REPLENISHMENT PROCESS AND BIN REORGANIZATION FOR THE MIXED LITE AREA OF THE DISTRIBUTION CENTER

 

Client: Rich Glover, Director of Manufacturing and Distribution, Safelite Glass Corporatioon

 

Student Consultant: Elizabeth B. Nielsen

Date: May 2008

Executive Summary

 

Safelite Glass contacted UNC to have a student investigate the efficiency of operations of their distribution center in Enfield, NC.  This document reports on the results of a twelve-month project investigating stocking and replenishment policies at the Enfield plant.

The replenishment section of the Safelite distribution center lacks an efficient and consistent system for maintaining windshield inventory in the open bins section.  Even without a real-time inventory system, Safelite can maintain a 95% open bin inventory (i.e., less than five percent empty bins) by restructuring the trigger for restocking the open bins.  The rate of empty bins this past summer and autumn varied between 11% and 22%.  When the percentage of empty bins is lowered, there are less backorders.  Backorders slow down the efficiency of pickers so fewer backorders will increase their productivity.  Decreasing the number of empty bins will lower the number of backorders and will thus directly increase the number of stock keeping units (SKUs) that can be picked per hour.  This study did not include the pickers directly, but it is estimated that maintaining the empty bins at five percent or less will increase productivity by 3.0 – 4.5% with a corresponding savings of $57,000 to $85,500.

At current levels of output and productivity, the number of employees used in the replenishment area is one Level 1 associate and four Level 2 associates, however when the percentage of empty bins is lowered, productivity is increased and the optimal number of employees drops to one Level 1 associate and three Level 2 associates.  Thus a decrease in the number of empty bins would also increase productivity by requiring one less associate than currently required in the replenishment area for each of two shifts.  This decrease in the number of required associates results in an annual savings of $35,000 (including benefits) per associate for a total savings of $70,000 per year.  Based solely on this decrease in labor the UPH statistic would increase by 0.5, from 20.41 (average UPH between April and July) to 20.91, a 2.4% increase.

The mix of employees performing picking operations was also investigated.  Due to traffic congestion with pickers, it is more efficient to use one associate to take away empty pallets from the open bins and a second associate to restock new pallets rather than have one associate do both tasks in one trip.

To streamline the replenishment process, a supervisor should always provide a list of about one hundred needed SKUs at beginning of every shift to keep open bins replenished.  Associates use this list to replenish the open bins in between calls for backorders.  As the open bins are replenished more fully, there will be fewer backorders and the replenishment crew will have more time to restock the open bins.  As information becomes available with the real-time inventory system, the list can be targeted towards SKUs that will be needed that day.  The combination of using the most efficient restock process and providing a full supervisor’s list before each shift will increase the UPH by roughly 1.5% for an annual savings of $28,500.

To lower the percentage of empty bins, longer shifts should be used exclusively for restocking open bins until the open bins are replenished to 95% capacity.  Once an acceptable level (five percent empty) has been reached the above recommendations will allow the open bins to be continually maintained at optimal capacity during the two regular shifts.  The replenishment process with these changes will be further enhanced by the installment of a real-time inventory system.

The open bins have not been reorganized in several years.  New SKUs are now placed in the bins in the best available spot.  Over time, the continual addition of new SKUs makes the picking sequence inefficient.  A new re-ordering of the bins takes into account not only size and curvature of each windshield for proper nesting within a packed mixed pallet, but also the frequency-of-use of each SKU to minimize travel time in the bins while picking a bate.  The bin reorganization is estimated to increase productivity by one percent with an annual savings of $19,000.

The overall savings to Safelite from this yearlong project is approximately $175,000 per year.