable response because many hands-on managers like to get stuck in to the practical aspects of equipment selection as early as possible. The proliferation of glossy brochures and eager salespeople also contributes to this situation. This is a misguided approach and one that must be resisted at all costs. An ill-informed equipment selection can leave a business with a legacy of on-going operational cost very a very long time indeed. Nowadays, there is an ever-increasing proliferation of equipment offerings coming onto the market. This is in response to the growing complexity of business with the explosion of SKU numbers and the increasing levels of competition and service expectations of customers. The range of equipment options available is too numerous to be addressed in the context of an article such as this. However, an very useful graphical algorithm has been developed by the Chartered Institute of Logistics and Transport and published in their monograph The Principles of Warehouse Design (1) and can help greatly to simplify the selection process. The table in Figure 1 below gives a high-level overview of some of the key operational characteristics of the most common types of storage equipment. Page 4 of 9
Figure 1 Block Stacking APR* VNA** Racking Drive-in Mobile Racking Pallet Live Storage Space 40 to 45% 27% 35 to 37% 39 to 43% 53 to 55% 45 to 48% Utilisation Selectivity 4% 100% 100% 20% 100% 10% Stock Rotation Very Poor LIFO^ Random Random Poor LIFO Random Very good automatic FIFO^^ Order Picking Very Poor First 2 Good Poor Poor Poor Levels Max. Height 3 to 4 10 11m 14 15m 8-9m 10 11m 10 11m Pallets Relative Cost 0 1 1.4 2.5 4.2 8.5 * APR = Adjustable Pallet Racking (Conventional Pallet Racking with Reach Trucks) **VNA = Very Narrow Aisle ^ LIFO = Last in First Out ^^FIFO = First in First Out Storage Systems Operational Characteristics Selectivity vs. Space Utilisation A fundamental concept to grasp in relation to storage systems is that those systems which offer high space utilisation such as Drive-in racking and Pallet Live Storage generally have a lower level of selectivity while those systems with lower levels of space utilisation such as Adjustable Pallet Racking (APR). This is why APR is suited to situations in which there are relatively large numbers of product lines or Stock Keeping Units (SKUs) with relatively small numbers of pallets per SKU. However, if there are relatively large quantities of certain SKUs in a product mix, it can often be more beneficial to consider more compact storage solutions that make better use of the available cube such as double-deep rack, push-back rack or pallet live storage. Relative Costs While the acquisition cost of these high-density systems may be off-putting as an initial consideration (for instance, the per pallet cost of pallet live storage can be 8.5 times the cost of conventional APR), this is only part of the picture. In fact, it is only the tip of the Page 5 of 9
iceberg when comparative operating costs over the lifetime of the systems are considered. Much more significant in terms of on-going cost is the impact that a given racking configuration and selection is going to have on work processes, efficiency and productivity over the lifetime of the installation. The initial capital cost of a racking installation can soon become a drop in an ocean of on-going cost incurred through inefficiency. For example, in a recent case study from a consumer goods distribution facility showed that the total warehouse operating costs were in the region of 860.000 per annum on a turnover of approximately 60.000.000. The distribution facility had reached capacity constraints while demand continued to increase rapidly. A limited revamp of the warehouse layout, with some new handling equipment and replacement of some storage systems costing about 80.000 resulted in a throughput gain of 100 per cent with approximately the same operating cost! This illustrates the point that the cost of planning, designing and purchasing storage equipment soon pales into insignificance in comparison with the implications for on-going operating cost. As is too often the case, acquisition costs alone should not be the driving consideration in storage equipment selection. While it is true that operating costs are very specific to individual warehouse operations and that it is therefore difficult to generalise, the evidence suggests that the operating implications of storage system selection are not given the prominence they warrant in the selection process. Evaluation and Selection The next destination on our roadmap is the evaluation and selection stage. Faced with a range of options, selection needs to be based on a structured process. Some objective criteria are required on which to base this evaluation. The evaluation criteria should be derived from the strategic considerations highlighted in the section on goals and objectives. Storage capacity and acquisition cost are just two of a number of aspects to be considered and are not necessarily the most criteria. Typically, some or all of the following items will figure in a list of evaluation criteria: Acquisition Cost Operating Cost Supply Lead Time Installation Time and Complexity Flexibility vis-à-vis Changes in Future Requirements Page 6 of 9
Manpower Requirements Re-training Requirements Storage Capacity Throughput Rates Ease of Product Identification Product Integrity and Protection Safety and ergonomics Quality and Finish Trends Because of the increasing complexity of the order profiles within many businesses, there is a trend towards the use of several different types of racking and shelving solutions within the same facility. For example, it is not uncommon nowadays to see facilities with conventional APR in a very narrow aisle (VNA) arrangement with turret trucks for bulk pallet storage and full-pallet picking, APR in a narrow aisle arrangement with reach trucks and case picking from first and second level using low-level order pickers together with a two-tier shelving structure for the storage and unit picking of small parts or eaches. Depending on the order profile of the stock, the picking strategy and the volume throughputs, we could also have more sophisticated storage media such as double-deep APR, push-back racking, pallet live storage or carton flow shelving systems. Increasingly too, we are beginning to see the integration of storage media with other technology such as conveyors, pick-by-light systems, automatic cranes, sorters and robotic pickers. The planning, economic justification and implementation of such integrated systems require specific and specialised skills sets and a good degree of practical hands-on experience. Given that most operational managers will only have the opportunity to implement major warehouse projects a small number of times in their career, we are beginning to see the emergence of in the market of specialist service companies and solutions providers who can design, specify and implement these systems as a packaged service offering. Page 7 of 9
Conclusion When choosing a racking solution, care must be taken at the planning stage to identify the purpose for which the system is required. It is crucially important that due diligence is applied to understanding the particular business model. A structured approach such as the roadmap described in this article is essential to ensure that all pertinent issues are covered explicitly. A crucial aspect in today s changing environment is that the design should allow the flexibility to add equipment to or remove it from the operation without significant amounts of disruption to the business. The majority of modern materials handling equipment is designed to allow flexibility with business needs. Nowadays most racking and shelving products are modular. Therefore, once manufacturers recommendations are respected and this is a crucial point racking and shelving systems can be moved and reconfigured to meet changing needs. Making a decision on selection requires the consideration of a wider range of criteria than the traditional storage capacity and per pallet cost of acquisition. Special attention needs to be paid to the effect of the selection on on-going warehouse operating costs and also on the ability of the system to meet the required levels of service and quality for your business. The growing complexity of storage, picking and materials handling challenges and the wide range of solutions available requires specialist knowledge to plan, select and implement solutions that will enable the business to fulfil its strategic goals. For further information on storage media selection, warehouse design and project management contact Patrick Daly, Managing Director, Alba Logistics Engineering. Burzovni Palac, Rybna 14, 110 05 Praha 1 Tel. +420 227 316 Fax +420 227 316 444 GSM +353 86 811 60 30 email: pdaly@albalogistics.com or visit the Alba Logistics website at www.albalogistics.com. Page 8 of 9
Bibliography 1. Institute of Logistics Guideline No. 4: Principles of Warehouse Design 2. Institute of Logistics Guideline No.1: Towards more efficient Order Picking 3. SEMA Guideline No.2: Guide to Erection Tolerances for Static Racking 4. SEMA Guideline No.4: Guide to the Specification of freestanding High-bay Racking and Clad Racks 5. SEMA Terms and Descriptions of Storage Systems 6. BITA Guidance Note: Truck/Racking Interfaces 7. Lansing Linde: Tolerance, interface and operational standards for very narrow aisle systems 8. Lansing Linde: Warehouse Planning in Manufacturing and Distribution 9. Lansing Linde; Order Picking in Manufacturing and Distribution 10.SESS: Guide to the Management and Safe Use of Pallet Racking 11.Jungheinrich: A Manual of Internal Logistics for Companies Logistics Systems using Industrial Trucks 12.Warehouse Education and Research Council (WERC): Starting up a World-Class DC (a roadmap to success) Hershey Foods Corporation s EDC III 13.Warehouse Education and Research Council (WERC): A Model for Determining Total Warehousing Costs 14.Warehouse Education and Research Council (WERC): Using Modeling to Solve Warehousing Problems 15.Health and Safety Executive (UK): Health and Safety in Retail and Wholesale Warehouses 16. The Warehouse Management Handbook, Second Edition, Tompkins and Smith Page 9 of 9