Reference no: EM132161384

Redesign MediLS

MediLS is a company that distributes medicines and medical aids that are sold to hospitals and pharmacies. At the moment they distribute their goods from a distribution centre in Muscat. From this distribution centre goods are supplied to customers in the Oman, Dubai and Sharjah.

The tenancy agreement for the present premises is about to expire and because, in future, these premises will be inadequate because of their structural condition, the MediLS company has decided to move to a new building.

MediLS does not have sufficient expertise and capacity available to carry out the task itself and will therefore engaged a logistics consultancy organisation. The organisation is asked to carry out a threefold task.

a) In the first part of the assignment a choice has to be made of a suitable location
b) The second part of the assignment deals with the organization of the processes, the organization of the physical operation (where, amongst other things, you have to think of stock control and planning the workload) and laying out the shop floor where the products will actually be passing. The newly to be designed warehouse must be designed based on flows and stock levels to be expected in 2021.
c) The third part entails a critical reflection upon the current inventory management concept supported by a new -and recalculated- inventory management concept for the new situation.

Assignments in steps

Because MediLS have insufficient time and logistic knowledge at their disposal, they have decided to engage a logistic consultancy that is going to help them answer three assignments:

a) What is the most suitable location for the newly to be built warehouse? See paragraph 4.1
b) What is the optimum layout for the warehouse processes, organization and floor plan, departing from the present product and sales characteristics and future growth? See paragraph 4.2
c) The third assignment entails a critical reflection upon the current inventory management supported by a new -and recalculated- inventory management concept for the new situation. See paragraph 4.3

At the moment MediLS has created a shortlist of three possible locations for the newly to be built premises (see Appendix B).
At the same time MediLS has created a dataset with the help of which the newly to be built warehouse can be designed (see Appendix A).
Besides this, the consulting company also has additional information which might be helpful during the redesign (see Appendix C).

Assignment a: Site selection

MediLS has already looked around for a number of possible suitable locations for their newly to be built warehouse. This number was reduced to three locations, the industrial estates:

a. Rusayl
b. Ghala
c. Boushar

Information concerning these locations is to be found in Appendix B. In addition information can be found on the websites of the industrial estates on Google maps etc.. It is advisable to consult other sources, too.

The consultancy is asked to determine what industrial estate is most suitable on the basis of five main criteria. The main criteria must be subdivided. The main criteria are:

1. Cost
2. Accessibility
3. Risk management
4. Location specifications
5. Labour

When making this assessment Multi Criteria Analysis (MCA) must be used (see toolbox projects). The weights going with the MCA are awarded by the group. When assigning the weights arguments have to be provided on the basis of what arguments these weights have been allocated.

Assignment b: Layout proposal

For the design of the layout of the new warehouse the MediLS.xls file can be used. The layout proposal is done on basis of the stock level as included in the MediLS.xls file.

The design must at least contain:

a) Insight in the flows
- Functional flow diagram
- ABC-analysis
- Possible other analyses

b) Outline design
- Technical flow diagram

c) At least two ‘high level' layouts (high level zoning plan):
- In these high level layouts, variations should be offered in the choice of storage systems for the various product groups. At the same time variations should be offered of the positioning of the various storage areas with regard to each other.
- Criteria on the basis of which a choice of layout can be made.

d) Detail design: For the alternative chosen at least these points will be described:
- Physical structure: worked out in professional drawings where, if necessary, Excel can be used or another program.
- Planning and control: Process description of all processes in the new warehouse (including pick strategy and goods allocation)
- Information & Communication: Information flows and used technology
- Organisation: Make -on the basis of the times of order entry, the time necessary to process an order and the time of dispatch- a division of the amount of labour to be carried out per time unit (to be determined yourself) per day. Combine with this the organization of the shifts and how many FTE per shift and per area will be working.

When making the layout proposal the branch and the regulations concerned must be taken into account.

e) Investment cost and operating budget
- Investment cost of the logistic layout.
- Operating budget (costs) of logistic layout and labour.

The Muther method can be used as general design guideline. The sheets of the warehousing lectures are also an important source.

In Appendix C an overview is included of the investment costs, depreciation periods and maintenance percentage of, amongst other things, the building and of the storage systems and the rolling stock. If a choice is made for a storage system or rolling stock not mentioned in this overview, prices may be requested from suppliers or searched for via internet.
Interest on investments is 6%. We use straight line depreciation.

The Appendix also contains productivity indicators with regard to intake of goods and different storage systems. If a choice is made of another manner of storage than the ones mentioned in this overview, the productivity indicators concerned have to be supported by additional sources and/or assumptions supported by arguments.

Assignment c: Inventory management
MediLS wants to know what arrangements with regard to delivery volumes and frequencies and times can best be made with the suppliers. At the same time MediLS wants to see these recommendations translated into an inventory control model that best combines with the future flows of product. The effect on the inventory levels is also part of the question MediLS has.
A choice has to be made of one of the three inventory control models:

- Reorder point model
- Periodic Review model
- Min-Max model

When calculating the relevant part the following can be taken as a starting point:

- Interest: 12% per year
- Space: € 1.000.000,- per year (based on the inventory value of 2017 (see data file)
- Risk: annually 6% of stock value is written off because of passing the expiration date.
- See data file for lead-time information, you can assume that the lead-time is stable
- The order amount per product can be rounded off to (a multiple) of box level.
- Order costs per order are € 20,-.
- The data file contains the lead time.
- Although the service levels are set in advance: please reflect on them!

Attachment:- Warehousing.rar