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Strategic Logistics Management Assignment

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Warehouse Management Analysis

Problem Set 2

Company Background

XYZ is an old-line manufacturing company using standard processes and practices. XYZ takes advantage of economies of scale by establishing long-term purchase agreements and by accepting materials and components from suppliers on a just-in-time basis. It produces products using level production strategy. In comparison to other companies, its products are produced quickly and economically. An internal comparative analysis shows that XYZ is equivalent or better than the competitors. 

XYZ’s manufacturing facility and warehouse are located in Boston, MA. The manufacturing facility provides the requisite space for current production and enough potential expansion to meet projected demand for the next three years. The current production capacity is 600,000 units per month. Production is level; therefore, standard production is 30,000 units per day (there are 20 days of production per month). Due to anticipated increases in demand up to 720,000 units per month in 2023, the company may consider relocating to a larger facility in 2024.

Within the facility, production process hinges on the efficient and effective layout of the assembly line and the packaging equipment. Based on standard packaging arrangements that are commercially available, XYZ uses standard size pallets (48” x 40”) that containing 100 products each. The height of each pallet is 7.5 feet with the product measuring 7 feet and the base of the pallet measuring 6 inches.

Customer Demand

Customer demand is: 300,000 units per month for January through March; 600,000 per month for April through June; 300,000 units per month for July through September; and 1,200,000 per month for October through December. XYZ ships its products either directly from the manufacturing facility or from its warehouse to its 10 exclusive distributors that are located in New York City, Newark, NJ, Philadelphia, PA, Baltimore, MD, Washington, D.C., Buffalo, NY, Pittsburg, PA, Cleveland, OH, Richmond, VA, and Charlotte, NC. Each distributor receives an equal portion of the shipments.

XYZ is responsible for shipping the goods to its distributors and paying for the cost of transportation. XYZ currently pays third-party logistics (3PL) service providers to transport the goods based on annual contracts. The contract cost is $1.50 per mile for full truck load (FTL). The tractor-trailer trucks have standard 40-foot trailers (8 feet wide and 8.5 feet high).

Operating System

XYZ’s manufacturing operations policy is to operate on a level production basis keeping the equipment and employees busy by building inventory, if necessary.  This approach allows the maximum utilization of plant and equipment and the maximum output for a given level of capacity. It also allows XYZ to main a stable production workforce.

Using state-of-the-art equipment, the production strategy is to produce high volumes of standardized products.  Emphasis is on having:

  • Low cost and high quality.
  • A flexible, cooperative workforce through training and incentives.
  • A low frequency of breakdowns; high levels of production.
  • A cooperative orientation with suppliers to maintain a level output rate.

As a line flow process, the critical management issues are maintaining process control; meeting product specifications (quality); managing the workforce; providing proper training; managing materials; ensuring capacity planning; and assuring supply chain management (SCM) and logistics. Since the production equipment is the pivotal aspect, its success is directly related to the overall success of the operation.  Workforce management is important because of the need for input/output material handling and the flow of finished product that is either shipped to customers or sent to the warehouse. Inventory management, both in form and quantity, is another vital issue since there are limits to the amount of inventory that can be stored.

Capacity planning is an important concern because production capability must be added in discrete units (i.e. 2nd shift; 3rd shift) rather than in incremental units. The aforementioned aside, production process and its requirements are quite simple: keep the machines running, have the workers ensure that materials and products flow, maintain consistent quality, and store the finished products in the warehouse, if production exceeds demand for the period.

Warehouse Operations

Key Considerations

Scheduling shipments from the manufacturing facility is an important consideration. Sequencing the shipments is based on priority rules and cost considerations. A major consideration in sequencing is the number of orders that must be processed. The goal is to ship the goods as soon as possible only constrained by FTL requirements. However, given the level production strategy of manufacturing, goods may have to be stored at the warehouse for some period based on production and demand. The production leaders are responsible for shipping the products (pallets) directly to the customers, if possible, or transferring the pallets to the warehouse if production exceeds demand.

Cartons are processed, stored, and/or shipped using standard pallets (48”x 40”). Each pallet weighs one ton. If production exceeds demand for the period, production transfers the pallets to the warehouse. At the warehouse receiving docks, workers check the goods (pallets) and load them onto a conveyor system for processing.  The automated equipment moves the pallets to the storage areas. The pallets are then placed in storage racks using the automated system. Material handling equipment can meet the current requirements and flows. The automated system uses the same conveyors to retrieve the pallets and moves them to the shipping docks when required for meeting customer orders. The warehouse has 2 levels of racks. Note: there is also the ground floor.

Whereas it is XYZ’s desire not to have excess finished goods inventory, finished products must be stored in the warehouse to keep production steady and to have the ability to respond promptly to customer demand.  Holding costs include warehouse overhead, workforce, material handling costs, storage costs, and overhead (administration).

The automated equipment has instrumentation and controls that continuously monitor the processes to ensure proper actions. The equipment has the capability to indicate an upset condition in the process and provide fail-safe actions to avert accidents or disruptions. Each piece of equipment has its own manufacturer’s installed safety devices designed to protect the operators and to secure the goods.  All picking (retrieval) and packing is accomplished via the automated system.

The only commercial traffic and movements at the warehouse are tractor-trailer trucks that load, and transport finished goods to customers. The warehouse has provisions for 10 shipping docks which are designed to accept all conventional types of vehicles.

Warehouse Organization

The warehouse management team includes: the operations manager, the workforce manager, and the facility engineer. The operations manager has the overall responsibility at the warehouse to direct, coordinate and supervise the work and all activities and individuals.  Work is to be performed according to company policies, protocols, and procedures. The operations manager has the authority to ensure that company’s requirements for performance are met and that all commitments including compliance with federal, state, and local regulations are adhered to. It is the intention of the company to meet or exceed all requirements regarding environmental issues, safety, and personnel health and well-being. 

The workforce manager is second in command. The workforce manager maintains proper relations with employees and all stakeholders including state and local officials and people in the community. The workforce manager supervises the operations.

The facility engineer is primarily responsible for the safe operation of the equipment from a technical perspective, including operations and maintenance (O&M), workforce safety, and fire protection.  The facility engineer’s responsibilities include:

  • Planning, administration, and execution of the technical aspects of the operation.
  • Providing fire prevention, safety, training, and inspections.
  • Reviewing the layout of equipment based on conformity with specifications to assure the best economic outcomes.
  • Approving basic designs and arrangement of the warehouse.
  • Ensuring expeditious solutions to problems so that storage capabilities and shipments are maintained.
  • Reviewing schedules to ensure they are consistent with requirements.

Communications is affected primarily by policies and by written work orders outlining the schedules, work to be performed, receiving, shipping and workforce requirements on a daily and weekly basis. Warehouse administration is the coordination center for all communications.  It is company policy that employee training is a priority matter.  All new employees are required to fulfill a basic warehouse and operations familiarity program detailing company policies, operations, procedures, and practices. Safety seminars, training programs, equipment operations courses and basic first aid are all part of employee training. 

Fire Protection

Fire protection is one of the facility engineer’s main responsibility. The facility engineer serves as the “fire marshal.”  The facility engineer is responsible for fire prevention and loss protection. The facility engineer conducts periodic safety seminars and drills so that all employees are familiar with fire prevention and emergency response procedures.  The facility complies with all applicable state and local building codes and fire regulations regarding exit signs, fire extinguishers, and other fire protection measures.  All exterior tanks are properly labeled. 

The company’s processes do not require flammable or combustible liquids other than fuels and lubricants used in vehicles.  Company policies and practices reduce the potential for a fire by keeping vehicles out of the processing areas and by minimizing the exposure of combustible materials.  Proper storage and handling of flammable liquids are affected by having external storage containers and by keeping the quantities low. Extensive ventilation is used to prevent accumulations of flammable vapors because there is always the possibility of leaks and evaporation in the storage containers. Ventilation of the storage areas for the flammable liquids is accomplished mechanical means.  Wherever possible, equipment such as compressors and motors that may possibly be sources of ignition will be used in spacious, open areas. Fire-detection and alarm systems are available in the building and on the process equipment. The plant water supply system is the primary fire-suppression system used by the plant fire brigade or public fire department. Dry chemical agents are available in separate containers.  These agents consist of finely divided powders that effectively extinguish a fire when applied to a fire by portable extinguishers.  Other types of fire extinguishers are placed at all strategic locations.

The local fire department and emergency response team are informed of chemicals and fuels used the facility in compliance with community right to know regulations. They have easy access to the facility from the highway. There are adequate hydrants on location to provide enough water to fight any fire.

Safety Program

XYZ’s has a well-organized safety program that encompasses all aspects of the operations.  From a management standpoint, the primary concern is safeguarding employees’ well-being, eliminating industrial hazards, and preventing accidents. The facility engineer is responsible for safety. The facility engineer is head of a Safety Committee that develops adequate inspection and control procedures to maintain a safe work environment and control safety devices.  The facility engineer reports to the operations manager who has the overall responsibility for safety and operations.

Employee safety is a constant concern. The safety devices include steel-toed shoes, hard hats, eye and ear protection and OSHA required safety devices.  The employees are instructed on accident prevention, emergency response, communications, and basic first aid techniques.

The facility engineer oversees the safe use of forklifts, lift trucks, automated guided vehicles, conveyors, and racks. The company requirements include:

  • All new industrial trucks shall meet the specifications of ANSI B56.1-1969, “Powered Industrial Trucks.”
  • Any power-operated industrial truck not in safe operating condition must be removed form service.
  • All new and existing overhead and gantry cranes shall meet the design specifications per ANSI B30.2.0-1976, “Safety Standard for Overhead and Gantry Cranes.
  • Exposed moving parts such as gears, set screws, projecting keys, chains, chain sprockets, and reciprocating components which might constitute a hazard under normal operating conditions shall be guarded.
  • Holding brakes and control brakes must be tested periodically accordance with manufacture’s specifications to determine whether they are within required tolerances.

The Assignment

The CEO has just hired you as the warehouse manager. You have the flexibility to make changes, but you must first obtain the approval of the CEO prior to implementing the changes. Your initial assignment is to examine the topics, methods, techniques, processes, and practices covered in the course topics and apply them to assessing and improving XYZ’s warehouse operations as discussed above.

As part of your assignment, you must determine the following:

  1. The expected flow of goods (pallets) to the warehouse on a per month basis to ascertain the handling and storage requirements at the warehouse and determine what the capacity of the warehouse is or has to be.
  2. The amount of racking (based on 2 levels and the ground floor) necessary to accommodate the peak period(s); validate the size of the warehouse in terms of volume (cubic feet) and floor space (square feet). The determination must include the aisles.
  3. The total annual costs for transporting the goods from the warehouse to the distributors based on the following expected distance to the distributors’ locations (note: the distances are based on best routes and do not considered traffic). As the warehouse manager, you only have to determine the costs of shipments from the warehouse and not from the production facility. (assume 20 pallets per FTL)
  4. New York City – 220 miles (4 hours)
  5. Newark, NJ – 270 miles (5 hours)
  6. Philadelphia, PA – 320 miles (6 hours)
  7. Baltimore, MD – 430 miles (8 hours)
  8. Washington, D.C. – 470 miles (9 hours)
  9. Buffalo, NY – 470 miles (8 hours)
  10. Pittsburg, PA – 600 miles (10 hours)
  11. Cleveland, OH – 770 miles (11 hours)
  12. Richmond, VA – 600 miles (10 hours)
  13. Charlotte, NC – 900 miles (14 hours)
  14. The option of owning and operating a fleet of trucks instead of using 3PL providers. Note: it is expected that drivers would cost $35 per hour, including benefits; the truck cost would be $0.60 per mile. It is assumed that the truck drivers can cover 50 miles in an hour on average.
  15. Identify major concerns about the warehouse operations, workforce management, and safety and fire protection. Determine several viable options; explain your logic.

Specifically, your submittal is expected to be a professional report that is intended to provide assessments, insights, perspectives, and recommendations. The memo must include responses to the assessments (Items 1 through 5). Please provide calculations, evidence (data and information), and discussions as part of the memo/report. The memo is your presentation to senior management (your findings and recommendations). Please remember recommendations do not have to be conclusions.


The problem set is worth seven points. The instructors and facilitators will determine the grade based on the following: 

  • Question 1 = 1.5 points
  • Question 2 = 1.0 point
  • Question 3 = 2.0 points
  • Question 4 = 1.5 points
  • Question 5 = 1.0 point

Please provide the answers per the item number. Submit the answers is Word. If you have calculations using Excel, you may also submit the Excel spreadsheet, but you must include the information from Excel in the Word document. Include your name in the file name that you submit per the following: AD 690 Lastname_ PS2.

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