Productivity & Operational Capacity Improvement Plan

FOR ESTEE LAUDER WAREHOUSING ACCOUNT

26 Nov 200826 Nov 2008Tharanga JayalalTharanga Jayalal

1

Development Plan

Identify the exact problem /gaps in ELC warehousing operation

Suggest & implement quick solution to resolve major issues

Implement a continues Improvement plan

2

Problem Statement

Agility Unable to deliver agreed / required volume of 1500 pick lines a day.

As a result, client ELC is unhappy with Agility operational performance and possible threat to lose the client by end of 2008 means within a month time.

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PRESENT OPERATION LEVEL Vs REQUIRED LEVEL

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eeee

CAPACITYCAPACITY

Present capacityPresent capacity

900 pick lines a day900 pick lines a day

Required CapacityRequired Capacity

1500 pick lines a day1500 pick lines a day

Improvement Improvement RequiredRequired

bybyBy 600 lines a dayBy 600 lines a day

Improvement Improvement RequiredRequired

byby66 %66 %

4

How the situation become critical

1. There were no improvements happened in the operation against the demand that significantly improved over a period.

15,4

44 23,8

51

13,5

13 20,7

42 29,4

15

33,9

53

33,4

00

44,5

520

10,000

20,000

30,000

40,000

50,000

July August Sept Oct

Throughput in lines from July to Oct'08

Thp Order lines

Thp Picked lines

Info: from ELC picking analyzes reportInfo: from ELC picking analyzes report

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2. There were no additional manpower & / or other resources added to meet the demand that increased significantly.

Staff Utilization

05

10152025303540

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Month

staf

f

15,444

23,851

13,513

20,742

29,415 33,

953

33,400

44,552

0

10,000

20,000

30,000

40,000

50,000

July August Sept Oct

Throughput in lines from July to Oct'08

Thp Order lines

Thp Picked lines

Workload IncreasedWorkload Increased Staff UtilizationStaff Utilization

6How the situation become critical

Vs

3. No homework done to keep the operation up to date.

No clear strategy defined for pick-face location & replenishment process. Also does not integrated to WMS as well.

No pick face locations assigned for 1475 SKUs that arrived newly within last 5 months time.

More than 1200 SKUs that assigned pick-faces were dead (Out of stock). Also 550 dead SKUs (SKUs not moved in last 90 days) laying on PF locations.

Poor location accuracy due to lack of cycle-count process in place.

7How the situation become critical

Best Possible Solution to OvercomeBest Possible Solution to Overcome

Implementing 3 shifts to ELC operation

Capability in 2 shifts Capability in 2 shifts

450 pick lines a shift450 pick lines a shift900 a day900 a day

Capability in 3 shifts Capability in 3 shifts

450 pick lines a shift450 pick lines a shift1350 a day1350 a day

OTBOUND / At PresentOTBOUND / At Present FutureFuture - - After ImplementingAfter Implementing

Capacity Improvement Capacity Improvement

450 Pick Lines a day450 Pick Lines a day

Capacity ImprovementCapacity Improvement

50%50%

(Based on present average volume 0f - 30 pieces, 0.022 CBM per pick line)(Based on present average volume 0f - 30 pieces, 0.022 CBM per pick line)

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Additional Staff RequirementAt Present WH Supervisor 02 Coordinator 01 Team Leader 02 Inventory Asst: 04 Pickers & QC 12 Inbounds 04 DGR 02Total 27

Requirement WH Supervisor 01 Snr. Stock Controller 01 Team Leader 03 Stock Controller 01 Inventory Asst: 03 Pickers & QC 18 Inbound Staff 06Total 33

Total no of permanent Staff required Total no of permanent Staff required additionally - 06 (22% Increase)additionally - 06 (22% Increase)

((It is also important to properly allocate the existing personnel to this integrated structure, with clearly It is also important to properly allocate the existing personnel to this integrated structure, with clearly defined and communicated job responsibilities to achieve the objectives of this proposal)defined and communicated job responsibilities to achieve the objectives of this proposal)

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Additional Cost Involvement for 3 Shift Operation

MHE – NO

2 additional batteries for MHE = AED 39,000.00 – Fixed(AED 19,500 Per Unit X 2)

Staff – 01 Team leader, = AED 4000.00 – Monthly(Approximately: AED 4000.00 Per Head)

06 Pickers = AED 12,000.00 – Monthly(Approximately: AED 2000.00 per head x 6)

Total Additional Cost = AED 16,000.00 – Monthly

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Proposed Organization Chart for ELC – WH Annexure 01

Major Change in Operation & Staff Allocation

Only 01 shift inbound ReceiptOnly 01 shift inbound Receipt(3 staff)(3 staff)

Expecting 100% Improvement Expecting 100% Improvement by by

adding a full inbound receipt adding a full inbound receipt team to the 2team to the 2ndnd shift shift

(3 staff)(3 staff)

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More Improvement Requires

by

16 %

(Total Required 66 % - 50 %)

12Have we reach the goal?

No

Increase efficiency in PICK-FACE picking

Targeted Targeted Efficiency Efficiency

of PF pickingof PF picking

70 %70 %

Present Present Efficiency of Efficiency of

PF pickingPF picking

52 %52 %

13Possible Solutions to Increase Productivity

Actions to Increase Pick Face Efficiency

To Operations Assign pick face locations for 1475 of moving SKUs

566 SKU’s which was assigned to pick face but no

transactions for last 90 days, to be moved out

physically to non pick face locations.

550 dead SKUs (no inventory or movements for last 90

days) to be removed from Pick-Face.

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15Actions to Increase Pick Face Efficiency

To WMS

Redefine the replenishment process in the WMS to pick

from PF, first.

Assign pick face locations for 1475 of moving SKUs

Adjust the minimum & maximum quantity in PF according to

pack-keys.

Implement full pack replenishment process instead of

present piece unit replenishment.

Work to avoid replenishing expired products in to pick face.

Cycle Count

Implement Cycle Count with immediate effect with a forecast plan to

complete a count cycle in every 78 days. (3 months)

Clean-up PF area according to the cycle count results.

Immediately Actions Taken

Up to now there are 864 PF locations checked & removed miss located

goods.

New cycle count plan has been created & will implement from 1st of

December 2008. (Annexure 2)

16Actions to Increase Location Accuracy

To WMS

1. Report of “SKUs did not assigned pick face location”

2. Pick face location with 0 quantity in any given time

3. Order commodity and / or quantity not allocated or

partially allocated

4. Outbound operations & performance monitoring report

with actual pick-lines (Currently monitors only order

lines)

17New Reports to be generated

CONCLUSION This will be Agility’s final chance to win this

client ELC. By implementing the proposed action plan,

Agility will be able to deliver quick result. It shows our dedication and interest on this

account. Keeping it up to the level of client’s

expectation, possibly we can avoid retendering and negotiate for contract renewal to retain this prestigious client account.

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