An automotive OEM parts distributor covering a five-state area was running out of room at its single 300,000 sq. ft. distribution center. The distributor was considering a $25 million expansion to be completed within 18 months. Current warehouse capacity exceeded 95.8% of available space. This left little room for new products or efficient part locating. The distributor asked Flow Consulting to do two things:
- Determine what steps could be taken to increase the current facility’s storage capacity, and
- Determine how soon the new facility would need to come on-line based on current growth rates at the current facility.
Flow Consulting leveraged its expertise in warehouse operations, procurement, supply chain management, and statistics to develop five steps that would dramatically increase the capacity of the current facility. Implementation time-line for each of the steps was completed in weeks, not months. The steps taken were:
- Re-balance the storage and rack types, move some product to push back and flow through racks, and adjust pallet rack-beam spacing to create a dense cube.
- Consolidating partial pallets is labor intensive, but finding the opportunities to combine the pallets took a new WMS report.
- Continually purging excess, slow moving and obsolete items needs to become a routine, not a crisis task.
- Bulk corrugated and pallet suppliers were nearby, which reduced the need for more than a couple days’ supply freeing valuable space.
- Statistical Analysis revealed that storage of too many of the wrong items and too few of the right items caused slow inventory turns and poor service levels.
The original 95.8% storage usage was reduced to less than 75% within 6 months and additional steps were identified to continue capacity improvement as the business grows. The $25M expansion thought to be needed within 18 months, was successfully delayed by more than 5 years.