Warehouse Layout Decisions
Problem Set 2 Hints
This Problem Set tests your ability to apply quantitative and qualitative decision making to Warehouse Layout and operations. You will also calculate the transportation cost from the Warehouse to the distributors.
How should ABC lay out its Warehouse in order to make efficient use of Warehouse Capacity and cost-effectiveness in transporting stored goods to its 10 distributors?
Question 1: Calculate the flow of goods (in pallets) arriving at the Warehouse each month (Jan.- Dec.) in order to determine the Capacity of the Warehouse (in pallets and tons).
Hint: Create a table that analyzes the Warehouse’s flow of goods/units (in thousands) per month. Call this table “Warehouse Monthly Flow of Goods.”
The rows of the table (starting from the top) are Production, Demand, Direct Ship, To WH, From WH, Storage.
The columns, labeled on the top, are Jan. through Dec. – a column for each month.
Production is level at 600 per month. Demand fluctuates per month, as does Direct Ship. Read the Problem Set to determine the monthly amounts.
To WH is cyclical per quarter – 300 each month 1st quarter, 0 each month 2nd quarter, 300 each month 3rd quarter, 0 each month 4th quarter.
From WH is 0 each month from Jan. through Sept. and 600 per month from Oct. through Dec. You can now calculate the totals for Storage, the last row.
Hint: To find the answer: The largest monthly Storage amount is the Capacity, in goods/units. Divide by 100 because each pallet contains 100 goods/units. You now have calculated the Capacity of the Warehouse. Each pallet weighs a ton – this will give you the Capacity of the Warehouse in Weight.
Question 2: Design the Layout of the Warehouse, including the racks for storing pallets and the aisles between the racks.
Hint: To find the answer: Set up racks to store the XXXXX pallets (max number of pallets from Question 1 above) with 2 shelves and the floor below for Storage. Each level (floor, shelf 1, shelf 2) should be able to store 1/3 of the XXXXX pallets (max number of pallets from Question 1 above). To determine the Warehouse area to be used for shelves, multiply the XXXXX pallet amount X 2 for just enough additional height space. The pallets are aout 4 feet wide, so multiply 4 X 2 to double-size the width. The answer is 96,000 square feet of shelving space. There will be 2 aisles of 9 feet, one on each side of the shelves – a total of 216,000 square feet of aisles. Add the 96,000 square feet of shelving to the 216,000 square feet of aisles, for a total of 312,000 square feet of Warehouse Capacity Utilization.
Question 3: Assuming 20 pallets per FTL truckload, and 10 distributor locations, determine the cost of shipping from the Warehouse.
Hint: To find the answer: Use this listing of distributor locations, miles from the Warehouse, and travel time (from Problem Set 2, Question 3).
- New York City – 220 miles (4 hours)
- Newark, NJ – 270 miles (5 hours)
- Philadelphia, PA – 320 miles (6 hours)
- Baltimore, MD – 430 miles (8 hours)
- Washington, D.C. – 470 miles (9 hours)
- Buffalo, NY – 470 miles (8 hours)
- Pittsburg, PA – 600 miles (10 hours)
- Cleveland, OH – 770 miles (11 hours)
- Richmond, VA – 600 miles (10 hours)
- Charlotte, NC – 900 miles (14 hours)
Note that each distributor receives the same quantity (90 FTLs). To derive this
figure, the total number of pallets shipped each year (XXXXX pallets) divided by
20 FTL X 10 distributors = 900 trucks per year divided by 10 distributors = the 90
FTLs that each distributor will receive.
Now, using 3PL service providers, multiply the mileage for each distributor city X
90 FTL for total distance traveled per distributor city, and get a grand total for
Annual Mileage (454,500 miles). Multiply $1.50 X the mileage for each distributor
city X 90 FTL, and get the grand total for 3PL Annual Cost ($681,170).
To do this, make a “Total Annual Distance & Transportation Cost Table” adding
a Distance column and a Cost column to the Distributor City Listing above.
Question 4: Would owning and operating a fleet of trucks be more cost effective than the Warehouse using 3PL?
Hint: To find the answer: Note that your own drivers are paid $35/hour and that a
truck would cost $.60/mile. In order to analyze this, start with the table that was
developed in Question 3 to create a new table called “Owning and Operating a
Fleet of Trucks.” Expand the Question 3 table with the following columns (l-r):
Distributor, Miles, Distance, Cost @ $1.50 (3PL), # of Trips (90 for each
Distributor), Driver Cost @ $35, Miles @ $.60 (Fleet Truck). Total the 3PL Cost
($681,750) and the Fleet Truck Cost ($540,450).
Question 5: Qualitative factors concering a Warehouse with a cyclical operation.
You can now make your final recommendation, considering both the quantitative and qualitative factors.