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Solving the warehousing problem in MRP

The missing link – warehouse capacity

When planners in manufacturing plan “when to order how much” (see our lot sizing article on how this is done), they have to consider what the effect will be on their warehousing. Inventory visualization

Only problem: today they can see the inventory material by material in SAP. But what is the inventory in pallets? Even more importantly, what is the overall warehouse capacity over the next 12-18 months and how does ordering inbound materials affect it?

A client of ours approached GenLots with this problem. They operate a biotech site and have 3 main storage types: Ambient temperature, Cold storage (-25°C) and Freezers (-80°C). The main problems for the planners were the following:

  1. When inventories exceed capacity, expensive storage has to be rented from third-party providers.
  2. The -80°C freezers are an expensive investment in themselves, and there is a significant lead time to ramp up their capacity until they are bought, delivered and installed
  3. There is no way of predicting scrap over all the products at a glance and prevent it from occurring.

So the KPIs for the project were clear from the beginning: 1) Reduce external storage, 2) keep warehouse utilization below 80% and add capacity in advance if it goes over, and 3) reduce scrap. 

The GenLots approach

In several short workshops, the clients’ needs were analyzed and mock-ups created. It became quickly clear that the inventory visualization application will be a graph, showing all information in one place. 

Inventory Capacity

The different storage types (aforementioned freezers, cold and ambient storage and some other types) have to be shown separately and their capacity be managed separately. There should be an overview of the current, average, and peak occupation, as well as the maximum capacity in pallets which can be changed for a specific date if the planner knows that additional storage will become available. 

Each maximum capacity limit can be seen on the graph when selecting a specific storage type view. The ability to view that the projected inventory volume will go above this maximum capacity level allows the material planner to decrease the projected inventory level by planning ahead rather than acting at the last minute and renting external storage. 

Another solution available to the material planner is to buy additional capacity in advance. The material planner now knows exactly how much and for when he should add storage capacity and in that case, it can be reflected on the global inventory visualization graph. For example, on the image below, we see that in week 14, the inventory level was supposed to reach above the 250 pallets maximum capacity. Seeing this, the material planner bought additional storage capacity so that it becomes available soon before this inventory peak. 

Overall the Inventory Visualization module allows material planners to visualize the projected inventory in value and volume and enables them to foresee if the different storage types’ maximum capacity will be exceeded when too many orders come in at the same time.

Inventory Capacity line

Filters

The planners should be able to filter the inventory by different criterias. One of them was to select materials, another the procurement type, and so on. All in all, we provided 6 filters, but they can be customized depending on the client’s requirements.

Graph

GenLots strives to be at the same time nice to look at and highly useful. So a lot of thought went into the graph. 

Inventory visualization

Spreadsheet

An application is nice, but from experience, planners like to drill down to details and have control over the data. We designed an excel download which among other things, shows every material’s inventory over every period. This is highly useful to find the specific culprits which will make the inventory go over capacity or cause scrap.

Data & implementation

The client was already using the GenLots order planner. This meant a connection to the client’s SAP was already established and could be extended to include new fields. We identified the conversion factors in the MARM table as the perfect spot to get the number of pallets. The numbers were given by warehousing and batch-uploaded into SAP.

We also had to calculate the average inventory for Non-MRP materials to get their storage space. 

Conclusion & next steps

We implemented the new global inventory visualization functionality within 3 months and with a relatively low effort for our client. External storage can be reduced. Planners are now aware of capacity constraints before they happen and plan with more confidence. Scrap is easily detected over all materials with one glance at the graph and is prevented with an improved planning. 

Looking into the future, further functionalities are possible given the flexibility of the tool and its connection to the order planner, our main supply planning calculation engine. 

We can model capacity in our order planning algorithm to prevent capacity issues automatically. Another option is simply to display to the planner whether the product is voluminous in storage or not, an information not readily accessible until now.

It was a pleasure to collaborate with a client to develop a feature that will help companies get towards operational excellence and ease the work for planners. The project was a win-win for both parties, and we would be happy to start other projects which add value to the GenLots product for all our clients.
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