Sensitivity analysis of the warehouse performances

In the analysis of the warehouse, an important aspect is to understand the robustness of the solution to the impact of the external environment.

The warehouse of a manufacturing facility is constantly exposed to stressful situations, having roots from different drivers, more often represented by market fluctuations, increase / decrease in volumes, need for flexibility of the storage system.

The core aspect in the definition of a proposal is that the solution must show a degree of resilience to changes in times; apart from the degree of innovation brought to the past situation, must not only be efficient in the operation, but the system needs to be tested in stressed operating conditions.

The analysis of sensitivity of the proposed layout starts by developing an assumption: the improvement in the system, as a result of an investment, should be able to withstand strain due fluctuations in the demand for products, either in best or in worst cases conditions.

As the demand increased of around 10% in the time span 2018-2022, the new target is to give in to a provocation, by observing what is going to happen if the demand, starting from 2023:

- increases in five years of 10% (best-case analysis).

- Conversely, decreases in five years of 10% (worst-case analysis).

To start the analysis, the proposal is to focus as a first step on the economic impact of implementing the warehouses.

For each warehouse unit, an approximated cost analysis has been performed, considering as a key aspect for the definition of an economic value of the storage (Table 3.1):

- Cost of the storage system: the cost of purchasing the storage system, including the elements composing the structure (e.g., pillars, beams, protection grids, accessories, etc.), the installation, and testing procedures.

- Cost for safety obligations: separated from the net storage system purchasing costs, they are the costs to be paid to cover safety insurance costs during the installation of the storage.

- Cost for construction: including expenses for performing construction work to install the storage system (e.g., masonry, plumbing, connection to power network grid, etc.).

- Cost of renting of material handling equipment: considered as a long-term rent (average duration equal to 60 months), it is the cost for the stacking equipment.

- Cost of labour: the cost for the operator, consider equivalent to the cost of one operator on 2 eight-hours shift, 5 days / week, for 220 working days / year.

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Table 5.1. Average depreciation costs of the warehouse WH VERSION BINS BINS PER

LEVEL

COLUMNS ROW AISLES AREA [sqm]

STORAGE TYPE MHE MODEL RACK SAFETY COSTS

CONSTRUCT.

WORK

FORKLIFT RENT

OPERATOR TOTAL COST FINISHED

GOODS 2.128 14 19 8 1 370 Movable rack Trilateral

Turret Truck 198.500 € 3.300 € 11.800 € 50.000 € 123.200 € 386.800 € RAW

MATERIAL 840 15 7 8 1 163 Movable rack Trilateral

Turret Truck 79.800 € 1.300 € 3.600 € 50.000 € 123.200 € 257.900 € LININGS 200 40 1 5 2 60 Static rack Reach truck 2.300 € 138 € 184 € 15.000 € 123.200 € 140.822 € STAMPED

PARTS 840 10 14 6 7 175 Static Rack Trilateral

Turret Truck 81.500 € 4.890 € 6.520 € 50.000 € 123.200 € 261.110 € ALUMINUM

EXTR. 240 - - - - - Cantilever Rack Reach truck 18.000 € 1.080 € 1.440 € 15.000 € 123.200 € 158.720 € COST OF EACH WAREHOUSE SYSTEM

FEATURES

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By comparing the value to the inventory value to be store in the warehouse it is possible to look for a break-even point (to know when the investment is recovered) and then compute a depreciation rate to understand the residual value of the system during its life cycle.

It is important to distinguish between investment and running costs: the first is only concerned to the calculation of the investment for purchasing the structure (Cost of the storage system + Cost for safety obligations + Cost for construction), while the second is related to the cost for maintaining the warehouse (Cost of renting of material handling equipment + Cost of labour).

To evaluate the profitability of the investment, is necessary to evaluate the Return of Investment (ROI):

𝑅𝑂𝐼 = 𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡

𝐶𝑜𝑠𝑡 𝑜𝑓 𝑡ℎ𝑒 𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡 ∗ 100

Going back on sensitivity, the computation of the best- and worst-case help to understand how the warehouse can be resistant to swings in demand or, on the contrary, burden by demand variation.

The first aspect to validate is to choose a suitable increment value: 10% has been considered in the analysis because of the linearity with the increase trend of the case study.

By decreasing the volume by 10%, the system does not show any sufferance, by dealing with all values of warehouse capacity levelling around 75% (Table 5.2).

By increasing volume of 10%, the situation shows a goods resilience of the system, that can stand variation in volume without excessive sufferance and with good values in term of warehouse saturation (Table 5.3).

In details:

- Finished goods warehouse: by increasing the demand, the volume expressed as number of bins passed from 83% to 91%, indicating that the warehouse can store 190 pallets yet.

- Raw material warehouse: the increased situation had a consistent impact on the warehouse, that in five years reduced its saturation safety threshold of 9%, on the other hand indicating the availability of 55 vacant bins.

- Linings warehouse: the increase by 10% hit the spot in the warehouse, going from 84%

saturation to 92%, allowing 15 units more to be stored in the warehouse.

- Webs and tables warehouse: in the best-case situation, the warehouse is showing a relevant amount of crisis, indicating that by augmenting the demand the saturation increases as well, requiring to think up different solution to avoid collapsing of the storage system.

- Backplates warehouse: best-in-class in terms of saturation, it is the warehouse that better reacted to the stress test, with a final 86% saturation value at the end of the increment period.

- Aluminium extruded bars warehouse: completely aligned with the other warehouses, it ended the test by a 92% of occupation, leaving free space per 20 extra loading units on the racks.

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Table 5.2. Sensitivity analysis: worst case situation

Table 5.3. Sensitivity analysis: best case situation

WH VERSION REQUIRED BINS NEW CONFIG BINS OCCUPATION with 10% increment FUTURE OCCUPATION FINISHED GOODS 1.763 2.128 83% 1.587 75%

RAW MATERIAL 714 840 85% 643 77%

LININGS 168 200 84% 151 76%

WEBS&TABLES 376 420 90% 338 81%

BACKPLATES 330 420 79% 297 71%

ALUM. EXTRUSIONS 200 240 83% 180 75%

WORST CASE (DECREASE OF 10% IN VOLUME)

WH VERSION REQUIRED BINS NEW CONFIG BINS OCCUPATION with 10% increment FUTURE OCCUPATION FINISHED GOODS 1.763 2.128 83% 1.939 91%

RAW MATERIAL 714 840 85% 785 94%

LININGS 168 200 84% 185 92%

WEBS&TABLES 376 420 90% 414 98%

BACKPLATES 330 420 79% 363 86%

ALUM. EXTRUSIONS 200 240 83% 220 92%

BEST CASE (INCREASE OF 10% IN VOLUME)

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