+

IME331 - Optimizing Material Handling System Costs Case StudyTeam D: Randall Chua, Matthew Tjahjadi, John Chia, Adrian Nuñez

+Agenda

■Abstract

■Requirements■ Alternative 1: Automated System■ Alternative 2: Conventional System■ Alternative 3: Conventional System in a Leased

Facility

■Choose Alternative

■Conclusion

+Abstract

■In this case study, THREE competing warehouse designs have been presented.

■All the results are based on ■Time Analysis■Economic Analysis■Layout Analysis ■Sensitivity Analysis.

+Requirements

■Total Weekly Product Flow = i=1nPi = 2399 units

■Total Weekly Inventory = i=1nPi×Ii = 2399 units

■Pi – Average Pallet flow per week of each product

■Ii – Inventory level of each product

+Alternative 1: Automated System■ Number of grids = 2399 pallets/8 pallets high= 300 grids

■ AGVS throughput : 5 pallets/hour/AGV

■ AS/RS system using AGVS

Figure 1: AS/RS system Figure 2: AGVS system

+Alternative 1: Automated System

■ Required throughput =

(2399)/(24hr×7day×0.90) = 15.87 ≈16 pallet/hr./machine

■ There is work efficiency 1-0.10 = 90%

■ There are three layout alternatives for storage:■ Interval one :22 x 14 pallets■ Interval two : 6 x 50 pallets ■ Interval three : 4 x 75 pallets

■ Number of AGV = (2399)/(24hr×7day×5 pallets/hr./AGV×0.9) = 3.17 ≈4

+Option 1

■ Total Area = 14,700 ft2

■ Supplied Throughout = 22 pallets/hr./machine

Number of S/R Machine:

16/22 = 0.72 which is

approximately one

140 feet

105 feet

+Option 2 (Chosen)

■ Total Area = 12,600 ft2

■ Supplied Throughout = 19 pallets/hr./machine

■ Number of S/R Machine: 16/19 = 0.84 which is approximately one

280 feet

45 feet

+

■ Total Area = 12,150 ft2

■ Supplied Throughout = 15 pallets/hr./machine

■ Number of S/R Machine: 16/15= 1.06 which is approximately two

Option 3

405 feet

30 feet

+ Total Cost

Category Cost Total CostSpace $25/square ft. * 12,600ft2 *

(1+0.15)$388,125

AGV $40,000 x 4 machine $160,000S/R Machine $100,000 x 1 machine $100,000

AS/RS Computer $600,000 $600,000Grand Total $1,353,125

Category Cost Total CostOperator Wages $9 * 5 operators * 24/hour *

360 days$ 388,800

Overhead and Support Cost

$11,344 * 12 months $136,128

Grand Total $524,928

Initial Cost

Annual Cost

+NPV Analysis

Year First cost Annual cost Saving Total cost

1 0 0

2 -1,353,125 -1,353,125

3 -524,928 1,000,000 475,072

4 -524,928 1,000,000 475,072

5 -524,928 1,000,000 475,072

6 -524,928 1,000,000 475,072

7 -524,928 1,000,000 475,072

8 -524,928 1,000,000 475,072

9 -524,928 1,000,000 475,072

10 -524,928 1,000,000 475,072

NPV(25%IRR) = $146,142

+Alternative 2: Conventional System

Number of grids = 2400 pallets/3 pallets high = 800 grids

Number of Rows: (800 grids)/(8 grids per row) = 100 rows

Figure 3: Forklift Truck Figure 4: Roller Track Storage

+Requirements

Max # of rows in each array: 12(12 rows per array)*(9 arrays)=108 rows

Pickup/Deposit Time = 0.003hr./occurrence ×2399 pallets = 7.2 hr

Travel time = 167.3 hr

Time required = 7.2 + 167.3 = 174.5 hr

Time supplied = 24hr. ×7day×0.9 = 151.2 hr

Number of forklift = 174.5hr/151.2 hr = 1.15 = 2

+Design

11 ft

15 ft

15 ft 11 ft

Total Area: 39,904 ft2

+ Total Cost

Category Cost Total Cost

Space $35×39,904 ft2 ×(1+20%) $1,675,968

Forklift 2*$22000 $44,000

Flow Track Storage $300×800 grid $240,000

Grand Total $1,959,968

Category Cost Total Cost

Operator Wages $9×(5+2)×24hr×360day $544,320

Overhead/Support Cost $8086/mo*12 mo $97,032

Grand Total $641,352

Initial Cost

Annual Cost

+NPW Analysis

Year First cost Annual cost Saving Total cost

1 -1,959,968 -1959968

2 -641,352 1,000,000 358,648

3 -641,352 1,000,000 358,648

4 -641,352 1,000,000 358,648

5 -641,352 1,000,000 358,648

6 -641,352 1,000,000 358,648

7 -641,352 1,000,000 358,648

8 -641,352 1,000,000 358,648

9 -641,352 1,000,000 358,648

10 -641,352 1,000,000 358,648

NPV = -$574,339

+Alternative 3: Conventional System with Leased Facility

Number of Square Array = 2400 Pallets/(8x12) = 25 = 5x5

+Requirements

Pickup/Deposit Time = 0.003hr./occurrence ×2399 pallets = 7.2hr

Travel time = 365.2 hr

Time required = 7.2 + 365.2 = 372.4 hr

Time supplied = 24hr. ×7day×0.9 = 151.2 hr

Number of forklift = 372.4hr/151.2 hr = 2.46 = 3

+Design 102,476 square feet

+ Total CostInitial Cost

Annual Cost

Category Cost Total Cost

Forklift $22,000*3 $66,000

Flow Track Storage $300 x 2400 grid $720,000

Leased Hold Improvement $300,000 $300,000

Grand Total $1,086,,000

Category Cost Total Cost

Operator Wages $9 x (5+3) x 24 hr x 360 days

$622,080

Overhead/Support Costs $6,937 x 12 mo. $83,244

Grand Total $705,324

+Year First Cost Annual Cost Rent Saving Total Cost

1 -1,086,000 -691,450 -361,920 1,000,000 -933,870

2 -705,324 -387,254 1,000,000 -92,578

3 -705,324 -414,362 1,000,000 -119,686

4 -705,324 -443,368 1,000,000 -148,692

5 -705,324 -474,403 1,000,000 -179,727

6 -705,324 -507,612 1,000,000 -212,936

7 -705,324 -543,144 1,000,000 -248,468

8 -705,324 -581,164 1,000,000 -286,488

9 -705,324 -621,846 1,000,000 -327,170

10 -705,324 -665,375 1,000,000 -370,699

NPV = -$1,878,106

NPW Analysis

+Conclusion

■ Choose Option 1 - Automated System■ Based on our NPV analysis of 3 different

options.