Best Practice of 3rd Party Logistics

"Minimizing the number of cartons to pick items in a warehouse"

Operations Fields: Warehouse, J Company
Application: CubeMaster, DevPack

Background

Total cost and time required to fulfill the orders in warehouse are increasing because of continuously increasing demand for small lot sized orders over Internet shopping mall. They have bottlenecks in the process of picking and cartonizing which prevent logistics from handling efficiently the orders. Customers complain about the delay, while workers are voicing their dissatisfaction about heavy workloads.

Objective

The objective of this project is to increase flexibility and decrease preparation time in dealing with orders by planning the picking and catornizing process. It should automatically calculate the minimum number of shipping cartons (totes) required to cover the order items by allocating the items to proper cartons those are selected from the multiple types of shipping cartons. It should also minimize the walking distance of workers who picks items and fills the cartons with the items in a warehouse by considering the locations of storages during the allocations.

How they applied CubeMaster to their fields?

DevPack, ActiveX components of VMS CubeMaster for developers, was used because they want to integrate VMS CubeMaster with their legacy system seamlessly. The legacy system collects order data from the order management modules and forwards the data to DevPack. It generates picking and cartonizing plan based on the order data and carton dimension from WMS (or ERP). The generated plans are displayed in a graphical browser that is a member of DevPack and helps users to determine they will confirm the plans.

The below pictures are screen shots of the graphical browser showing 1,002 cartons generated from the plan.

If the plans are confirmed, they are saved into the legacy database and working instructions are issued instantly at WMS. Workers receive the instructions via LAN and will implement the instructions.

The process to implement the working instruction is as below;


1. Empty cartons are prepared	2. Items are picked & packed into cartons	3. Cartons are filled with airbags


4. Cartons are finished with taping	5. Cartons are stacked on a pallet for moving to doc area	6. Pallets are loaded into a truck for final delivery

What are solved at their fields?

Let‘s see how they could address their problems by using VMS CubeMaster below table. As shown in table, by using powerful simulation features provided by VMS CubeMaster, they could cut logistics costs and boost flexibility and productivity with proper information on picking and cartonizing, working instructions and inspections.

Activities	Before	After
Picking and Cartonizing	Total number of cartons are not known. Total working times are not estimated. Carton types are determined by workers. Movement routes are determined by workers.	Total number of cartons are determined automatically. Total working times are estimated automatically. Carton types are determined automatically. Movement routes are determined automatically.
Working Instruction	Instruction by papers. No information about required number of cartons. No information about carton type and its items allocated. No information about movement routes in a warehouse.	Instruction by electronics. Required number of cartons is provided to allow workers to prepare them. Carton list including items, quantities and storage numbers are provided.
Inspection	By workers	Automatic inspection by comparing weight of calculated and actual cartons

Expected Customer Values / Benefits

As the results of applying the VMS CubeMaster to their fields successfully, they could solve bottlenecks and many troubles in their process to sharpen competitive advantages as a table below.

	Actual Effects	Competitive Advantages
Logistics	Amount of cartons and packaging materials reduced Preparation times reduced Workload reduced	Total costs reduced Customer satisfaction increased Productivity increased Flexibility increased
Customer	Accuracy of meeting the delivery date increased
Quality	Re-working reduced by eliminating errors

ROI

The table below shows the summary of costs reduction, ROI and payback period per single warehouse based on the previous information. As presented in the table, $5,500 can be saved a month in picking and cartonizing. Also, $6,000 can be saved in labor costs a month. Thus, investors can retrieve their original investments in less than 4 months and 3 times as much as their original investments over one year.

		Cost	Remark
Investment		$ 45,000	Cost of Licenses and Customization
Cost Down	Reduced Material Costs	$ 5,500 / Month	Effect of decreased cartons & packaging materials
	Reduced Labor Costs	$ 6,000 / Month	Effect of increased productivity
Benefits from reduced customer claims		$ 1,000 / Month	Effect of increased qualities
Total Reduction Costs / Month		$ 12,500 / Month
Life of The Project		2 Months
ROI (Return on Investment)		At Least 300 %
Payback Period		Less Than 4 Months

Similar Sites applied Cartonizing Optimization

ENPRANI Cosmetics, 2004
AMORE PACIFIC Cosmetics, 2005
KOREANA Cosmetics, 2005
HiLiving Cooperation, 2006
LGeShop Homeshopping, 2006

For more information about this project, contact Dr. Andrew Chang by sending an email.