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LITERATURE REVIEW
Abstract:
Order picking has long been identified as the most labour-intensive and costly activity for almost
every warehouse; the cost of order picking is estimated to be as much as 55% of the total
warehouse operating expense. Any underperformance in order picking can lead to unsatisfactory
service and high operational cost for its warehouse, and consequently for the whole supply chain.
In order to operate efficiently, the order picking process needs to be robustly designed and
optimally controlled. This paper gives a literature overview on typical decision problems in
design and control of manual order-picking processes. We focus on optimal (internal) layout
design, storage assignment methods, routing methods, order batching and zoning. The research
in this area has grown rapidly recently. Still, combinations of the above areas have hardly been
explored. Order-picking system developments in practice lead to promising new research
directions.
Introduction:
Warehousing and transportation forms the backbone supply chain of all industries. Adequate
storage capacity and strategic location of the warehouse enables efficient functioning of supply
and distribution network and also provides strategic competitive advantage to the business.
Proper material handling, storage conditions and timely movement of goods are necessary as
improper handling and prolonged storage can deteriorate the quality of the stored product.
Warehouse can play a key role in the integrated logistics strategy and its building and
maintaining good relationships between supply chain partners. Warehousing affects customer
service stock-out rates and firm’s sales and marketing success. A warehouse smoothens out
market supply and demand fluctuations. When supply exceeds demand, demand warehouse
stores products in anticipation of customers requirements when Demand exceeds supply the
warehouse can speed product movement to the customer by performing additional services like
marking prices, packaging products or final assembling etc.
Storage Warehouse:
A storage warehouse is a commercial building which is generally located in the industrial areas
and is used for the storage of goods. Storage warehouses are generally used by manufacturers,
wholesalers, exporters, transport business and customs to store goods.
.
A storage warehouse is an important part in the distribution chain of products. They are the hubs
where goods are stored to be distributed further. To help the movement of goods and the process
storage warehouses are equipped with cranes and forklifts.
With time the need of a typical warehouse has be declining due to the Just in Time policy
followed by the business to improve the returns of a business by reducing in process inventory.
The JiT system promotes the delivery of products or parts directly from the manufacturer to the
merchant eliminating the need of a storage warehouse. But still storage warehouses are
commonly used due to the convenience they offer in the distribution chain. The latest
development is the retail store type warehouses where decorative shelving is replaced by tall
heavy duty industrial racks.
Understanding Inventory:
Despite its importance to the supply chain, inventory is not universally well understood. It is
variously characterized, both positively and negatively, as an economic asset to a non-income-
producing use of capital funds.
Only when considered in light of all quality, client service and economic factors—from the
viewpoints of purchasing, manufacturing, sales and finance—does the whole picture of inventory
become clear. No matter the viewpoint, effective inventory management is essential to supply
chain competitiveness.
Inventory control is concerned with minimizing the total cost of inventory. In the U.K. the term
often used is stock control. The three main factors in inventory control decision making process
are:
The third element is the most difficult to measure and is often handled by establishing a "service
level" policy, e. g, certain percentage of demand will be met from stock without delay.
Types of Inventory:
Cyclic Inventory
Safety Inventory
Seasonal Inventory
Cyclic Inventory:
Cyclic inventory is the average amount of inventory used to satisfy demand between receipts of
supplier shipments. The size of the cyclic inventory is a result of production, transportation, or
purchased of material in large lots.
Safety Inventory:
Safety inventory is the inventory held in case demand exceeds expectation; it is held to counter
uncertainty. If the world were perfectly predictable, only cyclic inventory would be needed,
because demand is uncertain and may exceed expectations, however, companies hold safety
inventory to satisfy an unexpectedly high demand.
Seasonal Inventory:
Recent industry reports show that inventory costs as a percent of total logistics costs are
increasing. Despite this rise, many organizations have not taken full advantage of ways for
lowering inventory costs.
There are a number of proven strategies that will provide payoff in the inventory area, both in
client service and in financial terms.
Some of these strategies for lowering inventory costs involve having fewer inventories while
others involve owning less of the inventory you have.
Regardless of which techniques you employ, proactive inventory management practices will
make a measurable difference in your operations.
"Just-in-time production is a simple idea that may be difficult to implement " wrote Gershon and
Weiss.
"The basic concept is that finished goods should be produced just in time for delivery, and raw
materials should be delivered just in time for production. When this occurs, materials or goods
never sit idle, which means that a minimum amount of money is tied up in raw materials, semi
finished goods, and finished goods…. The just-in-time approach calls for slashing production
and purchase lot sizes and also buffer stocks—but incrementally, a little at a time, month after
month, year after year. The result is sustained productivity and quality improvement with greater
flexibility and delivery responsiveness." This production concept, which originated in Japan and
became immensely popular in American industries in the early and mid-1990s, continues to be
hailed by proponents as a viable alternative for businesses looking for a competitive edge.
No single inventory strategy is equally effective for all businesses. Indeed, there are many
different factors that can impact the usefulness of a given inventory strategy, including
positioning of inventory, rationalization, segmentation, and continuous improvement efforts.
Moreover, small businesses in particular often face financial and logistical limitations when
erecting their inventory systems. And of course, different industries have different inventory
needs. Consumer goods producers, for instance, need to have well-balanced inventories at the
point of sale, while producers of industrial and commercial products typically do not have clients
that require the same degree of delivery lead time.
Inventory Accounting
The way in which a company accounts for its inventory can have a dramatic affect on its
financial statements. Inventory is a current asset on the balance sheet. Therefore, the valuation of
inventory directly affects the inventory, total current asset, and total asset balances. Companies
intend to sell their inventory, and when they do, it increases the cost of goods sold, which is
often a significant expense on the income statement. Therefore, how a company values its
inventory will determine the cost of goods sold amount, which in turn affects gross profit
(margin), net income before taxes, taxes owed, and ultimately net income. It is clear, then, that a
company's inventory valuation approach can cause a ripple effect throughout its financial picture.
One may think that inventory valuation is relatively simple. For a retailer, inventory should be
valued for what it cost to acquire that inventory. When an inventory item is sold, the inventory
account should be reduced (credited) and cost of goods sold should be increased (debited) for the
amount paid for each inventory item. This works if a company is operating under the Specific
Identification Method. That is, a company knows the cost of every individual item that is sold.
This method works well when the amount of inventory a company has is limited and each
inventory item is unique.
FIFO: First-in, first-out is a method of inventory accounting in which the oldest stock items in a
company's inventory are assumed to have been the first items sold. Therefore, the inventory that
Vijay Pratap Gautam, M.F.Tech-IV Sem, Nift-bangalore Page 5
Improving Inventory Control by Re-engineering of Warehouse.
remains is from the most recent purchases. In a period of rising prices, this accounting method
yields a higher ending inventory, a lower cost of goods sold, a higher gross profit, and a
highertaxable income.
The FIFO Method may come the closest to matching the actual physical flow of inventory. Since
FIFO assumes that the oldest inventory is always sold first, the valuation of inventory still on
hand is at the most recent price. Assuming inflation, this will mean that cost of goods sold will
be at its lowest possible amount. Therefore, a major advantage of FIFO is that it has the effect of
maximizing net income within an inflationary environment. The downside of that effect is that
income taxes will be at their greatest.
LIFO: Last-in, first-out, on the other hand, is an accounting approach that assumes that the most
recently acquired items are the first ones sold. Therefore, the inventory that remains is always the
oldest inventory. During economic periods in which prices are rising, this inventory accounting
method yields a lower ending inventory, a higher cost of goods sold, a lower gross profit, and a
lower taxable income. The LIFO Method is preferred by many companies because it has the
effect of reducing a company's taxes, thus increasing cash flow. However, these attributes of
LIFO are only present in an inflationary environment.
The other major advantage of LIFO is that it can have an income smoothing effect. Again,
assuming inflation and a company that is doing well, one would expect inventory levels to
expand. Therefore, a company is purchasing inventory, but under LIFO, the majority of the cost
of these purchases will be on the income statement as part of cost of goods sold. Thus, the most
recent and most expensive purchases will increase cost of goods sold, thus lowering net income
before taxes, and hence net income. Net income is still high, but it does not reach the levels that
it would if the company used the FIFO method.
Warehousing was supposed to disappear with Lean Manufacturing. This has rarely occurred but
the nature of warehousing often does change from storage-dominance to transaction dominance.
In addition, the trend to overseas sourcing has increased the need for warehousing and its
importance in the supply chain.
Warehousing buffers inbound shipments from suppliers and outbound orders to customers.
Customers usually order in patterns that are not compatible with the capabilities of the
warehouse suppliers. The amount of storage depends on the disparity between incoming and
outbound shipment patterns.
Order picking can be defined as the activity by which a small number of goods are extracted
from a warehousing system, to satisfy a number of independent customer orders. Picking
processes have become an important part of the supply chain process. It is seen as the most
labor-intensive and costly activity for almost every warehouse, where the cost of order picking is
estimated to be as much as 55% of the total warehouse operating expense.
As the order picking process involves significant cost and can affect customer satisfaction
levels, there have been increasing numbers of process improvements proposed to help companies
with this supply chain issue.
Design Strategies:
One key to effective design is the relative dominance of picking or storage activity.
Techniques that maximize space utilization tend to complicate picking and render it inefficient
while large storage areas increase distance and also reduce picking efficiency. Ideal picking
requires small stocks in dedicated, close locations. This works against storage efficiency.
The figure below shows how different transaction volumes, storage requirements and
technologies lead to different design concepts.
This indicates a large and active warehouse such as a Distribution Center (DC). In these
situations, high technology automated picking combined with mechanized handling and high
density storage justifies itself.
Order picking can be defined as the activity by which a small number of goods are extracted
from a warehousing system, to satisfy a number of independent customer orders. Picking
processes have become an important part of the supply chain process. It is seen as the most
labor-intensive and costly activity for almost every warehouse, where the cost of order picking is
estimated to be as much as 55% of the total warehouse operating expense. As the order picking
process involves significant cost and can affect customer satisfaction levels, there have been
increasing numbers of process improvements proposed to help companies with this supply chain
issue.
The challenge is to find the right tools to increase accuracy and improve picking productivity,
and thus reduce labor costs. Take it one step further, and you have to decide which technology is
most effective: bar code scanners or voice-recognition devices?
A number of supply chain academics such as G.P. Sharp and Edward Frazelle have proposed a
number of ways of classifying the order picking system. Four solutions have been identified for
order picking.
Picker to Part
Part to Picker
Sorting System
Pick to Box
Picker To Part
This particular method is very common and found in most warehouse environments. The process
involves a storage area, a picking area and a material handing system that is used to refill the
picking locations from the storage area, which can be forklift based or more specialized such as
gravity flow racks. The storage area will contain the items required to fulfill the customer orders.
The picking operator can then pick the items for each customer order from the items stored in the
picking area. As all the items are in a smaller area than the regular warehouse, the picking
operator can fulfill the order more efficiently than if they had to pick the items from the general
storage area in the warehouse. The gravity flow racks are especially useful for items that are
commonly ordered so the picking operator can be in one location and pick items from the trays
in front of them. There are a number of technological advances in ―picker to part‖ processes such
as ―pick to light‖ or ―voice picking‖. These systems allow picking operators are informed which
item to pick based on a light appearing on the item location or a voice informing the operator on
a headset which item to pick.
Part To Picker
The part to picker method employs the same physical locations as the previous method; storage
area, picking area and a material handling system that moves the items from the storage area to
the picking area. The difference with this method is that the picking area is made up of a series of
picking bays. The items are moved from the storage area and delivered to the picking bays. Each
bay receives the items for one or more orders. The picking operator collects the items delivered
to their bay and the customer order is fulfilled in this manner. This method can be subject to
wasted labor as picking operators can find themselves waiting for items to be delivered to their
picking location.
Sorting System
The sorting process including the requirement for a picking area, a storage area, replenishment of
the picking area and a sorter. This method uses automatic material handling system consisting of
multiple conveyors and a number of sorting devices. The items are placed on a conveyor in the
storage area and the items are sorted for each particular order. The operator in the picking area
collects the items that have been sorted for a customer order and processes that order. The
efficiency is gained because the operator does not have to consume time collecting individual
items.
Pick To Box
Pick to box is similar to the sorting solution as it uses the same elements; a picking area, a
storage area, replenishment of the picking area and a sorter. The picking area is organized so that
there are a number of picking zones connected by a conveyor system. The operator fills the box
with the items on a customer order and the box moves to the picking zones until the customer
order is complete and it is then ready for shipment to the customer. The efficiencies are gained
because the operator does not have to consume time collecting individual items, but the cost of
the initial set up of this solution could negate any cost benefits that the solution offers.
Choosing an order picking system depends on any number of requirements such as cost,
complexity, number of customer orders, size and number of items, etc. Every company has a
unique requirement and one order picking solution may suit one business and not another.
Determining the requirements will ensure that the most efficient order picking solution is
selected.
Space Utilization
Costs too high
Poor productivity
Poor layout
Processes not working
5’S
4. Seiketsu (Standardization)
Even a clean work place with proper selection and proper arrangement will soon become dirty if
Seiri, Seiton and Seiso are not continuously repeated. Let us prevent problems by keeping things
standardized and maintaining a good environment.
5. Shisuke (Discipline)
Everyone should be disciplined to follow strictly the rules and maintain standards while working.
For example let us adhere to the timings and let us follow the prescribed operation standards.
Benefits of 5’S:
References:
Objective:
Improving Inventory Control by Re-engineering of warehouse in supply chain management at
Prateek life Style Limited.
Introduction:
Companies look far and wide for ways to make their extended supply chains more efficient. But
sometimes the best solutions lie close to home.
Inventory exists in the supply chain because of the mismatch between supplier and demand. An
important role that inventory plays in the supply chain is to increase the amount of demand that
can be satisfied by having the product ready and available when the customer wants.
An apparel supply chain with high inventory levels at the retail stage has a high level of
responsiveness because a consumer can walk into a store and walk out with garments.
The Fundamental rethinking and Radical redesign of the business Process to achieve Dramatic
improvements in critical, contemporary measures of performance ..."
Sub- Objective:
To study the existing layout of ware house.
Increase the better identification for the inventory (Finished Goods) in the warehouse.
Methodology:
References:
Ware houses like,
Shoppers Stop
Company Profile
Basic Information
Factory Information
Company Name: PRATEEK LIFESTYLE LTD Street Address: 113, Krishna reddy industrial
area City: Kudlu gate, 7th Mile Province/State: Karnataka Country/Region: India Zip: 500068
Telephone: 91-080-41112634 Mobile Phone: 91-9845070731 Fax: 91-080-2572 7219 Website:
http://www.prateeklifestyle.com
Inventory:
Inventory exists in the supply chain because of the mismatch between supplier and demand. An
important role that inventory plays in the supply chain is to increase the amount of demand that
can be satisfied by having the product ready and available when the customer wants.
Inventory is held through the supply chain in the form of raw material, work in process and
finished goods. Inventory is a major source of cost in a supply chain and has s huge impact on
responsiveness.
An apparel supply chain with high inventory levels at the retail stage has a high level of
responsiveness because a consumer can walk into a store and walk out with garments.
Mark Taylor in the Mark Taylor – Formal Shirts, Casual Shirts, T-shirts
Re-engineering, or more specifically, business process reengineering (BPR), is a term that was
launched into the forefront of the business world by Michael Hammer and James Champy in
their 1993 book, Reengineering the Corporation: A Manifesto for Business Revolution. In this
book, Hammer and Champy define reengineering as:
"The Fundamental rethinking and Radical redesign of the business Process to achieve Dramatic
improvements in critical, contemporary measures of performance ..."
Re-engineering Cycle
Re-engineering:
To ensure that the storage locations are well defined and have a unique identification
number.
To ensure that the locations are well defined in the system and coincide with the
planogram.
To ensure that the warehouse layout facilitates quick storage and picking facility.
Process Triggers:
In the re-engineering
Company Process:
Goods Received
The supplier (Prateek Apparels Limited) sends goods to the warehouse, along with a GRN
The information on the GRN is entered into The Warehouse Management System
Manually creates put away instructions for the goods
As the goods come to warehouse, a receiving receipt is given by the security guards.
After tallying the goods according to Challan, goods are stored to receive goods area.
Goods are then sending to GRN department where inward entry is being done in
VOYEGER Software.
Goods are then send to respective places for storing to the appropriate places and
arranged in racks in FIFO Manner.
Based on the sales report data, Pick slip is being generated with the help of VOYEGER
Software.
This Slip is handover to picking worker who manually search the goods and put the
goods for outward.
After outward scanning, goods are packed and send to dispatch department where after
documentation, goods are dispatched to the respective stores through van and small
trucks.
Existing Layout:
They are doing two places out ward scanning and no space for the office.
Modified Layout:
SEGMENT-4
SEGMENT-3
SEGMENT-2
SEGMENT-1
Identification of Aisle.
BRANDS PIECES
TOTAL 2,15,000
SO, TOTAL RACKS REQUIRE FOR MARK TAYLOR FORMAL SHIRTS (INCLUDING
BUFFER) 65
TOTAL RACKS FOR FORMAL SHITRS 25
SO, TOTAL RACKS REQUIRE FOR BLACK COFFEE SHIRTS (INCLUDING BUFFER)
21.429
TOTAL RACKS FOR BLACK COFFEE SHITRS 22
SEGMENT – 1:-
SEGMENT – 2:-
Total No. Of Aisle = 10
Total No of racks = 90
No of shelf in 1 rack = 5
Therefore, Total No of shelf in 2nd segment = 450
SEGMENT – 3:-
Total No. Of Aisle = 10
Total No of racks = 95
No of shelf in 1 rack = 5
Therefore, Total No of shelf in 3rd segment = 475
SEGMENT – 4:-
Total No. Of Aisle = 10
Total No of racks = 95
No of shelf in 1 rack = 5
Therefore, Total No of shelf in 4th segment = 475
SEGMENT -1
AVAILABLE RACKS = 92
BRAND ALLOCATION = MARK TAYLOR
CATEGORY ALLOCATION = SHIRT
RACK REQUIRED FOR CASUAL SHIRT = 25
RACK REQUIRED FOR FORMAL SHIRT = 65
TOTAL RACK REQUIRE = 90
AVAILABLE RACKS = 92
BALANCE RACKS = 2
SEGMENT -2
AVAILABLE RACKS = 92
BRAND ALLOCATION = HIGHLANDER
CATEGORY ALLOCATION = SHIRT
RACK REQUIRED FOR CASUAL SHIRT = 75
RACK REQUIRED FOR FORMAL SHIRT = 0
TOTAL RACK REQUIRE = 75
AVAILABLE RACKS = 92
BALANCE RACKS = 17
SEGMENT -3
AVAILABLE RACKS = 95
BRAND ALLOCATION = BLACK COFFEE & LOCOMOTIVE
CATEGORY ALLOCATION = SHIRT
RACK REQUIRED FOR BLACK COFFEE SHIRT = 22
RACK REQUIRED FOR LOCOMOTIVE SHIRT = 29
TOTAL RACK REQUIRE = 51
AVAILABLE RACKS = 92
BALANCE RACKS = 41
SEGMENT -4
AVAILABLE RACKS = 95
BRAND ALLOCATION = ALL BRANDS
CATEGORY ALLOCATION = T-SHIRTS
RACK REQUIRED FOR MARK TAYLOR T SHIRT = 32
RACK REQUIRED FOR LOCOMOTIVE T SHIRT = 29
RACK REQUIRED FOR HIGHLANDER T SHIRT = 28
TOTAL RACK REQUIRE = 89
AVAILABLE RACKS = 92
BALANCE RACKS = 3
Size Identification: In the each and every rack define the size, according the size
availability of the brand wise; define the size number in racks.
SIZE 37
SIZE 39
SIZE 40
SIZE 42
SIZE 44
Slot Number:
Define the slot number according to segment, aisle, rack and shelf wise. It is the better
identification for the each segment and each brand.
Example:
SL 01 01 01 01
SEGMENT RACK NUMBER
AISLE SHELF
SECOND LEVEL
Want to develop pick detail model according to Barcode detail and Slot number.