Warehousing Guide

WAREHOUSE SAFETY

separated. Procedure also speaks to the development of traffic plans for different vehicles and making use of signage
in and around the warehouse.
Separation by physical barrier is when barriers are put in place to prevent pedestrian personnel walking on driveways
where moving machinery moves and vice versa. The physical barrier ensures that there is no possibility that a moving
machine interacts with a pedestrian.
To ensure warehouse safety, it is necessary that risk assessments be periodically done in and around the warehouse.
Risk assessments allow for personnel to identify potential risks and in that train themselves to identify risks and ways
to mitigate the risks. On completing risk assessments, demarcations, procedures and physical barriers need to be put
in place where relevant to ensure minimum interaction between personnel and moving machinery.
Several safety measures can also be put in place to ensure minimum incidents and accidents. Examples include
prohibiting access to non-essential personnel or allow access only to personnel that are required to do work in the area
and are well trained in all safety aspects pertaining to this area. This will mean that you have limited traffic in total on-
site and in the warehouse. Forklifts and other moving machinery can be fitted with beepers and blue lights (focusing
on the floor) that serve as warning signals to any pedestrian that may be in the vicinity.
Walkways or walking paths that pass next to stock stacked high or packed high on racking or shelves could be caged to
ensure that if something falls, pedestrians are not injured. Proximity detection systems can also be implemented. The
system works in such a way that if a pedestrian is close to a moving machine such as a forklift, the driver of the machine
and the pedestrian are alerted by vibrating handheld devices. This should alert each of them to be more cautious.
For further separation, catwalks can be made use of resulting in pedestrians moving on different levels compared to
moving machinery.
Fire safety is not covered here but is an important part of warehouse safety. Appropriate fire safety measures must be
in place to prevent and extinguish warehouse fires.

51

LOGISTIC MASTER PLAN (LMP)

Logistical Master Plan, LMP, is a methodology developed by RIC to model holistically a warehouse or a Distribution
Centre. (TLMP, Technical Logistical Master Plan, is the equivalent methodology and modeling practice applied to
manufacturing centres)

In an LMP, RIC models, quantifies and analyses “everything that moves and everything that takes space.” If required, a
dynamic simulation is incorporated. The different aspects of the (warehouse) businesses are quantified in terms of their
capacity, in terms of space requirements, needed resources, functional practices and required standards. Bottlenecks
are identified; improvement and operational excellence opportunities are developed, and a phased expansion or
transformation program is set.
Companies often analyse only certain elements of a site to determine its capacity. When a business call for additional
capacity (storage, throughput, shift from bulk DCs deliveries to direct customer deliveries, etc.), CAPEX is spent on
increasing this, merely to discover that the real bottleneck was not attended to (and could have actually been operational
rather than facility’s infrastructure). This will then result hurried introduction of new facilities and processes as well
as the relocation of facilities, buildings, equipment and services, all of which requires further “emergency” CAPEX
and OPEX for the “newly discovered” bottleneck, ending with a costly and messy site with suboptimal layout and
suboptimal operations.
It should therefore be mandatory to obtain a holistic and long-term view of the site before any planned work is initiated.
To achieve this holistic view, RIC integrates all Capex, Technical, Logistical & Operational aspects of the business into
one LMP model. This proves invaluable towards achieving a life cycle optimisation of the business and the resulting
site expansion plan. This optimal expansion plan can then be progressed to determine the true ultimate capacity of the
site. This ultimate capacity can be a function of available space, utility consumptions, municipal regulations, etc. This
requires that not only does the capacity of each aspect be quantified, but it needs to be physically displayed on a site
layout to ensure spatial integrity and effective concept development.
One of the key challenges to any type of (capacity) planning is that the future is not set in stone. This is a significant
issue when it comes to developing a “CAPEX intensive” site. It is therefore, principal that any planned development
is done so with flexibility in mind, as businesses often push new ideas or concepts into the market or are forced to
react to market forces or conditions. The sensitivities of these potential factors, therefore, need to be analysed when
planning for a site’s development. As hard as this seems, it can be done if the site is modeled correctly.
52

LOGISTIC MASTER PLAN (LMP)

As each industry and client are different, a customised approach is typically preferred. An LMP model will always require
a true understanding and insight of the operation/facility being studied. The methodology of developing an LMP will
follow: business / site familiarisation to ensure a total and holistic analysis; data acquisition, current capacity and space
quantification for all site aspects, present bottleneck identification and quantification; bottleneck development plans,
development of expansion or transformation phases leading to a defined site ultimate capacity.
To start with, quantification is modeled statically using spreadsheets & formulas plus, if required, dynamically using
advanced simulation tools. (Simulation will typically be used when the operation is complex, changing periodically and
contains a significant number of non-linear operation and cost functions)
To support this, all modeled expansions need to be space planned so that the physical and spatial developments (all
the way through to site ultimate) can be visually understood and explained to all parties involved.
Alternate site capacity development options are defined and assessed using an agreed set of relevant KPIs. Typical
KPIs are CAPEX, future OPEX, Ease of implementation, Flexibility to changing market conditions and effect on ultimate
capacities.
The overall result of following this process enables reducing capital expenditure by preventing equipment/service/
buildings becoming obsolete, delaying capital expenditure and avoiding facilities/equipment relocation. Above and
beyond the associated time value of money savings, LMP will support optimised site service reticulations; minimised
travel distances (forklift, employee, etc.); maximised sites operational efficiency; and the ability to test the sites’
sensitivity to evolving business & market conditions and other.

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INVENTORY OPTIMISATION

Companies put a tremendous amount of effort to minimise inventory for a good reason. Research indicates that companies
carry on average an inventory value equivalent to 11% of annual revenues. The typical yearly cost of carrying inventory is at
least 10% of inventory value (higher costs often arise from stock losses, damage, expiry, storage costs, etc.) so companies
spend over 1% of annual revenue on carrying inventory, without considering the cost of the working capital that is tied
up. This can easily translate to 5% - 10% of profits. Studies have shown a high correlation between overall manufacturing
profitability and inventory turns.
Inventory optimisation is not limited to final product’s stock; it should also be applied to raw materials, work-in-process,
spare parts, etc. Optimising inventory level is not an easy task and often companies fail to do so effectively.

7.2.1 COMMON ERRORS IN DEFINING STOCK LEVELS
An initial challenge for optimising stock levels is the setting of
the right and relevant objectives. The goal is not to achieve
100% customer service or to minimise safety stocks. High service
levels can be achieved with cost overruns, excessive inventory
and resorting to “heroic,’” costly “firefighting” measures. In
addition, it is not safety stock but rather average/total stock on
hand that should be minimised. Service level depends not only
on safety stock but also on reorder quantities; manufacturing
and supply lead times and capacities (average and variability).
Similar service levels could be achieved with different safety
stock levels or with no safety stock at all, depending on the
replenishment parameters set.
Companies that do not implement inventory optimisation methodologies commonly use “rules of thumb” such as
inventory target days of coverage that are then introduced in the ERP/MRP systems. While easy to execute, such
techniques generally result in poor performance. Without information of the service level that is expected, planners,
who are deeply penalized for stock outs, are conservative and set relatively large safety stock policies. Experimenting
with inventory policies to reduce stock levels is a dangerous approach, everyone seems to be in until customer service
starts to suffer.
One of the first formulas that were proposed to manage inventory planning, which is still popular today, is the Economic
Order Quantity = (2 D K / h)1/2, where D is the annual demand, K cost of an order and h annual holding cost per unit.
The formula defines the reorder quantity that minimises inventory holding and ordering costs. The formula assumes
no variability/uncertainty in demand or delivery times (safety stock equals to zero), or other factors that usual impact
in the ordering such as quantity discounts.
Many websites recommend the following formula to calculate safety stock = z (d2 σRT2 + RT σD2)1/2 where z is the
standard normal value that corresponds to the required service level, d average period demand, σRT2 replenishment
time variance, RT average replenishment time and σD2 demand variance. It must be noted, however, this formula is
only valid for reorder quantity equal to one (i.e. expensive, low demand parts). For order sizes greater than one, the
formula is not right and results in safety stock much larger than what is truly required.
There is, in fact, no simple formula for calculating safety stock for a given service rate and a reorder quantity greater
than one.

54



INVENTORY OPTIMISATION

7.2.2 INVENTORY OPTIMISATION APPROACH
Inventory optimisation goal is to achieve best balance between
average on-hand inventory cost, service level and reorder
frequency cost, considering supply and demand variability, that
maximises profitability and cash flow. Inventory optimisation
involves then coordination between different areas, breaking “silo”
thinking and setting common goals and KPIs. Studies indicated that
organizations that utilised advanced methodologies for inventory
optimization reduced inventory levels by up to 25 percent in the
first year with further reductions achieved in following years. The
following is a set of initiatives that must be undertaken to optimise
company´s inventory:

7.2.2.1 IMPROVE OPERATION’S PERFORMANCE AND RELIABILITY
In a perfect world with zero variability, no safety stock is needed. Hence, the first step to reduce stock levels is to
increase supply/production reliability and diminish demand variability as much as possible. In addition, reducing lead
times and increasing production capacity and flexibility, will result in lower inventory requirements and reduced overall
cost.
7.2.2.2 IMPLEMENT AN INVENTORY POLICY ALIGNED WITH THE COMPANY´S OBJECTIVES.
• To properly control inventory, companies must monitor the inventory position, and not just on-hand inventory.

Inventory position = Inventory on hand + Incoming orders – Backorders.
• Reorder quantity should be optimised based on inventory holding cost, quantity discounts and the cost of ordering,

shipping and handling an order. The reorder point is the stock level that covers expected demand during the lead
time, plus the safety stock.
• Simulation or an analytical computation can provide the service level that results for certain reorder quantity and
safety stock. Company´s executives can then visualise trade-off curves of average inventory on hand versus service
level and decide what is the optimal balance for the company.
• Generating these curves for many items could take a long time. In this case, an inventory optimisation software that
could run thousands of stock policy simulations at the same time is a good investment.
• Managers must define the service level requirements for each item depending on strategic importance, inventory
value and profit margin in the case of final products.
7.2.2.3 IMPROVE FORECAST ACCURACY
Improved forecast accuracy means reduced demand uncertainty, which leads to a better alignment of all the company´s
areas such as lower stock levels and enhanced service levels.
New machine learning tools can significantly improve the forecast accuracy by considering not only recent sales, but
the company’s selling price, competitors’ prices, marketing campaigns, related product sales, general economic factors
and other considerations.
7.2.2.4 SUPPLY CHAIN NETWORK OPTIMISATION
Buffers are required to synchronise supply and demand in the presence of variability. There are three different types of
buffers, namely; inventory, response time and capacity.

56



INVENTORY OPTIMISATION

Selecting which of these buffers the company should invest in is a strategic decision. The following questions should be
considered when selecting the appropriate buffer.
• What is the company´s accepted clients´ demand of response time?
• Should the company have prepared contingencies plan to respond to the demand variability that could reduce the

need of safety stock?
• Does the business want to have a minimum amount of stock, but a large and flexible production capacity, enabling

it to produce small production batches and react quickly to demand fluctuations (more flexibility in production,
reduced inventory)?
• Does the organization prefer a steady production plan, postpone investment in production capacity, but hold a larger
amount of inventory?
• Does the company want more variability in inventory and less variability in production or vice-versa?
The warehouse storage capacity needs to be optimised together with production capacity optimisation and the
resulting operating costs so to minimise the company´s present value cash outflow.
7.2.2.5 ESTABLISHING BUSINESS INTELLIGENCE SYSTEMS
These systems can assist in managing and gaining insights to how to optimise inventory levels. The advantages of
Business Intelligence systems are described below:
• Access vendors and suppliers stock status to reduce stock levels and avoid bullwhip effect.
• Get a clear view of inventory status and take proactive actions.
• Identify stock-out risk on real time and select most appropriate actions
• Analyse supply and demand historical record to define optimal stock policy
• Identify selling trends

7.2.3 STANDARDISATION
Standardisation is the process of ensuring
that the input requirements of a process,
the procedures governing the process, the
time for each step and the expected output
of the operation are known within a team or
organisation. Standardised work is important
in warehousing, distribution and operation
because it allows us to understand variance in
our processes. Standardisation also allows us
to make appropriate corrections.

Without standardisation, the sources of variation are uncertain and cannot, therefore, be corrected. For that reason,
standardisation serves as a fundamental platform for continuous improvement. Standardised work and processes
prevent disruption to the stability and efficiency in warehousing and distribution. In order to maintain operational
efficiency, an operation needs a team, preferably all personnel, dedicated and committed to problem-solving and
continuous improvement (improving standards). Standardisation will assist in various aspects of the warehouse,
including inventory optimisation. However, the details are not discussed in this article.

58

LISTING

AUTOMATION SSI Schaefer CONVEYORS EQUIPMENT
T: +27 (0) 11 707-2600
Future Packaging F: +27 (0) 11 707-2620 Interroll SA (Pty) Ltd Johannesburg: 011 397 7883
T: 011 794 3310 E: [email protected] T: +27 11 281 99 00 Durban: 031 331 0057
E: [email protected] W: www.ssi-schaefer.com M: [email protected] Cape Town: 021 271 0119
W: www.futurepack.co.za W: www.interroll.co.za E: [email protected]
KNAPP Logistic South Africa W: www.caslad.co.za
T: +27 (0) 11 465-9284 Yokogawa SSI Schaefer Kemach Equipment (Pty) Ltd
M: +27 (0) 72 255-0352 T: +27 11 831 6310 T: +27 (0) 11 707-2600 T: +27 11 826 6710
E: [email protected] F: +27 11 831 6370 / 86 411 8144 F: +27 (0) 11 707-2620 F: +27 11 826 1069
W: www.knapp.com E: [email protected] E: [email protected] E: [email protected]
W: www.yokogawa.com W: www.ssi-schaefer.com W: www.kemachjcb.co.za

BARCODING/SCANNING COURIER SERVICES FIRE PROTECTION

LILAC Kemtek EPX Courier Services Whip Fire Projects
PROCESS AUTOMATION (Pty) Ltd T: +27 (0) 11 624 8000 T: +27 (0) 861 379 542 T: +27 (0) 21 930 3149
T: +27 11 397 2800 E: [email protected] W: www.epx.co.za E: [email protected]
F: +27 86 560 7390 W: www.kemtek.co.za W: www.whipfire.co.za
W: www.lilac.co.za EDUCATION & TRAINING
FORKLIFTS
Labelton Bizzco
Intralog T: +27 (0) 73 461 1775 T: +27 (0) 10 001 0283
T: +27 (0) 74 137 5526 E: [email protected] E: [email protected]
E: [email protected] W: www.labelton.co.za W: www.bizzco.co.za
Neptek Linked
T: +27 (0) 21 982 0190 T: +27 (82) 788 1367 Supply Chain Smart A Square Forklift
T: +27 (0) 87 808 9286 W: www.linkederp.com T: +27 (0) 10 001 0283 T: 0860 (FORKIE) – 0860 367 543
E: [email protected] E: [email protected]
W: www.neptek.co.za Zetes W: www.supplychainsmart.com 011 900 1777
Parker Hannifin T: +27 (0) 11 615 3103 E: [email protected]
T: +27 (0) 11 961 0700 W: www.zetes.co.za ELECTRONICS W: www.forklift.co.za
E: [email protected]
W: www.parker.com/za CRANES Pepperl & Fuchs ATON
T: +27 (0) 87 985 0797 T: 087 940 9256 / 010 534 6054
E: [email protected] E: [email protected]
W: www.pepperl-fuchs.co.za W: www.atonengineering.co.za

SICK Automation Demag Seartec Bidvest Materials Handling
T: +27 (0) 11 472-3733 T: +27 (0) 11 898 3500 T: +27 (0) 11 405 7400 T: +27 (0) 11 397 0500 - JHB
M: +27 (0) 76 338-9193 F: +27 (0) 11 898 3533 E: [email protected] T: +27 (0) 21 940 8140 - CT
E: [email protected] E: [email protected] W: www.seartec.co.za T: +27 (0) 31 700 1634 - DBN
W: www.sickautomation.co.za W: www.demagcranes.com W: www.bidvestforklifts.co.za

FREIGHT FORWARDING

Hyster Forklift Pro Active ID Logistics Future Packaging
T: +27 (0) 87 943 6149 T: 011 869 6776/8294 T: +27 (0) 10 005 1822 T: 011 794 3310
E: [email protected] E: [email protected] E: [email protected]
Toyota Forklifts W: www.proactiveshipping.co.za W: www.id-logistics.com/za W: www.futurepack.co.za
T: +27 (0) 11 571-0387 C: 079 87908787
M: +27 (0) 71 106-4867 Ukuthutha Solutions T: 011 028 0567 Pyrotec
E: [email protected] T: +27 (0) 31 263 2083 E: [email protected] Tel: 011 611 1820
W: www.eiegroup.co.za M: +27 (0) 82 324 6231 W: www.nacelogistics.co.za Fax: 011 611 1834
E: [email protected] Imperial Logistics Email: [email protected]
TCM Forklift W: www.ukuthutha.co.za T: +27 (0) 11 677 5000 Website: www.pyrotec.co.za
T: +27 (0) 11 966 9700 E: [email protected]
F: +27 (0) 11 966 9726 GENERATORS W: www.imperiallogistics.co.za PALLETS & CONTAINERS
E: [email protected]
W: www.tcm-forklift.jp Aggreko Maritime Shipping CHEP
T: +27 (0) 861 244 735 T: +27 (0) 860 111-407 T: +27 (0) 31 267-9300
Manitou W: www.aggreko.com M: +27 (0) 82 372-6465 W: www.chep.com
T: 011 975 7770 E: [email protected]
T: 011 049 7770 LABELLING W: www.maritimeshipping.co.za PROPERTIES
E: [email protected]
W: www.manitou.co.za Traceability Solutions Natloc Logistics Growthpoint
T: +27 (0) 10 020 7220 T: +27 (O)11 390 2314 T: +27 (0) 11 944-6288
T: +27 010 596 8460 E: [email protected] E: [email protected] M: +27 (0) 83 628-2442
T: +27 087 236 6625 W: www.tracesol.co.za W: www.natloc.co.za W: www.growthpoint.co.za
C: +27 071 612 0135
E: [email protected] LIFTING Trackmatic Waterfall
E: [email protected] T: +27 (0) 11 531 3400 T: +27 (0) 87 845 1132
W: www.jungheinrich.co.za Combilift E: [email protected] M: +27 (0) 83 675 9962
M: +27 (0) 82 337-6815 W: www.trackmatic.co.za E: [email protected]
FORKLIFT ACCESORIES T: +27 (0) 11 900-8010/12 W: www.waterfallcity.co.za
W: www.combiliftforklifts.co.za Value Logistics
CPR T: +27 (0) 860 100 046 RACKING
T: +27 (0) 11 740 3458 LOGISTICS W: www.value.co.za
E: [email protected] Acrow Racking & Shelving
W: www.cprbatteryservices.co.za MACHINERY T: +27 (0) 11 824 1527 - JHB
T: +27 (0) 11 824 3681 - JHB
Eternity Technologies Bollore Logistics Future Packaging T: +27 (0) 21 905 0500 / 2 / 4 - CT
T: +27 (0) 11 965-1875 T: +27 (0) 11 396-0365 T: 011 794 3310 T: +27 (0) 31 465 0377 - DBN
M: +27 (0) 73 361-6601 M: +27 (0) 83 756-8300 E: [email protected] T: +27 (0)82 719 1196 - DBN
E: [email protected] E: [email protected] W: www.futurepack.co.za E: [email protected]
W: www.eternitytechnologies.com W: www.bollore-logistics.com Dexion
PACKAGING T: +27 (0) 21 552-0220
F: +27 (0) 86 517-2949
First National Battery Barloworld Logistics Filmatic Packaging Systems E: [email protected]
T: +27 (0) 21 932 6331 T: +27 011 445 1600 T: +27 (0) 21 862 2192 W: www.dexioncape.co.za
E: [email protected] E: [email protected] F: +27 (0) 21 862 4605 Econorack
W: www.battery.co.za W: www.barloworld-logistics.com E: [email protected] T: +27 (0) 11 872 1080 / 1020
W: www.filmatic.com E: [email protected]
W: www.econorack.co.za

FLOORING STORAGE SOLUTIONS

Krost Shelving & Racking CLF BITO SEW
T: +27 (0) 11 827-5555 T: +27 (0) 11 704 5557 T: +27 (0) 11 397 7377 T: +27 82 770 8796
E: [email protected] W: www.concreteflooring.co.za T: +27 (0) 21 770 0016 E: [email protected]
W: www.krostshelving.co.za E: [email protected] W: www.sew.co.za
MATERIALS HANDLING W: www.bitosa.co.za SSI Schaefer
Palian T: +27 (0) 11 707-2600
T: +27 (0) 11 708-0222 Solutions4u WAREHOUSE F: +27 (0) 11 707-2620
M: +27 (0) 84 703-1926 T: +27 (0) 11 900-8010/12 SOLUTIONS E: [email protected]
E: [email protected] M: +27 (0) 82 337-6815 W: www.ssi-schaefer.com
W: www.palian.co.za E: [email protected]
ROS International KK Storage
T: +27 (0) 11 023 5448 Siyamuva CELL C T: +27 11 503 1500
E: [email protected] T: +27 (0) 11 397 1131 T: +27 (0) 74 786 5786 E: [email protected]
W: www.ros-intl.co.za E: [email protected] E: [email protected] W: www.storequip.co.za
SSI Schaefer W: www.siyamuva.co.za W: www.cellc.co.za
T: +27 (0) 11 707-2600
F: +27 (0) 11 707-2620 RACKING MAINTENANCE
E: [email protected]
W: www.ssi-schaefer.com

Spode Storage ROS International DHL Space Creators
T: +27 (0) 11 100 4772 T: +27 72 444-1010 T: +27 (0) 11 821 0100 T: +27 7 981 0765
E: [email protected] E: [email protected] E: [email protected] E: [email protected]
W: www.spodestorage.co.za W: www.ros-intl.co.za W: www.dhl.co.za W: www.spacecreators.co.za

Store Lab ELECTRICAL Fortna HEALTH & SAFETY
T: +27 (0) 11 708-0135 COMPONENTS, T: +27 (0) 11 028-5900
F: +27 (0) 86 696-4099 DISTRIBUTION & E: [email protected] V & V Training
E: [email protected] W: www.fortna.com T: +27 (0) 11 914 3911
W: www.storelab.co.za SOLUTIONS E: [email protected]
Jeff Crockett CLOUD W: www.vvtraining.co.za
C: 0723479042 Sietech INVENTORY
T: 011 462 4249 T: +27 (0) 31 205 9492 VALVES
E: [email protected] E: [email protected]
W: www.prostorage.co.za W: www.sietech.co.za Invincible Valves
Universal Storage T: +27 (0) 11 822 1777
T: +27 (0) 11 793-1111 RECRUITMENT W: www.invalve.co.za
F: +27 (0) 86 724-5304
M: +27 (0) 72 672-0983 PROMHS (Pty) Ltd. WEIGHING
E: [email protected] T: +27 (0) 83 447 4097
E: [email protected] Loadtech
DOCKING SYSTEMS W: www.promhs.co.za T: +27 (0) 12 661 0830
E: [email protected]
T: +27 (0) 11 900-3909 Flexcom KNAPP Logistic South Africa W: www.loadtech.co.za
F: +27 (0) 900-2559 Professional Recruitment T: +27 (0) 11 465-9284
E: [email protected] Services M: +27 (0) 72 255-0352
W: www.stabaload.co.za M: +27 82 9444 009; E: [email protected]
E: [email protected] W: www.knapp.com
W: www.flexcomrecruitment.co.za

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