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1. Stores and Warehouse
Organisation
1.1
The Purposes of the Stores / Warehouse
The stores is self-evidently a major company service department.
Service is provided on behalf of the following functions:
Service to Purchasing
& Quality:
The stores receives raw materials and bought-out parts
on behalf of Purchasing. The receipts must therefore be counted accurately
and the material checked or sampled as to quality. Information about receipts
must be promptly notified to the central database.
Service to Production:
The stores must marshal and issue all works orders on behalf
of production, and perhaps any tools and fittings needed. The stores also
accepts material from production, whether completed work or scrap. The nature
of production is such that emergency issues of material are always likely
to be required. It would follow from this for a factory stores that the
facility should provide a service during all times that production takes
place ... including second and third shifts.
Service to Production
Planning:
The planning of production and the correct maintenance
of stocks are essential services as the company progresses manufacture,
but these tasks simply cannot sensibly proceed unless the stores/warehouse
correctly maintain stock records at a very high level of accuracy.
Service to Distribution
(Logistics):
The stores or warehouse must prepare goods for despatch
to external customers within a turnaround time that has been agreed between
its manager, the distribution manager and transport supervision. The function
of despatch includes packaging and, perhaps, making ready all documentation.
Service to Field
Service or Engineering:
There may be a requirement to hold and dispense spares
for machines both within the factory or installed at customers' premises
on a 24-hour basis. The stores' role in providing this service entails call-outs
... not merely leaving a key with security.
Service to Finance
(and Senior Management):
Stock is regarded for financial
purposes as a current asset of the company - ie an asset of the same
nature as cash and debtors - so that consequently Stores' maintenance of
accurate records is a vital contribution to company management. The accuracy
of the records is not merely an issue at year end when the balance sheet
is being struck. On going accuracy is needed continually for integrated
financial accounting purposes.
Other important functions of the stores relate simply to
the internal good management of the facility. Obvious examples are the safe
and economical handling of material; and security from fire and theft. As
well, there is a requirement to maintain stock in good condition. (It is rarely
accepted, however, that the stores or warehouse is responsible for the ordering,
forecasting or replenishment of stock itself, except perhaps inexpensive consumable
items or fuel in the course of operating a simple "2-bin replenishment" system
. We must return to the question of purpose and function in the final Section
of this on-line course, when the matter is discussed as to how well the stores
has performed and the need for its continuous improvement.
1.2
Stores & Warehouse Construction
1.2.1
The Building
A single storey building is almost always to be preferred
- it is cheaper to construct and it is cheaper to fit out with ancillary
services. Above all, a single storey is more suitable for fork lift trucks
which, in a multi-level facility, would otherwise need sometimes to go
from level to level via lifts. Although single storey buildings are nowadays
the norm, there are two ways in which some of the advantages of a two
storey building can be obtained. The first is by the construction within
the warehouse of a mezzanine floor for offices and limited specialised
sub-stores. The second is to have multi-tiered binning. This consists
of stacking one run of shelving, say 3m high, on another that is also
3m high. A floor is then provided for storesmen at the higher 3m level.
It should be noted, however, that a disadvantage with both mezzanines
and multi-tiering is the exclusion of natural light at the lower levels.
This forces up operating costs due to the need for artificial lighting,
and may lead to accidents. (Inadequate lighting is a major cause of accidents
generally.) Of course, if the new stores needs to be in the centre of
a major city, land prices may force the company to develop a multi-storey
facility.
Multi-storey warehouses can be successful if care is
taken to 'zone' the stored material carefully. Typical zoning schemes
are: (i) high and low pick densities (see later); and (ii) bulk stock
/ back-up stock / picking stock. A financial reason for single-storey
is given in the relationship between the cost of the construction, worked
out in £ per cubic metre of space obtained, and the (single storey) height
to the eaves. This can be illustrated by a graph showing how the relative
cost per cubic metre of space created falls exponentially as the overall
height of a building rises. As a rough estimate, a 12 metre high building
would cost only 15% more than a 6 metre building. However, a 12 metre
(tall) warehouse would show major cost savings over a 6 metre (more extensive)
warehouse of the same racking capacity, with savings in land costs, rates,
heating etc.. Perhaps as important as this is the resale value of the
warehouse, as more and more companies are looking for new premises and
focus on buildings well over 6 m high.
1.2.2
Large Scale Equipment
A two-stage approach can be used to work out the best
system of materials handling. First, the best or most likely range of
units loads of incoming materials is determined: size, weight, frequency
etc.. This will enable the equipment to be decided that is necessary to
handle them, and the design of the receiving docks. Secondly, the unit
loads required by the company's own customers are considered, so that
the equipment needed at this end of the materials handling system can
be determined. (For example, consider the requirements to fit out a supermarket
... receiving docks and fork lift trucks are necessary to deal with incoming
cartons brought in from the retailer's depot, and wire trolleys and trolley
parks are needed to deal with the carrying away of customers' weekly groceries
to their cars.)
1.2.3
Flooring and Floor Flatness
Floors are always of concrete, sometimes treated with
compounds to reduce slippage and to minimise dust and grit. Specialist
contractors must be employed to lay them, capable of constructing them
to the required high standards of flatness and delivering the required
degree of durability.
Flatness is especially important: if a floor is not flat,
fork lift trucks will slow down and may collide with racking. But what
is flat? To answer, consider an elevation difference of 10mm across a
1500mm aisle. Put a narrow aisle truck on the floor at this level and
raise its cab 15m. Now the 10mm difference has become a 100mm static lean.
At speed, that 100mm lean becomes a lean of 300mm. Floor flatness is specified
by BS8204 (Part 2). Floors should have an elevation difference of less
than 3mm. Flatness is measured by a prophilograph machine, which traces
the floor contours electronically. An uneven floor can be flattened by
a laser-guided grinding machine, or, alternatively, a new floor can be
laid as an apron on the old one.
1.2.4
The Loading Bay
Loading bays are positioned so that vehicles can have
direct, unhindered access to them without the need for complicated manoeuvring.
Among other things, easy access will speed the loading and unloading processes
and may even reduce the need for extra bays. A key decision is whether
to allow for side loading or end loading of vehicles. End loading
offers many advantages. Although it restricts access to only one part
of the load, the narrower width is such that than one can get two bays
in a space, compared to one with side loading. End loading also provides
better temperature control and greater safety. (Loading bays are a particularly
critical area for safety ... 25% of all industrial
accidents occur in this area). Note incidentally, that clockwise
circulation of traffic up to the loading bays is required to provide better
driver control of the reversing turn into the bay. The construction of
the loading bay must clearly allow for modern materials handling equipment
and practices. Doors should be 9 ft, or a little more for higher trailers.
The height of the loading bay platform must accommodate any number of
vehicle types and make allowance for the fact that vehicle heights rise
and fall during the loading and unloading processes. The usual (very cost
effective) solution nowadays is to build permanent docks levellers.
As for location, two common practices are diametrically opposed to each
other. One is to locate both the receiving and despatch bays next to each
other. The other is to put them as far apart as possible! However, with
modern communications and materials handling, it may be more effective
to place bays at several points around the building to allow direct pick-up
and easy despatch by factory departments. If this is done, of course,
all such bays must be centrally controlled and berth activity supervised.
The question of how many loading/unloading bays should be provided in
the construction of the stores or warehouse can be decided best through
the use of a simulation model as described below.
1.2.5
Other Important Areas
Further vital topics which must be dealt with include
those in the list below. Perhaps the most important point, however, is
that the stores should be designed, at least in rough, by stores staff
themselves - it will be realised that an inadequately planned facility
can have massive, permanent on-going effects on operational costs. For
example, failure to obtain the know-how and inside knowledge of staff
may result later in queues; excessive waiting times for drivers or shop
floor operators; double handling; and delays in clearing materials for
use.
(a) Doors
For the sakes of security and to minimise heating costs,
instal only those doors which are essential. Aspects of doors to consider
are from (1) to (5) as follows - or perhaps a combinations of them is
required ... (1) their speed (speed is clearly important for doors to
cold areas); (2) whether automatic control is desirable; (3) security;
(4) thermal efficiency: (5) whether specialist factors apply, such as
use as fire shutters, extra high security or heavy duty. How much traffic
will use the door and what types of traffic will it be? Alternative door
types are (i) sectional insulated overhead doors ('up and over' doors,
or Thermadoors), which may be standard, or normal, lift, high lift or
low lift, (ii) Rapid Roll doors. An essential accompaniment to internal
doors is either a traffic light or one-way system. (Warning klaxons are
an additional safeguard.) Door control activators should also be given
attention - it is grossly inefficient if drivers of FLTs need to dismount
to open/close the door. The necessity for high speed, insulated doors
is dealt with under Cold Stores.
(b) Lighting
Ensure that the fullest possible advantage is taken of
natural light, especially in gangways and passages, so make sure shelves
and racks when they are installed will not obscure windows. (Windows of
continuous glazing with wired glass.) Inadequate lighting can make it
difficult to read documents, labels and screens. Anto-glare filters should
also be considered. (On the matter of clarity of documents, ensure that
bold, clear fonts are used and that the pitch of letters and numbers is
sufficiently large.)
(c) Picking Areas
Dealt with below.
(d) Special Storage Areas.
Heavy goods, bins, safes and others may be zoned into
special stores areas to be laid out in conjunction with the main pallet
racking.
(e) Ancillary Services Areas.
These are: the boiler house; electricity sub-station;
garage; fuel pumps; canteens; toilets; car parks; first aid stations,
etc..
1.2.6
Gathering Data
(A) Calculating Pallet Space
The following simple six step procedure can be used to
find the average palletised area that will be occupied by a case or package.
i. If the cases are to be stacked on a pallet, find
the number of cases per tier on each pallet and the number of tiers
per pallet. For example, 5 cases per tier and 4 tiers per pallet =
20 cases per pallet.
ii. Decide the maximum number of pallets per stack.
For example, with 3 pallets per stack, the number of cases is 20 ×
3 = 60.
iii. Each stack occupies the area of one pallet,
plus, say, 1.5 cms overhang on each side. The area is thus 1030 mm
× 1230 mm, = 103 cm × 123 cm = 12,670 sq cm, or 1.267 sq metres per
stack.
iv. The gross area in iii. is reduced to 60% net
after allowing for aisles, staging areas and offices. Thus net area
is 1.267 / .6 = 2.11 sq metres per stack.
v. We must now allow 20% wasted space for honeycombing,
so that the actual space per stack is 2.11 / .8 = 2.64 square metres.
vi. The area per case for planning purposes is therefore
2.64 / 60 square metres per case, = 0.044 square metres per case.
(For example, if stacking 2,000 cases, allow 2000 × 0.044 square metres
= 88 square metres.)
(B) Calculating Pick Popularity
(P)
Analyse existing data such as the stock records transaction
trail and record the total number of picks plus putaways per item per
month. If the file holding this data is sorted into descending order of
the number of picks + putaways, it will be found that the top 20% of the
items account for 80% of the total number of picks + putaways ... the
familiar ABC effect.
(C) Calculating Volume Movement
(V).
From the data in (B), apply the volume of each item V.
This is defined as V = T × C, where T = the average total number of units
of the item put away and withdrawn per month and C = physical volume of
each unit - ie the space occupied by one item, measured in cubic centimetres
(or cubic feet). That is, volume movement is the volume of each item stored
and picked per month. Analysis of items in descending order of volume
movement will show typically that 15% of items account for some 80% of
the total volume movement. Of equal interest to the stores planner is
the fact that 50% of the items account for less than 0.5% of the total
volume movement.
(D) Calculating Pick Density (D)
If P = the average number of putaways and withdrawals
per month for an item, and V is its volume movement, then each item's
pick density D = P / V. Pick density is needed in determining storage
location, as explained further below.
Hint: In order to find the volume of a small item, institute a "measuring
cup" of fixed volume ( say 100 cc) and determine how many units will fit
in a cup. For large items, imagine them being in a box, and apply a tape
measure to the imaginary box.
1.2.7
Changes in Modern Stores Design
The stores designer today must be very conscious of the
rapidity of change taking place in the tempo of modern manufacturing.
With Just-in-Time supplier receipts, kanban and JIT deliveries, the quantities
of stock ordered from suppliers, manufacturing lot sizes and the delivery
quantities demanded by customers are becoming progressively smaller and
their frequency of movement correspondingly greater. So while in the past
the emphasis in design was on economy of storage density, todays emphasis
is on speed and flexibility. Issues today are traffic jams and the quick
attention to incoming goods and shop floor receipts.
1.3
Storage Options
Storage options here means the stores or warehouse 'furniture'
- the physical containers, shelving and the rest used to contain the items
being stored. Note that the term stores furniture seems to imply that
the fixtures and fittings are static and the goods within them are at rest.
It is possible, however to install what is termed 'live' storage facilities.
With live storage, either the goods themselves move, or the equipment moves,
or both. An example of live storage where the goods alone move is a chute.
1.3.1
Shelves and Bins
Open shelving is suitable for items within strong packages,
such as small boxes of components. A working ledge at the front is typically
provided for counting out items being picked. Closed shelving usually
means closed at the back and is more common. It is suitable for non-packaged
goods and can be fitted with shelf trays. Lockable fronts may be provided.
A shelving bay means a single multi-shelf construction ... ie one
unit of shelving from the equipment supplier. By bolting several bays
together side-by-side, we form a 'run'. A very strong, stable structure
is formed when two runs are bolted together back to back, and, as indicated
above, runs can also be stacked in tiers. Guidelines on shelving are contained
in BS826, specifying preferred dimensions.
1.3.2
Racking (Non-Pallet)
The term "racking" is applied to any storage fixture
that is not shelving or binning. Racking is used for the storage of an
enormous variety of goods - pallets themselves, tyres, cables, bars, tubes,
drums ... The layout of racking must be given the greatest attention at
the design stage, since the decisions made will have a considerable effect
on the utilisation of floor space (and volume) and on the speed and efficiency
of storing and picking.
A common requirement in industrial stores is for racking
for bars and tubes. The basic options are to hold the stock either horizontally
or vertically. The preference is usually for horizontal racking. This
may be either pigeon hole or antler ('horn'). Pigeon
hole racking consists of angle irons in which the bars are stored together.
A disadvantage of it is that mechanical handling is difficult. With the
antler method, the racking consists of a framework of angle irons, so
that each bar is stored in an individual slot like bottles in a wine rack,
making mechanical handling easy. Horizontal racking clearly demands corresponding
horizontal working space, and if this is limited compared to height, vertical
racking may be preferred. Two problems with this are (1) that the bar
or tubing may become distorted due to the pressure of its own weight;
and (2) the greater safety hazard it presents.
Note that warehouse racking is regulated under the Construction
(Design and Management) Regulations ('CDM'), part of the Health &
Safety at Work Act. The CDM regulations were amended and re-issued in
April 2007. Although racking in a warehouse may seem a long way from a
building site, the Health & Safety Executive classifies the installation
of racking as a construction project. To comply with the CDM regulations,
companies must ensure that a health and safety plan has been developed
before any construction work begins. A health and safety file that
is available for inspection at any given time must also be produced. The
preparation of the plan is the responsibility of the warehouse manager.
It will usually begin with a description of the 'project' and a general
statement of health and safety principles and objectives of the work.
It will include arrangements for managing and organising the project,
and include the identity of those responsible for the actual erection.
1.3.3
Pallet Racking
There are a great many standard storage arrangements
for pallet racking. The Stores planner can decide on the configuration
suitable for a specific need simply by contemplating a standard layout,
the type of material to be stored and the picking/putting away rates to
be achieved. Seven standard arrangements are given below, with very brief
comments on each. Their pro's and con's are summarised below.
(i) Block Stacking
Unit loads are stacked on top of each other, and stored
on the floor in storage lanes ("blocks"), two to ten deep. Block stacking
is suitable only for a very limited number of different items, where product
quantities are large and/or where products themselves are bulky and turnover
is high. Very high storage density is achieved though ease of access is
not good. Also note that block stacking is strictly LIFO (see below),
so that if FIFO is necessary, block stacking is not a feasible option.
(ii) Single and Double Deep Pallet Racking
Single deep racking is a simple system that is associated
with pallet racking for picking faces (see Two-Step Picking later). It
allows immediate access to every load stored. A major disadvantage, however,
is the loss of some 60% of floor space to aisles. Double deep pallet racking
is merely an extension of single with less loss of space to aisles (but
with more honeycombing).
(iii) Drive In and Drive Thru Racking
The racking consists of upright columns with horizontal
rails to support pallets. Storage lanes of the chosen depth reduce space
lost to aisles even more. High density, but suitable only for low/ medium
thruput items. LIFO only. Drive thru merely means access from two sides.
(iv) Pallet Flow Racking
This superior though expensive system is similar to Drive
In Racking, except that loads are moved on skate wheel conveyors. As a
load is removed from the front of the storage lane, the next lane advances
to the picking face. Pallet flow racking gives high throughput and good
space utilisation, and permits FIFO. It is used for high density, high
thruput storage, but costs some £200 per storage position.
(v) Push-Back Racks
As a load is placed in storage, its weight and the force
of the FLT (fork lift truck) pushes back the other loads in the lane.
As a load is removed, the rear loads push forward. Expensive and LIFO.
(vi) Mobile Pallet Racks
Whole rows of rack are moved forward together, eliminating
aisles.
Safety is a most important concern
with all racking. Training must be given by the equipment manufacturer
and the greatest care exercised to ensure loads are evenly distributed
and that they never exceed the manufacturer's limits. Operating conditions
must also be satisfactory, such as lighting and working space, and the
racking installation must be rigorously inspected on a regular basis,
not simply when someone 'notices something is wrong'... For Racking Safety
Trainining, visit SESS.
1.4
Allocating Storage to Stock
The first task is to obtain and analyse the volume movement
of all items so that the correct storage capacity can duly be assigned to
the items to be stored. The four principles which the planner will typically
follow are:
1. Low volume movement; high popularity:
These items should be assigned to very productive, low
volume storage media - for example, carousels (see below).
2. Low volume movement; low popularity:
Expensive storage media cannot be justified for these
items. The media selected for them will be storage drawers and bin shelving.
3. High volume movement; high popularity:
These items must be stored in pallet racking systems
that lend themselves to frequent picking and restocking, such as flow
racks and single deep racking.
4. High volume movement; low popularity:
Other, less expensive styles of racking will typically
be chosen.
Consideration should be given to the relative merits of the
seven types of pallet racking described in the previous sub-session. The characteristics
and appropriateness of the seven systems are summarised in the following table.
Characteristics
and Appropriateness of Racking Systems
....................................Cost
.Storage Density .Load Access .Thruput Capacity .FIFO? Variabl Load Sizes?
Block Storage ........................n/a..............v.good............................poor
............................average...................y.............................good
Stacking Frames....................low..............good...............................poor.................................poor.....................n.............................poor
Sing/Dou Deep ......................low..............good..........................good/OK.........................good/OK................poor......................average
Drive In/Thru ........................ low...............good.............................good...............................average..............difficult......................poor
Flow Racks..............................high..............good............................good.................................v.good..................yes............................poor
Push Bk...................................high...............good.............................v.good...........................average..............difficult...................average
Mobile.......................................high..............v.good............................poor................................v.poor...................no.........................average
As we see from the table, both relative volume movement
and relative picking popularity are taken into account in working out required
storage volume and determining the specific storage media to be installed.
Relative volume movement and relative popularity are consequently taken into
account in determining where "regions" of stock and storage media are to be
located. In short, where both volume movement and popularity are high, flow
racking might be best. Where volume movement is low, then we might turn to
(1) storage draws (low popularity); (2) bins and shelves (medium popularity);
and (3) carousels (high popularity).
1.5
Allocating Stock to Storage (Pick Density and 'Golden Zone')
For a very small number of special items, the decision as
to which locations they are to be assigned for storage will be made on an
individual basis. For example, precious metals will be located in safes and
material likely to give off fumes will be located in well ventilated areas.
The decisions for the great majority of items within a general storage region,
however, will be made after first considering how easy (quick) it is to put
away into, or pick from, those locations. In stores jargon, the locations
where these activities may most easily be accomplished are referred to as
"the golden zone" - locations which are between
waist and shoulder high, and are close to a central point in the stores. Next
come locations in the "the silver zone". Finally, the slowest and most distant
locations make up "the bronze zone". Nominating locations and zones is the
first task in deciding what to put where.
At first thought, it seems intuitive that the criterion for
deciding which items are to be assigned to the golden zone should be on the
basis of their popularity. However, popularity alone ignores the fact that
the stores planner is trying to optimise the use of the golden zone, and that
consequently he should also take into account how much space is taken up by
items. What he wishes to do is to maximise the degree of picking that takes
place there. Consequently, the notion of pick density,
previously defined, must be examined further.
As previously stated, if P = the average number of putaways
and withdrawals per month for an item (ie popularity) , and V is its volume
movement, then each item's pick density D = P / V.
The planner must calculate the pick density of each item
within a stores region and allocate the group of items with the highest pick
densities to the golden zone, the group with next highest pick densities to
the silver zone and those with the lowest densities to the bronze zone.
To illustrate the optimisation of golden zone space, consider
a simple example of a golden zone of just 10 cubic meters of space. Now consider
three items A, B and C, with the attributes shown in the table below.
...............................Item ....................Popularity
P ................Volume-Movement V (T × C) ..........Pick Density D (P /
V)
................................A .....................200
per month ......................10 m3 per month .................................20
requests/m3
................................B .....................150
per month .......................6 m3 per month ..................................25
request/m3
................................C ......................120
per month .......................4 m3 per month .................................30
requests/m3
Suppose now that we decide to store one months supply of
material in the golden zone. If we were to allocate Item A to the zone on
the basis of highest popularity, this will exhaust the capacity of the zone
and the number of visits we will get to it will be 200. If , however, we use
the basis of pick density, the items assigned to the golden zone will be C
and then B. Together, these will exhaust the zone's capacity of 10 m3 (ie
6 + 4 = 10) and the number of visits we will get will be 270 (150 + 120).
The use of pick density instead of popularity in allocating items will make
a significant difference to the stores' utilisation of prime space.
1.6
Material Flow Planning (Layout)
The dominant scheme for the layout of the facility is as
a U-shaped flow. The advantages of a U-flow are as follows:
* There is very good utilisation of dock resources (doors,
dock levellers, space, goods in/out staff), since receiving and despatch
operations can share docks;
* U-flow makes cross docking easier, and also facilitates
the immediate onward movement of incoming Just-in-Time supplies to the
factory floor;
* U-flow gives excellent FLT utilisation, since putaway
and picking trips can be combined;
* There is good security;
* U-flow design is inherently more flexible - it is easier
to expand the various facility areas as operations change.
Other layout schemes are "Straight Through" (for distribution
depots) and "Modular Spine".
THE
USE OF SIMULATION IN MATERIALS FLOW PLANNING
Simulation is an immensely powerful tool
in warehouse design and warehouse development for providing
answers to such questions as "how many FLTs should be deployed?", "How many
cranes?", "What would be the effect of a conveyor system covering these locations?"
Simulation is particularly useful in warehousing since it incorporates the
mathematics of queuing theory in order to test the effect of likely activity.
For example, "How long will vehicles wait to unload by mid-morning, and how
many extra docks should be provided to reduce these queuing times by 75% ?"
Virtually every company planning and building a new warehouse will have used
simulation in order to do so. Recent past users of simulation have included
Boots, in building a complete distribution/logistics system, and Littlewoods
Home Shopping, for a £40m distribution centre eventually incorporating 18
cranes and 350, 000 locations. The main benefits reported were:
The ability to test and compare the performance of alternative
scenarios put forward at the 'ideas stage' of the projects;
An ability to monitor/assess the effects of changing
requirements by What-If?;
Accurate comparison of alternatives, with all supporting
data ;
Problem solving through the ability to test alternative
solutions.
The use of simulation requires the building of a computer
model of the proposed facility or proposed change - vehicles, traffic, routes,
times, loads etc.. Nowadays, easy-to-use systems which incorporate interactive
animation can easily to built by anyone. The completed models incorporate
animation and realism, with the advantages that people at all levels are quickly
able to grasp what is being proposed, and (through interaction) are able to
input their own ideas or get detailed information about what is being shown
on the VDU. For example, by clicking on a fork lift truck in the picture,
statistics can be obtained about its percentage use, distance travelled etc,
in operating the warehouse over, say, a specified hour. The training needed
to use an animated simulation package sufficiently well to obtain good results
is just a few days. In reality, users must spend most of the time fact finding,
discussing alternatives with colleagues and deciding objectives. (As a hint,
if the student of this course engages the service of a simulation consultancy,
perhaps paying fees in accordance with the time spent, it is essential to
find out beforehand precisely what data needs to be provided, and to have
such data readily to hand.) The foremost interactive animated simulation package
in the UK principally aimed at warehousing is Automod, and its sister module
Autostat, from Brooks Software, Reading. Visit http://www.automod.com
or phone 0118-921-5600.
1.7
The Installation of Automation
Automation is costly and the more flexible and extensive
in design it needs to be, the more costly it gets. Consequently, there are
four important requirements to consider before embarking on it, as follows.
There must be .....
1. sustained, high levels of steady production throughput;
2. a low, stable product range;
3. a high labour content;
4. large individual customer offtake quantities.
Automated equipment consists of electromechanical devices,
communication systems and computers. Electromechanical devices and communications
systems include powered rollers, vehicles guided by wire contacts along floor
mounted tracks, automated stacker cranes and other apparatus with feedback
and sensing devices. For example, a common scheme is to install vertical pallet
racks of conventional design, but with a power / computer operated fork lift
truck on a track in the gangways, the truck capable of reaching all pallet
heights. The automation then consists of the truck moving along the tracks
and moving the forks up and down, in and out, under the control of a computer
program. Many early attempts to automate, however, were failures. There were
three reasons:
A. Technical Overambition.
It was not unknown for the design of early systems to
take two or three years to complete. The designers of the automated system
moreover then required that every movement should be as perfectly meshed
in the real world as on paper. Mechanical devices, however, break down.
The scale of early warehouse projects was greater than experience showed
to be practical.
B. Logical Overambition.
In order to automate the warehouse fully, it is necessary
for software designers and programmers to understand and describe its
operations fully. Computer programs must be written and database data
properly set up. But many of the activities in the manual warehouse are
simply too involved to describe, and must of necessity rely on human knowhow
and intuition, which cannot be programmed.
C. Commitment and Discipline.
Early automation attempts were looked on as technical
and engineering projects. Success however requires full, multi disciplined
team commitment and massive advance training and publicity. These requirements
were not recognised.
To achieve success and avoid the mistakes of the past, five
guidelines are put forward.
1. Islands of Automation.
The monolithic automated warehouse is a myth. Instead,
automation must be seen as a set of projects physically isolated from
each other. Each project can be put in alone and should generally be capable
of justification in its own right. Examples of islands of automation are
the automatic storage and retrieval of full pallets; and the installation
of automated guided vehicles using wire-to-the-floor, as described above.
2. Flexible Operational Interfaces.
It must be possible for the storeman or warehouseman
to take control of operations at suitable interfaces. For example, if
there is a breakdown or incident in the marshalling of (automated) retrieved
pallets, it must either be possible to divert the retievals to a temporary,
manually controlled area or to take over the system.
3. Supplier / Customer Liaison.
The obligations of the automated equipment supplier are
not confined merely to the customer's experience
with the technology. He must liaise closely with the customer as part
of a team in setting up training schemes and seeing to other matters (eg
in developing manuals). By the same token, the customer must realise that
he also has an obligation to cooperate fully with the supplier.
4. Dedication and Organisation.
The heart of success in automation is not technology.
It is the dedication of the company and its managers to achieving success,
including taking into account the fears and aspirations of all personnel.
Success comes from organisation, competence and hard work. (These lessons
have long been known in the field of big project development).
5. Partial Automation.
The stores or warehouse supervisor should contemplate
partial automation only ... the installation, say, of AGVs, carousels,
automatic weighing machines, labelling etc, each installed only as and
when its use seems to be individually justified on a strictly local basis.
1.8
Coding and the Stores' 'Vocabulary'
For identification, classification and computer purposes,
each unique item in the stores must be assigned a unique code. Together, the
codes and each code's associated information, such as the item's name and
other major features, are known as the stores' vocabulary. One obvious
property of a coding system is that the codes generated through it should
be consistent. In fact, codes are often made up using a "hierarchical approach",
based on the particular types of goods in store. An example is the assignment
of a 6 figure numeric code (ie NNNNNN), where the 1st digit is the type of
material (ie raw material, component, piece part ...), the 2nd is 'metal'
or 'non-metal', the 3rd is type of metal, the 4th the form ('rod', 'tube',
'ingot' ...), the 5th the shape and the 6th the size. (A well-established
methodology is the Brisch system, which is a means by which a company
can put together a coding set itself, geared to its own use.)
For the stores, there are two vital coding issues: memorability
and meaning.
Memorability means that the code can be copied down
or transcribed onto transactions easily and with consistent correctness. (Incorrect
recording is a major cause of error in stock records.) It has been shown that
to achieve memorability the maximum length of a code should be 7 digits (and
6 would be better - but very definitely not 8 or longer, unless a barcode
or RFID reading system is in place).
The question of incorporating meaning into the code
is more difficult. First, it should be said that there is very obvious merit
in keeping to the same coding as used by production and purchasing. However,
the general company scheme may not be best for the stores since it is desirable
in this environment for the storeman to be able to tell from the code that
the material he is about to pick or place has certain properties. For example,
suppose that a material which was subject to special quality procedures (QP)
had to be handled within the stores in a certain way. The fact that the material
is a "QP" can be stored on the database so that special instructions are displayed
as necessary by the computer system. But to be safe, it may be desirable to
include this on the code itself, so that storemen can recognise it on occasions
not involving the computer. A second example relates to packaging. It may
be logically correct to designate the 50kg Box Packet as 01, the 50kg Soft
Packet as 02, the 100kg Box Packet as 03 and 100kg Soft as 04. But it may
be safer to code them B50, S50, B100 and S100 to prevent errors during the
physical act of picking. All the attributes of a material qualified by its
package can be maintained on the database internally, available to the storesmen
through computer programs. But it may be necessary to incorporate a number
of these classifications in the visible code itself to help staff in the operational
side of their jobs. If so, the risk then arises, of course, of making the
code more unwieldy from the viewpoint of memorability!
1.9
Installing Technology
1.9.1
Batch v. On-Line
Batch.
'Batch' processing means that data events are progressively
recorded through some medium (whether paper forms or an electronic recording
collector) and the records then input to the computer all together. That
is, the original data are deliberately held back from being input to the
computer until a reasonable quantity of information has been collected,
so that input, although efficient, is made usually several hours after
the events being recorded. If a transaction is found to be in error when
finally submitted to the computer, there can be a delay of many days before
its investigation and final correction.
On-line.
In on-line processing, data relating to an event is notified
to the computer on an individual basis as soon after the event as possible.
(There is usually nevertheless a brief time delay between the event and
the transmission of the record. The delay may be minutes or, in a slacker
environment, one or two hours.) There are two advantages to on-line processing.
First, the central computer database is brought up to date far sooner,
and usually accurately reflects the current situation. Secondly, there
is immediate feedback after submitting the transaction and, if it is in
error, the opportunity exists for immediate error correction by the person
responsible for completing it in the first place.
1.9.2
Data Recording Equipment
Data recorders:
These are hand-held machines similar to electronic
personal organisers. When its capacity has been reached, or after an
appropriate period of time, the device is taken to a terminal and the
data that has been captured is transmitted, or 'down loaded', to the
computer.
Radio data terminals (RDTs):
These are hand-held devices which incorporate a small
VDU screen, plus a tiny keyboard (say, 3"). More importantly, they
are able to communicate directly, on-line, with the computer via a radio
signal - ie a cable is not required. Data recorders and RDTs can optionally
have bar code scanners attached and some models are suitable for rugged
or hostile environments.
1.9.3
Voice Directed Picking
Voice directed picking is a highly effective and increasingly
popular technology that has many advantages in both stores and warehouse
operations. With 'voice', workers wear a headset, earphones and a belt-attached
portable computer which enable them to hear instructions from the computer
and to speak words of confirmation as to action taken - below under Order
Picking.
1.9.4
Communications
Electronic Data Interchange (EDI): This medium
is perhaps being eclipsed by the Internet. The term EDI refers simply
to the creation of data by one computer, in computer readable form, and
its acceptance directly by a second computer. Usually, the transfer of
data is through a data network known as a Value Added Network (VAN).
The sending company transmits the data with the code of the intended recipient
company. The data is stored on the VAN operator's computer at the nearest
position to the receiver. The receiving company scans the VAN computer
at times convenient to itself for any messages addressed to it. Local
networks mean in-house networks communicating via coaxial cable laid
in the premises. Wideband networks are inter-site, and are capable
of carrying vastly greater volumes of data traffic. They are typically
provided by BT between specified major towns and cities. The Internet
is a communication medium based simply on ordinary, existing telephone
cabling, and has the consequent virtue of being cheap. Direct access between
a distribution depot and a central warehouse is via a local telephone
call using simple software. Both text and graphics can transmitted and
received.
1.9.5
Weighing and Measuring Devices
Computerised weighing machines. A sample scale
can be used to find the 'mean', or average, unit weight of a product,
and the average then stored on a computer. Large electronic scales are
subsequently employed to weigh the main stock entering the stores or warehouse,
with direct links to the computer database holding the unit weight. Care
must be taken to account correctly for the container weight, referred
to as the "tare", and to ensure the items' weight is not distorted
by oil, wetness etc. Other devices of value are simple weighbridges,
non-computer weighing scales, calipers and micrometers.
In the process industries, bulk liquids are measured by flowmeters
or even simple dip tapes and dip sticks. Many methods used
for measuring liquids are acknowledged as being problematical, with comparatively
wide tolerances arising inherent in the techniques themselves. Problems
may be compounded by the need to take the temperature of the liquid, and
the further need to assume the temperature is uniform throughout the material's
bulk.
Weigh Counting.
This method of counting items which are dispensed from a stores or
warehouse is used when items are small or light. It is normally done
on purpose-made weigh counting scales. (The first thing to
note is that a scale should be selected that has a sensitivity appropriate
to the weight of the items being counted - ie if the items are light,
the scale should be more sensitive). The procedure follows three steps:
(1) First, the "tare", or base weight, of the container
in which the parts are held should be determined most carefully by
separate weighing - say, weight T, which is entered into the memory
of the weighing scale; (2) Next, a sample of the items to be counted
should be taken and counted out most carefully, and the total
weight, including the container, determined. Say there were 12 items
in the sample, and the total weight was was W. This data is again
entered into the memory of the scale, which is then able to calculate
the unit weight of one item. In our example, this is (W - T)/12,
or X. Finally, (3) we weigh all the items which are to be counted.
Say, the weight is B, including the container. The number counted
is given directly by the counting scale, and here is (B - T)/X. Note
that ideally in order to be sure of the accuracy of the unit weight,
4 or 5 weighings should be taken and averaged. This is because the
differences in weight between the units being weighed is random and
the statistical distribution of these differences is Normal. The most
important factor is to obtain an accurate reading of the tare weight
of the container. Substantial errors can arise if the same unit weight
X is applied in weighings involving apparently identical, but
different, containers, each container therefore having a different
tare weight. Note that a variation of this method of weigh counting
is reverse sampling.
1.9.6
Bar Coding and RFID Tags
Bar
Codes
The familiar bar code is the representation of a numeric,
alphabetic or alphanumeric code by a pattern of dark and light stripes,
with 'start' and 'stop' characters at either end, and which can be interpreted,
or read, by a light scanning device called a bar code reader. Bar
code readers are either contact or non-contact. Contact
readers such as those used in retail shops are also called fixed beam
readers, since the device needs to be very close to the bar code. They
are comparatively inexpensive (£100 +). Non-contact scanners, or line
scan readers, work by repeatedly reading the code with a laser beam fired
by a gun, perhaps mounted on a truck, until the reading is error free.
They cost about £1000. There are a dozen or so different bar coding systems
for assigning a code to a material. One used extensively in the warehousing
of consumer goods, including the outside carton packaging of groceries,
is termed Interleaved 2 of 5. It is numeric only, and requires
the code to comprise an even number of digits. With Interleaved 2 of 5,
even numbers are represented by the white stripes and odd numbers by the
dark bars. Its advantage is its physical density. In industry generally,
however, there is a preference for the Code 39 system. This is
capable of encoding numbers and letters. Each character is represented
by a group of 5 bars and 4 spaces, and has an in-built check to eliminate
mistakes in the physical reading and interpretation of the code by the
bar code reader. Other bar code systems are EAN (European Numbering
System) and UPC (Universal Product System). UPC was devised
by IBM in 1973 and is the one used in groceries in supermarkets. Its advantage
is that the code does not need to be on a flat surface to be read by the
reader.
Bar coding in the stores or warehouse is not always successful
even when those attempting its implementation have carefully assessed
that it will be. There are three issues.
First, there is the matter of ergonomics.
Ergonomics is the science of man-machine interaction, and here means
how codes are to be assigned, how (literally) they are to be attached
to the objects and locations in question, how the codes are to be
read, and what equipment is to be used. It also encompasses the nature
of the computer system that will read the codes and how associated
data, such as quantities, are to be recorded.
The second issue relates to the physical nature of
the items actually to be bar coded and seems to be the most critical
of the three. If there is a wide variety of shapes and sizes, and
many items are irregular or have a unsuitable surfaces, it will be
difficult to devise satisfactory, consistent ergonomically sound procedures.
Thirdly, if it is intended that incoming raw materials
are to be bar coded by suppliers, their competence and willingness
to do so must be considered (or, at least, their willingness to apply
bar code labels and documents supplied by the company).
If bar coding works well and easily, without a continual
struggle to keep it going, there are two advantages to its use. First,
self-evidently, material and location codes are read correctly and more
easily. Secondly, the reading process ensures that each transaction relating
to an activity is indeed raised, and is not forgotten, and that it is
then input to the computer system in a timely manner. (Missing transactions
are a major source of error in attempting to achieve high stock records
accuracy.)
RFID
Tags (Radio Frequency Identification Tags)
By 'identification' is meant the attachment of a small
"tag" bearing the code and much other data of what is to be identified,
and the subsequent reading of the tag code and data at some later stage
by a tag reader. The physical tag attached to the object may commonly
be a label, in a flat, thin, flexible ticket or may take other forms depending
on the application to hand. Important attributes of tags are that they
are robust and capable of functioning in extremely harsh environments
and that they are reusable and can last for many years. The code and other
data associated with the tag is read by a special tag interrogator, a
primary function of the interrogator, or reader, being to excite a component
within the tag termed its antenna. Although the technology associated
with RFID tags and interrogators is changing rapidly, as at the date of
this on-line course (2006), the microchip incorporated in the tag 'structure'
is likely to be a silicon microprocessor and the antenna formed from conductive
carbon ink. The silicon chip will be attached to carbon - ink electrodes
at the back of the paper label. (Labels are referred to as smart labels.)
Note particularly in RFID tags that a battery may
be incorporated into the tag - that is, a tag may have a small lithium
battery to boost power. Tags with batteries are referred to as active
tags and without as passive tags. Power
is transmitted to the tag in the first place from an electric field created
by the tag interrogator. Data is transferred from the tag to
the interrogator through the modulation by the tag of the interrogator
signal. With their extra power, active tags are able to communicate with
an interrogator over considerably greater distances than passive tags
(many thousands of feet rather than only tens of feet). Active tags are
also capable of carrying and conveying greater amounts of data (thousands
of bits rather than tens). Not surprisingly, however, active tags are
more expensive. Cost is currently a major issue in RFID technology, especially
as it concerns its widespread adoption in retail.
A critical milestone in the practicality and acceptability
of RFID technology has been the adoption in late 2005 of the GEN2 data
technology standard and the ALE standard. GEN2 governs the
basic tag reading technology essential to the production of tags themselves
and tag readers. ALE deals with the collection, management and routing
of data; it addresses the problem of huge amounts of raw data generated
by RFID readers - readers can make multiple readings of the same tag in
a fraction of second, so that this "dirty data" must be filtered. In summary
the key benefits of GEN2 and ALE are the ability to read RFID tags quickly
and simultaneously.
Finally, and most importantly, we see from the technical
nature of the interaction between the RFID interrogator and the RFID tag,
that two major advantages lie with the technology and distinguish it from
bar coding.
First, that in order to read a tag,
it is unnecessary to have a direct view of it.
Communication is by electrical waves and antennas, and line of sight
is no more required than it is required of a radio in order to broadcast
to it a programme from a transmitter.
Secondly, it is possible easily to
read tags which have been attached to a succession of irregularly
shaped items which would be unsuitable to bar
code reading. Examples in everyday life typical of the application
of RFID tags are: car tagging for toll booths; hospital patients;
criminals on licence; airline luggage; library books; the tagging
of wild and domestic animals; and marathon runners.
For the
stores or warehouse, however, one critical application of tags is in making
use of the ability to read simultaneously the identities of all the tagged
components of an incoming* or outgoing load merely by scanning it from
a distance with the tag interrogator . * Provided
the supplier has tagged all materials, of course.
A second
is the ability quickly and easily to verify and count stored stock, as
in cycle counting or in the conduct of an annual stock take.
Yet a third
example, recently announced by Intermec and Cascade Products, is to mount
RFID readers in the tines of fork lift trucks and verify the correctness
of warehouse floor picks via a computer display in the truck cab.
As well,
RFID tags have been attached to stillages to help track and control the
(remarkable!) losses of these devices. A final example of use relates
to a national company distributing wines and spirits, which wished to
double check assembled loads for correctness on its vehicles before despatching
them to customers, and to a major retailer receiving loads of garments
hanging on rails at its major stores from its distribution warehouse.
Besides these, there are an ever increasing number of other applications
involving the simultaneous, mass reading of palletised loads at the point
of despatch and the verification of loads at their destinations.
In order to commence a move to RFID, the stores supervisor
might first attend a one-day course on the subject held at the DTI's RFID
Research Centre in Bracknell, Berks.. Further details are obtainable at
the Research Centre's website at http://www.rfidc.com.
In addition, it is possible to see RFID in action at an RFID demonstration
site run by Unipart Logistics and others at Oxford. Two consultancies
expert in RFID are Manhattan
Associates and Davies
& Robson.
1.10
Special Situations
1.10.1
Stockyards
Construction
The stockyard must be sited with immediate access to
adequate roads capable of taking heavy lorries. If it is to be accessed
by rail, railway lines should be sunk to ground level. And if so, if possible,
a single line to a deadend in the yard should be avoided because of subsequent
queuing problems. Beyond this, stockyards are cheap to construct, amounting
merely to expenditure on barbed wire or other fencing, plus the required
surfacing. Surfacing will depend on the loads to be stored. In order of
rising cost, they are: Gravel or Ashes - this will not support
heavy loads and heavy traffic in bad weather; Tarmac - popular,
though liable to damage and 3 times more expensive than gravel; and Concrete
- 5 times more expensive than gravel, but suitable for all loads in all
weathers. The most important additional feature is adequate drainage to
disperse rain water - even long life building materials are damaged by
constant contact with standing water.
Repairs and Maintenance
The need for a proper programme of repair and maintenance
of a stockyard is a matter of greater concern than points about the original
construction. Stockyard maintenance, especially in Winter, is a constant
activity. Areas to watch out for include: fencing (to ensure that
it is fully maintained); waterlogging (drains must be cleared so
that standing water is dispersed ... and Autumn leaves cleared up!); surface
holes (holes must be repaired); and lighting (ensuring floodlighting
is periodically checked).
Layout and Organisation
The gatehouse is the nerve centre for all documentation
including the overall company stock records system. A very minimum requirement
is connection to the central office by phone and fax. Better, even for
small stockyards, is a proper telecommunication link, perhaps involving
RDTs. Points to watch in respect of organisation are:
(a) the establishment of a proper location system, with
ground areas coded by alley ways and local areas, perhaps being marked
out by posts;
(b) If dangerous or flammable material is stored, the
provision of emergency equipment and the establishment of full procedures;
(c) measures to prevent trespassers, especially children,
from entering the area - the company is liable if
children manage to gain access and subsequently come to harm;
(d) stockyards are very frequently seen as a nuisance
to residential neighbours - traffic, noise, lighting etc, so that if possible
they should be sited well away from houses or land where house planning
permission may be granted;
(e) setting up an efficient one-way system for traffic,
with good signposting;
(f) ensuring that there is supervision during all opening
hours, including meal breaks;
(g) neatness and tidyness must prevail to minimise the
risk of accidents;
(h) the stock must be cycle counted on a regular basis.
Note that it is not unknown in poorly managed stockyards for corners of
stock to become isolated and forgotten.
(i) Remember the effect of weather on signs and, especially,
labels. Even plastic labels can become unreadable after a time, and routine
label replacement may be necessary.
1.10.2
Cold Stores
The cost of building a cold stores is about 3 times that
of an ambient store. A second considerable cost is the cost of running
the store (and the colder, the more costly): this must be balanced by
the cost that would otherwise be suffered from the deterioration of the
product. As well, temperature controlled vehicles are expensive. The temperatures
needed for the degree of cold clearly depends on what is to be stored.
Thus:
......Frozen Stores ................-30C to - 10C .............................meat,
fish
......Chilled Stores ................- 5 C to 0C ..................................fresh
meat, fish, poultry
......Cool Stores ................... -1C to + 5C ..................................dairy
produce
......Cold Stores ................... +5 C to +15C
below ambient .... citrus produce
The critical factor in the operation of a cold store
is the activity taking place at the door. If warm air is allowed to enter
the building, ice will form and will be costly to remove. Solutions to
the problem are the installation of a conveyor tunnels; air locks; and
fast acting insulated doors. (A well-known vendor of high speed, insulated
doors is Hormann,
in Leicester; Hormann have developed the DOBO docking system,
whereby docking takes place before opening.) A related problem in cold
stores is condensation. Excessive condensation can form on the product
and damage it. To avoid this, loads are best removed in small quantities,
with immediate protection using moisture-proof covers. Note that it is
common practice that storemen in cold stores take a 15 minute break per
hour. The most careful watch must be kept on racking, fixtures and fork
lift trucks continually exposed to the cold. Steel can become brittle
and dangerous. (FLTs bought new and destined to work in cold stores are
in fact modified by manufacturers). Repairs to racking are also a problem
- oxyacetylene welding is not undertaken, since welds become eutectic
and break. Instead, bolted racking is used. Repairs to a floor also present
difficulties, since there is usually a need to raise its temperature to
effect them. Care must also be taken in product stacking - it is essential
that air should be allowed to circulate the product stored.
1.10.3
Tools Stores
In general, tool control is best accomplished in conjunction
with the planning of materials and jobs, in the normal management of the
shop floor. The ability to associate particular tools with particular
jobs by augmenting the database with the relevant data is not especially
difficult. What makes tools different, however, is (1) that tools are
reusable, and (2) that tools have a limited working life, after which
they must be replaced or repaired.
Storage
and Retrieval
Although many factories maintain separate tool stores,
there are considerable advantages in incorporating actual physical
tool storage within the standard materials store. The chief of these
is that the strict procedures which govern the stores itself are then
applied also to the management of tools. That is, (a) access is restricted
to storemen only; (b) there is meticulous booking in & out of material;
(c) there is, or should be, availability of service at all times that
production takes place.
The Issue
of Tools
The requirement for tools to be issued to the shop
floor can be coordinated from the job release planning data. From
this, tool picking data is prepared each evening and the tools distributed
to the work centres each morning. There will also be direct requests
of more or less urgency from shopfloor personnel each day. And finally,
there may also be 'reverse issues' - system-generated tool
recalls based on tool life calculations on the database.
Planning
Requirements for Tools
(a). Consumable Tools: These tools are generally
worn away over a matter of a few hours in operation, and are then
discarded and replaced by new ones. They include (say) small grinding
wheels, drills etc.. Assuming the annual usage of them is sufficiently
high, a satisfactory method of planning their stock and replenishment
is to employ the conventional 2-bin system; (b). Medium Life Tools:
Many tools such as milling cutters can be used a number of times -
say, for so-many dozen hours - after which time and after due inspection
they must be discarded or repaired. A consequence of this in planning
future replenishment schedules is the difficulty of accounting for
the stock of tools on hand; (c) Long Life Tools: Tools with
a comparatively long life such as milling fixtures and drilling or
assembly jigs are often associated with a specific component. If so,
the requirement for the tool can be monitored by associating it with
that component's bill of materials. Three well-spoken of software
packages in this area are Tyco, Autotask (from Sandvik) and Super
Capes.
Tool History
Database
Where tools are individually specified, with a tool-type
id and an individual serial number, a tool history should be maintained
by recording from other shop floor support systems the actual hours
each tool is in use, along with basic backup data such as expected
life, acquisition leadtime, operations / components used with etc...
Software packages in this area include the three packages above (ie
Tyco, Autotask and Super Capes).
2. Materials &
Materials Handling
2.1
Knowledge and Protection of Materials (including FIFO)
Having a knowledge of the materials that are handled and
stored are core requirements of the storeman or warehouseman. "Knowledge"
means knowledge of the materials' sources and suppliers; any special circumstances
in their manufacture; their technical characteristics; methods of measurement;
how their quality is assessed; and the uses to which the materials are put.
The simplest and most reliable scheme that the stores supervisor
can adopt for protecting the material in the store's care is surely adoption
of a policy of FIFO (First in - First out). FIFO
ensures that the oldest stock is used first so that it has less chance of
deterioration due to the passage of time. Identification of the oldest material,
however, may not always be easy when the storeman comes to make a withdrawal,
especially in a fixed location store. Three methods for doing so are:
(a) Since the stock recording system tracks the dates
stock was put away, picking instructions might be issued taking account
of the age of stock to be removed;
(b) When stock is originally stored, its putaway date
or batch sequence number should be clearly marked;
(c) If material is particularly sensitive to deterioration
due to time, the medium chosen for its storage should be geared to enable
FIFO to be accomplished readily. For example, stored objects may be placed
at one end of a long bin, and removed by access to the far end of the
bin, the material in the bin being pulled along on rollers (ie live storage).
For any storage medium, staff must be trained to put material away supermarket
style - ie the newest to the back.
For legal, traceability and safety reasons, some types of
material must be separated by technical/production batch. Familiar examples
are foodstuffs, pharmaceuticals and parts used in aircraft manufacture. (There
may also be a requirement for traceability under ISO 9000.) Since the batch
identification data includes the storage date, FIFO picking instructions are
generally straightforward in such instances.
The stores supervisor is not the only manager who can contribute
to reducing the threat of time's passage to the condition of stock. In todays
manufacturing environment, "lean production" techniques which greatly reduce
stock holding can make an even greater contribution than FIFO. For example,
purchasing department must recognise that excessive purchasing lot sizes are
expensive and that the cost of stock holding is over 25% per annum of the
value of material held. And the production manager can get smarter in the
scheduling of work, and can vastly reduce production lot sizes by the adoption
of fast machine changeover techniques (which make it more economic to manufacture
small lots).
Time is not the only enemy of stock. Others are damp, dust,
physical damage and sunlight, usually in that order, and action to avoid these
perils must be taken accordingly. For example, protective coatings of grease
or oil might be applied, or the items might be stored in damp-proof and rigid
containers, perhaps in small quantities for easier, damage-free issue. Potatoes
and other items may be stored in humidified warehouses*. Other examples of
protection are the storing of electronic components to ensure that they are
not harmed by magnetic fields or X-rays, the protection of certain agricultural
goods by dusting them with insecticide and anti-fungus powder, and the stacking
of timber in an interleaved fashion to permit the circulation of air. Finally,
the safe storage of some goods predominates the whole stores operation. Two
examples are the storage of explosives, requiring a police certificate, and
the storage of petroleum, requiring a local authority certificate. (* One
result of storing potatoes in humidified warehouses is to increase their weight,
and also increase their value if eventual payment is calculated by weight.)
2.2
Pallets and Unit Loads
2.2.1
The Pallet
There are some 50m pallets in use in the UK, the majority
made of wood from the Portugese Maritime Pine, a wood harvested nowadays
literally as a crop. The pallet is designed for use with the fork lift
truck. The load carrying capacity of the pallet is determined by its design,
construction and weight. The more wood, the stronger the pallet. When
pallets are first bought, a maximum load bearing capacity and the operating
environment in which it is to be used are specified; it is dangerous and
illegal to exceed the specifications.
Plastic pallets are also used, as well as wooden pallets.
An advantage of plastic pallets is that they are capable of easy, thorough
cleaning and disinfection. (For that reason, their use may be insisted
on by food manufacturers). Before choosing plastic pallets, an assessment
should be made of the damage likely to be incurred to them due to stress
in loading and unloading operations. For example, pallets made of hollow
plastic may rupture, leading to the ingress of water and dirt. Consideration
should also be given the effect on plastic of conditions of storage: temperatures
below -20C may lead to cracking and fractures, with the implications this
has for safety.
2.2.2
The Unit Load
The most critical and distinctive feature of a pallet
is its "footprint" - ie its width x breadth. In UK industry, the standard
pallet load platform is 1000mm × 1200mm. As a consequence, what is created
de facto is the standardisation of the loads carried. Such standard
loads are referred to as unit loads - ie individual loaded pallets,
built up, perhaps, from separate packages in the form of a rectangular
block, handled as a single lot and capable of being stacked onto other
similarly palletised unit loads. A major consequence is that the provision
for their handling from one company to the next by standard equipment
is easily accommodated. Complete standardisation of unit loads in terms
of their dimensions and maximum weights is referred to as unitisation.
(Unitisation exists in the grocery supply chain all the way from grocery
manufacturers' factories to the retailers' local depots.) A further form
of unit load and unitisation is one based on a standard ISO container,
this being 8' wide and 8' high, and one of four standard lengths (10',
20', 30' and 40'). Container handling also entails standard equipment
- end loaders, side loaders, straddle carriers, gantry cranes etc..
2.2.3
Pallet Loss
By far the biggest issue relating to wooden pallets
is that of their loss. Because they are so widely used, many staff see
them as common property. Indeed, certain organisations operate pallet
"pools" through which they are interchangeably swapped. But common
property has a knack of sticking to some firms and disappearing from others.
It is not uncommon for a very large company to appoint a full time "pallet
officer" - usually a young manager of the investigative type. Hints and
tips to reduce pallet loss are:
(1) to take the problem seriously - measure and report
pallet expenditure and loss, and keep up the pressure;
(2) to mark all pallets Property
of the ABC Company if they are not to be swapped via a pallet
pool. This is the only sound identification legally;
(3) to make staff responsible for pallets that they
remove from the premises - drivers carrying palletised loads, for example,
must know they are expected to account for their returns.
2.2.4
Pallet Stacking
While much attention in the past has been paid to individual
package design, often little has been spared for the way those packages
are stacked on pallets or how they can be packed better in standard outer
cases. One software package that addresses the problem is CAPE PACK. This
consists of a number of modules for showing how pallets are to be stacked
(the 'Palletise' module), how boxes and containers are to be filled
(the Boxfill module), how boxes might be redefined for better stacking
and filling (the Packfill module) and how new packaging requirements
should be designed (the Cellsize module). There are other features
as well, including 'Display Pallet', giving a 3D ‘inside' view
of the proposed stacking of boxes etc.. CAPE PACK is sold by Cape
Systems Ltd. (phone 020-8752-8610).
2.3
Packaging
2.3.1
The Package
The development of a company's packaging is a well- established,
dedicated function in larger warehouses, often entailing the appointment
of a packaging manager. His role is to ensure that the company's packages
meet the standards specified, and to develop new packages in order to
increase the competitive edge and reduce costs. Complaints about split
packages or damaged goods must be evaluated carefully to establish the
precise reason. The job clearly involves liaison with package manufacturers
to identify possible applications of new package types. Proposed changes
to packages must be evaluated carefully by the entire material handing
chain as discussed below - by manufacturing (to test handling and filling),
by distribution (for transport and handling) and by the customer (for
handling and being of pleasing appearance). Note that all wood used in
packaging which is then exported must, according to the ISPM15
regulations, be fumigated, heat treated and marked to avoid the spread
of woodland pests.
The principal functions of packaging are given below.
In considering them, it should be noted very obviously that storage facilities
and methods of transport also help determine packaging specifications,
as well as the protection itself of the goods to be carried. In considering
the functions, the packaging technologist must assess the trade-off between
factors - for example, the best protection against damage may involve
too great a bulk and too high an increase in haulage weight. Thus: (1).
Protection of the Goods (Environment): this may be especially exacting
when material is being sent to "deep sea" markets - into cold Canadian
winters or to Thailand in the monsoon season. (2). Protection of the
Goods (Transport): Fragile goods may require specific purpose packages
with internal package clamps, protective frames, cross pieces and polyester
foam cut-outs in the shape of the product. (3) Handling: this includes
palletisation so that packages can be stacked in a single (ie unit) load.
(4). Recognition: it should be possible for customers to recognise
goods quickly and without error, especially as companies move to more
frequent deliveries of smaller quantities. (So-called "shop ready" packaging
is also becoming increasingly demanded by retail customers.) Counting
multiple items within a package is also important from the viewpoint of
stock records accuracy. Finally, there is the question of advertising
and appearance. Students of this on-line course with a special interest
in packaging may care to join The
Institute of Packaging, phone 01476-514590. The IOP have a diploma
in packaging technology, and corresponding training schemes.
2.3.2
Packaging Waste
The packaging waste regulations became law in 1997 and
were forced on the UK by the hated European Union. They were intended
to reduce the effect of packaging waste on the environment. The targets
set are as follows: recovery (including energy recovery
and compost), 50% - 65%; and recycling: 25% - 45% (at least
15% by weight of each individual package material to be recycled. Five
terms should first be defined, as follows.
Primary packaging - the package that constitutes
the sales unit sold to the ultimate customer.
Secondary, or grouped, packaging - the package used
to contain the primary packages
Tertiary packaging - the package containing the secondary
packages.
Recovery or reprocessing - (including recycling and
incineration with energy recovery).
Recycling - use of the packaging to make new packaging.
Companies which are required to take action with regard
to the regulations are known by the Environment Protection Agency or Scottish
Environment Protection Agency (SEPA) as obligated producers. By
"producer" is meant any organisation which creates or supplies packaging
somewhere along the supply chain to the final consumer. Examples are the
manufacturers of bubble wrapping, manufacturers of plastic granules, a
company filling bottles or cans with drinks or, say, a company making
and wrapping sandwiches. Different targets, termed activity obligations,
have been set for companies depending on their roles in the supply chain
as follows:
raw material manufacturers 6%;
converters 11%;
packagers 36%; and
retailers 47%.
A company's obligation with regard to the Regulations
is a figure calculated as follows:
Obligation = Amount of packaging handled
× Activity obligation × Recovery target.
For example, suppose a company produces 400 tonnes of
steel sheet per annum. Its obligation under the Regulations would be to
recover 400 tonnes × 6% (raw material manufacturing) × 38% (recovery target)
= 9.12 tonnes per annum.
Obligated companies are required: (1) to register direct
with the Agency or join a scheme (see below); (2) to provide it with data;
(3) to recover or recycle their target of packaging, or obligation, as
above; and (4) to furnish proof of their compliance.
There are essentially two routes
to compliance - individual compliance or compliance as part of a scheme.
(1) I n d i v i d u a l C o m p l i a n c e : the company may work
through waste management companies or scrap merchants, or it can purchase
materials in the first place from these sources. Evidence of recovery
is given in the form of a packaging recovery
note (PRN). (2) S c h e m e s: Collective compliance
schemes consist of companies which have clubbed together to fulfil their
obligations by way of the aggregated totals for all their members. Two
'popular' national schemes are VALPAK and Waste pak. There is also a dairy
industry scheme called DIFPAK. Note that obligations under the regulations
are also incurred by importers ... that is, a company must take on the
responsibilities of others in the supply chain outside the UK. Since their
introduction, in true EU fashion, the regulations have actually reduced
the amount of recycling in the UK.
WEEE
Directive (Waste in Electrical & Electronic Equipment)
More legislation confronting UK manufacturing and distribution
comes in the form of the Waste in Electrical & Electronic Equipment
(WEEE) Directive. This directive requires companies to set up a means
to recover, recycle and reuse equipment currently being disposed of in
landfill sites. Producers are responsible for the collection, treatment,
recovery and "environmentally sound" disposal of their goods and their
financial implications.
2.4
Materials Handling
2.4.1
Introduction
The scope and sophistication of equipment available for
materials handling are now very considerable, and devices are sold by
a large, keen, specialised supplier market. To assist him in keeping abreast
of developments, it is suggested that the storesman or warehouseman should
very definitely take and read one monthly magazine in this field. An example
might be ShD (Storage, handling, Distribution).
To obtain a free copy of ShD, complete and submit the form at the magazine's
website. For all this, the natural way of handling materials that
are not 'too heavy' is manually. Recognising the efficiency and
cheapness of manual handling, proof should be demanded why it cannot be
used, before turning to mechanical handling, and consideration should
be given to assisting the manual handling process. Examples of ways in
which manual handling might be made easier are (1) giving attention to
the handleability of packages, including those from suppliers; (2) provided
waste is not thereby created, ordering bar and tube in shorter lengths;
(3) using box pallets or storing small components in tote boxes.
The task which must be undertaken before appraising mechanical
handling equipment is to assess carefully the problems to be solved. Analyses
must be made of the loads to be handled and the tonnage to be moved annually,
the types of vehicles making inwards deliveries and involved in despatch,
and how they are to be unloaded/loaded. What lifting gear is required
and what speed, power and other technical characteristics are required
also? The cost/benefit case must also be worked out - the cost of the
equipment, its potential life, its operating costs and the savings it
will make.
2.4.2
Equipment for Seizing and Lifting
Devices include multiple tines with hydraulic pads for
bricks and concrete blocks, tipper forks and many others. Clamps constitute
the largest family. Examples of such equipment include: rotating paper
reel clamps; mechanical clamps for drums; hydraulic squeeze clamp; an
hydraulic clamp for a drum; mechanically operated overhead concrete block
clamps; and hydraulic bale clamps to squeeze soft loads such as wool.
2.4.3
Hand Operated Equipment
The humble wheelbarrow is an example of hand-operated
equipment, perhaps modified specially to carry sacks or other particular
loads. Selector trucks contain numerous bins for components and
might be wheeled round a factory floor to dispense materials. Stillage
trucks are wheeled platforms pulled by a drawbar, and are sometimes
fitted with a hydraulic lifting facility. Other hand-operated devices
include hand stackers, pulley blocks, chutes, and
monorails.Also encountered are pallet trucks, similar to
stillage trucks, but with forks instead of a platform, and roller conveyors.
2.4.4
Power Driven Equipment
By far the most common device in this category is the
electric fork lift truck. Because of the
absence of fumes and hydrocarbon fuel, it is particularly suitable for
use in an indoor, confined space. In fact, there are number of means for
powering the FLT, depending on the truck's desired nominal lift capacity
.... for example, diesel and LPG are typically used in stockyards and
other outdoor areas. Ranges of power are: (1) up to 1 tonne, electric
FLT; (2) from 1 to 4 tonnes, electric, diesel or LPG; (3) from 4 to 6
tonnes, diesel or LPG; (4) over 6 tonnes, diesel. Note that for the electric
FLT, with the use of heavy-duty batteries, batteries must be recharged
nightly. Otherwise, there is little difficulty in starting them up, and
drivers should be encouraged to switch them off at the end of their shifts.
The lifting principles of the fork lift truck are that the weight of the
truck is is at the rear, and counterbalances the load lifted through the
'forks' of the truck at the front. Visit The
Fork Lift Truck Association website. As well as the conventional FLT,
we also find ... (1) reach trucks. Reach
trucks operate by having the forks within the wheelbase of the truck when
moving. The forks move out when material is to be stored or removed. Their
advantage is in saving gangway space. Variations to the reach truck are
(2) the side-loading truck (the forks emerge
from the sides) and (3) the turret truck.
With turret trucks, the forks rotate 90 degrees on a masthead. Loads are
carried along aisles and gangways as with conventional FLTs and are then
swung 90 degrees for putting away on the racking. FLT attachments include
clamp jaws, booms, hooks and other devices as discussed above.
Driver
Regulations
Driving hours are subject both to British regulations
and EU regulations. The EU limits are: daily driving, max. 9 hours (but
two shifts of 10 hours in a week are permitted); per fortnight, max. 90
hours. There must be a weekly rest after 6 driving periods, and a 45 minute
break after 4.5 hours (this can be split into several periods).
2.4.5
Cranes
Overhead electric cranes may typically have 5 or 10 tonnes
capacity, and be either controlled from the floor (the controller walking
besides the crane) or controlled from a cab slung on the crane bridge.
'Goliath' cranes travel along tracks laid along a (very stout) structure
on two opposite sides of a factory floor or a dock road. There are also
stacker cranes and mobile jib cranes, the latter mounted, perhaps, on
a vehicle.
2.4.6
Order Pickers
Usually, the driver/picker rises with the truck. They
may comprise front or side-loading forks and cage arrangements round the
pallet on which the stock picker can walk.
2.4.7
Powered Conveyors
Conveyors are widely used in stores. They are especially
successful when large numbers of small items have to be moved quickly
and regularly to a certain point. Clearly conveyor systems might have
been more appropriately discussed in Section
1, since they should be designed in conjunction with the racking or
binning layout. An example of a conveyor arrangement is a fishbone layout.
That is, a main conveyor travels down the middle of the facility and subsidiary
conveyors at each side feed it. The racking in this case is also a fish-bone,
being laid out along the sides of the subsidiary conveyors. The conveyors
themselves may be powered rollers, powered belts, overhead tow lines and
sub-floor tow lines.
2.4.8
Automated Guided Vehicle (AGVs)
Automated Guided Vehicles, controlled by computers, are
becoming more common than conveyors and monorails because of their greater
flexibility and the fact that one breakdown does not disable the complete
operation - see above. They may follow
underfloor tracking or, by means of optical sensors, white 'route' lines
painted on the stores and factory floor. Other mechanical handling methods
and devices include electromagnets, the use of vacuums, scissor lifts,
robots, hoists, continuous lifts and heavy duty lifts.
2.4.9
Training and the 'Five Rules'
Staff required to operate mechanical handling equipment
need to possess manual dexterity and coordination that are well above
average, and these attributes should be specifically tested for at interview
time before these personnel are taken on into the stores or warehouse.
Training itself should be off-the-job and given by an instructor who knows
how to teach - not merely how to 'do' (or how to pass on bad habits!).
A great many equipment suppliers hold training courses, and courses are
available on fork lift truck driving at specialised training companies
throughout the UK. The training curriculum itself covers knowledge of
safe loads and operating methods, driving and operating skill, and theory.
It is important that pupils should be willing to recognise and correct
their own mistakes. Also note the mandatory regulations The Provision
and Use of Work Equipment Regulations 1998 (PUWER). In brief, these
regulations require employers to ensure equipment provided for use is
(a) suitable for its intended purpose; (b) has been assessed for risks
associated with its use; (c) has been subject to recorded inspection;
and (d) is maintained in good working order. The so-called five rules
associated with this entry in the on-line course are:
1. There should be central decision-making in
new moves (ie moves never previously undertaken);
2. Use of only the correct equipment;
3. Staff must have been trained in any move they
undertake;
4. Small stores should know their limits (ie they
should not undertake moves they have no experience of);
5. A stores should ensure others know the scope
of its expertise (other managers may assume the stores can move anything
and may be reluctant to bring in a specialised company from outside
... say, in rearranging machine tool layouts on the factory floor).
2.4.10
The Avoidance of Double Handling
Handling a load twice when it should be handled once
only clearly increases the operational load on the stores or warehouse
unnecessarily. Typical causes are as follows:
(a) The stock records system is inadequate so that
space thought to be available to use turns out to be full.
(b) Goods inwards are delivered and off-loaded at
an inappropriate place in the factory, and would have been better
directed, say, to QC or production department.
(c) If we sell EXW or FCA (see below),
we are at the whim of customers with regard to goods marshalling and
despatch. Should we not sell delivered (DDP)?
(d) Lack of space is often cited as an excuse for
double handling. But 'problems are opportunities to improve' - if
a fixed location warehouse is too small, convert the location system
to random (see below).
Equipment
Maintenance
Finally, note that the subject of materials handling
includes care and operator maintenance of equipment. Full-scale equipment
maintenance by the company's engineering maintenance section is clearly
also a most vital activity. Service and inspection should be regular,
and records must be kept of them and of any repairs and replacements.
Individual items of equipment should be marked with a unique company id
number. An unconnected point is the placing of identifying plates over
the controls of each item of equipment.
2.5
Transport and Despatch
2.5.1 Regulations
and Safety
Note that manufacturers and suppliers
of 'hazardous goods' are required to classify, package and provide information
on substances listed in the Chemical (Hazard Information and Packaging
for Supply) Regulations 2002. As well, The Transport of Dangerous
Goods (Safety Advisers) Regulations 1999 stipulate the requirements
for the movement of dangerous goods by road, rail and inland waterways.
The regulations make employers responsible for loading, transport and
unloading of dangerous goods and requires them to have a sufficient number
of qualified safety advisers to 'sign off' and supervise the loading and
unloading of the goods.
2.5.2
Road
By far the greatest advantage of this mode of transport
is that it offers a door to door service, with goods remaining on the
vehicle. Road transport services are frequently hired on an occasional
basis, from a national pool of many thousands of common carriers. The
transport by road of goods into Europe is typically by trailer or in 12
metre containers Although part loads can be despatched, either
a haulage contractor or a freight forwarding agent (see below)
may undertake to combine the company's own consignment with those of other
customers in an arrangement referred to as groupage. Full loads
may then proceed to a roll on - roll off ("ro-ro") ferry, to a
container port or to the Channel Tunnel container base.
2.5.3
Rail
The despatch of goods by this mode usually requires either
that our own factory and that of the customer are directly connected to
the railway network or that rail links which are not strictly part
of the national rail network are specially built to connect the supplier
and/or buyer to the network (as with steel factories or national breweries,
for example), or that supplementary road operations provide the
required network links at extra cost. Rail truly comes into its own for
the transport of heavy, cheap goods: coal and coke; petroleum products;
and chemicals and aggregates.
2.5.4
Ship
The term for ocean going shipping to markets
other than Europe or Ireland is deep sea transport. The vast proportion
of goods to be conveyed by deep sea, other than bulk material, will be
loaded in ISO (ie standard) containers on container vessels. The operation
begins when a gantry crane or straddle carrier loads an empty container
onto a vehicle at a container base. This is then moved to the company's
premises, where it is loaded, sealed and returned to the base. It is then
transported by vehicle or by container train to a container port, where
a container crane lifts it into a specially built slot within the vessel.
At the destination port, the process is reversed.
2.5.5
Air
The main air freighting services available are: (1) direct:
goods, flown out on the next flight; (2) consolidation, in which:
airlines and agents build up an air pallet load from various suppliers'
goods, and despatch the pallet either when it is full or at a published
frequency; and (3) deferred: the airline undertakes to despatch
goods when there is surplus capacity. This service is cheaper, but there
is no certainty when the despatch is to be made. The two types of aircraft
used for these air services are: (1) passenger aircraft, which can carry
limited cargo, and (2) cargo aircraft devoted to cargo. There are few
routes which justify the operation of cargo aircraft only. When airfreight
despatches are made, there are very precise regulations issued by IATA,
the international air transport authority. IATA classifies goods as: (1)
not admissible; (2) admissible on cargo aircraft only; (3)
admissable on passenger aircraft, but only in limited amounts; and
(4) admissible on passenger aircraft without restriction. In practice,
a large proportion of goods are carried in passenger aircraft. But because
these give priority to passengers and their baggage, there are many occasions
when cargo is shut out at the last moment.
2.5.6
Arranging Transport - The Freight Forwarding Agent
An important intermediary engaged by the stores or warehouse
manager to effect the transport of goods to a particular destination is
the freight forwarding agent. Forwarding agents may operate as
individuals or on behalf of transport or shipping companies. Some deal
with worldwide distribution; others specialise, say, in particular destinations
or particular modes of transport. All offer expert, up-to-the-minute advice
to clients on the mode of transport best selected for a particular despatch;
they will arrange for the consolidation of loads and will book space with
carriers. Freight forwarding agents will also advise on required documentation
and can act as local intermediaries with customs officials. The costs
of a freight forwarder's services are generally covered by commissions
and margins obtained by him from the carrying companies he engages on
behalf of his clients.
2.5.7
Route Planning Software
Computers hold maps and can be used to plan a single
route to a specified destination - there are several such 'sat nav' systems
on the market, which are also used widely in private cars. What is less
well understood is that computer packages can also be used to plan the
shortest total distance for several vehicles distributing material
on a single day. The routes that the computer plans are not the same as
would be planned separately for each vehicle in isolation. In other words,
suppose two routes were planned separately for two vehicles to (say) 10
customer each, and each route so planned was, say, 100 miles. If a route
planning package now planned the two routes together, it would come up
with two different routes for each vehicle from before, and the total
distance would be about 180 miles (ie some 20% shorter than the previous
total of 200 miles). The principle by which the software works is referred
to as the Savings Criterion. Thus consider a Factory F and two
customers C1 and C2, with distances from F of 'a' miles and 'b' miles.
With 2 trips, the distance travelled to C1 and C2 is clearly (2a + 2b).
With 1 trip, the distance is (a + b + x), where x is the distance between
C1 and C2. Thus the savings by making only 1 trip = (a + b) - x. The savings
by combining the two trips will be greater the further away the customers
are from the factory and/or the closer the two customers are together
- that is when (a + b) is large and/or x is small, or both. Because of
this, the transport routes worked out by computer packages tend to assume
a 'petal' shape, with elongated shapes. Packages also allow the transport
planner to incorporate special constraints which meet requirements particular
customers may have about delivery times, by incorporating individual customer
requirements such as early-closing days or the need to deliver, say, between
11am and 12pm. Transport planners typically review the first-cut computer
routes and key in amendments to cater for special circumstances only they
can deal with. There are many software packages - for example Dayload,
Optrak, Paragon, Routemaster, Trandos, Visit, LogiX and the popular Truckstops
(from Kingswood, Brentford, London, phone 0208-568-7000).
3. Stores and Warehouse
Operations
3.1
The Carriage of Goods
Although the company and the external supplier can make whatever
joint arrangements they wish in allocating responsibility for, and carrying
out, the many tasks necessary to effect the transfer of goods between their
two factories, they will usually settle the matter by nominating that one
or other of the thirteen standard terms drawn up by the International Chamber
of Commerce, used worldwide and referred to as the Incoterms,
should govern the transfer. (New sets of Incoterms are published from time
to time. The most up to date set at the moment is Incoterms 2000, published
in December 1999.) To nominate a particular Incoterm, a specific reference
must be made in the contract between buyer and supplier stating which Incoterm
is to apply in the agreement, and also adding the Incoterm's year of publication.
However, in agreeing a particular term, there is no reason at all why the
provisions set out in the standard term should not be modified by the two
parties if some special condition is to prevail. For example: "Delivery is
to be made in accordance with Incoterm 'EXW' published by the International
Chamber of Commerce in 2000, modified as followed .... ". Guidelines regarding
modifications are included in the book 'Guide to the INCOTERMS', published
by Prof. Jan Ramberg (see below).
There are 13 Incoterms set out in four groups named for the
initial letter of the standard abbreviations of each term included, as given
below.
Incoterm Group E (Departure)
EXW (Ex-Works) ... (followed by a named place).
The supplier fulfils his obligations to the buyer when he has made the
goods available at his own premises. Note that he is not responsible for
loading them onto the buyer's vehicle. The buyer bears all costs and risks
in taking the completed load from the supplier's premises. Problems for
the stores or warehouse with EXW are that the buyer may delay in making
the collection, so affecting the supplier's storage costs and disrupting
his everyday work (for example, the buyer's vehicle may arrive without
prior warning, at a difficult time, causing disruption and congestion).
Incoterm Group F (Main Carriage Unpaid)
FCA (Free Carrier) .... (followed by a named place)
The supplier fulfils his obligations when he has handed the goods
over into the custody of a carrier named by the buyer. The "place" may
be a transport terminal or into a vehicle. FAS (Free Alongside Ship)
... (followed by a named place) The supplier delivers the goods alongside
a vessel on the quay. The buyer bears all risks and cost from this point.
FOB (Free on Board) ... (followed by a named port of despatch)
Delivery and transit risks pass from the supplier to the buyer when the
goods cross the ship's rail at the nominated port.
Incoterm Group C (Main Carriage Paid)
CFR (Cost & Freight) ... (followed by a named destination
port) The supplier must bear the cost of carriage, although other
costs such as insurance remain the responsibility of the buyer. CIF
(Cost, Insurance and Freight) ... (followed by a named destination port)
This differs from CFR only in that the supplier is now responsible for
marine insurance as well. CPT (Carriage Paid To) ... (followed by a
named destination) The supplier clears the goods for export and bears
all freight costs. However, liability for loss or damage passes to the
carrier (and hence indirectly to the buyer) when the goods are delivered
into the custody of the carrier at the port of destination. CIP (Carriage
and Insurance Paid To) ... (followed by a named destination) As with
CPT, except that the supplier must himself procure and pay for insurance
for the cargo on board ship.
Incoterm Group D (Arrival)
DAF (Delivered At Frontier) ... (followed by a named
place at the frontier, before the customs barrier) Supplier clears
for export, and fulfils his obligations when the goods have been made
available at the named point (ie before customs clearance). DES (Delivered
Ex Ship) ... (followed by a named port of destination) The supplier
pays all costs and bears all risks in bringing the goods to the port of
destination, and fulfils his obligations when the goods are made available
to the buyer on board ship. DEQ (Delivered Ex Quay, Duty Paid) ...
(followed by a named port of destination) The supplier makes the goods
available on the quay at the destination port, cleared for import, and
must bear all risks, costs, duties and taxes in doing so. The term "Duty
Paid" is added, but commonly the term is modified by the two parties to
read "Duty Unpaid", the wording of the Term being correspondingly changed.
DDU (Delivered, Duty Unpaid) ... (followed by a named place within
the country of destination * ) The supplier makes the goods available
at the named place in the country of importation, and bears all risks
and costs except duties and taxes. DDP (Delivered, Duty Paid) ... (followed
by a named place within the country of destination *) The maximum
obligation of the supplier, and the complete opposite of EXW. The supplier
is fully responsible for every cost and requirement in delivering the
goods, including the payment of taxes, the obtaining of an import licence
and the payment of import duty. On the other hand, the proficient supplier
is able to affect service through the judicious choice of carriers and
the correctness of his documentation, to the satisfaction of his customer.
A complete, legally accepted list of conditions, known as
'INCOTERMS 2000', is obtainable - 215pp, £26.75, and may be ordered from Amazon.
As stated above, a further book, providing commentary as well, is'Guide
to INCOTERMS 2000' by Prof. Jan Ramberg, £52.25. It is strongly advised
that any stores/warehouse supervisor responsible for interpreting an Incoterm
should obtain a copy of the ICC publication and Ramberg's book.
3.2
Transfer of Goods and the Law
3.2.1
Common and Statute Law
Much of the law involved in the transfer of goods relates
to contract law. Contract law is a division of the common law.
Common law is not a specific law passed by parliament - instead, it has
developed in the UK over very many hundreds of years, and is based on
universal principles. One of these principles, the one behind contract
law, is that we should stick to bargains we have made with other people.
The details of contract law are based upon this principle and on the decisions
made in the courts relating to past cases. As well as common law, there
is statute law - laws specifically passed by parliament. Two statute
laws in this area are the Sale of Goods Act, 1979, and the Sale
and Supply of Goods Act, 1994
3.2.2
Delivery of the Goods
'Delivery' is simply the transfer of physical possession
from one person to another. Thus the signing of a delivery note presented
by the supplier or haulier simply acknowledges receipt of the goods. Section
34 of the 1979 Sale of Goods Act specifically lays down that: Where
goods are delivered to the buyer and he has not previously examined them,
he is not deemed to have accepted them until he has had a reasonable opportunity
of examining them to ensure their compliance with the contract.
(The Act also states that the supplier must, on request, give the buyer
reasonable time.)
3.2.3
Acceptance of the Goods
The word 'acceptance' means a different thing in everyday
English than in law. In everyday English, acceptance simply means
literal receipt. In law, in effect it means the buyer's concurrence that
the goods delivered comply with the contract's provisions in a number
of vital regards. For example, it means that the delivery date is agreeable;
that the general material state, especially as regards design and quality,
is agreeable; and that the quantity delivered is agreeable. (Agreeable
here does not mean perfect, it simply means the receiving company is content
with the matter.) Now it is a fact of contract law that if there is a
breach of conditions of a contract, the contract can be terminated.
Consequently, from the legal viewpoint, since such agreeableness means
compliance with the central contract conditions, the most important effect
of legally accepting the goods is that the buyer can no longer terminate
the contract because of breach of conditions.
Section 35 of the Sale of Goods Act states: "The buyer
is deemed to have accepted the goods when he intimates to the seller that
he has accepted them, or when the goods have been delivered to him and
he does any act in relation to them which is inconsistent with the ownership
of the seller, or when, after the lapse of a reasonable time, he retains
the goods without intimating to the seller that he has rejected them".
It is unlikely that the signature of a storeman would ever be accepted
in court as constituting legal "acceptance", regardless of what was said
at the time. Note that timeliness of delivery is regarded as a warranty
- a secondary matter - not as a contractual condition, unless the contract
specifically states that on time delivery is a condition. Only if it is
so stated to be a condition can the company terminate the contract.
3.2.4
'Title', or Legal Ownership
Just because the receiving stores is in possession of
the goods, and even if it has accepted them in the legal sense above,
this does not mean it has legal ownership. Legal ownership of, or legal
title to, the goods, is transferred to the buying company only when the
terms of the contract specify that it is to be transferred. In almost
all cases, the contract will stipulate that title is transferred only
when payment has been received. One reason for this is that if the buyer
were to become bankrupt before he had paid for the goods, and the supplier
still retained legal title in them, the supplier could claim for their
return by the receiver in bankruptcy. If it were the buyer who had title
to them in these circumstances, however, the receiver would sell the goods
to pay off his debts.
3.2.5
The Processing of Raw Materials
Section 19 of the Sale of Goods Act specifically deals
with retention of title by the seller as discussed above. If, then, goods
are held by the buyer in their unaltered and original form, they may be
reclaimed by the supplier in the event that the buyer becomes insolvent
or fails to make payment, as already mentioned. However, if the goods
have been processed, so that the original material has lost its identity,
it is held that the material sold has become the buyer's property regardless
of the supplier's retention clause to the contrary. However, even though
the original goods are lost to the supplier, if the buyer is in possession
of other goods relating to a separate, second contract with the same supplier,
albeit these being already paid for, title in these other goods can be
claimed by the supplier against payment for the first contract. Among
other things, this obviates the need for the supplier continually to identify
and mark the materials sold to the buyer - for example, when materials
are being supplied in a succession of repeat orders.
3.2.6
Bailments
There are many instances in manufacturing where the company
receiving goods never does become the owner of them. For example, it may
be sent components so that it can perform a specialised technical operation
on them. When this has been done, the components are to be returned or
sent on to a third party. Again, the company may receive free issue material
from its customer for use in a job being undertaken on its behalf. Transitory
goods in these circumstances are referred to as bailments, the
party supplying them being the bailor and the party receiving them
the bailee. A formal definition of bailments is that they are "goods
delivered in trust upon an expressed contract that the trust be faithfully
executed on the part of the bailee".
Finally note that any attempt by the supplier
to impose some condition on the buyer when he makes the delivery is invalid
- it is not part of the original contract and should be ignored - examples
are: (1) the supplier must be notified in 3 days of ...; and (2) the
supplier is not responsible for damage discovered after delivery.
3.3
The Principal Steps and Official Notes in Ordering and Receipt
I Notification of the Order (Purchase Order)
Purchasing department sends a copy of the supplier order
to the stores with the identification and quantities of materials, date
to arrive and mode of arrival.
II Confirmation of Delivery (Advice Note)
The supplier sends the firm a note in the post or on
fax saying the goods are being despatched. Details are included of all
items, codes, quantities, the company's order number an the supplier's
own reference number.
III Stores Preparation
A single delivery can involve a great deal of work so
that labour and equipment planning are important. The busy stores will
also wish to schedule suppliers' deliveries where possible to obtain an
even flow of arrivals throughout the day.
IV The Delivery (Delivery Note and Consignment Note)
A note giving details of the delivery should accompany
the physical goods. One of two procedures only should then be followed:
A delivery note will be accompanied by a consignment note if the suppliers'
goods (the delivery) are being delivered by a third party haulier. Details
must be transmitted to Purchasing and Production, and to Stock Records.
V Unloading and Inspection (Unpacking Note)
3.4
Quality and the Receipt of Goods
3.4.1
Introduction
Every stores supervisor is concerned about the quality
status of incoming materials. Occasionally, it is possible for the receiving
company to be assured of 100% incoming quality conformance. This occurs
when the supplier undertakes to perform "statistical process control",
or SPC, at his place of manufacture. This usually also involves an inspection
of his procedures by the purchasing company's quality control manager,
and the issuing by him of a supplier accreditation certificate.
If this has been done, the incoming material can be received straight
into stock or, if a Just-in-Time system is in operation, straight to the
production line.
3.4.2
The Main Decision on Incoming Quality (The Breakeven Point)
The level of quality that an external supplier agrees
it can and will send to the company should be agreed jointly by the supplier
and the company's quality control manager after due observation and discussion
of his proven quality performance over some time. For example, after discussion
of his manufacturing process, it may be decided that the supplier can,
and will, meet a target commitment of 1.5% non-conformancies. (A 'non-conforming'
part is one not meeting specifications, also known as a 'defective'.)
The main decision at this point, for (1) a particular material, from (2)
a particular supplier, at (3) an agreed percentage non-conformancies,
is based on two factors as follows:
(a) the cost of inspecting one incoming part, k1, and
(b) the cost of a non-conforming part entering production,
with the need then to scrap it or rework it, k2.
What is now calculated is the "breakeven
point", or BEP, as follows:
BEP = k1 / k2 x 100%
For example, if k1 is 15p and k2 is £10.00, the BEP is
15/1000 × 100% = 1.5%.
The decision that is made is as follows: (1) if the incoming
percentage non-conformancies that has been agreed, as discussed above,
is greater than the BEP, 100% inspect the incoming parts; and (2) if the
incoming percentage non-conformancies is less than the BEP, allow all
parts straight into production, with no inspection or checking. For example,
if the incoming parts are declared by the supplier to be 2.9% non-conforming,
and the BEP is calculated to be 1.5%, it is cost effective to 100% inspect.
If the incoming parts are declared to be 0.3% non-conforming, it is not
cost effective to inspect - the parts should be admitted straight into
production.
Note that as a matter of policy, some incoming parts
are always 100% inspected, regardless of the rules above - for example,
safety critical devices, pharmaceuticals and aircraft parts. Other parts
are never 100% inspected - fuses, ammunition and cylinders of gas.
3.4.3
The Inspection of Incoming Parts by the Stores
If inspection is to be performed on incoming parts, the
advantage of its being performed immediately on arrival by stores staff
are speed of throughput and overall reduced stockholding If incoming goods
are required to be quarantined, and quality control department then notified
to perform the inspection themselves, there is inevitably a delay in doing
so, perhaps of several days. Among other things, this means that materials
must be ordered and delivered earlier than they are otherwise needed.
The overall stockholding burden on the company is consequently proportionally
greater than it would be if material was inspected by the stores on
receipt. The two circumstances of inspection are 100% inspection as
commented on above, and sampling inspection, described below.
Inspection of parts by a member of stores staff is simply on a "go / no-go"
basis. A particular physical characteristic is decided on for test by
quality control department, and the storeman is simply required to examine
whether the part is conforming or not conforming with respect to that
characteristic. An example might be the diameters of incoming steel rods,
which can be very quickly tested by a "snap-to" gauge, a snap-to gauge
being a simple plain metal device with customised holes of different dimensions
drilled into it. Thus if a rod is being tested, and its diameter is too
large, the rod will into neither of two particular holes on the gauge.
If its diameter is too small, it will fit into both of the holes. If it
is within specification, it will fit in one of the holes but not the other.
3.4.4
The Sampling of Incoming Parts
There are four circumstances in which the stores are
required to sample incoming parts:
(1) when the percentage of non-conforming parts guaranteed
by the supplier happens to be very close to the breakeven point, BEP
(see above);
(2) when the supplier simply cannot guarantee any
particular percentage quality at all;
(3) when experience shows the actual percentage non-conforming
which is sent is erratic from batch to batch; and
(4) where 100% inspection is otherwise indicated,
but is infeasible because the parts are destroyed on test.
The first thing to say is that sampling is an exact science
and a major part of the subject of quality, involving the use of well-established,
mathematically based "Sampling Tables", each containing a large
range of individual sampling plans (see below). (Any quality control
manager who believes that sampling means the selection, say, of 5% of
incoming parts, or some other percentage, as he sees fit, should read
up on the subject.)
Sampling
Plans and Sampling Tables
A sampling plan specified in a Sampling Table
first requires the user to determine (1) what physical characteristic
of the incoming units determines whether a unit is 'conforming' to quality
requirements or not; (2) p, the percentage of non-conforming
parts expected to be in the batch, usually as agreed with the supplier;
and (3) the number of units in the incoming lot to be sampled (the number
of units is traditionally referred to as N.) The sample
plan itself, set out in the Sampling Table for the particular combined
value of p and value of N specified, then states the size of the sample
to be taken from the incoming lot, referred to as n (and
which is to be 100% inspected), and the 'acceptance criterion'
c. The acceptance criterion means that if there are c non-conforming
units in the sample, or fewer than c, the whole lot of N units should
be accepted. If there are more than c non-conformancies, the incoming
lot should be rejected in its entirety.
The two most popular Sampling Tables are known as MIL-STD-105E
and Dodge-Romig Set IV. However, the storeman or stores supervisor will
not be responsible for selecting a Table. This will be specified jointly
by the supplier and the quality control manager. Instead, what the stores
need to understand are (1) the idea of a "sampling plan", as explained
above, (2) the difference between single
sampling and double sampling, explained below, and (3) the procedures
involved in each. Thus:
Single Sampling
As stated above, in order to look up and read the appropriate
sampling plan from those included in the chosen Sampling Table, what must
be specified are N, the size of the incoming batch, and p, the percentage
of non-conforming parts expected to be in the batch (ie agreed with the
supplier as a target). What the sampling plan will then specify are n,
the size of the sample to be taken from the incoming batch, and c, the
'acceptance criterion'. When the sample has been taken and 100% inspected,
if the number of non-conformances in it is less than or equal to c, the
batch is accepted; if the number of non-conformances is greater than c,
the incoming batch is rejected.
Double Sampling
As before, in order to find the appropriate sampling
plan from the chosen Sampling Table, what must first be specified are
N, the size of the incoming batch, and p, the percentage of non-conforming
parts expected to be in the batch (ie agreed with the supplier as a target).
What the sampling plan will specify are n1 and n2, the sizes of the first
and second samples, and c1 and c2, the two acceptance criteria. When the
first sample is taken, if the number of non-conformances is equal to or
less than c1, the incoming lot is accepted (ie a second sample is not
taken). If the number of non-conforming items in the first sample is greater
than c2, the incoming lot is rejected (again, a second sample is not taken).
However, if the number of non-conforming items in the first sample is
greater than c1 and less than or equal to c2, the second sample of size
n2 is taken. If a second sample is taken, then the rule is that if the
total number of non-conforming items in the two samples combined is less
than or equal to c2, the incoming lot is accepted. If it is greater than
c2, the incoming lot is rejected. It should be noted that double sampling
is far cheaper to conduct than single sampling, since n1 is about half
the size of n and taking the second sample is not usually necessary.
Finally,
what does the stores - and company quality - gain from sampling? Firstly,
with sample plans from the MIL-STD-105E tables, it receives an assurance
that if a batch of parts is accepted under a plan, there is a 95% chance
that in reality the parts in total will be at the value specified for
p% or better. Under the Dodge-Romig Set IV tables, the company is assured
that if the parts overall are worse than p%, there is a 90% chance the
incoming lot will be rejected. As far as the late Harold Dodge
was concerned, the justification for sampling was that if a supplier's
batch of parts failed the sampling test, the whole lot would be returned
to him, not just the failing components. The pressure on the supplier
at that point to sort out his own problem is then very considerable.
3.5
The Issue and Despatch of Material
The speed and accuracy with which requests for stores or
warehouse stock are handled are often pointed to as primary indicators of
the efficiency of the whole operation. There are two good reasons for this,
relating to the physical ability to handle stock and the accuracy of the stock
records.
3.5.1
Stores Issues within the Factory
For a stores, the question of authorisation is a conflict
between the exercise of control and the pursuit of flexibility. Control
can be by the maintenance of lists of authorised people or job functions.
(These are, however, often difficult to keep up-to-date, and their use
may break down when critical personnel are off site.) The overall procedures
are fairly standard throughout industry. The following steps are representative:
(1) compilation of an issue note; (2)
authorisation; (3) requisition check; (4)
scrutiny by stores;(5) identification of goods;
(6) selection (physical); (7)
issue of stock; and (8) update of records.
The terms met in issue documentation
include stores requisition, requirement voucher, stores
indent, issue ticket, stores order, demand note,
kit marshall list, stores schedule and picking list ...
nine terms all meaning the same thing and containing data regarding the
codes and/or descriptions of the goods, quantities, works order numbers,
cost centre codes, serial number and so forth. The types, methods and
circumstances of issuing stores material may typically be as below.
issues on request - 1: the user comes to the
stores and presents a duly authorised note;
issues on request - 2: a note is sent in by
hand or internal mail for a physical issue at a later time. This is
ideal, especially when the requirements are complex, since the work
involved can be interleaved with other jobs in the best way;
issues on request - 3: low value items may
be requested verbally, without a note, and simply handed over;
scheduled issues to production: material requests
in this category are likely to come direct from production control
department. Goods are physically issued into a marshalling, or kitting,
area or direct to a work station in the shop. Documents are likely
to be prepared by a computerised planning and control system, which
may simply generate assemblies and kits according to a known bill
of material formulation;
imprest issues: (the word imprest means a
'loan' or 'advance') certain materials may be kept in local areas
- for example, line-side stocks in assembly. Each week (or better,
each day), a supervisor prepares a list of replenishment requirements
after counting the remaining stock. The remaining stock may also be
calculated rather than counted, by a highly error prone system based
on completed production, referred to as backflushing. Thus if 1 unit
of P is used to make 1 unit of Q, and 500 units of P are originally
issued, and achieved production is 175 units of Q, there "must" be
325 units of P remaining. Since the system always goes wrong, it is
wise to issue as little stock in the first place, and simply rely
on counting to maintain the records;
replacement issues: The user must present
to the storesman an old, used up item (eg a burnt out motor);
loan issues: often, tools and instruments
needed for plant repair work;
bulk issues: these are usually made in set
quantities to production work centres or lines. They must be carefully
monitored and costed to avoid waste and wastefulness;
allocated issues: material may be received
into stores from a supplier intended for a specific, identified works
order or department. The greatest care must be taken to ensure that
it is strictly reserved for and issued to that job or user, and no-one
else. A variation on this theme in the process industries is the division
of stock of the same item - say, a chemical - into different grades
of quality, with certain grades restricted to certain uses or jobs;
capital issues: the identity of the capital
equipment requiring the material is recorded in the records for financial
accounting purposes. They are often also allocated issues.
3.5.2
Despatches outside the Factory
Despatches to outside will normally be of regular sales
products to our customers, from whom we shall eventually obtain payment.
Since the company will lose direct control of the goods, checking must
be rigorous. The procedures are typically as follows: (1) the recording
of customer demand; (2) production of documentation; (3) the distribution
of documentation; (4) order picking; (5) the loading of stock; (6) transportation;
(7) return of documents/notes; (8) the analysis of data. Note that a very
effective way of checking the correctness of a final despatch is through
RFID tags - see above.
3.5.3
Load Assembly
Despatches to outside take on a different complexion
when they are large loads sent on a frequent and perhaps regular basis.
Load assembly in these cases is an important operational activity that
demands skill, planning and investment. In its narrowest sense, the term
means the physical stowage of goods for immediate despatch, and is related
to route planning above. As stated there
in different words, one of the tradeoffs in logistics is between economy
of cost, epitomised by certain types of routes typically planned on a
variable basis from day to day or week to week, and the desire by customers
for deliveries at specified times irrespective of whether their delivery
is light or heavy. That is, the tradeoff is cost v. customer acceptability.
However, whatever the time of day of delivery, customer acceptability
is increased if the distributor has made a good job of physical loading
- for example, by the avoidance of damage to goods, by arranging the load
in a way conducive to straightforward unloading ("first on, last off")
and by swift and efficient vehicle turnaround.
The actual planning of the vehicle load requires access
to certain basic data, such as: (a) vehicle capacities (cube and weight);
(b) drivers' hours; (c) customer locations (computer-based maps can find
the standard driving time from the location coordinates); and (d) the
delivery (or collection) time associated with the volume of goods per
order. The loading of the vehicle is then a two-step procedure as follows:
Step 1: Take the first order to be loaded (ie last
unloaded), establish time from the warehouse to customer, including
delivery operations. Check driver's time. Check vehicle capacity.
Step 2: Take the next order and add the time to travel/deliver
from last customer to this customer. Check driver's time and vehicle
capacity. If the time or capacity is exceeded, the load is already
complete. Otherwise, repeat Step 2.
Software has been successfully used to manage load assembly
in warehouses. It will determine the original stock picking sequence by
reference to the destinations and routes to be travelled by the vehicle(s),
and is closely linked to route planning software above.
The system may also be technically integrated with radio
data terminals or RFID tags (see
above). There are many software package on the market, often incorporated
as modules within Warehouse Systems - See Dispatcher CS from LIS Warehouse
Systems Ltd, High Wycombe. Another package also well spoken of is Paragon.
Vehicle loading and unloading can be assisted by a number
of devices. For example, especially with a large number of "drops" (ie
individual deliveries) involving small packages, doors can be provided
in the side of the vehicle. Attention must be given to platform heights
so that mechanised equipment for loading/unloading can be efficiently
used. Loading/ unloading itself may utilise: pallet trucks; wheeled
pallet cages; rollers in the floor of the vehicle; overhead
conveyor rails for hanging loads; the `Jolada' system of pallets
on floor channels moved by jacks; vehicle cranes (for building
material);and tail lifts. There may also be the use of securing
devices to ensure to loads do not fall in transit - shoring bars, tie
rails, dunnage bags.... Note that when large, single drop loads are
involved, it may be sensible to consider the use of 'swap bodies ' - that
is, demountable trailers that can be left at the customer's premises for
unloading at his leisure and which are taken back empty the following
week when the next load is delivered.
4. Special Topics
4.1
Variable versus Fixed Locations
The flexibility of a stores and its ability to adapt to changing
circumstances is greatly helped by the adoption of a variable (or 'random')
location storage system. The traditional method of storage, the only one
available before the days of computers, is the fixed location system.
In the fixed system, every item to be stored is allotted a storage location.
In the variable system by contrast, all of the stores locations are maintained
as a file by the computer system, and, for each one, the product and quantity
currently stored there. When incoming stock is to be put away, the software
determines the most suitable empty location for its storage, employing a computer
algorithm as discussed below. When stock is
to be retrieved, its location is found by the system and picking information
issued. The advantages of a variable system include the following:
1. Far less space is needed for stock than with a fixed
location system. Space savings of 30% can be expected.
The main reason for improved space utilisation is, of course, that with
a fixed location system, the (fixed) space made available must be sufficient
for the maximum stock holding. The full space advantages of a variable
locations, however, implies smaller locations and will require the manager
to consolidate stocks of the same product on a continuous basis.
2. A changing mix of items over the years is catered
for quite naturally;
3. The storage of seasonal goods and very fast moving
goods is accommodated automatically without recourse to overflow areas.
In a variable system, sudden stock surges are accommodated simply by the
occupation of more locations;
4. It is easily possible to segregate/quarantine incoming
lots of material, assigning them exclusive locations, if this is desirable
or necessary for technical or commercial reasons.
As well, variable locations make for smoother day-to-day
operations. Thus in putting away, the storeman need not concern himself about
finding space - the system will direct him immediately to a guaranteed, suitable
location. And in picking multiline orders, the system will work out his shortest
travel route and guarantee both the correctness of the locations and his adherence
to FIFO principles (see below).
Before listing a number of software features required, two
examples are given of data processing in (a) putting stock away in a variable
system, and (b) retrieving stock. The examples relate to a product P50 in
a storage facility in which locations are coded according to the following
scheme: ARRSB, where A = aisle code, RR = rack number, S = shelf code, and
B = bin number. (Thus Location C10B4 is aisle C, rack 10, shelf B, bin 4.)
(a) Putting Away
On date 12 November, it is required to store 200 units of
P50. The current stock position of P50 before this is done is as follows:
Location...............................................Quantity....................................................Date
Stored
....A04F1...................................................450........................................................10th
October
...A06C3 ...................................................500........................................................30th
October
..A07A2 ....................................................120
.......................................................18th September
Total ........................................................1070.................................................................n/a
The computer scans the database for an empty location as
near to existing stock of P50 as possible, and directs the storeman to put
the stock in Location A08G4. After he has done so, and the transaction has
been processed, the stock position of P50 is as shown in the next Figure.
Location...............................................Quantity....................................................Date
Stored
....A04F1...................................................450........................................................10th
October
...A06C3 ...................................................500........................................................30th
October
..A07A2 ....................................................120
.......................................................18th September
..A98G4 ....................................................200
.......................................................12th November
Total ........................................................1270
...............................................................n/a
(b) Retrieval
After the storage on 12 Nov, it is required to withdraw 150
units of stock of P50. Using the FIFO principle, the computer determines that
120 units are to be retrieved from Location A07A2, and the balance of 30 from
Location A04F1. After the two withdrawals have been made and the data transactions
processed, the stock position of the product is as shown in the final Figure
figure below.
Location...............................................Quantity....................................................Date
Stored
....A04F1...................................................420........................................................10th
October
...A06C3 ...................................................500........................................................30th
October
..A07A2 .......................................................0
............................................................... n/a (*)
..A98G4 ....................................................200
.......................................................12th November
Total ........................................................1120
..............................................................n/a
(* This empty location would not, of course, be displayed
- it would simply "disappear" from any association with P50.) A
worry expressed by many stores managers considering the switch from a fixed
location system to a variable one is that stock may be placed but the location
wrongly recorded, the stock thereby becoming "lost" since its actual location
is no longer capable of discovery through the system. A number of safeguards
are available here. First, if a storeman is directed by the system to place
stock in a location supposedly empty, and finds it occupied, he must abort
the placement and report matters so that an audit of the location can
be carried out. Secondly, periodically, all locations recorded as being empty
on the system can be printed out, and a quick visual check made to verify
that they are indeed empty. Finally, a powerful verification system based
on secondary location codes can be instituted, as given below.
The
Magic Number Method:
A unique, randomly generated secondary code is assigned to
every stores location, and tagged to the end of the primary location code.
For example, the secondary code 3729 may be generated and tagged to primary
location code A08G4 to give a new code as follows:
A08G4-3729
When the storeman puts stock away at a location or retrieves
it, he must record on the transaction the full code of the location, including
the tag. The computer checks the validity of the full code and rejects
the transaction if the primary code and the tag do not match. For example,
suppose the 200 units of P50 in the figure immediately above had not been
placed at Location A08G4, but had been wrongly placed in, say, Location A08F4
instead, Location A08F4 having tag 6881. The storeman records on his transaction
"A08G4-6881" (he thinks he has placed it correctly!) The transaction is rejected
because primary code A08G4 corresponds to tag 3729, not 6881.
There are numerous software packages on the market offering
a variable location putaway and retrieval system, and all proprietary
warehouse management systems (WMS's) include this facility. There is great
scope in the design of any such system to contribute to stores flexibility
and effectiveness. However, many packages are, frankly, poor, and any student
of this on-line course who is going down this road is urged to take the greatest
pains in evaluating alternative systems. Investigation must be thorough, and
detailed answers must be given by the various software vendors to questions.
The following issues and package capabilities should
be closely gone into.
(1) As stated in Section 1,
in stores jargon, the easiest stores locations for putting away and picking
are referred to as "the golden zone" - locations which are between waist
and shoulder high, and which are close to a central point in the stores.
(Next come locations in the "the silver zone". Finally, the slowest and
most distant locations make up "the bronze zone".) In the system, a fundamental
requirement is to be able to nominate locations and zones maintained by
it in this manner, and as well to be able to nominate certain locations
within these three zones as suitable for special storage (eg large, long
or secure - categories peculiar to the company's types of stored items);
(2) What is next required of the system is that it should
direct stock to be put away in locations which make best use of storage.
Again as explained in Section 1, the criterion usually used is each item's
pick density. Pick density recognises
the fact that the company wishes to optimise the use of the golden zone,
and that consequently it should take into account how much space is taken
up by items to maximise the amount of picking that takes place there.
For each stocked item, the supervisor must determine its volume-movement,
V. This is defined as V = T × C, where T = the average total number of
units of the item put away and withdrawn per month and C = physical size
of each unit - ie the space occupied by one item, measured in cubic inches.
If P = the average number of putaways and withdrawals per month, then
each item's pick density D = P / V. The company should determine the pick
density of each item and record this on the system. The system must allocate
items with the highest pick densities to the golden zone, items with the
group with next highest pick densities to the silver zone and those with
the lowest densities to the bronze zone;
(3) In addition to pick density, the system must also
take account of special storage problems such as size, weight and length.
These needs must be combined with pick density for putting away;
(4) Where a choice of locations exists in storage, the
system should select the location nearest to existing stock of the product
being stored. The natural affinity of stored items should also be considered
- for example, Products A & B are distinctly different items, but 70%
of all orders to pick A also include a need to pick B (eg cans of adhesive
and ceramic tiles).
(5) In stock retrieval, adherence to the FIFO principle
(first-in, first-out). Besides conforming to good storekeeping practice,
this rule will also tend to lead to locations being emptied at the fastest
possible rate, thus freeing space for further storage. (In the second
figure above, the oldest stock is at A07A2, and withdrawal of 120 units
leaves the location empty and available for further use. In the last figure,
the oldest stock is at A04F1, and this location will be continually selected
for picking until it too is empty.) However, the principle of FIFO in
the system cannot be divorced from the good practice of picking stock
so as to empty locations as soon as possible (thus freeing them for further
use). And on top of both of these matters is the question of stock consolidation
- for example, should the system direct consolidations, and if so, on
what basis? - partial pallets, partial shelves, partial bins ...?.
(6) Directions to storemen and warehousemen as to picking
routes is clearly also within the ambit of the random location program.
Dramatic reductions in pick times are often obtainable by the employment
of mathematically based optimisation routines for working out superior
pick sequences. (An example of one such routine relates to a "man-aboard"
picking vehicle - this makes one traverse of the aisle for picks from
high locations, then a second traverse for picks from low locations, avoiding
excessive slow raising and lowering of the vehicle.)
In order to be successful, the operation and management
of a variable location system demand meticulous attention to accuracy
in recording data and promptness in communicating it through a sound on-line
system. Training is of the essence - staff must thoroughly understand
the system and must follow through any errors revealed in its day-to-day
operation. For example, if a storeman is directed to put away items in
a location that is supposedly empty but which in practice turns out to
be occupied, it is not sufficient merely to abort the put away and find
somewhere else. The reason for the problem must be investigated, the source
of the error must be found and the system improved.
Finally, a storeman in a variable location store should
be appointed as "Mr Storage Planner". The appointee's job is to control
the system and keep data up to date (eg pick densities). The storage planner
should also direct consolidations and must be able to override the system
where there are clashes, say, between FIFO and emptying locations, or
in identifying affinities between products.
4.2
Order Picking
4.2.1
Cost and Picking Performance
Order picking is a principal activity of the establishment,
and the efficiency with which it is done is a prime measure of performance.
The way that order picking is organised should be constantly in the mind
of the stores supervisor or warehouse manager in the light of changes
to the number of orders and number of items per order, changes in technology
and changes in costs. The manager should also be fully aware of the broken
down costs of picking in his particular warehouse - ie where the time
is spent. For warehouses generally, labour overall accounts for 60% of
total warehouse costs, and the split of labour costs by activity is typically:
.............................................................................................Percent
Labour
...............................................Receipt
of Goods ............................15 %
...............................................Storage
............................................10 %
...............................................Order
Picking ................................55 %
...............................................Despatch/Consolidation
................20 %
Regardless of other warehouse costs associated with picking,
therefore, such as supporting equipment and the unavoidable costs associated
with holding stock itself (insurance, rates ...), picking itself accounts
for 33% of direct total costs (ie 60% × 55%
= 0.33).
An accepted general measure of picking performance is
as follows:
Total Labour Warehouse Time (in minutes)
/ Number of Order Lines Picked
For example, suppose in one week the labour hours spent
in picking came to 200.0 hrs, and over this time 400 orders were picked,
with an average of 6.0 lines per order (ie 6 different products ordered,
each associated with the order quantity specified). The picking rate is
thus:
200.0 x 60 minutes / 400 x 6.0 lines
= 5.0 minutes per line
Although the breakdown of activities which make up a
'pick' will vary from warehouse to warehouse, the following are typical,
quoted in a Dexion study published some years ago.
...........................................Activity .....................................................Percent
of Time
..........................................Travelling
...............................................................60%
..........................................Extracting
...............................................................20%
..........................................Searching ...............................................................10%
.........................................(Documenting
+
.........................................(Reaching +..............................................................10%
for all
.........................................(Sorting +
..........................................(Counting
----------------------------------------------------------------------------------------------
100%
From the previous figures, if picking constitutes 33%
of total warehouse labour costs, and travelling to and from the picking
face is 60% of that, then travelling to and from the stock to pick orders
constitutes about 20% of all warehouse labour costs. The possibility of
substantially reducing this time is clearly a serious matter. Ascertaining
the statistics above for a particular warehouse requires careful thought,
then measurement, and then calculation. The video-ing of operations is
often an effective way to obtain the raw data.
4.2.2
Reducing Travelling Time in Picking
Clearly from the figures above, a reduction in picking
travelling time is the Number One aim in improving picking efficiency.
It is not the only means, however. Other tasks that might come under scrutiny
are: Documenting - use of the computer to direct the picking operation
and automate the flow of information; Reaching & Sorting - consider
Stock to Picker systems (see below), voice directed picking, pick-to-light
and the installation of automation; Counting - weighing on digital
scales and greater use of pre-packing. Nevertheless, the main cause of
lost time remains travelling, and here the most important issue is whether
there should be one-step or two-step picking!
One-step order picking
One-step order picking is where the customer's order
is satisfied by picking stock for it direct from the main body of the
stores. The stores employing one-step picking are often low throughput
with a small number of stores staff.
Two-step order picking
Two-step order picking is where an intermediate, transient
secondary stores is established, that lies, logically speaking, halfway
between the customer's order and the primary stores. That is, in two-step
picking, substantial amounts of stock are picked from the primary stores
into a secondary store - for example, a "mini-store" or picking face.
Then, customers' orders themselves are picked from the mini-stores/picking
face. Two step picking is associated with larger stores or warehouses
handling large numbers of comparatively small orders. The most important
decision of all in picking efficiency, therefore, is to decide between
one-step and two-step. To do so requires painstaking assembly of data,
calculations and, possibly, the use of simulation as described in Section
1.
4.2.3
One-Step Order Picking
i. Picking Multi-Line Orders
All of the items on a multi-line order will be picked
on a single picking trip. The importance of locating the stock in the
first place, perhaps by the picking density method, has been dealt with
earlier. Also mentioned was the matter
of working out superior picking routes, perhaps by complex mathematical
means. It may also be possible to combine several orders into a single
multi line order by order bunching. There are numerous ways orders might
be bunched within the stores. For example, if many of the orders received
contain common items to be picked, they can be temporarily amalgamated
to eliminate multiple journeys to the same stock. The amalgamation of
Order 1 and Order 2 in the table below reduces the number of trips to
withdraw products A23 and B21 from two each to one each.
...................Order 1 .....................................................................Order
2
Product ............No of Units............................................Product
............No of Units
A23.......................4..............................................................A23......................4
B21 ......................6 .............................................................B21
.....................3
C56 ......................3 .............................................................D55
.....................2
.............................................Amalgamated
Order
........................................Product ............No
of Units.
.........................................A23.........................8....
.........................................B21 ........................9
..
.........................................C56 ........................3
..
.........................................D55 ........................2
...
In the example, the two original orders must now be separately
built up from the marshalled, amalgamated stock of the 'amalgamated' order.
A problem above with stores is that the customer himself may be physically
present, and if so will not wish to be kept waiting a longer time than
necessary, quite regardless of the efficiency of the bunched up picking.
This consideration is likely to be absent when dealing with orders in
a warehouse from external customers, since customers will have sent their
orders in remotely via a Sales Order Processing (SOP) system. Since customers
are remote, the opportunity for bunching is far greater. The 2-order procedure
illustrated above for a stores can be amended as follows: (1) collect
all SOP orders over one hour; (2) bunch and sort the orders as in the
illustration above; (3) pick the marshalled stock down to nothing, and
back into the originally received SOP orders.
ii. Zonal (or Sectional) Picking
Perhaps the most common improvement to basic one-step
picking efficiency is zonal picking (the arrangement of "stock" by a supermarket
is an obvious example of zoning, making the picking into his trolley by
the customer fast and efficient.) In the stores or warehouse, to start,
stock is analysed into groups such that the number of pick requests per
group are approximately equal (also taking into account items with high
pick affinities - ie different items often picked together in the same
order). The space occupied by stock in each group is next calculated.
The storage area within the stores/warehouse is next sectioned into physical
zones, the space within each physical zone being appropriate for each
zonal group. Finally, each item of stock is located within its zone according
to the pick density principle previously described. When an order comes
in, the lines on it are split up and the requirements from each zone are
given to the zone section leaders for picking. The picked items are placed
by the section leaders in the marshalling area designated for the order
in question. A variation on the method that requires considerably more
organisation and coordination than seems apparent at first glance, and
which is used only in large warehouses, is to send the original order
note from section to section, each section picker picking the stock which
he sees on the order is in his particular zone.
Dynamic zoning:
It is necessary in zonal picking to keep the picking
demands per zone and the picking manpower allocated to it under constant
review. Locations which are included in Zone A should be reallocated to
Zone B if the picking activity increases in Zone A and decreases in Zone
B. An incidental advantage of zonal picking is that it reduces socialising
by storemen.
4.2.4
Two-Step Order Picking
An obvious and critical question in two-step picking
relates to the management of the secondary store - how are replenishment
quantities, retrieved from the main store to 'top up' the secondary stores,
to be determined, and how and when are the 'top ups' to be physically
accomplished. The requirements of the secondary store can be calculated,
by a variety of means, so that the material is picked on a regular periodic
basis (perhaps once a day for convenience, being sure to replenish enough
so as not to run out during the day). Calculations can be made by keeping
track of works order or customer orders through the appropriate computer
system. Alternatively, it might be practical to replenish the secondary
store by a simple two-bin system - ie through a system controlled purely
visually. As for carrying out the replenishment, if economics allow it,
it is a good idea to delegate the responsibility for doing so to a particular
person or team.
4.2.5
Picking Technology I - Picker to Stock
Order picking must be seen in the total context of method,
warehouse organisation, supplies and customer activity - and the choices
available of technology and materials handling equipment. Picker to
stock systems include simple equipment such as storage drawers, gravity
flow racks and bin shelving. It should be recognised, however, that inexpensive
equipment may be disproportionately expensive in terms of time and manpower.
Pick Modules and Rollers
Boxes and pallets are trundled along a `picking tunnel'.
Goods placed at one end are trundled along until finally they are picked
for despatch at the other. Two advantages are (1) FIFO is maintained automatically,
and (2) a single box or carton or pallet only is presented to the picker
at the other end. The pick module ... ie the picking area reserved for
the picker ... is thus separated from the storage replenishment activities.
Picking Vehicles ("Man Aboard")
The picker travels to the picking face on a specialised
vehicle, which places him at the correct height for picking.
Automatic Crane Retrieval
Automatic cranes are directed by computer input instructions
to pick stock (say, a complete pallet) from one or more specified locations,
bring it to the human picker in charge of the order, and return the pallet
to storage. Automatic cranes are often necessary in very high racking.
In other circumstances, it is vital in such a system that effective use
is made of warehousemen's time while the crane(s) are fetching stock,
otherwise all that will have been achieved is the substitution of a fork
truck or reach truck for very expensive automation.
Radio Links and Conveyors
It may be possible to avoid fully fledged two-step picking
by having pickers permanently stationed near the stock, in communication
with the order assembly operation by radio or VDU. Stock is called for,
picked at once and returned to the marshalling area by an automatic vehicle
or conveyor. Pickers at the stock in such a system can be assigned to
separate warehouse zones, to cut down their travelling time even further.
4.2.6
Picking Technology II - Stock to Picker
Because the amount of stock in the secondary store is
small and resident there for very short periods, the emphasis here will
is on highly efficient picking per se, so that machine-driven retrieval
systems are likely to be preferred. It may even be economic to have a
very simple stock layout, such as an open U arrangement on benches. (If
so, attention must be paid to separating the human pickers in the U from
the fork lift trucks and empty boxes and pallets.) Higher up the technology
ladder, the techniques applied throughout industry for such equipment
as bottling lines and similar high speed synchronised operations have
also been applied to picking. The result is the availability of fast,
purpose built though expensive devices ideal for stock-to-picker operations.
Each system is designed and installed, tailored to a warehouse's individual
volumes, speeds and space. All utilise the computer to the maximum degree
such as by: (a) tracking replenishment needs by counting the stock picked;
(b) printing despatch labels and other documentation, including accounts,
to accompany despatches; and (c) making use of bar coding and radio frequency
identification tags. Many systems are capable of retrieving and delivering
3000 items per hour to the picking face (ie to the manual pickers) from
a stock of 3000 different lines. They are major engineering undertakings
fully comparable with their equipment counterparts in manufacturing industry,
and must be backed up by equivalent engineering and maintenance support.
Simpler, more easily installed equipment includes the following.
Horizontal and Vertical Carousels
:
Horizontal: These can be heavy or light duty,
and are often used for heavier or more bulky objects than the traditional
vertical carousel. For efficiency, one picking station should be served
by a number of the carousels ... perhaps 3 to 5 of them. These are arranged
in groups of so-called 'pods', butting on to the station. The orders are
input to the VDU console. Each carousel then rotates in turn, stopping
at the trays/boxes of each of the required objects stored on it.
Vertical: The shelving within the cabinet rotates
clockwise or anti-clockwise, to present the required tray at the picking
front. The number of storage locations might be 928 (ie 58 × 16), but
with long shelves, different things can be stored on the same shelf. They
are driven by computer, and usually combined with a facility to print
customer labels and prepare accounting information including invoices.
They are good for small objects and can achieve savings per pick of up
to 80%. Because of their cost, both horizontal and vertical carousels
are generally viable only for small items of relatively low consumption.
The principal problem regarding their efficiency is the time taken for
the carousel to trundle round and present the stock to the picker. For
that reason, one operator will typically have charge of two carousels,
and for 35' carousels, one operator will have charge of three carousels.
Popular makes are the well-spoken of Linvar (Leicester), Linpic (Nottingham),
the Cardex Shuttle and - for picking bottles in pharmaceuticals distribution
- the Haystack. Software includes Maximo. It has been said that it is
not a carousel's inherent advantage as a medium of storage which is of
value, but the fact that it eliminates the inefficiency and travel time
associated with whatever method of storage it has replaced. In the words
of Ken Clark, manager of SLS Sears Logistics Services, Illinois, There
is no way to justify the high cost of the carousel in terms of picking
the items stored in it. The justification came from taking these items
out of the area in which they were previously stocked, thus reducing order
picking travel time in that area by compressing its size.
Mini-Stacker Cranes
First marketed under the name `Supreme', the picking
retrieval is made by a mini- stacker crane under central computer control.
The system is useful for more than small objects and is popular because
it creates a good working environment. Stock is kept strictly separate
from unauthorised personnel. The speed of picking is not especially fast
given the high capital cost of the equipment. Speed-up is obtained by
picking several orders together and by overlapping jobs - say, machine
picking of Orders 3 and 4 and manually load assembling of Orders 1 and
2.
4.2.7
Voice Directed Picking
Voice directed picking is a highly effective and increasingly
popular technology that has many advantages in both stores and warehouse
operations. With 'voice', workers wear a headset, earphones and a belt-attached
portable computer which enable them to hear instructions from the computer
and to speak words of confirmation as to action taken. The computer communicates
with the company's Warehouse Management System (WMS) to retrieve
the locations to be picked, then the identities and quantities of items
to be picked, and transmits this information as speech to the system.
The worker proceeds to each designated location, reads out a check digit
to confirm its correctness and receives further instruction as to the
identity and amount of what is to be picked. He confirms the pick when
he has actually physically picked the material, and the system then proceeds
to the next location/item. The advantages of voice
directed picking operations are that the storeman or warehouseman has
his hands and eyes free. Picking accuracy is far higher than with
a paper based system, productivity is substantially higher and accidents
are reduced. For information on voice picking, contact Vocollect
or PsionTeklogix.
An alternative to voice directed picking is pick to light. With
light directed picking, a small light is illuminated at each place from
which picking is to take place, speeding up the travelling process. The
system is however more expensive and less flexible than voice.
4.3
The Maintenance of Stock Records
4.3.1
How The Stock Recording System Works
The stock recording system encompasses the maintenance
of data records concerning the receipt, movement, storage and withdrawal
of physical stocks committed to the stores' care. The main product and
stock information is contained on a file of data, the file usually consisting
of one record for each separate product. The data record itself, corresponding
to the particular product under consideration, will consist of header
information giving, say, the product's description, unit cost, storage
life etc.. It will also consist of data of a highly dynamic nature showing
the quantities of stock currently on hand, perhaps split among such categories
as free, allocated and earmarked. The stock recording system is said to
be transaction driven. That is, when a physical event such as a
receipt occurs, a corresponding data transaction is raised with the relevant
data relating to that receipt - product code, quantity, supplier code
and so on. The data transaction is processed by computer and the information
on the receipt used to update the main stock record. Besides the use of
stock records in inventory and operational systems, the records system
becomes the eyes and ears of the manager in physical stock management.
Provided that sufficiently flexible means are made available to interrogate
the records, with easy-to-use on-line query facilities, the stores or
warehouse manager can 'scan his stock' each week to determine items which
are in danger of exceeding their shelf lives, spotlight slow-moving products,
report warehouse turnover and occupancy etc.. Many of the costs of stockholding
such as obsolescence can thus be largely eliminated.
4.3.2 What
is Meant by 'Records Accuracy'
To estimate the accuracy of the store's records, it is
necessary (1) to select randomly a reasonable number of records (say,
50), then (2) to count the physical stock of the actual products to which
these records correspond, and then (3) to compare the recorded quantity
of each product with the quantity counted. If 100 products were to be
selected and counted, and in 81 cases the recorded quantity was the same
as the physical stock counted, the accuracy of the 100 records is 81 /
100, or 81%. That is, the formula is:
Accuracy = Number of Records Correct
/ Number of Products counted
There are a number of snags in carrying out the above,
one of them related to the complex matter of the reconciliation of the
record and the actual count (see below).
However, for many stores, a further question is whether the record and
the physical stock must match exactly for the record to be considered
correct, or whether a degree of "tolerance" is allowed between the two
figures such that the record is still considered to be correct despite
the difference.
Although there are very many products which can and should
be counted exactly - large, expensive structures, for example - there
are many others which simply cannot be counted exactly. Bulk liquids
are difficult to measure. Some items such as yarn, counted by weight,
have a weight heavily affected by humidity. And some items are extremely
cheap and numerous, and seem not to be worth the expense that would be
necessary to count them accurately - some small electronic components,
for example.
Although a tolerance might be assigned to every item
separately, this would burdensome and contrary to commonsense. Instead,
before estimating records accuracy, the stores controller should first
assign every item to one or other of a limited number of "tolerance
classes". Examples of tolerance classes are 0%, 2% and 5%. Then, when
comparing the stock record with the actual count, the tolerance percentage
of the product must be allowed for. For example, suppose Product P had
a tolerance of 2%, and there were 500 units on the record. 2% of 500 is
10 units. Consequently, if the physical stock is anywhere between 490
and 510, the record is declared correct. For example, if the count is
508, the record is correct, and if it is 511, the record is wrong.
4.3.3
Improving the Stock Records 'System''
The views of attendees on GMCS's now discontinued course
on Stock Records Accuracy over many years as to the causes of stock errors
in their own companies are summarised in the table below
1.
Incorrect Counting .............................................. 11.8%
2. Missing
Transactions ............................................. 9.0%
3. Insecure
Stores .................................................... 8.6%
4. Incorrect
Recording .............................................. 8.1%
5. Incorrect
Picking (ie wrong item) ........................... 6.9%
6. Stock
placed in Wrong Location .............................. 6.6%
7. BOM and/or
Backflushing Errors ............................ 5.6%
8. Slow
Reporting of Transactions .............................. 4.8%
9. Errors
introduced by the Annual Stock Count ........... 4.3%
10= Working
under too much Pressure ....................... 4.1%
10= Misidentification
of Parts ..................................... 4.1%
12. Data
Keying Errors ............................................... 4.0%
13. Scrap
or Production missed ................................... 3.9%
14. Use
of the Wrong Transaction ................................ 3.1%
15. Wilful
lack of Care ................................................. 3.0%
16. Units
of Measure ................................................... 2.8%
17. Duplicates
(ie same transaction submitted twice) .... 2.1%
18. Misidentification
of Locations ................................. 2.1%
19. Failure
to count Raw Material Receipts .................... 1.9%
20. Shrinkage
(unreported deterioration/write offs) ..... 1.6%
21. Incorrect
Picking List issued ................................... 1.1%
22. Theft
.....................................................................
0.8%
23. IT/System
faults .................................................... 0.1%
It can be seen from this that the top five causes out
of 23 account for an incidence of 44 error occurrences out of 100. The
causes of error to attack first are therefore these five ... basically
to do with (1) counting, (2) locating, and (3) the management of transactions.
After identifying the prevalent causes, the stores manager must set to
work to change the recording system, perhaps
by providing new technology, by providing more effective training or by
whatever other means are necessary to eliminate or alleviate the causes
and put matters right. In other words, the problem
and the solution to it are not in the hands of staff; they are in the
hands of management.
4.3.4
Controlled Stores Access
If the Stores Manager and his staff are to be accountable
for the accuracy of the stock records and the integrity of the material
in their charge, it is essential that they maintain full control at all
times over stock issues and receipts. In short: the
stores must be physically secured and manned at all times, and must be
strictly out-of-bounds to non-stores staff. The closed store may
present a problem in factories which have multiple product locations (with
materials placed near to their points of use). Although the cost of re-laying
out the factory can be high to achieve controlled access, it is a prerequisite
to the achievement of inventory records accuracy. One of these costs clearly
is the need to man the entry to the stores. Although the principle of
a fully-closed store must not be violated, there are a number of ways
to mitigate the cost and possible inconvenience, such as by introducing
imprest and bulk issues previously mentioned.
In the last analysis, however, this is a matter where it may be necessary
to bite the bullet. A storeman must man the gate to the store.
4.4
Cycle Counting
Note:
this subject is covered at considerable length in the free on-line course
on Stock Records Accuracy at this site. Go to
Cycle Counting Agenda
or Cycle Counting text.
Despite our best endeavours, it seems inevitable that the
computer records for the stock of a few products will deviate from the actual
physical quantities of the material present. This is especially likely to
occur if the material is subject to a large number of transactions ... ie
many receipts and many issues. And because of it, it is periodically necessary
to count the stock and correct the computer records where they differ.
In the past, this process has been combined with the financial
and legal requirement to account for the value of the stock at the company's
year-end, stock being a major asset in the book of accounts as explained below.
When all the stock is counted at the year-end for this purpose, the activity
is referred to as the annual stockcheck or the annual audit.
It is a disruptive and error-prone time, involving weekend working and hapless
helpers drafted in from other departments.
A more natural, more efficient and far less disruptive way
of checking physical stock against the record is by way of a programme of
cycle counting. Cycle counting means choosing and counting a number
of products day-after-day or week-after-week until eventually they have all
been counted. When they have all been so counted, the process starts all over
again. The length of time to count the stock and start again is the 'cycle'.
If a company counted its stock three days a week such that it was all counted
by the end of six months, and then started again, this would be a six month
cycle. Indeed, a company might well count certain of its products (say, the
10% with the most transaction) over a one month cycle and others (say, the
30% with the fewest transactions) over a much longer cycle (perhaps, six-monthly).
Three issues which must be decided before commencing a cycle counting programme
are: (1) what the cycle length is to be (or what the different lengths are
to be, if the products are to be split into different counting groups); (2)
what is to be the rota of counting within a cycle; and (3) how records of
actual counts are to be maintained and published. These questions are lengthy
ones answered in full in the Stock Records
course referred to above.
4.5
The Financial Control of Stock
4.5.1
The Custodianship of Assets
As previously stated,
the role of the storeman is to provide a service to the production, purchasing
and distribution functions, and to receive, store and issue just that
amount of stock in a timely way that is determined by the planning and
other systems which they employ. The storeman or warehouseman therefore
takes the accountant's view - that stock is a valuable asset (under his
direct control). The company has paid money to suppliers or indirectly
through the production process to acquire it, and expects in time to put
it to further use or to sell it. In short, it is what is known as a current
asset. A major company accounting document required by law and good
practice, to be prepared at the end of each financial year, is the balance
sheet. This is a snapshot at that moment in time of what the company
owns (its assets) and what it owes (its liabilities). The
assets themselves are placed in one of two classifications, fixed assets
and current assets. Examples of fixed assets are land and buildings,
machinery, and fixtures and fittings. Current assets are those which either
are cash, or are expected to become cash in the near future. They include
cash at the bank, stock and debtors (ie companies that owe us money, usually
being customers who have not yet settled their bills).
The reason that stock in the stores is taken to be a
current asset is that it is regarded as an investment waiting to be sold.
That is, when the company manufactures the items on its sales range, in
effect it is investing money in the production so that it will have the
stock available to sell. When the sale has been made, the company no longer
owns this investment - instead, it has revenue from the sale.
The stock in the stores is valued at its cost
price. A cost price for every item is calculated by the accountant
based on the costs incurred in the production process - raw materials
purchased, electricity expenses and factory operators' wages, for example.
Note that work that is partially completed, basic components, sub-assemblies
and work in progress are also valued at their cost prices. In these cases,
although the material could not be sold to a customer, the items still
represent investments, in these cases, waiting to proceed to the next
stages of the manufacturing process.
4.5.2
Financial Reporting
There is a requirement to record carefully any discrepancy
between the stock record and a physical count. Discrepancies and the formal
reporting of them in financial terms are clearly important matters. A
company which fails to keep close control over stock jeopardises its own
continued existence as a solvent, on-going concern. If the stores or warehouse
has a large range of different items, it is unlikely to be best to show
a list of stock losses and gains individually. Instead, it will be more
helpful to summarise them in groups of similar items. In effect, each
group is an account. (The familiar term accountancy means
the management of the company's books of accounts.) Consider two groups,
or accounts, (a) copper tubing, and (b) rubber components, and the discrepancies
that might be revealed one time from counting the items of copper tubing
items and the rubber component items:
Account Name .............Total Value of .......................Total
Value of ..............Net Value.................Net Value of
..........................................all Surpluses ......................all
Deficiencies .............of Surpluses ...........Deficiencies
Copper Tubing .......................£10 .............................................£2
.................................£8
Rubber Components ..............£17 ...........................................£20
.....................................................................£3
Suppose now that prior to the production of these reports
of the net (ie total) surpluses and net deficiencies, the previous value
of copper tubing we believed we held was £1000 and the value of rubber
components was £700. We can now post two financial transactions to these
accounts as shown in the final table below.
Copper Tubing Account ........................£1000 ......................................Rubber
Components Account ...........£700
Stock Surplus .............................................£8............................................Stock
Deficiency ...................................£3
Revised Value of A/C ..............................£1008.........................................Revised
Value of A/C .......................£697
4.5.3
Managing Stock Losses
When it comes to the re-evaluation of stock for various
reasons such as its spoilage or damage, the views as to cause and cure
are required of many staff in the company including the accountant, the
production and purchasing managers, the marketing manager and, of course,
the stores manager himself. Categories of stock other than 'fit for purpose'
will be different for each company, depending on the nature of its business,
but might include: obsolescent (the material is going out of use
but is not yet unusable); obsolete (the material will never be
needed again); deteriorated (the reason for the deterioration should
be recorded - storage conditions, damage, excess length of stay etc..);
and slow moving. In purely financial terms, stock gains and losses
may be reported to senior management in the above terms say, every 6 months.
However, the stores manager will wish to review stock in this way far
more frequently than that - say, every month. The review will take the
form of a VDU query or printed report, and enable him to identify material
at risk ... for example, material moving into the danger zones of excessive
duration on the shelf. In other words, the idea is to look at things and
take action before they become problems.
4.6
Transaction, or Audit Trails
4.6.1
Defining a Transaction Trail
When the stores manager accesses the computer record
for a given product in his charge, the information he sees on the VDU
is of a 'static' nature. He sees a snapshot. In order for him to appreciate
the succession of events which have taken place ... the receipts into
stock, the stock movements, the picks, the despatches ... it is necessary
for him to see a trail of the data transactions. A transaction
trail or audit trail is a display of the transactions which have been
raised and submitted to the stock recording system and which have successively
brought the record to its current state. For example, suppose that at
the beginning of the morning according to the record there were 500
heavy duty batteries in stock. Later, at 10.00am, a system transaction
is submitted and processed for a receipt of 150 batteries from the supplier.
Shortly after this again, at 10.30am, a further transaction is processed
for 90 units issued to the shop floor. The record now says that there
are 560 heavy duty batteries (500 + 150 - 90). This example is illustrated
below. Note that the successive stock quantities on the record show
the 'before' and 'after' record amounts (ie before the transaction was
applied and after it). Note also that the order in which transactions
are displayed is from bottom to top. This is so that increasingly old
transactions can be seen by "scrolling" round the bottom of the screen.
In the example below, the times the data transactions were input are
given, as recorded by the computer clock.
Audit Trail Report
31st October........................Product:
Heavy Duty Batteries ...................Record..560 units
Time ..............................................Trans. Quantity.........................................................Stock
Before.....................Record After
10.30am....................(Issue to Shop) .......90 .............................................................................650.........................................560
10.00am ...................(Receipt from Supplier ....150 ...............................................................500
........................................650
The stock record system should provide the ability
to display the audit trail of any product on the VDU at any time. The
maximum number of (increasingly old) transactions capable of being retrieved
will be clearly governed by what is on the computer disk. It may be
necessary to page back through several VDU screens to see them all.
Except in automated warehouses, the times at which transactions are
input to the system will not correspond to the times at which the physical
events they describe actually occurred. The submission of the transactions
will be later by seconds, minutes or hours. In fact, in batch systems,
it is possible for the transactions to be input in a different order
to the order of the real events. In the example above, if the storesman
had been unable to submit the receipt transaction until 11.00am, even
though the actual delivery was made much earlier, the audit trail would
read as below instead:
Audit Trail Report
31st October........................Product:
Heavy Duty Batteries ...................Record..560 units
Time ..............................................Trans. Quantity.........................................................Stock
Before.....................Record After
11.00am....................(Receipt from Supplier ........150
...........................................................410........................................560
10.30am ...................(Issue to Shop ...........................90
...........................................................500 .......................................410
It can be seen that the the stock record at one point
above was 410 units, even though we know there never were that number
of units present. The investigation of out-of-order or missing transactions
and known or apparent discrepancies between the "real world"
and the stock records to establish the true position is referred to
as "reconciliation".
4.6.2
The Reconciliation of a Stock Count
One reason that the storeman may wish to investigate
a transaction trail is the stores' concern with the reconciliation of
a physical stock count and the stock record held on the computer. Because
the chronological order in which the transactions are posted
to the stock recording system is not necessarily the order in which
the physical events to which they relate take place, or because transactions
may be missing or late, or for some other reason, it
is not possible simply to substitute the physical count figure for the
current stock figure unless the stock is closed off from picking and
putting away well before the cycle count, as described below.
In all cases, if the stock has not been closed off, even when the count
figure and the stock record figure agree, it would be necessary to investigate
the transaction trail, looking for out-of-order and late transactions,
before either making an adjustment or verifying the record as being
correct. An example of the effect of a late transaction on an attempt
to reconcile a stock count is given below. In the example, suppose that
a number of events occur relating to a part P from 3.00pm to 4.00pm.
The first figure below represents the physical stock quantities involved,
in particular the changes in stock level following a receipt and an
issue. It can be seen that the third 'event' to occur is the carrying
out of a cycle count at 3.40pm, which duly records a stock quantity
of 1200 units. In this example and in the ones following, the transaction
trail should be read from top to bottom.
Figure 1 - Representation of 'Events' (Physical
Stock)
Time ..............................................Description
of Event.................................................... Quantity.......................Physical
Stock in Store
3.00pm....................(Starting Stock Quantity) ................................................................................................................................................1000
3.15pm ................... Receipt from Supplier .......................................................................................500
........................................................1500
3.35pm..............Issue
to Shop .........................................................................................................300..........................................................1200
3.40pm ..................Carrying out of Cycle Count.............................................................................1200..........................................................1200
The next figure shows the stock record of Part
P and the data transactions raised and submitted in response to the
events depicted in Figure 1 above. It is assumed that the stock record
is correct at 3.00pm. The cycle count value is submitted as a transaction
at 3.50pm.At the time the cycle count transaction is received, however,
the Issue to the Shop transaction of 300 units which occurred at 3.35pm
has not yet been submitted to the system. It is late. It can be seen
in Figure 2 that it is not finally submitted until 4.00pm. Figure 2
: Data Transactions relating to Figure1 (previous page)
Figure 2 - The Stock Record and Data Transactions
Time ..............................................Description
of Data Transaction..................................................Trans.
Value.....................Stock Record
3.00pm....................(Starting Stock Record)
.................................................................................................................................................................1000
3.20pm ................. Receipt from Supplier Trans...................................................................................................500
.................................................1500
3.50pm..............Submission
of Cycle Count ....................................................................................................1200..................................................1200
4.00pm ..................Issue to Shop Trans...................................................................................................................
300....................................................900
Because of the lateness of the submission and processing
of the Issue to the Shop transaction of 300 units at 4.00pm, if a comparison
is made at 3.50pm between the cycle count value of 1200 units and the
stock record of 1500 units at that time, it will appear that the record
is in error by a 300 units excess. When the cycle count transaction
then changes the stock record to 1200 units at 3.50pm, the late transaction,
when it arrives, further changes the record to 900 units and makes it
wrong.
In order to be able to reconcile the cycle count with
the record, it is necessary to close off the stock physically from further
picking or putting away before the count takes place, and keep it closed
off until the reconciliation. By closing off the stock, the possibility
of late transactions is eliminated - there are no physical events
taking place, so there will be no late transactions! For example, suppose
above that the stock is closed off at 3.30pm, and remains closed off
for an hour, until 4.30pm, to give time for all late transactions to
get through the system. As before, the cycle count takes place at 3.40pm,
and the reconciliation takes place at 3.50pm. The Issue to the Shop
of 300 units physically occurs at 4.35pm, and the transaction relating
to it is submitted at 4.40pm. The physical situation is illustrated
in Figure 3 below, and the record is shown in Figure 4, also below.
Figure 3 - Representation of 'Events' (Physical
Stock)
Time ..............................................Description
of Event.....................................................Event Quantity.....................Physical
Stock in Store
3.00pm....................(Starting Stock Quantity) ................................................................................................................................................1000
3.15pm ................... Receipt from Supplier .......................................................................................500
........................................................1500
3.30pm ....................CLOSE OFF STOCK .........................................................................................................................................................1500
3.40pm .....................Carrying Out Cycle Count...............................................................................1500.......................................................1500
3.50pm .....................Reconcile Stock Record.....................................................................................................................................................1500
4.30pm.......................RELEASE STOCK...............................................................................................................................................................1500
4.35pm .....................Issue to Shop ..........................................................................................................300.........................................................1200
Figure 4 - Stock Record and Data
Transactions
Time .......................................................................Description
of Data Transaction.............................................Trans. Value.....................
Stock Record
3.00pm....................(Starting Stock Record) .................................................................................................................................................................1000
3.20pm ................... Receipt from Supplier Trans. ..........................................................................................................500
.....................................1500
3.30pm ....................CLOSE OFF STOCK ......................................................................................................................................................................1500
3.40pm .....................Carrying Out Cycle Count..............................................................................................................1500......................................1500
3.50pm .....................Reconcile Stock Record...................................................................................................................1500.....................................1500
4.30pm.......................RELEASE STOCK...........................................................................................................................................................................1500
4.40pm .....................Issue to Shop Transaction.................................................................................................................300........................................1200
Note
that the subject of reconciliation and the role of software is dealt with
in greater depth in the Stock Records Course at this site. Visit Section
4.4 of that course.
5. Human Resources
5.1
Recruitment and Selection
5.1.1
Staff Recruitment
Recruitment is defined here as the process of eliciting
applications from personnel to work in the stores or warehouse, not the
final selection and appointment of a successful candidate. There are two
issues which the HR manager may wish to consider regarding recruitment.
Firstly, it is common for the company to advertise a stores job internally,
perhaps because it is inexpensive to do so, or perhaps because it is known
that a shop floor operator would know the company's ways of working and
so require little training. One must question, however, whether internal
appointments are as effective as those resulting from external advertising
seeking recruits with deep stores' knowledge and long stores experience.
Secondly, in order to advertise the post, it is necessary to define its
duties and wage rate. It is common here for HR to grade a stores job by
a simple classification scheme. That is, the question is asked
as to what other jobs it seems to be like. Consequently, what is missed
in doing this is that part of the job related to record keeping, required
meticulousness and other unique, necessary qualities - not least, the
need for willing assumption of responsibility for a large financial investment
in stock. It is highly desirable, therefore, that remuneration and grading
of the stores job should be achieved through application of a so-called
"point factor" system such as the
Hay scheme.
A point factor scheme is a quantitative job
evaluation methodology. A point-factor job evaluation system is a thorough
means of analysing a job from first principles, and identifying the various
factors which constitute it and which must be dealt with in its performance.
After analysis, the various factors and the degrees to which they apply
in the actual conduct of the job by a job holder are "weighted"
numerically. Note that the weights to be applied are decided by discussion,
and their magnitude will be determined in part at least by how management
views the difficulties and importance of the challenges facing the company.
'Factors' might include: problem solving ability; willingness
to assume responsibility; and ability to plan and coordinate.
The points, or weights, assigned to factors will be graded according to
the need for the factor in actually carrying out the job (semi-routine
problem; generally defined problem; abstractly defined ...
etc). As mentioned, the Hay System is a very well-known point-factor job
evaluation procedure By employing a point factor scheme, stores/warehouse
job qualities relating to the need for clerical aptitude and acceptance
of financial responsibility will be brought out. The job is likely to
be placed in a higher grade than at present as a consequence.
5.1.2
Staff Selection
Two aspects of staff selection are testing and
interviewing. Dealing first with testing the job applicant, two
qualities needed of a recruit are a practical nature and clerical/numeracy
attributes (combined with good eyesight). Practicality is self-evidently
needed of the storesman or warehouseman in materials handling and reacting
to unexpected events (see Section 2).
Numeracy is needed in the requirement to support the computer input and
output side of the job. These include completing and submitting stock
data transactions and the ability (say) to use computer put-away software.
So the first thing to test might be the job applicant's eyesight and colour
vision. After this, a simple numeric test might be given. [One test administered
by a company is to give each applicant a sheet of paper on which is printed
a list of, say, 30 product codes. The candidate is required to copy the
codes onto a second sheet of paper! Not too many applicants can do so
correctly.]
As for interviewing the candidates for the job, the first
requirement is that the process should be well organised purely from the
viewpoint of personal arrangements. The WASP procedure has been
suggested, as follows: W: Welcome ... Putting the candidate at
ease and explaining the interview purpose; A: Acquiring .... Acquiring
knowledge, perhaps by going through the candidate's work experience in
(reverse?) chronological order; S: Supplying ..... Supplying information
in answer to the candidate's questions; P: Parting ..... Explaining
what happens next, and in what timescale.
5.1.3
The Job Offer
First, it should be noted that the contract of employment
begins when the successful candidate accepts the company's offer, not
when he starts actual work - a contract of service is but an example
of contracts in general, so that the general law of contract will be applicable.
Also note that the company may make the job offer subject to the receipt
of "satisfactory references". If so, the prospective employee should beware
that satisfactoriness is entirely a matter subjective to the prospective
employer, and also that a referee is under no obligation to provide a
reference. If the job offer is made orally, the employer has a statutory
duty under the Employment Rights Act 1996 to send the new employee a "written
statement" within two months setting out such details of the employment
as pay, hours of work, place of work, job title and so forth. The company
should take particular care in framing conditions relating to place of
work, hours and duties: these should be drawn up widely if it wishes to
preserve flexibility in its deployment of labour. Also a part of the contract
are implied terms. For the employer, they are the duty to act in good
faith and others including those relating to health and safety, and, for
the employee, duties of fidelity, obedience and to act with reasonable
care and skill.
5.2
Industrial Relations in the Stores
5.2.1
Grievances
If a solution to a dispute cannot be found, or if a disciplinary
matter cannot be resolved, the two sides may turn to conciliation,
mediation or arbitration and the services of a third party
to break the deadlock. Industrial experts ready to take on the task are
to be found at the Government's Advisory, Conciliation and Arbitration
Service (ACAS, phone 08458-500501 for free advice). The role of the
third party in conciliation is simply that of facilitator. In mediation,
he will put forward specific recommendations. If employer and employee
have agreed to arbitration, the third party will prescribe a solution
which the parties have agreed in advance they will accept.
In the event of a dispute, and failing negotiation conducted
through standard procedures, the employee, in concert with others, may
engage in industrial action to further his case. Examples of industrial
action are: go-slows, working to rule, overtime bans
and strikes. Any one of these actions, if taken, would constitute
a breach of contract by the employee, the first three being failures in
his contractual duty of fidelity, the last a fundamental breach. Furthermore,
either the employee, if the action is 'unofficial', or the union or staff
association, if it is 'official', unless statutory immunity from legal
action applies, as described below, would be liable to action in law for
a claim in tort, the principle torts applying being those of contract
interference and inducing a breach of contract. A tort is a "civil wrong"
- that is, it is an action taken by one person that harms another. For
example, if Person A drops a hammer that accidentally lands on the foot
of Person B, injuring him, Person A has committed the tort of negligence,
and can sue for damages in the court. Torts are part of common law. (For
example, there is no statute law forbidding people negligently to drop
hammers on other people's feet.)
5.2.2
Breach of Contract
The company is entitled to dismiss employees on strike
without notice for breach of contract. (There is no law which "permits"
a person to break a contract of employment.) If the strike is unofficial,
the strikers are considered to be acting as individuals. They have no
right of appeal for unfair dismissal to an Employment Appeal Tribunal,
since a tribunal has no jurisdiction over matters of contract. If the
strike is official (ie if it is endorsed by a union or staff association),
and all strikers are dismissed en bloc, they also have no right
of appeal for the same reason. However, an appeal can be made if dismissals
are selective. Since the dismissed employees have been treated differently
from those not dismissed, the grounds of the appeal would be that there
has been unfairness - that is, that the employer must have had hidden
motives for his action that related to them but did not relate to others.
Statutory immunity from liability for certain torts,
including those relating to contract above, is given under the Trade Union
and Labour Relations (Consolidation) Act, 1992. In order for the Act to
apply, however, certain conditions must be met. First, the dispute must
indeed be in contemplation or furtherance of a trade dispute. Secondly,
there must be a yes/no ballot of union or staff association members for
the action proposed, with a simple majority in favour. Thirdly, the industrial
action must be confined to a dispute directly affecting the employees
balloted, at their place of work. That is, those involved in secondary
action in support of other employees involved in a dispute elsewhere are
not immune from liability.
5.2.3
Discipline
Discipline by the employer may be reinforced by: a formal
caution; a warning (or final warning); demotion;
or suspension for a period from the company (with pay). However,
the manager whose member of staff is the subject of the disciplinary proceedings
may believe it to be strongly in the interests of his store or warehouse,
and those of the company, that the employee be dismissed. If so, he must
co-operate closely with the HR manager. For one thing, dismissal other
than for breach of contract dealt with above,
is hemmed about by legal obligations and restrictions. As well as for
reasons of ethics, there is a need for the company to avoid unfair dismissal
because of the Employment Protection (Consolidation) Act, 1978. Note that
this Act defines fairness, rather than unfairness, so that in any
case before a tribunal, there is a burden of proof on the employer to
establish that there was a fair reason for the dismissal, as defined under
one or other of the six headings set out below. It is also necessary at
a tribunal to show that the dismissal was "reasonable". Facets of reasonableness
are that the severity of the action taken was matched by the seriousness
of the offence; that the action was consistent with action previously
taken against other employees in similar circumstances; and, most importantly,
that fair disciplinary procedures, such as the issuance of written warnings
and the granting of an opportunity for an employee to state his/her case,
had been put in place and were scrupulously followed.(Failure by the employer
to follow procedure in every particular is a major cause of tribunal findings
of unfair dismissal.) The allowed reasons for dismissal under the Act
are:
1. Lack of capability or qualifications.
The principle two reasons in practice are inherent
incompetence and ill-health necessitating long-term absence from work.
2. Misconduct.
Examples of misconduct are disobedience; serious
negligence; a wilful failure to take prescribed safety precautions;
damage to the company's commercial interests; falsification of records;
drunkenness; and violence.
3. Redundancy.
Dismissal attributable to actual or intended cessation
of business or to an actual or expected reduction of the work carried
out by the employee.
4. Statutory disqualification.
The employee cannot perform his duties without contravening
the law. Usually, this means a driver losing his licence and being
unable to drive.
5. Some other substantial reason.
The principal application of "SOSR" arises when the
employer is forced for valid business or financial reasons to reorganise
the company's operations and, to do so, must unilaterally change the
terms and conditions of contract of employees. Employees not agreeing
to the revised conditions may be dismissed for SOSR.
5.3
Fire Precautions
Fire is an ever present worry for the stores or warehouse
supervisor. Fires are devastating to the operation of the business: they often
result in loss of market share; and the incurrence of huge expense in terms
of loss of stock and damage to the building itself. It is reported from insurance
companies that warehouse stock losses (including stock made unsaleable by
fire) account for 20% of the financial value of all industrial claims. Loss
of warehouse buildings and property accounts for a further 10%.
The ferocity of fire in warehouses can be judged from reported
statistics. Thus even fires involving non-combustible materials such as metal
parts can create air temperatures at ceiling height in excess of 650 C if
such materials are packed in cardboard or crates, or are surrounded by foam
protection. Fires involving combustible materials may produce ceiling air
temperatures over 1100 C. At this heat, non-combustible building materials
will fail. Steel, for example, is structurally damaged by heat over 600 C
and steel supports exposed to the higher temperature for 10 or 20 minutes
will collapse (no-one will forget the horror of the collapse of the Twin Towers.)
Even when steel reinforced concrete buildings survive, the cost of reconstruction
and renewal may exceed 50% of the original cost of the building.
Protection against fire must consequently be a high company
commitment and well-known as an article of company policy. Management must
put in place fire protection and control systems, assign responsibility for
them and ensure those responsibilities are properly carried out. The means
to avoid fire or mitigate its effect through the use of non-combustible materials
and the installation of effective alarms. Sprinkler systems must be installed.
The required action can be considered under five headings as follows.
(i) The Basic Fire System
The warehouse's basic precautions must be put in place
and the work done to draw up the initial fire regulations. The Warehouse
will not receive a fire certificate from the fire authorities until these
activities have been performed. Advice may be obtained from The
Fire Protection Association.
(ii) Fire Regulations
The warehouse's fire regulations cover the precautions
to be obeyed to avoid a fire and the actions to be taken if a fire occurs.
The regulations should be simple and to the point, they must be published
and they must be prominently displayed at a number of sites. The principle
regulations issued by government are The Fire Precautions (Workplace)
Regulations 1997 and The Fire Precautions (Workplace) (Amendment)
Regulations 1999. These are pblished at www.hse.gov.uk.
(iii) Fire Drills
All staff must be regularly trained in fire drills, with
(say) two drills per year. Drills include correct assembly at the designated
assembly points. Staff must understand the purpose and procedure of the
'reporting hierarchy' whereby the senior person at the assembly point
accounts for all persons who were on site to ensure no-one is missing.
The speed and efficiency of fire evacuations must be recorded by the manager
so that progress in efficiency can be tracked.
(iv) The Containment of Fire
Fire walls and regulatory escape routes should also be
provided, as should flame and smoke detectors wired to an audio alarm
system. It is essential that plentiful supplies of water are available
at all the required points for fire fighting by the fire brigade and for
the service of automatic fire sprinklers. It is stated by fire insurance
experts that the installation of effective automatic fire sprinklers will
reduce loss eight fold. A well-designed automatic sprinkler system can
control or extinguish a fire, preventing it from spreading by dousing
adjacent areas and preventing it also from causing structural damage by
cooling steelwork. Sprinklers are permanently on guard and will function,
despite smoke and heat, under conditions which prevent effective fire
fighting by the brigade - in narrow aisles and at ceiling height, for
example. Automatic sprinklers operate from the moment a fire begins and
water damage to stock is confined to the area in which the fire breaks
out.
(v) Fire Fighting Apparatus
The manager is responsible for ensuring that there is
sufficient fire-fighting apparatus at the designated fire points. (Fire
points should be clearly sign-posted and mentioned in the regulations.)
The apparatus including the audible alarm system mentioned in (iv) above
must be regularly tested. Staff should receive training and annual update
training in the use of the apparatus.
5.4
Security
The stores/warehouse should be of substantial construction,
with windows capable of being locked, so as to be capable of resistance to
forced entry. It should be laid out with a minimum number of access points
to buildings, perhaps by reducing the number of extra doors which have been
provided as amenities simply to cut staff walking time. Staff access should
be arranged so that they are "covered" by formal reception areas. Goods arrival
and removal doors should similarly be covered if possible by supervision.
Entry to the stores must be restricted to those with the express permission
of the stores supervisor. A good system should be in place with regard to
keys, with no duplicates allowed. (A system of computer controlled electronic
keys can be installed with separate security passes for personnel whose jobs
require access.)
Theft in
the UK each year from stores and warehouses and from vehicles in transit occurs
on a grand scale. It is a duty of the stores manager to take actions which
will reduce these losses and the costs associated with them. The organisation
and layout of the stores must take account of security from the beginning.
The set- up of routines is very much more difficult and less sure of success
if the basic requirements have not been built in.
Naturally, a major point in the provision of security is
the installation of alarms. Often, however, the alarm system is poorly matched
to the premises and the environment in which it must operate. This can then
be compounded by inadequate training of guards and staff (the majority of
false alarms occur at the start and finish of shifts, when the system is being
switched on/off). The police will downgrade their response to an alarm if
there are more than two false alarms in a year. Modern alarm equipment can
now incorporate verification analysis ... for example, is an external alarm
signal then shortly followed by an internal alarm signal...? Equipment can
also be fitted with an analysis of the type of intruder (a cat or a man ..?)
and the precise location of the intrusion. Other security points include:
(i) the locking up of pilferable items in separate enclosures
and strongrooms;
(ii) the provision of external floodlighting; and
(iii) the installation of closed circuit TV to cover all
entrances and walls.
Internal
Theft - Summary
The profile of the internal thief employed in the stores
varies from the employee who believes taking office supplies and commonly
available materials to be not really stealing and, anyway, a perk of the job,
to the professional thief who will potentially steal large amounts of inventory
and who may be working with others outside the stores or factory. Internal
theft is effected by a variety of means - from putting goods in the pocket
or in a satchel or briefcase, putting goods outside a little used door for
later collection, putting material in recycling or refuse containers for later
collection, all the way to making arrangements with drivers and conspirators
in customers' factories or using the stock system and deleting records of
transactions. As well, IT precautions should be taken to prevent entries in
the stock records transaction file from being deleted. (Individual transactions
should never be permanently deleted from the transaction trail file. If, for
any reason, a transaction must be deleted for IT reasons, a copy of the deleted
record should be retained as a 'dummy'. )
Perhaps the most important factor in the control of theft
is the ethical stance adopted by the company and its senior managers. If employees
see evidence of dishonest practice at the highest level, they will not be
held back on moral grounds from dishonesty in their own jobs. Other than that
most important point, theft can be controlled by the following means.
1. as stated above,
maintaining limited access to the stock. And if a storeman is not in his
own work area, should he really be there?
2. Institute high levels of stock records accuracy, and
adopt the policy that material "cannot be stored, moved, despatched, consumed
or produced without supporting documentation".
3. The supervisor must know what is going on in his own
stores. He should walk about and question people not doing what they are
supposed to be doing or not in the place expected of them. For example,
he must query material staged without proper documentation.
4. Managers should keep a watch for tell-tale signs that
theft is taking place. These include - figures changed on order documentation;
missing documents; authorisation stamps missing; stock records inaccuracy
(*); unusual markings on packages; partly opened packages; window guards
with missing screws; products or picking slips discovered in rubbish skips;
employees making frequent trips to the car park during work hours; drivers
loading their own vehicles; little used or emergency doors have cardboard
wedged in their locks. (* It is not enough merely to check stock records
for accuracy. A record may be kept accurate through false transactions.
Consequently, the audit trails of certain records should be scutinised
by auditors to ensure that recorded transactions are genuine.)
Since March 2006 it has been illegal for any person to work
as a 3rd party security guard without an SIA licence (Security Industry Authority).
There are two types of licence - Frontline (for guards) and Non-Frontline
(for managers). Nevertheless, the company engaging the services of a security
provider should vet the firm carefully and additionally vet each guard individually
to ensure he has the necessary experience, training and 'stability', notwithstanding
his possession of a licence. Smart, polite guards or a licence do not guarantee
integrity. In some companies, there is a 300% staff turnover and management
control (from an HQ a hundred miles away) is poor. Finally, let it be said
that the outsourcing of security or the employment of a security company does
not release company management from its liabilities and obligations under
the law ... the duty of care to provide security to both a company's employees
and its property. For that reason, and to assess effectiveness in this difficult
field, it is recommended that the company arrange for an external audit of
its actual security - ie the services of a company that will physically test
its procedures with a surprise visit by personnel attempting to gain entrance.
An organisation providing on-site audits is The
Security Watchdog, of Liphook, Hampshire.
Severe problems arise when material is committed to transit.
In selecting third party hauliers, therefore, considerable attention must
be paid to the standards and procedures of the haulier in the matter of security.
The modes of transport suffering the fewest losses are aircraft and rail,
the first because of excellent procedures and safeguards followed by airlines
and airports, the second because the nature of the loads make them unattractive
to thieves. Road is the problem. Driver training by a specialist company is
essential. Stores staff themselves should always be responsible for sealing
and unsealing vehicles, not external drivers. Besides the use of seals, vehicles
themselves are secured by slam locks, deadlocks, brace locks and immobilisers.
In addition, and more and more popular, is the deployment of a vehicle tracking
system for vehicle recovery. There are two types of system. The first operates
by a GPS (ie global positioning satellite), capable of tracking the vehicle
to about 30 yards. GPS Systems have an advantage that unauthorised detours
and stops by drivers themselves can be detected. On the downside, the signal
from these devices can be jammed. The second type is based on a terrestrial
signal, emitted from the device in the vehicle and which cannot be completely
jammed. The theft can be detected when it occurs, not simply when the driver
reports it. Two systems in the UK are TrakBak and Tracker.
5.5
Pests in Stores and Warehouses
In a warehouse, you are never more than five yards from a
rat. The incidence of pests in the stores and warehouse should be monitored
by the maintenance of a Pest Book, with records kept of all so-called
"visits" by new pests or all discoveries of pest colonies. The information
to be recorded should be date and time, location and
a sketch of the creatures. The book will be needed by the firm brought
in to deal with them, and, perhaps, by the Health and Safety Executive. Stores
and warehouse pests include rats, silver fish, firebrats, cockroaches, the
warehouse moth, the Indian meal moth, tropical warehouse moth and house moth.
Beetles include the biscuit beetle and flour beetle. Also, there are the Australian
spider, wasps and flies, mites, mice and rats, feral pigeons and starlings.
5.6 Health and Safety in the Stores
5.6.1
Personal Responsibilty
While the need for uncompromising support for health
and safety by the company can hardly be overemphasised, responsibility
at the practical level must clearly lie with the storeman himself and
with the stores supervisor. There is also a role for the human resources
manager, although it is likely to be administrative, especially regarding
formal compliance with regulations. For one thing, The Health & Safety
at Work Act, 1974, described below, lays
down in general terms the duties of the employer with regard to the health,
safety and welfare of his employees. In addition, one requirement is that
the company should issue a written statement of its policy, and also lay
down the duties of the employee regarding his own self-care and a requirement
for his cooperation with the company these matters.
As well as practical training, especially in the safe
handling of materials and equipment dealt with in Section
2, the storeman must know the meaning of hazard signs and warnings.
He is required to move a wide variety of often unfamiliar materials, and
possibly new ones every day. Warning signs are there to protect him. There
are many hundreds of signs, some familiar to everyone in industry, others
not.
5.6.2 Criminal
Liability
Eight major statutes relating to health and safety in
employment were enacted between 1833 and 1963, the last four being The
Mines and Quarries Act, 1954; The Agriculture Safety Provisions Act, 1956;
The Factories Act, 1961; and The Offices, Shops, Railways and Railway
Premises Act, 1963. In 1974, however, the government implemented a new
law termed The Health and Safety at Work Act (HSAWA). The Act set
up the Health and Safety Commission (HSC), a body corporate with a remit
to prepare regulations and issue codes of practice and guidance, and a
Health and Safety Executive (HSE). The HSAWA is referred to as an enabling
act. That is, it provides for a legislative mechanism whereby procedures
specified in the offices of the Health & Safety Commission can be translated
into legally compelling regulations and the 'semi-legal' codes of practice.
In summary, then, the HSAWA permits new regulations, changes to existing
ones and new or changed codes of practice to be drawn up and directly
issued by the HSC, so obviating the need each time for fresh legislation
and, let it be said, so avoiding the need for their prior scrutiny by
the idiots and drones sitting in parliament. A major instance of the culmination
of this process was seen in 1988, when nineteen regulations and four codes
of practice relating to dangerous substances were issued under the HSAWA,
publicised throughout industry as The Control of Substances Hazardous
to Health Regulations (COSHH).
Also see The Transport of Dangerous Goods, above.
5.6.3
Civil Liability
Obligations in the matter of health and safety under
the common law centre round the duty of care and statutory duty.
The duty of care arises from the relationship between the employer as
manager and the employee as subordinate, rather than from the contract
of employment. Statutory duty in H&S relates to the requirement to conform
to laws and regulations such as those described above.
If the company fails in either of these duties, and an employee is thereby
injured (ie some detriment thereby befalls him), that employee may take
action in the courts for damages, alleging either the tort of negligence
or the tort of breach of statutory duty. Assuming the action is
between the employee as plaintiff and the employer as defendant, the employee
must show three things to succeed in an action for negligence. Thus:
1. that
the employer owed the employee a duty of care;
2. that
the employer did not fulfil the duty of care;
3. that
as a result of 2., the employee suffered injury.
If causation is not present - ie if there is no link
between (2) and (3), the action will fail. The degree of care which must
be exercised by the employer will depend on the likelihood of an injury
occurring and the likely severity of the injury if it does so occur. In
a judgment in 1949, Mr Justice Asquith expressed the principle thus: A
computation must be made in which the quantum of risk is placed on one
scale, and the sacrifice involved in the measures necessary for averting
the risk is placed on the other. Bearing in mind always the proportionality
of risk and care required, the employer is likely to have taken "sufficient
measures" if:
(1) he has ensured that the employee is fully aware of
the dangers of his work and knows what precautions must be taken; and
(2) he has made precautions readily available, and ensured
that the employer knows of their existence.
That is, it is not the duty of an employer to eliminate
every possible risk. There are limits, namely the boundaries of reasonableness.
Note that if an accident occurs because of the malfunction
of a machine or the sudden failure of a supplier's component - for example,
the splintering of a metal rod - statute law in the form of The Employers'
Liability (Defective Equipment) Act, 1969, applies regarding anyone injured.
Under the Act, the employer is deemed to be entirely liable for an accident
due to these reasons.
The word "foreseeable" used in the context of precautions
to be taken, relates to a foreseeable cause of an accident, not
a foreseeable consequence of one . For example, in Doughty v. Turner
Manufacturing, an asbestos cement cover fell into molten metal, causing
an explosion. In court, Turner Manufacturing was able to show that no
similar accident of this type was known, and that it was not known that
an explosion would occur. Although Turner Manufacturing was directly responsible
for the literal occurrence of the accident, it was not liable in law for
negligence, because it could not be shown that it had lacked reasonable
foresight. The case highlights the essential need for the company, the
company safety officer and the stores supervisor to keep abreast of H&S
knowledge from careful study of H&S magazines and HSC/HSE publications.
The defence offered by Turner Manufacturing of not knowing an explosion
would occur has not been available to any other company in the same circumstances
from the moment the facts were publicised in H&S literature.
5.7 Reviewing the Stores' Performance
There is a current vogue in the UK for setting targets for
everything, whether they are NHS waiting lists or traffic accidents on the
M6. Three targets that could be devised for the stores might be "picking performance
better than 5.0 minutes per order line", "stock records accuracy of 97.0%"
and "packages lost/damaged in transit less than 0.1%". Setting targets and
"measures of performance" however are fundamentally misconceived for two reasons,
as follows. (1) All human centred systems, such as the maintenance of stock
records, are liable to natural variation in output (due to what are called
"common causes" of error), invalidating the very idea of a fixed target. (2)
When staff performance is measured by a target, hitting the target becomes
the sole focus of endeavour, rather than providing customer service. For example,
hospitals concentrate on performing a large number of fast, easy operations,
regardless of the state of health of patients waiting and medical emergency.
Similarly, storemen measured on their picking rate may focus on speed at the
expense of accuracy.
There are two ways in which such an assessment might be made.
The first is through the calculation of well-known, standard financial parameters
which reflect the general management of the facility
rather than the personal conduct of individuals. Three parameters
are :
(i) Storage Costs (£ per pallet), including the ratio
of (actual space occupied)/(theoretical capacity) and the degree of honeycombing
present;
(ii) Handling Costs :the cost of receiving, putting away,
picking and despatching, per unit handled
(iii) Stock Records Accuracy: the number of records correct/
the number of items stored x 100%
The second assessment of performance is for
the stores to present to each of its customers a statement of the services
it believes it offers and the principal areas where it is developing improvements.
Then it must listen very carefully to what its customers
have to say and how its services might be changed or improved. Its customers,
we recall from the start of Section 1, are
the shop floor, purchasing, distribution, quality, finance, engineering and
planning. In other words, forget targets, concentrate on customers.
Further Recommended Reading: ReInventing the Warehouse,
by Roy L.Harmon, 1993 (The Free Press).
Last date of amendment 14th February 2007
The
End
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Crabtree, formerly managing director of GMCS
Ltd, at one time located in Garstang, Lancashire, UK, phone 01995-601535. The
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