Reference no: EM132295137

Pat just took as CEO over the warehousing, purchasing and export operation at Gladstone. There had been six managers in the previous two years, none of whom had any warehousing or logistics experience. Things had gone bad for all of them at GLADSTONE. So, Pat was in a situation where it was solve the problems or be counted as number seven. You might imagine Pat found many issues in this 15 year old company ranging from organizational to labor utilization. Pat got started with a review of some preliminary financials and crossed them with warehouse and export operations reports. The warehouse was located in an industrial area near the international airport and a major US seaport. The floor space was about 37,500 square feet. It was dimensioned some 150 feet on the street side; north side, with three truck-height doors, each with dock levelers and 250 feet on the west side, with a railroad spur and boxcar-height dock along that side with one very large door that was designed for railcar discharge. The south and east sides, had no possible warehouse access (See diagram of warehouse attached). Pat could see the racking was set up for the railcar handling but it had been ten years since it was used and the spur was no longer in condition to receive a railcar; it would cost upwards of $700 a lineal foot to repair and would exceed $800,000. Pat quickly took that off the “to do list” as a not feasible. Pat turned from the numbers and used observation to gather data. The racking (pallet storage) was four pallet levels high and not in great shape. Some racks were not even secured to the warehouse floor and with some structural damage, but they had been getting along. However, the east to west orientation of the racking might have been good for the railroad but caused the cargo follow problems: It seemed to take forever to discharge trucks and to then stuff the export containers. One of the previous managers with the staff had proposed adding on two more crew sets to solve the problem. That meant buying two additional forklifts at some $20,000 each unit. They must be propane mandated by county ordinance and with chain drive mast to fit inside the containers as well as capable of reaching the upper fourth level of the warehouse racks. Also, needed were two operators at $22.00/hour each total cost includes hourly rate, tax and insurance and one helper for driver at $12/hour each which also included hourly rate, tax and insurance. Pat had gleaned operating cost for these machines from the previous financials and estimated them at about 15% per year of their original purchase price as a good rule of thumb. Although forklifts might last many years GLADSTONE’s controller confirmed to Pat that they would depreciate them over five years using IRS regulation and the Original Case designed by Professor Michael P. McCarthy BSBA, MBA, CMS Feb 2015 P a g e | 2 vender suggested the estimated salvage value of the forklifts could equal of about 5% of the purchase price. Observing the operation, Pat watched for several days as pallets were unloaded from the delivery trucks. They would travel typically west 75 feet then south 125 feet to the center of the racks then traveled another 75 feet east to the center of the isle and put away each pallet (See diagram attached). Then the forklift retraced its route to the truck to retrieve the next pallet. Total travel: 550 feet per pallet each cycle. Based on times taken very discreetly it seemed the average speed was three miles an hour. Pat took into account an entire cycle (that is from lifting a pallet in the truck to returning to lifting the next pallet, OSHA MAX is Five Ml/Hr.). Pat went back inside the office to do some numbers. Reviewing the service demand levels, it worked out to be about 50 export containers and about 50 deliveries by large over-the-road trucks with 20 pallets each per work week. The demand was therefore approximately 2,000 pallet movement (through-put) a week. GLADSTONE had already paying overtime to the crew, which had doubled their paychecks but was straining their health and home life, not to mention the potential safety hazard of an over worked crew. Pat observed working conditions first hand noting that it could get to over 120 degrees Fahrenheit inside the container and the warehouse itself often topped 90 degrees. With this ambient, some crew members were a bit touchy, to say the least, and this was leading to labor issues. The owners of GLADSTONE were also continuously complaining about export products not getting out on schedule and even missing ships at the port, sometimes even air cargo. These last issues caused retail problems throughout the Supply Chain for the GLADSTONE’S group in Latin America with 148 stores owned and a billion US dollars in annual sales. Pat’s superiors only wanted immediate results not excuses. After great deal of thought and number crunching, Pat’s new idea was to change the direction of the racks to a north south orientation. The idea was to reduce the travel to average about 125 feet into the warehouse or basically 250 feet round trip which would be some 50% less than the current configuration. After receiving three quotes from local rack suppliers, Pat decided on an experienced installer with a 30 year positive record. Their Bid was about $22.50 per lineal foot installed. Now Pat had to analyze and sell the best solution to the owners of GLADSTONE which is it? A) To begin looking for another job ASAP B) Pat’s idea for racking will solve the problem. C) Does Pat really need to buy more forklifts and hire more people? how can I add the warehouse diagram ?