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1 Goran Dukic, Assist. Prof. University of Zagreb Faculty of Mechanical Engineering and Naval Architecture Industrial Engineering Department Zagreb, Croatia Greener Warehouses Through Increased Efficiency 17th European Forum of Logistics Education Faculty of transport and traffic sciences University of Zagreb, Zagreb 2010

2 public becomes more aware of environmental issues and global warming consumers are/will be asking more questions about the products they are purchasing companies will have to expect questions about how green their manufacturing processes and supply chain are, their carbon footprint and how they recycle green thinking emerged in various initiatives adopted by companies, driven by environmental regulations (legislation), environmental concerns of their customers (marketing) and environmental impact of their production activities (ecological awareness). The concept that encompasses environmental initiatives in all stages of supply chain is called Green Supply Chain Management (GSCM) Green thinking in supply chains

3 GSCM... “integrating environmental thinking into supply chain management, including product design, material sourcing and selection, manufacturing processes, delivery of the final product to consumers, and end-of-life management of the product after its useful life.” (Srivastara, Green Supply-Chain Management: A State-of-The-Art Literature Review, 2007) The recent emergence of Green SCM provides the opportunity to review processes, materials, and operational concepts from a different perspective. It incorporates the role of the environment in supply chain value creation. ( GSCM – definition

4 Industrial Ecology Term from early 1970’s “Managing Planet Earth”, R. Frosch and N. Gallopoulos, 1989 officially created in 1992 “The development and use of industrial processes that result in products based on simultaneous consideration of product functionality and competitiveness, natural-resource conservation, and environmental preservation. Also known as design for environment, green design.” (Sci-Tech Dictionary) “Discipline that traces the flow of energy and materials from their natural resources through manufacture, the use of products, and their final recycling or disposal. Research in industrial ecology began in the early 1990s. Life-cycle analysis traces the flow of materials; design for the environment works to minimize energy use, pollution, and waste.” (Britannica Encyclopedia) Industrial ecology and green supply chain management are practically the same thing with a difference in scope. Industrial ecology  product design, manufacturing processes GSCM  implementation of green thinking in all segments of companies’ supply chain activities. GSCM vs Industrial Ecology

5 Sustainability Term from early 1960’s “Development that meets the needs of the present without compromising the ability of future generations to meet their own needs. “ (World Commission on Environment and Development, 1987) “Environmental sustainability refers to the environmental actions or impacts of what we do. In moving towards sustainability, we are attempting to reduce our ecological footprint or to tread more lightly on the Earth. This equates to reducing the amount of resources we use (and buy), the waste we produce and the emissions we produce.” (John Tranmer, “The Challenges and Rewards of Sustainable Development”) Integrating environmental thinking into supply chain = integrating (environmental) sustainability “Sustainability will become one of the prime drivers of the supply chain agenda” (Françoise van den Broek, Green Supply Chain Management, Marketing Tool or Revolution?, 2010) A Green Sustainable Supply Chain can be defined as "the process of using environmentally friendly inputs and transforming these inputs through change agents - whose byproducts can improve or be recycled within the existing environment. This process develops outputs that can be reclaimed and re-used at the end of their life-cycle thus, creating a sustainable supply chain.“ (Patrick Penfield, The Green Supply Chain, MHIA 2007) GSCM vs Sustainability

6 GSCM segments “Supply chain management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities.” “Logistics Management is that part of Supply Chain Management that plans, implements, and controls the efficient, effective, forward, and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requirements.” (CSCMP) In the case of green logistics/supply chain, all of the issues which pertain to regular logistics/supply chain still apply, with the added factor of environmental friendliness. Developing innovative and more sustainable approaches to reverse logistics for the collection, recycling and disposal of waste products

7 Green warehousing is a relatively new approach which implements the greening into warehouses and distribution centers. There are many elements that you can implement in a warehouse. In short, each element which reduces energy consumptions or material usage/waste is a greening element. Each element that uses renewable materials and energy sources is greening element as well. Some elements which are frequently mentioned in literature and also used in practical examples are: –Using an energy efficient lightening, –Using doors with sensor which automatically close, –Using wind turbines or/and solar energy, –Using ventilators to push hot air from the top to the bottom of a warehouse, –Using a sensors (motion detectors) for the lightening so the light is turned on only where and when needed, –Using building materials which are better insulator, –Using equipment with less carbon emission and less energy consumption, –Using returnable/recyclable containers and packaging materials, –Forklift fleet improvements, –Implementation of paperless warehouse management system (WMS), etc. Principles of green building and greener operational practices/equipment Green Warehousing

8 Top No.1 Green Warehouse ?

9 Top No.1 Green Warehouse (cont.)

10 More and more examples...

11 Economics in greening SC/warehouses Green initiatives should clear three hurdles: they must be acceptable financially,environmentally, and socially Economics of GSCM / Green Warehousing? To be fully adopted by organizations, the greening of supply chains should contribute to better economic performances and competitiveness. “Difficulties are not only seen in the lack of comprehensive strategies, but also in assessing related financial impacts. Many companies are not yet able to quantify the costs that could be avoided or would arise due to a switch to a green supply chain approach, nor are they able to determine how additional costs could be funded. If companies do have a budget, only limited funds seem to be available and the funding is mostly tied to single solutions/projects, instead of serving long-term strategies. “ (Center of Innovation for Transport and Logistics at the Berlin Institute of Technology, “Global Logistics 2015+”, 2009)

12 “Only a limited number of initiatives for environmentally-friendly production have proved to be profitable.” (Quariguasi Frota Neto, J., J. Bloemhof, J. van Nunen, E. Van Heck, “Designing and evaluating sustainable logistics networks”, International Journal of Production Economics, 2008) High number of participants in E&Y Green for Go survey acknowledged that GSCM measures to date are not expected to generate positive ROI for at least three years (30%) – if at all (22%) “The adoption of cleaner solutions is generally bounded by an increase in costs. Companies should look at the cost of sustainability initiatives as an investment and should look for good trade- offs between environmental impact and costs. The Return on Investment (ROI) of going green can be more sales, increased market share, enhanced visibility, happier employees, and a better brand. Cleaner air, a healthier climate, and a better future for your kids are not bad benefits either.” (Françoise van den Broek, Green Supply Chain Management, Marketing Tool or Revolution?, 2010) Economics in greening SC/warehouses (cont.)

13 However some companies have seen that this not a bad thing and indeed have been able to convert the public’s interest in all things green into increased profits. A number of companies have shown that there is a proof of the link between improved environmental performance and financial gains. Companies have looked to their supply chain and seen areas where improvements in the way they operate can produce profits.” (Martin Murray, Introduction to the Green Supply Chain, Logistics/Supply Chain) Successful examples of greening SC General Motors reduced disposal costs by $12 million by establishing a reusable container program with their suppliers. Perhaps General Motors may have been less interested in green issues if they were making record profits, but in an attempt to reduce costs in their supply chain, GM found that the cost reductions they identified complemented the company’s commitment to the environment. Nestlé employs an ongoing, company-wide sustainability program that has generated significant environmental and financial benefits. The company has applied the strategy to its use of product packaging by initiating an integrated approach that favours source reduction, re-use, recycling, and energy recovery. In particular, the company’s packaging material savings between 1991 and 2006 led to $510 million in savings, worldwide, according to Nestlé’s corporate website. Wal-Mart, which in 2005 launched a sweeping business sustainability strategy, recently set the goal of a 5% reduction in packaging by 2013. The retail giant expects the cut in packaging will save 667,000 metric tons of carbon dioxide from entering the atmosphere. Moreover, the company anticipates $3.4 billion in direct savings and roughly $11 billion in savings across the supply chain;

14 “Most aspects of doing greener business in the supply chain truly are related to greater productivity, which is always a goal of supply-chain management”...” much of good logistics engineering is not only compatible with greener business practices, it’s actually synonymous with it.” (Underwood: Green Ware(house) Effect, Area Development Online, Aug/Sep 2008) Well-known techniques and technologies of improving warehouse operations could be/are in compliance with a greening “Smart, efficient, accurate and green – these are the attributes of the modern warehouse. Best-in- class manufacturers and distributors understand that today’s economic climate requires the ability to respond to market conditions quickly and effectively. In addition, as public scrutiny continues to put pressure on companies to become better environmental stewards, technology serves the dual purpose of helping firms to save money and to reduce their environmental impact.” (Luke Heaton, Advanced, Automated Technology Solutions Deliver Greener Warehouse Operations, Vormittag Associates, Inc.) Dual purpose of good logistics engineering

15 Total logistics costs as a percent of sales in EU in 2007  average 8.39%  high variation among industries Source: Logistics Costs and Service 2007, Establish, Inc. ORDER-PICKING - process of retrieving items from storage locations in response to specific customer request Source: Tompkins et al. Facilities Planning, Wiley, 1996  most laborious in a typical warehouse  up to 55% of warehouse operating cost  direct influence on service level (order accuracy, speed of delivery) Order-picking in warehouses

16 50% of the total order-picking time spent on unproductive traveling  potential to improve OP by reducing traveling distances  focus of most OP methods Improving OP efficiency in existing warehouses / designing new warehouses  redesign / optimal design of OP area  using operational policies (methods) and technologies to optimize processes Source: Tompkins et al. Facilities Planning, Wiley, 1996 Improving OP efficiency – recucing traveling distances

17 Routing methods (policies) - determine the sequences and routes of picking Various methods (policies) are developed and used in practice, heuristics and optimal algorithm.Various methods The performance of heuristics depends on the particular operating conditions of the system under study due to their definitions. With routing order-pickers efficiently using routing methods, it is possible to obtain a reduction between 17 and 34% in traveling distance. The amount of reduction depends naturally on method used in particular situation. An optimal algorithm results in a shortest possible, thus optimal route. In practice heuristics are predominantly used to route order-pickers - particular heuristic policy in some situations may provide near optimal solutions and avoid the confusion inherent in optimal solutions. Knowledge of performances of routing methods is importantperformances of routing methods Routing methods

18 Storage methods (policies) - assign items to storage locations based on some rule Assign the frequently accessed items to the locations near depot (like volume-based storage policy or Cube-per-order index based storage policy). Reduce travel distances compared to random assignment (where items are stored in any available location by randomized rule). There are several different types (patterns) of storage used in practice in order- picking systems. The performance of a particular storage type could greatly depends on the routing method implemented.several different types (patterns) of storage Large savings are possible using particular storage method, achieving in some cases 45-55% of travel distance reduction compared to a random storage. Knowledge of performances of storage methods (in combination with routing methods) is importantperformances of storage methods Storage methods

19 Orderbatching methods (algorithms) - group two or more cutomer orders in one picking order Most basic method is single order-picking. Pickers pick one customer order at a time (in one route). Operations with low picks per order will find the travel time excessive. In batch picking, multiple customer orders are grouped into batches – picking orders. The items from several customer orders are picked in one route, which generally reduces the travel distances per order. There are several orderbatching methods (algorithms) developed and used in practice. The potential savings using orderbatching in comparison with single order-picking ranged from 40 to 70% in conducted simulations for random storage. The analysis of orderbatching algorithms with volume-based storage showed that savings are cumulative, with potential savings in travel distances up to and even over 80% compared to random storage and single order-picking. Knowledge of performances of orderbatching algorithms (in combination with routing and storage methods) is importantperformances of orderbatching Orderbatching

20 Optimal layout of order-picking area Evaluation of routing policies showed that layouts of order-picking area have significant influence on resulting traveling distances. For a given storage capacity, one can find optimal layout regarding number and length of aisles. Results of previous researches showed also that adding one or more cross aisles could benefit the total traveling distances. Is also possible to find optimal number of cross aisles which generally decreases the picking travel distance by 20-30% of associated route in layout with no cross aisles. Order-picking area layouts

21 Innovative layouts All papers regarding analysis of order-picking methods in manual-pick order-picking systems imply traditional layouts. Traditional design assumptions (cross aisles are straight and must meet picking aisles only at right angles, picking aisles are straight and are oriented in the same direction), limit efficiency and productivity because they require workers to travel longer distances and less-direct routes to retrieve products from racks and deliver them to designated pickup-and-deposit points. Recently radically new, innovative warehouse layouts that could reduce retrieval times in pallet picking are proposed.innovative warehouse layouts –Flying-V layout, the expected distance to retrieve a single pallet 8-12% less than in traditional design –Fishbone layout, the expected travel distance can be more then 20% less than in a traditional design Performances of OP methods for picking from multiple locations in warehouses with new non-traditional layouts ? Outperformed by traditional layout with central cross-aisle in case of picking from multiple locations per routeOutperformed New innovative layouts

22 The technology that is obviously necessary to be able to implement mentioned methods is Warehouse Management System (WMS) with built-in algorithms for routing, storage and orderbatching. Paper-less WMS is an element of greening warehousing –reducing paper usage in warehouses –additional capability of greening through increased efficiency Three technologies that are used in order-picking systems inherent with paper-less directing order-pickers are RF scanning, Voice Technology and Pick-to-light systems. All three systems can offer increased speed and accuracy compared to paper-based WMS, but choice depends on the nature of the business and products being handled. Improved productivity and accuracy = Less travel = Less energy = Less CO 2 Technologies for order-picking

23 Improving efficiency of order-picking process in warehouses using operational methods and advanced technologies is not in confrontation with greening. Energy savings are possible by setting a suitable routing method, storing and picking strategy, choosing the right picking technology and most suitable layout, simultaneously making warehouse efficient and green(er). Conclusion








31 Routing order-pickers in warehouses  movement of the order picker from location to location to retrieve products.  the objective is to sequence the items on the pick list and to create a good route – as short as possible.  the problem is actually a special case of the Travelling Salesman Problem Routing methods

32 THE ANALYSIS OF ROUTING METHODS - 48 different situations examined (6 pick list’s sizes, 2 warehous’s sizes, 4 layouts) - random storage Small # of picks  appropriate heuristics are only 5-10% over the optimal algorithm Large # of picks  difference between appropriate heuristics and optimal algorithm is neglected Performances of routing methods

33 THE ANALYSIS OF STORAGE METHODS Volume-based storage - most frequently accesed items in the locations “nearest” to the depot - different types (patterns) of volume-based storage Storage patterns

34 THE ANALYSIS OF STORAGE METHODS - 48 different situations examined (6 pick list’s sizes, 2 warehous’s sizes, 4 layouts) - 4 types of storage, 4 volume-based ABC curves in combinations with routing methods The preferred types of storage for particular routing method Routing method Region Preferred type of storage # of picksABC curve S-Shapeall within aisle Return largeless skewedacross aisle smallmore skeweddiagonal Largest Gapall within aisle Combined largerallwithin aisle fewalldiagonal Optimal largerallwithin aisle fewmore skeweddiagonal Performances of storage methods

35 THE ANALYSIS OF STORAGE METHODS - all volume-based storage types provide travel savings over random storage Right selected routing heuristics with preferred type of storage result in travel distances only few percents over the optimal. 45-55% (small # of picks, more skewed ABC curve) few-15% (large # of picks, less skewed ABC curve) - the performances of routing methods with volume-based storage changed Performances of storage methods

36 - potential savings using OB methods in comparison with single OP depend on the # of customer orders per group (OP’s capacity / avg. order size), 40-70%. - savings by OB methods and volume-based storage in comparison to single order-picking with random storage are cumulative 10 5 23 1.5 Orders per group THE ANALYSIS OF ORDER-BATCHING METHODS Performances of orderbatching methods

37 Flying-V warehouse layout (Graphic courtesy of Kevin Gue and Russell Meller) Fishbone warehouse layout (Graphic courtesy of Kevin Gue and Russell Meller) Basic traditional layout (left) and traditional layout with one (middle) cross aisle (right) Innovative warehouse layouts

38 Simulation results of average travel distance (in meters) Example of picking route in examined fishbone layout Analysis of picking in fishbone layout

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