How to Layout a Warehouse or Distribution Center

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How to Layout a Warehouse or Distribution Center Seven Steps to a World Class Warehouse

Supply Chains. Solved.

Dr. Ed Frazelle Author, World Class Warehousing President, RightChain™ Incorporated

Seven Steps to an Optimal Warehouse Layout

RightChain ™ Incorporated

I. Warehouse Layout Introduction a. Module Objectives b. Methodology Overview II. RightChain Layout Methodology

a. How to Estimate Space Requirements b. How to Optimize Space Requirements c. How to Optimize Bay Matching d. How to Optimize Adjacency e. How to Optimize Material Flow Paths f. How to Select Material Handling Equipment g. How to Plan Expansion and Contraction a. Multi-Channel Retail Fulfillment b. Major Auto Parts Distribution Center c. Food and Grocery Distribution d. CPG Warehouse Layout

Course Contents

III. RightChain Layout Cases

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Course Objectives The RightChain Layout methodology and optimization system develops material flows that minimize total travel distance, mitigate congestion, open sight lines, maximize storage density, and conform to site restrictions. In this learning module we (a) describe and illustrate alternative warehouse layout configurations, (b) present the benefits, costs, and proper applications for each layout type, (c) illustrate a methodology for developing optimal warehouse layouts, and (d) share case examples of how optimal warehouse layout designs have been implemented in major industrial settings.

World Class Warehousing

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RightChain Layout Methodology

1. Estimate high-level space requirements for all warehouse activities. 2. Optimize and refine space requirements for all activities. 3. Assign activities with high storage requirements to high-bay space, and labor intensive processes in low bay space. 4. Locate activities with high adjacency requirements close to one another. 5. Determine the high-level facility flow pattern. 6. Assign the optimal material handling method to each flow path. 7. Develop and document facility expansion/contraction strategies.

Develop expansion & contraction schemes.

Estimate high level space requirements.

Select material handling methods.

Optimize activity space requirements.

Bay match all space assignments.

Determine high-level facility flow.

Maximize activity adjacencies.

World Class Warehousing

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RightChain Layout Methodology

Develop expansion & contraction schemes.

Estimate high level space requirements.

Select material handling methods.

Optimize activity space requirements.

Bay match all space assignments.

Determine high-level facility flow.

Maximize activity adjacencies.

World Class Warehousing

Page 5

RightChain Layout Methodology

How are productivity and safety impacted by occupancy? How do peak to average inventory ratios and peak duration impact storage requirements? How does congestion impact storage space design? How do key business and product factors impact storage space requirements?

Estimate high level space requirements.

World Class Warehousing™

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Productivity and Safety vs. Occupancy

One of the most important factors in sizing warehouse storage areas, is the planned occupancy. Occupancy greater than 80%, hinders productivity and safety. Beyond 80 percent occupancy, put-away locations are difficult to find, and optimal put-away locations are near non existent. As it becomes more difficult to find put-away, re-warehousing, and re slotting locations; operators are more likely to leave product on the floor, in the middle of travel aisles, and nowhere near their optimal location; thereby impeding productivity, safety, and housekeeping.

Occupancy greater than 80 percent hinders productivity, safety, and housekeeping.

Productivity/Safety

80%

Occupancy

World Class Warehousing™

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Peak Storage Planning

Peak Storage Requirements

Design-For Storage Requirements

Size near the peak when the ratio of peak to average requirements is less than 1.2 and the duration of the peak is over half the year.

Two of the key metrics for determining build-to storage requirements, are the peak to average storage requirements, and the duration of the peak. Let’s suppose the peak storage requirement is double the average requirement, and that peak only lasts for two weeks. Should I plan to build for the peak requirement, or something much less than that? If I built for the peak in that scenario, I would be only half occupied for 50 of the 52 weeks in the year. The lower the peak to average ratio, and the longer the duration of the peak, the closer to the peak requirement I should build to.

Average Storage Requirements

Minimum Storage Requirements

Warehouse Storage Requirements

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

World Class Warehousing™

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Warehouse Storage Requirements | High Peak to Average Ratio, Short Duration

Peak Storage Requirements

Size near the average when the ratio of peak to average requirements is more than 1.5 and the duration of the peak is less than half a year.

Inventory Levels

Minimum Storage Requirements

Average Storage Requirements

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

World Class Warehousing™

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Key Factors in Storage Space Requirements

14%

300k sf

Product Cube

Sales

SKUs

Storage Requirements

Inventory Turns

Storage Density

Occupancy

42%

7% 1 If sales increase while turns decrease… 2

STORAGE REQUIREMENTS INCREASE

16%

18%

If SKUs increase while occupancy decreases…

3 If product cube increases while storage density decreases…

World Class Warehousing™

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Pallet Storage Space Requirements Estimation

1. Divide forecasted unit sales by annual inventory turns to compute average on-hand unit inventory. 2. Divide the average on-hand unit inventory by the average units per pallet to compute the average on-hand pallet inventory. 3. Multiply the average pallet inventory by the ratio of peak-to-average inventory to compute the peak pallet inventory. 4. Multiply the peak pallet inventory by the portion of peak inventory used for storage planning purposes to compute the effective pallet storage capacity. 5. Divide the effective pallet storage capacity by the location utilization factor to compute the required number of pallet storage locations. 6. Divide the required number of pallet storage locations by the storage density (square feet per pallet computed as a function of the aisle width and storage height) to compute the floorspace requirements.

World Class Warehousing™

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Storage Space Modeling

Conventional Scenario NAV, Real Time Scenario NAV: Narrow Aisle Vehicle, Storage Density = Square Feet per Pallet

World Class Warehousing

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Aisle Congestion Analysis

Operators per Aisle Year 1

Year 2

Year 3

Year 4 Year 5 Just like inventory congestion leads to lower productivity and higher accident rates, operator congestion in the aisles significantly reduces operating productivity and increases the likelihood of operator injury. An acceptable aisle occupancy threshold should be determined and not exceeded. Operator congestion can be reduced via zone picking, increased levels of material handling automation, zone activity balancing, intelligent slotting, task simplification. In this particular case, automation was required and justified based on the congestion factory alone; the activity per SKU was so great for such a large portion of the products that picking automation was the only feasible way forward.

World Class Warehousing™

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Warehouse Storage Optimization

The optimization, minimizes the total cost of labor, space, and equipment; typically reducing total storage cost by 20 to 30%. The optimization also specifies the footprint, and labor required, for each product; as well as the total cost of storing, and handling each product. The computation helps inform the financial viability of all products.

RightChain Slotting assigns each product to its optimal storage mode, space allocation, storage configuration, and handling method. In this instance, a major consumer products warehouse is optimized with a storage mix of 5-high, 5-deep floor storage, and 7-high single-deep rack; and a vehicle mix of counterbalance lift trucks, and ASRS machines.

World Class Warehousing™

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RightChain Layout Methodology

Develop expansion & contraction schemes.

Estimate high level space requirements.

a. Apply best practices in rack layout configurations, and the use of space along walls and aisles. b. Put warehouse nooks and crannies to best use throughout the warehouse. c. Make use of the warehouse within a warehouse concept.

Select material handling methods.

Optimize activity space requirements.

Bay match all space assignments.

Determine high-level facility flow.

Maximize activity adjacencies .

World Class Warehousing™

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Warehouse Layout Best Practices

Dock

1 Interior walls covered with storage 2 End caps provide access along aisles Receiving and shipping on the same end of the building allow flexible and efficient dock door utilization and security. The majority of storage rows along the long axis of the building to maximize storage density 4 3

Receiving/Shipping

5 Over-aisle storage 6 Over-dock storage

World Class Warehousing™

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Warehouse Nooks and Crannies

1. Over-dock storage for staging and empty pallets.

2. Over-aisle storage to utilize clear height over aisles.

4. Over conveyor storage for small parts storage.

3. Over/under conveyor storage for pallets and misc.

World Class Warehousing™

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Warehouse within a Warehouse

Random Backstock

R eceiving & Putaway

Pick Line Replenishment

Retail

Periodicals

Trade

Bookclub

Order Fulfillment

Daily Order Analysis and Scheduling

Order Fulfillment

Capacity

In all our research and experience, in general, small warehouses are more efficient than large ones. If that’s the case, how do you make a large warehouse efficient? Partition it… in to small ones.

P acking

Shipment Authorizatio n hipment Authorization

Packing Packing

I nventory Mgt

Order Entry

Shipping

World Class Warehousing™

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RightChain Layout Methodology

Develop expansion & contraction schemes.

Estimate high level space requirements.

Step 3 in the RightChain Layout Methodology is bay matching. In bay matching, we assign activities that only require low clear heights, typically labor intensive activities, to low-bay space; and we assign activities that require tall clear heights, typically storage-intensive activities to high-bay space.

Select material handling methods.

Optimize activity space requirements.

Bay match all space assignments.

Determine high-level facility flow.

Maximize activity adjacencies .

World Class Warehousing™

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Bay Matching

Unused clear height.

What’s wrong with this picture? First, the clear height is very underutilized. Mezzanines could easily be installed. Second, the aisles are over-sized. The combination yields a highly underutilized building cube capacity. Many of our clients, only consider the utilization of their footprint. The true measure of building utilization, is the utilization of its cube capacity. Bay matching assigns storage intensive activities, to high-bay space, and labor intensive activities, to low-bay space.

Oversized aisles.

World Class Warehousing™

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RightChain Layout Methodology

Develop expansion & contraction schemes.

Estimate high level space requirements.

ADJACENCY OPTIMIZATION

Step 4 in the RightChain Layout Methodology is adjacency optimization. The principle is to locate activities with high levels of material movement between them close to one another; and to make sure that activities that should be far removed from one another are.

Select material handling methods.

Optimize activity space requirements.

Bay match all space assignments.

Determine high-level facility flow.

Maximize activity adjacencies

World Class Warehousing™

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Adjacency Mapping

There are many ways to represent adjacency requirements. Activity-proximity graphs, like the one in the illustration, are helpful visualizations. Each functional area, is represented as a node on the graph, and each adjacency requirement, between each pair of activities, is represented by the weight of the line connecting them. The example, is from a Honda parts distribution center, serving their auto dealers on a daily and weekly basis.

World Class Warehousing™

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Adjacency Optimization

Based primarily on material flow patterns, processes with high adjacency requirements, should be located close to one another. For example, reserve storage should be located near receiving, since there is typically a lot of material flow between receiving and reserve storage. The same can be said for receiving and cross-docking, cross-docking and shipping, case picking and pallet storage, case picking and broken case picking, picking activities and packing activities, and packing activities with shipping. These natural flow relationships often lead to the U-shape flow design.

World Class Warehousing™

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Warehouse Optimization Example

RightChain’s Warehouse Layout Optimization System minimizes the material handling cost to, from and between warehouse activities by optimizing the building configuration and maximizing adjacency. In this client example, the heatmap reveals the near random adjacency and an inefficient 8 by 3 configuration.

The optimized layout has a high degree of adjacency, a U-shape flow, and a 6 by 4 configuration. The result is a 12% reduction in inter-activity material handling costs. As a side note, our research has confirmed that all things being equal, a 1.5 ratio of width to depth yields the lowest inter-activity material handling cost.

World Class Warehousing™

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RightChain Layout Methodology

In Step 5, we will explore the pros, cons and applications of the four primary warehouse layout flow paths. 1. U-Shaped Flow 2. Straight Through Flow 3. Modular Spine Design 4. Multi-Story Warehousing

Develop expansion & contraction schemes.

Estimate high level space requirements.

Select material handling methods.

Optimize activity space requirements.

Bay match all space assignments.

Determine high-level facility flow.

Maximize activity adjacencies .

World Class Warehousing™

Page 25

U-Shaped Flow Path

The U-Shape flow pattern is the most common warehouse flow path. There are many reasons. First, receiving and shipping dock doors, on the same side of the building, permit high operational flexibility, and dock door utilization. Second, receiving and shipping on a single side of the building, improves facility security. Third, the u-shape flow design accommodates dual storage and retrieval transactions, a form of interleaving, with limited dead heading. The design also minimizes truck apron and access space, and allows the building to be expanded on three sides.

Broken Case Picking

Case Picking

Pallet Storage and Retrieval

Order Assembly

Cross Docking

Inbound Staging

Outbound Staging

World Class Warehousing™

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Straight-Through Facility Flow Configuration Characteristics

• Typically in high volume environments in which receiving and shipping activities by themselves are major operations. • May be the only reasonable option when receiving and shipping peaks coincide. • May be only reasonable option when the DC is attached to factory. • Limits dual handling transactions. • Storage location assignment is good for put-away or retrieval, but not both.

R E C E I V E

S E L E C T

S T O R E

S H I P

World Class Warehousing™

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Modular Spine Design

A modular spine design utilizes a large material handling spine to connect independent buildings dedicated to specific warehouse activities in large scale warehousing and distribution environments. Examples include rack-supported buildings for a unit load AS/RS; an air conditioned low bay building for value added services such as monogramming, pricing and marking; a low-bay building dedicated to returns processing; or a low-bay shipping building equipped with high-speed sortation equipment.

Value Added Services

Case Picking

Shipping

Broken Case Picking

Pallet Storage

Returns

Receiving

World Class Warehousing™

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Multi-Story Distribution Centers

When we work In Japan, Europe, Singapore, and in parts of Australia, multi-level distribution centers are quite common. It's because large tracts of land are scarce, expensive, and especially so in urban areas. In fact, in Japan, DCs with 5, 6, or 7 levels are not atypical. In those multi-level DCs, they stack processes on top of one another, instead of adjacent to one another. It's very difficult to design those DCs, because connecting those spaces vertically, is much more complex than connecting them horizontally. It's a bit like playing chess in three dimensions. As a result, the optimization design and associated simulations are even more critical components of DC design. As urban logistics becomes increasingly common in the United States, we will see more multi-story DCs and will need more sophisticated DC planning and optimization capability. RightChain Warehousing design for Scroll Corporation, a Japanese e-fulfillment company.

World Class Warehousing™

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RightChain Layout Methodology

Develop expansion & contraction schemes.

Estimate high level space requirements.

MATERIAL HANLDING OPTIMIZATION

Step 6 in the RightChain Layout Methodology is to optimize the selection of the material handling equipment that moves product between warehouse activities. There are a wide variety equipment types including industrial vehicles and powered conveyors.

Optimize material handling methods.

Optimize activity space requirements.

Bay match all space assignments.

Determine high-level facility flow.

Maximize activity adjacencies .

World Class Warehousing™

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Industrial Vehicles

1. Conventional counterbalanced lift truck.

2. Single-load automated guided vehicle.

4. Multi-load, un-manned counterbalanced lift truck.

3. Multi-load, manned counterbalanced lift truck.

Conventional counterbalanced lift trucks, single-load automated guided vehicles, multi-load manned counterbalanced trucks, and mutli-load un-manned counterbalanced lift trucks are some of the industrial vehicles used to connect warehouse and distribution center activities with one another.

World Class Warehousing™

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Conveyor Systems

2. Car-on-track conveyor.

1. Pallet conveyor.

4. Pallet transfer car conveyor.

3. Overhead pallet conveyor.

Traditional pallet conveyor, car-on-track conveyor, overhead pallet conveyor, and pallet transfer car conveyor, can all be used to move material to, from, and between warehouse activities. Overhead options, are frequently overlooked, but can be a means to improve clear height utilization.

World Class Warehousing™

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Material Handling System Sizing

Peak Requirements

Size Material Handling Systems for Peak Activity!

Average Requirements

Minimum Requirements

Processing Requirements

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

World Class Warehousing™

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RightChain Layout Methodology

EXPANSION AND CONTRACTION

Develop expansion & contraction schemes.

Estimate high level space requirements.

Many warehouses are designed with the false assumption that the design assumptions will play out perfectly. Yet, I have yet to come across a warehouse facility that was not in some form of reconfiguration; typically due to expansion or contraction. The principle is to have in mind expansion and contraction as normal and to setup the warehouse design with flexibility to accommodate the reconfigurations accordingly.

Select material handling methods.

Optimize activity space requirements.

Bay match all space assignments.

Determine high-level facility flow.

Maximize activity adjacencies .

World Class Warehousing™

Page 34

Facility Expansion and Contraction

The only thing we know about tomorrow is that it will be different from today. In a warehouse, different may mean larger or smaller, faster or slower, more variety or less variety, taller or shorter, more people or fewer people, more technology or less technology, etc. To accommodate the rapid pace of change, a wisely configured warehouse layout includes expansion and contraction plans for each area in the warehouse and for the warehouse as a whole.

Value Added Services

Case Picking

Shipping

Broken Case Picking

Pallet Storage

Returns

Receiving

World Class Warehousing™

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1. Multi-channel Retail Fulfillment Layout 2. Auto Parts Distribution Center Layout 3. Example Spine Design for Grocery Distribution 4. ABC Block Stack Floor Storage Layout for a Major Food and Beverage Manufacturer

Example RightChain Warehouse Layouts

Auto Parts Distribution The RightChain Warehouse Layout Methodology moves step by step from optimizing material flows, to a block layout, to a full detail design drawing. The example is from a Honda auto parts distribution center housing 24 unique and high volume activities with sophisticated storage requirements, operating 7 by 24 by 365. The template is used across all ten Honda parts distribution centers, and allows them to operate at industry leading productivity and storage density.

World Class Warehousing™

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Modular Spine Design for Grocery Retail DC Operations

Cluster Concept Transportation Hub Centers Super Combo’s

Pallet Flow-Through Truck To Truck

Conventional Order Select by Store

Cross Dock (A+ SKUs)

Continuous Replenishment Flow-Through (A and B SKUs)

Low Volume Slow Turn

Regular Turn Product (B and C SKUs)

Product (C and D SKUs)

Item Sequencing Module Batch Pick Put To Store Order

Batch Pick Order Select By Store

The illustration depicts a modular DC spine design for a large grocery distribution operation. The modules are dedicated to four specific order flows and/or item popularity designations. Module 1 is dedicated to cross-docking transactions for A+ items. Module 2 is devoted to continuous flow transactions for A and B items. Module 3 is designed for regular flows for B and C items. Module 4 is to slow flows for C and D items.

World Class Warehousing™

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ABC Block Stack Floor Storage Layout for a Major F&B

“BEFORE” Layout

Optimized RightChain™ Layout

A SKUs B SKUs C SKUs

This warehouse layout engagement, was a bit like defragmenting a hard drive. The most prominent feature of the optimization, was the location of A, B, and C products, in the locations commensurate with their velocity. In the BEFORE layout, you can see that A, B, and C products are scattered ,nearly randomly, throughout the warehouse. In the RightChain optimization, the A items are the closest to the receiving and shipping docks, and the C products are the furthest away. The optimization design yielded a 38% increase in operating productivity, with a corresponding cost reduction.

World Class Warehousing™

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About Dr. Frazelle Dr. Frazelle is RightChain’s president and CEO. He is one of the world's foremost authorities on supply chain strategy, operations and technology. He is former founder of The Logistics Institute and Supply Chain Management Series at Georgia Tech; at that time the world’s largest centers for supply chain research and education. Dr. Frazelle is also author of McGraw-Hill's Logistics Management Series library of books on supply chain strategy, optimization and operations including Supply Chain Strategy , Inventory Strategy , and World-Class Warehousing . His upcoming books include Supply Chain Artificial Intelligence , and The Language of Logistics . His books are read in seven languages including Chinese, English, French, Korean, Portuguese, Russian, and Spanish. As an educator, Dr. Frazelle has taught at some of the world’s premier academic institutions including Cornell, Georgia Tech, Kyushu Institute of Technology, Meiji University, National University of Singapore, Northwestern, Waseda University, and the University of Wisconsin. He has trained more than 50,000 professionals in the principles of supply chain management, and was named Georgia Tech’s Outstanding Professional Educator. As an inventor, Dr. Frazelle developed the RightChain™ Methodology and co-developed RightChain’s Supply Chain Optimization as a Service (SCOaaS) solution. They are guiding the supply chain decision making and execution in some of the world’s most successful corporations including BP, Carrier, Coca-Cola, Disney, General Mills, Honda, Kraft Heinz, Pratt & Whitney, among many others. Dr. Frazelle's supply chain achievements have been recognized by the Council of Supply Chain Management Professionals, Warehousing Education and Research Council, the Material Handling Institute, and the Institute of Industrial Engineers. He was named Georgia Tech’s Outstanding Professional Educator. He is former president of the International Material Management Society and board member of the Warehousing Education and Research Council. Dr. Frazelle holds his PhD from Georgia Tech, and his master and bachelors from North Carolina State University.

World Class Warehousing™

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