Simulation can strengthen logistics management

It is always better to learn from mistakes made on the drawing table than real mistakes. Simulation is an easy and effective decision-making tool that allows warehouse managers to test the impact of a change in product placement, the introduction of new forklift types, or a completely different initiative. Simulation is also a very pedagogical and visual means of explaining changes to both the top management and the employees.

Modern warehouses are becoming more and more strategically important but also complex units, in which highly technological systems, a large number of employees, capital tie-up and customer service put increasingly strict demands on the decisions of warehouse managers. There are many aspects and interests to take into account when you have to optimize and implement changes.

One can divide the aspects of decision-making into three groups:

The companys stakeholders (the partners interests)
The companys situation (the current and actual possibilities)
The companys strategies (what the top and functional management want)
At the seminar Progressive and Optimal Warehouse and Logistics Management in Skovlunde on 2 March, Consultant Preben Kristoffersen of Consafe Logistics A/S gave a lively and lucid introduction to simulation as a warehouse management tool.

Close to reality

It is important to consider all aspects, and this puts great demands on the companys basis for making decisions. Here simulation can be a valuable tool for getting to the heart of the matter and clearly visualizing the consequences of different initiatives. Its value lies in the fact that it is very close to reality. It builds on actual historical data and simulates reality so closely that there really isnt much room for debate, said Preben Kristoffersen, who has many years experience with introducing simulation in the warehouse environments of many Nordic companies.

Start with the basic needs!

Preben Kristoffersen took his starting point in a rewriting of Maslows Hierarchy of Needs pyramid for the warehouse world. The levels of the warehouse pyramid are as follows:

New vision
Results
Technological development
Personnel & organization
Physical warehouse optimization
Physical warehouse optimization and new vision are the bottom and top layers of the needs pyramid. Preben Kristoffersen stressed the importance of being aware of the pyramids structure and ensuring that the foundation is in order before you move on to implement new initiatives on the higher layers of the pyramid.

Simulation caters for all interests

According to Preben Kristoffersen, changes in product placements, structural building changes and possibilities of savings are typical examples of initiatives based on the top managements interests; whereas initiatives such as the introduction of new work methods, new forklift types and training of personnel are changes that usually arise from the employees interests.

The beautiful thing about simulation is that you can set up all the necessary parameters for a change and then add the different possible parameters and see the consequences in terms of finance, effectiveness, processes, ergonomics, work environment and so on. It is thus possible to satisfy all the various information needs the employees and top management might have, said Preben Kristoffersen. He added:

The best solutions are almost always the simple solutions. But the more complex the warehouse world becomes, the more complicated it becomes to find the simple solution. Paretos well-known 80-20 rule also applies in this connection. A 20% effort can give a savings potential of 80%. With simulation it is possible, on a scientific basis, to cut through the fog and discover where that 20% is.

What will an ABC-distribution mean?

A classic problem for a warehouse is whether to introduce an ABC-distribution of the products placement in the warehouse. A-products are the products the warehouse personnel need to access most often. They are therefore placed within easy reach. C-products are the products the warehouse personnel rarely need to pick, and they are therefore placed at the back of the warehouse.

Using Consafe Logistics simulation programme, Preben Kristoffersen then gave a step-by-step account of how to carry out a simulation of a change in product placement based on the ABC principles in a given warehouse. You simply take a whole years invoices and enter the data into the programme. Normally this will show that the products are distributed roughly as 20% A-products, 40% B- products and 40% C-products.

The simulation programme will then be able to visualize the impact that a changed product placement according to the ABC principles will have, for example, for eight hours forklift driving in the warehouse. In this example forklift driving accounts for 12.7% of the warehouse costs, while salary accounts for 71.8%. The simulation resulted in savings of 17.3% in the forklift driving, which, converted into concrete savings per order line is 2.10 kroner.

The simulation programme can then do an impact analysis of what happens if you introduce a warehouse robot, maxipacker or laser-guided driverless forklifts.

14.1% of the time spent in the printer queue

The simulation programme can also calculate the impact that introducing wireless terminals for the pick personnel will have on the wasted time spent waiting in the queue for the printer, says Preben Kristoffersen, and clicks on a few places on the screen, which represents the warehouse and is visible to all the seminar participants. Immediately all the little forklifts on the screen start to move around the warehouse corridors and simulate a days work, which makes the simulation very visual and easy to understand. The result of the simulation is that it is possible to save 14.1% of the forklift time, which the forklift previously spent waiting in printer queues, and which with the wireless terminals they can now spend on effective picking time.

From idea to implementation

Simulation can be used for many tasks and phases in a companys developmental process. Examples are:

Testing alternative solution concepts and models
Testing different situations, e.g. variations in sales
Visualizing, communicating and explaining changes
Training employees
We all have an obligation to take initiatives, and simulation is a strong tool for selling ideas to both the top management and the employees. It can document, visualize and create a basis for improvements, concluded Preben Kristoffersen.