A project for International Truck & Engine Corporation

Service parts distribution at International Truck & Engine Corp.

The predecessor to ITE was the International Harvester Company, which built and sold agricultural equipment, which was seasonal. Now, as the International Truck & Engine Corporation, they make and sell trucks,Ê school buses, and engineÊparts. With a more diverse suite of products, seasonalities have been minimized. The parts business have experienced 14 consecutive years of growth but corporate (manufacturing) growth is heavily dependent on economic conditions.

The ITE warehouse is a service parts facility: It ships spare parts on demand. Customer demand is not under their direct control but can only be forecast statistically. It is typical of such warehouses that they carry very many sku's and that most of them move slowly. Of the approximately 22,000 skus held by this DC, 1,500 account for about one-half of the annual volume.

Another feature of service parts distribution is that delivery is urgent, and especially so in this context: Some large industrial truck may be idle (not generating revenue) while waiting for repair parts.

The DC serves mostly truck dealers and a typical order is for about 70 lines, though this may vary considerably. "Stock orders" are picked in the morning and go to replenish dealer's stock. "Emergency orders" are those for parts that are urgently needed, such as for repair, but not typically carried at the dealer, because they are slow-moving or expensive or both. Emergency orders are accepted until 3PM and will be sent out the same day.

The Atlanta DC employs about 35 order-pickers and they are assigned to zones (areas of the warehouse). Picking is coordinated through RF. We will focus on the following three zones (or perhaps on only one or two of these):

• Zone 5, for parts that weigh no more than 50 pounds each. Zone 5 includes
  • Floor stack, for fast-moving parts with multiple pallets in stock that can be stacked
  • Bins, of various sizes, for parts for which the total on-hand supply will fit into at least the largest bin. Parts are picked from all levels
  • Rack, for parts whose aggregate cube is too large to fit in a bin. Parts are picked from A and B levels and, in some aisles, C levels.
  Zone 5 consists of aisles 301 and higher. There are no reserve or secondary storage locations for any part in Zone 5.
• Zone 2, for parts that weigh no more than 100 pounds each. Zone 2 includes
  • Floor stack, for fast-moving parts with multiple pallets in stock that can be stacked
  • Rack, which may contain some parts weighing less than 50 pounds but are large compared to ITE's standard shipping container. Parts are picked from A and B levels and some C levels (details below)
• Zone 3, for parts that weigh over 100 pounds each. Zone 3 includes
  • Floor stack, for parts multiple pallets in stock that can be stacked
  • Rack, from which parts are generally picked from A and B levels. Parts for which a sales unit is palletized, such as engines, transmissions, large fuel tanks, can be picked from any level.

About 20 workers pick small parts from Zone 5. Two or three workers pick heavier parts from Zone 2; and about five workers pick the heaviest parts from Zone 3.

Pickers travel by electric truck except those picking the heavy items; they use a lift-truck.

Orders are batched by the warehouse management system. The logic behind the batching is not clear.

Here is a photo tour of the distribution center.

The project

The main concern of the client is convenience of retrieval.

Data

The company data is copyrighted and proprietary. You may use it for the purposes of this course only. (If you would like to use it for something else, please contact me to discuss.)

Here is the data we have to work with:

• Item Master: Descriptions of approximately 22,000 skus can be found in this compressed text file (1.2M). This file includes the following fields:
  • Unique part number
  • Text description
  • Weight, in pounds. Small items of less than 50 pounds are generally stored in bin-shelving; heavy items (more than 100 pounds) are generally stored in pallet rack. Light bulk is generally stored in rack.
  • Selling unit (eaches or multiples)
  • Multiple quantity
  • Annual picks (trips to the storage location): "P12 TR"
  • Annual demand measured in eaches: "P12 DMD"
  • Supply code: "SCD"
    • 026: active stocking part (the most important code!)
    • 826: has been replaced by another part number
    • 626: marked for discontinuance
    • 426: non-stocked order on demand (eg returns)
    • 441: a direct ship item (there should be none in this data set
    • 888: replaced by components

  Miscellaneous issues:

  • The asterisks in the field names have no meaning.
  • Only skus in pallet rack have secondary locations and they may have more than one secondary location. (For example, engines are stored one to a pallet, and there may be more than one engine on-hand.) Picking is done from the primary location and secondary locations are used as reserve.
  • Sku dimensions are unreliable.
• Order history: for July, August, and September 2004. Each record consists of the following fields:
  • Order number
  • Date
  • Order type: DSO, ESS, and DSS are stock orders, for which ITE pays the freight to the ordering dealer. All stock orders received by 3:00am are shipped the same day. Some dealers put in their next day's stock orders in the late afternoon; they are picked and shipped the next day just as if they had been submitted after midnight but before 3:00am. EMR, PRT, CRT are emergency or critical orders. They are shipped the same day as received; the dealer chooses the routing and pays the freight.
  • Sku ID
  • Quantity ordered
  Note that heavy parts are picked as unit-loads and other parts are batched according to some logic embedded in the warehouse management system, which is not accessible to us.
• Warehouse layout: Storage locations are described in this compressed MS Excel spreadsheet (0.5M) and here is a drawing of the warehouse layout in either pdf (1.4M) or AutoCad (2.9M) format. (You may want to bring a copy of the drawing to a Kinko's or similar service to have it printed in large-scale format.) Note from the arrows that the default pick-path is serpentine and every aisle is restricted to one-way travel. The cross-aisles are also one way, in the general direction of travel.

Warehouse layout and addresses

The three main areas of the warehouse are

• Bin-shelving, for small, light skus. (This area accounts for 70% of the skus and most of the picking.)
• Racking, for light bulky items
• Pallet rack, for heavy items

There are other, smaller, special purpose areas that we will not consider, such as the area for aerosols and flammables and the area for hoods and body panels.

Bin-shelving for small parts: Aisle 381 Bin 1

Aisles and bins are numbered on the floor as shown in the photo. Level A is the lowest, then B, C, etc. For example, address 381-01-B2 refers to the storage location at aisle 381, bin (section) 1, level B, the second position in the one-way direction of travel. Notice that the next bin on the left is 03, then 05, etc. The bins on the right are numbered 02, 04, etc.

Level T stands for "top" and will be a reserve location. Reserve locations are to be found only in the pallet rack area

Layout:

• There is a zone 4 but it may be ignored. It is outside storage used for hood sections, which cannot be moved into the building.
• Every aisle that is 366 or higher is bin-shelving of various sizes, as are the EVEN number locations in aisles 361,363,365
• Floor storage aisles are 306, 308, 310 and 215, 217, 219 and 128, 130, 132, 134 and 100, 102, 104, 106. Product that moves in high volume is stored here.
• Everything else is rack storage except:
  • 151 and 153 are outside storage reserved for hood sections
  • Aisle 235 EVEN locations 06 through 237-10 (even numbers only), and as well as aisles 242 location 10 through aisle 244 location 18 EVEN numbers only have a "B" levels used for panel storage and parts here can move only within these special locations.
  • Aisles 201, 203, 205, 207 are special stand-up racking. Parts should only move for velocity within these aisles.
  • Aisles 321, 323, 328, 330, 331, 333, 338, 340, 341, 343, 348, 350, 351, 353, 358, 360, 361, 363 have "C" levels suitable for primary pick locations.
  • Aisles 235-06 through 237-10 EVEN numbers only have "C" levels suitable for primary pick locations.
  • Aisles 242-10 through 244-18 EVEN numbers only have "C" levels suitable for primary pick locations.

Rack for bigger, heavier parts: Aisle 361 Section 1

First steps

Here are some suggestions to help you get started: First note that there are two parts to the slotting decision, in what type of storage mode to place a sku and exactly where to place it.

• Step 1: Make sure you understand the basic business issues.
• Step 2: Understand current operations and how they reflect the business issues.
• Step 3: Understand skus. Validate sku data and prepare report for client; make it easy for the client to resolve data discrepancies. what are most important skus?
• Step 4: Develop tools to evaluate current operations. You will need these to judge whether your eventual suggestions are in fact improvements.
• Step 5: Develop tools to improve current layout. For example, build a computational engine that will swap skus that are stored in same size locations and apply it to move faster-moving product closer to shipping.

Here are some questions you may want to explore:

• Where are the most popular products currently stored? Can you generate an image of the layout with storage locations color-coded to show frequency of visits?
• The simplest redesign would be to carefully swap the contents of equal-size storage locations. (It will be hard evaluate more detailed rearrangements because we do not know sku dimensions.
• I hope some groups will go on to suggest more complex redesigns, including those that require changes to the infrastructure; but you will need to evaluate the benefits.
• Does it makes sense to have a forward pick area for some skus?
• Are the right products in floor storage? How should this be decided?