CASE STUDY $2\mathrm{.}1-$ The maintenance stores dilemma $-$ A case study of Vortex, a maintenance stores operation, by Gwynne Richards.

GWYNNE RICHARDS is the Director of Apprise Consulting Ltd$.$ You are a logistics and warehousing consultant. You have just come out of a three$-$hour meeting with members of the management team of a maintenance stores operation in the UK$.$ You also took a tour of the stores.

This is what the general manager told you as you were being shown around.

Introduction

Vortex, a manufacturer of hi$-$tech drilling equipment, has grown significantly over the past few years and it is now running out of storage space for its maintenance stores operation. The number of parts required to service and repair the company$$s equipment has increased substantially as new equipment and clients have been introduced and therefore space is at a premium.

This is borne out by the amount of floor space taken up by the storage of items ranging from large engines and drill bits, including metal suitcases containing repair equipment.

The engines and drill bits are banded onto pallets and are not stackable.

Returned equipment from various sites across the world are also stored on the floor close to the inbound area.

A second warehouse $($Unit B$),$ across the road from the main facility, also contains refurbished items whilst a third warehouse $($Unit C$),$ approximately $800$ metres away, stores items that are yet to be refurbished together with items that, although deemed obsolete, have yet to be written off and removed. Some of these items are being cannibalized by the engineers on a regular basis.

The business philosophy of the company is to ensure that all their equipment, whether operated in the UK or abroad, has sufficient parts both local to the equipment and at the main warehouse to ensure minimum downtime. The main warehouse is utilized to replenish the local country warehouses and also to provide emergency cover for those parts that are not held at the local warehouses. A great deal of the company$$s success is based on a near $100$ per cent up time for its equipment. However, the introduction of new equipment on a regular basis results in more hi$-$tech equipment being produced and therefore more sophisticated parts being required. These parts are produced both locally and in manufacturing sites in China, Brazil and Russia.

This can amount to $20$ new lines each week as the machinery is very complicated and sophisticated.

In order to achieve competitive prices the procurement director needs to purchase large quantities from suppliers so as to obtain the best possible discounts.

The three directors are experienced in finance, engineering and procurement respectively.

In July $2004$ TMS moved into a new warehouse and distribution centre. A $10-$year lease was signed on the building. There is an additional plot of land adjacent to the warehouse on which an extension can be built. This will increase total space by at least $25$ per cent and possibly up to $30$ per cent. However, it will require an extension of the lease for at least a further $10$ years. The other local stores sites are on short leases and the company can vacate easily by agreement and by giving three months$$ notice.

The stores

The stores area in Unit A has a floor area of approximately $3,000$ square metres and a mezzanine floor at the far end of the warehouse opposite the inbound door. This is approximately $1,000$ square metres and is reached by a set of stairs on the eastern side of the building. The warehouse has an internal height of eight metres to the eves. There is no sprinkler system installed.

A second structure of $1,000$ square metres was constructed, with the landlord$$s permission, three years ago. This is accessed via a low tunnel $(2\mathrm{.}5$ metres high$)$ between the two structures. This also has a single door to the outside yard. The overall height of this structure is only $3\mathrm{.}5$ metres. This area is utilized for packing and despatch.

In total there is only one inbound door and one outbound door.

It was decided that the best configuration was to use Section $1$ for inbound and to store all of the parts. Section $2$ is used for packing, staging and despatch. Many of the replenishment orders for the local warehouses are held in this area until sufficient parts are ordered to fill a $20-$inch container. Urgent orders are despatched either on a less$-$than$-$container load $($LCL$)$ basis or air freighted to the required destination.

Section $1$ utilizes mobile shelving and standard shelving for the storage of the majority of the parts. These are situated both under the mezzanine and on the mezzanine itself.

A number of filing drawers are also utilized for the storage of very small parts such as nuts, bolts and washers.

Engineers and the localized stores are able to place orders for any quantities of goods. This often necessitates opening bags of screws to count out individual items.

The company operates a stock control system which is updated on a daily basis by manually