Hard Work Pays Off - Warehouse Layout Project Yields Big Results
Steffes Corporation, a family-owned business, began in the 1940's as a small manufacturing operation. From 1965 to 1985, the corporation grew into a steel fabrication business, manufacturing replacement snowmobile skis, hopper-bottom storage bins, furniture frames, and a variety of custom designed equipment. During the mid 1980's, in response to electric industry, the corporation started manufacturing an electric thermal storage heating unit which has set the standard for quality, safety, reliability, and performance. In 2007, Steffes Corporation entered a new market and quickly became a leading manufacturer of products and technical services; addressing many needs of the growing oil and gas industry. The company takes pride in continually improving the effectiveness of its Quality Management System and is in conformance with API Spec Q1 and ISO 9001:2008.
Their mission statement reads, “…to design, build, and market sustainable high value added innovative manufactured solutions for the energy, construction, and other industries while creating wealth for our customers, employees, shareholders, community and suppliers."
The warehouse plays an important role in supporting manufacturing activities. It is used as a supermarket for storing finished products, purchased parts and components, and some of the work-in-process inventories. There were a number of problems impacting the productivity of this warehouse. Such problems included wasted time searching for and placing products, wasted spaces, and lack of organization.
Impact Dakota had previously provided 5S training; which included inventory management, layout analysis, pull/kanban, and supermarket design. Steffes looked to Impact Dakota to facilitate and coordinate a project which would help improve utilization of the warehouse.
A warehouse layout was drawn showing the macro-level interface with Manufacturing, Suppliers, and Shipping. Another layout was drawn showing the allocation of floor and vertical space to different products. The Impact Dakota team spent a considerable amount of time observing and interviewing the users of the warehouse and solicited their input identifying problems and improvement opportunities.
As a result of studying the drawings, warehouse visits, interviews and discussions, a number of problems and their root causes were identified. The team identified items to address which would help with quicker identification and retrieval of products in the warehouse:
- Mislabeled racks
- Missing labels
- Hard to read labels
- Poor placement of labels
- Insufficient number of labels
- Obsolete labels on the racks
- Not enough “non-production” labels
The team also observed and documented other factors that contributed to the inefficiency of warehouse operations:
- Racking system structure
- Racking system utilization
- Floor space use
- Products retrieval and placement
- Policy and practices
These factors also have influence on "identification and retrieval of products" outlined in previous paragraph.
During the course of this project, the team simultaneously worked on addressing:
- 5S (sort, set-in-order, shine)
- Consolidating of partial containers/racks
- Re-layout of racking systems
- Re-assigning of inventory for better access
- Freeing up floor and rack spaces occupied by unneeded items
- Steps to address problems related to products retrieval and placement
Productivity and Time (warehouse labor) - resulting from improved layout and placement and identification of products. (1,300 hours – productivity; 1,320 hours – time)
Cost Savings (one time) - resulting from a one-time cost avoidance of $120,000 not needing to add a 1,200 square feet of facility and creating of additional rack space foot print, about 128 square feet.
Additional cost savings of about $30,000; resulted from improved product retrieval and placement.
Cost savings (recurring) - $30,000 from improved product retrieval and placement will be recurring. In addition, there is an annual operating cost which is avoided as a result of not needing to build additional warehouse space. This is estimated to be at $12,000/year (10% of $120,000 identified above).
“The LEAN instruction provided by Impact Dakota paid immediate dividends. It provided us with many tools to help us identify, as well as rectify, areas of waste within our organization. We were able to immediately put our learned skills to use improving the organization and utilization of our warehouse. As we move forward, I am confident that the skills learned will continue to benefit us for years to come.”
—Mike Schmidt, Engineering Technician