McBride's warehouse had become too small: effective warehouse planning and management became a very profitable solution
McBride had set aside millions to address capacity challenges in their warehouse – challenges that had arisen as a result of increased customer demand. By optimizing their existing warehouse instead, which became more well-organised, structured, and efficient, the costs were kept at a modest DKK 50,000. kaastrup|andersen's optimisation of McBride's warehouse thus saved them investments in the millions.
McBride had landed several order increases with existing customers, and this placed demands on the warehouse's capacity and efficiency. The raw material warehouse and warehouse logistics in particular were a major challenge, and it was difficult to see how the increased production could be supplied with the existing buildings and equipment.
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McBride's own suggested solution required a large investment in both silos, pallet racks, trucks and other equipment in order to meet the customers' increased demand. But it was impossible for the company to get a proper overview of how the needs were, among other things because their 80-100 different raw materials had very different characteristics, both in relation to package size, format, storage requirements and - not at least – how big a deduction the production had from the individual raw material.
In this case you gain insight into how McBride and kaastrup|andersen took up the challenge – and came up with an effective, profitable solution.
Challenge
With demand corresponding to a 50% increase in both production and inventory, McBride faced a positive development that required greater storage capacity. In particular, the storage capacity for raw materials was under scrutiny, and McBride set aside a sum of several million Danish kroner to solve the challenges.
One of the challenges was that McBride's raw materials warehouse contained several different storage types: there were raw materials in silos and big bags, some were liquid, some were solid, some of them had to be stored at specific temperatures, and some had a certain shelf life that had to be taken into account. There was also great variation in how big a deduction the production had from the different raw materials.
Another challenge was that McBride's factory was located close to a residential area, where legislation dictated when and how many trucks could deliver goods to the factory's raw material warehouse. This meant that extra quantities had to be factored in to ensure that production did not come to a standstill when trucks were prohibited from entering.
Solution
The consultant from kaastrup|andersen started with a large data extraction from SAP. The large amount of data included purchases, deliveries and withdrawals from storage to production. But a warehouse is not only about data: There are physical locations, many employees, functions and processes involved, so the uncovering work also included information gathering in the entire organization.
The data from SAP was recorded and enriched in two large, detailed Excel sheets that were used as the basis for all the calculations. The level of detail clearly showed why McBride had initially fallen short in carrying out the calculations: The many characteristics of each raw material included, among other things:
- Dimensions of package
- Stackable or not
- Solid or liquid
- Stock limits (some goods may not have more than 50 t in stock)
- Minimum purchase quantity (for example 20,000 liters in a tanker)
- Should the raw material be in a warming room (where capacity is limited)
The list of parameters was long and the individual parameters had to be weighted differently when simulations and calculations were carried out.
In relation to the surrounding logistics, calculations were also made: An increased number of tankers and trucks with raw materials could create queues in the unloading area – and at the same time the legislation regarding traffic in the area had to be observed. This indicated that agreements and relationships with suppliers should be reviewed to ensure the necessary precision in the planning of raw material deliveries.
For those raw materials where it made sense, kanban became part of the overall setup to ensure the most efficient flow of raw materials and minimize stock tie-up.
The solution also included a buffer warehouse, located in a warehouse a few hundred meters from the raw material warehouse, because although calculations and simulations showed that the warehouse would be efficient and well-functioning, experience said that it made sense to have a plan B.
Result
The overall overview and the final solution looked completely different from what the management at McBride had imagined. It turned out that the required investments could be kept at around DKK 50,000 – a figure far below the many millions that they had initially set aside. The drastic positive deviation occurred thanks to an optimized warehouse setup, both in relation to the placement of the goods, purchasing processes and handling processes.
kaastrup|andersen handed over a comprehensive overview of calculations and upcoming tasks, and McBride also got all the basic data in the two Excel files, so that they could work on the setup themselves and adjust the many parameters if they needed it .
With the solution, McBride had a big implementation task ahead in order to get the full benefit from the warehouse setup, because it was not only about moving inventory around and cutting down on warehouse ties, but also a large number of processes that the employees had to use and get used to. But with the big savings in mind, there was good motivation and commitment to the task.
What is the state of your warehouse and its inventory? Is it effective – and how much value have you tied up in it? Do you have an overview of what is needed to optimize it?
Contact us for a chat about how we can help you and your company to an (even) more efficient and profitable operation that suits your market's needs.
Call or write to Peter Nymann Andersen on +45 70 27 77 19 or pna@kaastrupandersen.