Warehousing is a primordial supply chain link that involves many elaborate operations, thus posing a wide variety of challenges.
In this context, a retail company faced the need to improve the overall flow of products in one of its fresh food warehouses, which operates in a 24/7 schedule, whilst leveraging its global efficiency and maintaining the freshness of its products. For this purpose and given two alternative layouts, our main goals were (1) to understand each layout’s strong points and limitations, (2) to assure a high service level and the flexibility of the operation, and (3) to follow the different performance indicators for the current and the alternative layouts.
Aiming to tackle the retailer’s problem, a digital twin was created to accurately simulate the current operation. Subsequently, modifications were made in the model to evaluate the two proposed alternative layouts. Each layout was tested for distinct levels of affluence and for various scenarios, in order to better understand the warehouse’s congestion levels and how each layout impacts the company’s key performance indicators.
All the main indicators obtained from the simulation models were gathered and delivered to the retailer, therefore leveraging a more accurate, data-driven decision regarding the distinct layouts.
Through the digital twin, the retailer obtained a bird’s-eye view and a detailed-view of the warehouse operation. Hence, the project not only conveyed a new perspective on the current functioning of the warehouse, but it also allowed a thorough analysis of the main performance indicators for the three layouts.
The project demonstrated that digital twins may help developing risk-free approaches for testing in an agile way, different layouts and scenarios. Hence, instead of time-consuming and costly real-life experiments, a model was created to aid decision making, while allowing a better perception on the future evolution of the company.
Warehouses are a critical part of a seamless supply chain. The current focus on assigning value-added activities to warehouses, in order to reduce downstream labour costs, asserts that warehouses need to be designed in detail and carefully thought. The significant amount of processes happening simultaneously and the interdependencies between them imply that it is crucial to make accurate decisions when implementing any changes. When studying a process improvement, a layout change or the introduction of a modern technology in the warehouse operation, the critical question that arises is the following: Will this change affect negatively the warehouse’s performance? What are the benefits of having a more balanced operation? A warehouse can only operate at peak efficiency if all its processes are balanced as a whole and are communicating without any major disruptions. The existing discontinuances can either be due to suppliers that are delivering too early or too late, to a bottleneck in the warehouse operation or to the difficulty in finding something specific in the warehouse. Considering the example of an unbalanced reception, if the warehouse’s suppliers are not allocated to the best periods of time, it might lead to the need of having more operators and more buffer space in the reception area. Also, an unbalanced reception could imply that downstream processes, such as sorting or shipping, would need more operators to work at its maximum capacity. Simulating warehouse flow can help determining bottlenecks in the operation and the hidden cost of an unbalanced warehouse operation. Where should products be to improve sorting efficiency? The current demand for more products with shorter lifecycles and for increased differentiation is a challenge to warehouse operations. This evolution leads to more investigations on the placement of the different products in the warehouse, to ensure the reduction of the amount of time spent in picking activities, the most labor-intensive warehouse operation. Simulation is a proven methodology to test different location assignment positions and to verify the impact of changes in the amount of time and resources needed in a warehouse. Can an innovative technology or layout improve warehouse performance? A crucial part of managing a warehouse is the need to improve its performance and to make complex decisions among diverse options on how to achieve the proposed improvements. Could the change of a warehouse’s layout lead to an increase in the congestion between operators? Could the adoption of a new automation process, which would double the overall processing rate of the warehouse, be worthy, without an increase in the reception rate? Would that lead to any savings or would it just make the warehouse more unbalanced? All these different scenarios can be properly simulated in detail, evaluating the trade-off between each measure and weighing the distinct opportunities holistically. Minimising the risk of warehouse changes Usually, investing in warehouse changes requires big investments that can either derive from new equipment, from outsourcing or moving the operation while the change is occurring, from overtime compensation to the workers, among others. In worst case scenarios, these changes can have consequences which may affect the performance of the whole supply chain and put it at risk. It is highly uneconomical and extremely risky to test different scenarios in a real warehouse, enhancing the importance of virtual reality. Simulation presents itself as a new world of dynamism towards decision making and demonstrates an endless growth potential in companies.