GROUP PROJECT (LTG

2015)

MR LTD PALMERSTON NORTH

(240.752 INTEGRATED LOGISTICS)

What are the underlying problems at MR Ltd?

The following information has been made available to you regards this MR Ltd Project.

ORGANIGRAM

MANAGING DIRECTOR

Finance
Director

Logistics
Director

Operations
Manager

Materials
Manager

Marketing
Director

Planning
Manager

Distribution
Manager

Warehouse
Supervisor

Transport
Supervisor

Operatives

Drivers

RL4 M4A:1

Note: Only the Distribution Structure is expanded so use cost centre approach.
SITE DATA
Warehouse and Site Plans are attached in MR Ltd 2.

You undertook a site tour and noted the following: 1. Entrance

Drove onto site unchallenged.

Unclear directions where to park.
Turned into Vehicle Assembly area.
Went into Distribution Office first, then directed to Main Office when asking for
Managing Director.

2. Yard

Vehicles parked haphazardly.

Cars being washed.
Fuel pumps unattended.
Pallet store area full of damaged pallets.
Broken fork trucks with parts missing sitting beside pallets.
Cars parked alongside fuel pump.

3. Warehouse

Walked in unchallenged.
Vehicles being off-loaded outside.
"Careless" fork lift driving.
No procedures available for stock location.
No written safety policy displayed.
People standing around talking, some smoking.
Above average absenteeism apparent (upon discussion)
Damaged product lying around.
Congested despatch area.
Morale seems low.
Fork trucks covered with stickers.
Graffiti on walls.
Toilets unclean, dirty sinks, grubby towels.
Lighting good, no space heating system.

RL4 M4A:2

SITE PLAN
NOT TO SCALE
FENCING (Rest of Perimeter Building Walls)
Grassed Area

Grassed
Grassed
Area

PRODUCTION
AREA

IN

Area

OUT
IN

Main
Office
Area

PALLET
STORE
WAREHOUSE

CAR
PARK

VEHICLE
PARK

OUT
FUEL PUMP

VEHICLE
WASH

VEHICLE
ASSEMBLY

OUT
IN

RL4 M4A:3

Grassed Area

WAREHOUSE PLAN
SCALE
<
IN

10MM = 5 METRES
70 metres
(Ground
Level)
Receipt
Area

Building Stanchions/Pillars
>

Fire
Exit

STORAGE
AREA

90
metres

CLEAR HEIGHT
AVAILABLE = 15 METRES

20 PICKING
m AREA
e
t
r
e
s W

DESPATCH
AREA

(BANKED)

CANTEEN

Fire
Exit

Office
VEHICLE ASSEMBLY
Distribution AREA (GROUND LEVEL)

OUT

(RAMPED)

RL4 M4A:4

INFORMATION AND QUESTIONS

In addition to the information already given you are passed the following description of
the warehouse and transport operations

WAREHOUSE METHODS AND DATA

Open
Monday to Saturday, 0800 to 1800 hours, 51 weeks per annum (closed 1 week for holiday).
Overtime is worked from 1800 to 2000 hours to load transport vehicles.
Note. Site Access is possible 24 hours a day, 7 days a week.

Receive
From on site production by production trailer shuttle system (Flat 40 foot trailers).
Product palletised, 1 Line per pallet.
Pallets size 1.0 x 1.2 metre.
Offloaded by CBT from ground level.

Put Away to Storage Area

By Counterbalance diesel forklift truck (CBT).

Storage
Random locations.
Blockstacked on pallets, two high maximum, otherwise product "crushes".

Bring Down to Pick Area

By CBT.

Picking
Manual onto pallets, placed on Hand Pallet Truck (HPT).

Pick Area to Despatch Area

By HPT.

Loading to Transport Vehicle

By CBT.

RL4 M4A:5

TRANSPORT METHODS AND DATA

Loading
Picked pallets by CBT.
1600 - 2000 hours each day.

Delivery
0900 - 1500 hours, Monday to Saturday, 51 weeks per annum.
Daily deliveries.
Each vehicle has a drivers assistant.

Unloading at Customers
Pallets removed by HPT (supplied by customer).
Cartons hand stacked onto conveyor belts by driver and his assistant.
Empty pallets are returned to vehicle.
Customer, tally counts/checks cartons only.

FIRST IMPRESSIONS - QUESTION (1)

From ALL of the information given to you so far:

What comments would you make about observations? Why?

What possible operational short falls can be identified in the MR operation?

What logistics management practices appear questionable?

What loss aspects might apply at MR Ltd?

o
o

Identify what types of losses you believe could exist, where, and what causes
you to believe this?
How might MR Ltd minimise losses.

What immediate improvements would you suggest? (Note: the site cannot be
extended)

RL4 M4A:6

PRODUCT DATA
You are given the following data in addition to that already provided.

PRODUCT DATA
Product is dry, kept at ambient temperature.
Number of Lines

350

Gross Kilos per carton

13 Kg

Dimensions, metres (L.W.H) per carton

0.5 x 0.4 x 0.4

Cartons per pallet

24

Pallet dimensions

1.0 x 1.2 metres.

PRODUCTION TO WAREHOUSE METHODS and DATA

Open

Monday to Saturday, 0800 to 1800 hours, 51 weeks per annum (closed 1 week for
holiday).

Overtime is worked from 1800 to 2000 hours to load transport vehicles.

Note. Site Access is possible 24 hours a day, 7 days a week.

Receive

From on site production by production trailer shuttle system (Flat 40 foot trailers).

Product palletised, 1 Line per pallet.

Pallets size 1.0 x 1.2 metre.

Offloaded by CBT from ground level.

Put Away to Storage Area

By Counterbalance diesel Fork Lift Truck (CBT).

Storage

Random locations.

Blockstacked on pallets.

Two high maximum, otherwise product "crushes".

Bring Down to Pick Area

By CBT.

RL4 M4A:7

Picking

Manual onto pallets, placed on Hand Pallet Truck (HPT).

Pick Area to Despatch Area

By HPT.

Loading to Transport Vehicle

By CBT.

MATERIALS MOVEMENTS AND DATA

Loading

Picked pallets by CBT.

1600 - 2000 hours each day.

Delivery

0900 - 1500 hours, Monday to Saturday, 51 weeks per annum.

Daily deliveries.

Each vehicle has a drivers assistant.

Unloading at Customer

Pallets removed by HPT (supplied by customer).

Cartons hand stacked onto conveyor belts by driver and his assistant.

Empty pallets are returned to vehicle.

Customer, tally counts/checks cartons only.

RL4 M4A:8

RESOURCE DATA
(People and Equipment)
Warehouse

Pickers
CBT drivers
CBT equipment
HPT equipment

6
6
6
6

Transport
Drivers
Driver's Assistants
Vehicle numbers
GVW - Rigid
payload - Tonnes
capacity - Pallets

60
60
60
7.5 tonne
3.5
10

Administration

Note:

Order clerks
Transport clerks
Supervisors
Manager (Distribution)

2
2
2
1

All equipment is owned, but is externally maintained on Sunday.

COST DATA
All per annum (unless otherwise stated).
Manpower
Based on 40 hour week, 52 weeks with 4 weeks holiday.
Warehouseman
Vehicle Driver upto 7.5 tonne GVW
over 7.5 tonne GVW
Supervisor
Admin. Assistant
Vehicle Assistant

$30000
$30000
$35000
$40000
$28000
$28000

(Note. Overtime is paid pro rata at time and half. eg, if work 60 hours, are paid 40
hours basic and the overtime of 20 hours, is paid as 30 hours).

RL4 M4A:9

Establishment Costs ops/yr

Rent and Rates

Heat and light
Manager
Security (night)
Other overheads
Product damage
Pallets

$160.00 per sq metre

$80.00 per sq metre
$80000
$120000
$160000
$350000
$700000

Warehouse Equipment/unit/yr
HPT
CBT

$150
$14500

Transport Equipment
Fixed Cost, excluding people
Variable cost, per KM

$25000
$0.30

(Note. Variable cost includes external maintenance).

RL4 M4A:10

CUSTOMER DATA
Two major JIT manufacturers are supplied.
Throughputs are shown on the volume data sheet.
The percentage split of volume is:Wellington Customer

70%

New Plymouth Customer

30%

Customer Service

Is paramount, as daily deliveries are required. (Because of this MR Ltd had

taken the decision to gear up to cover peak requirements with all their own
resources. Management is sure this should continue, so it is currently Board
Policy).

Customer Orders

Orders typically must follow a daily cycle as below:Orders Taken By.

1000 hours Monday
to
1000 hours Friday
1000 hours Saturday

Delivered By.
1500 hours Tuesday
to
1500 hours Saturday
1500 hours Monday

Each customer order would typically include each product line.

VOLUME DATA
In Cartons

MONTH

RECEIVE

DELIVER

STOCK

JANUARY
FEBRUARY
MARCH
APRIL
MAY
JUNE
JULY
AUGUST
SEPTEMBER
OCTOBER
NOVEMBER
DECEMBER

75000
75000
75000
75000
75000
75000
75000
75000
75000
75000
75000
75000
900000

90000
108000
162000
99000
72000
63000
54000
36000
45000
54000
63000
54000
900000

170520
137520
50520
26520
29520
41520
62520
101520
131520
152520
164520
185520

RL4 M4A:11

PRODUCTIVITY - QUESTION (2)

What is the current warehouse capacity?

Is it adequate for monthly throughput?

What key cost elements within MR Ltd. Your answer should include the elements and
their values.

What are the monthly operational costings for MR Ltd.

What is your possible warehouse capacity? (Options must be justified and costed)

Can you justify would be the Cost/Benefit of the investment

NOTE: You should use your professional judgement to decide what areas you are going to cost
and at what depth! Show justification for your decision. Note however, that you will use these
costs later in the course to compare them against the costs you calculate after recommending
improvements.

NOTE: Vehicles currently average three deliveries per week and 45,000 kms per year,
each vehicle.

CURRENT UTILISATION - QUESTION (3)

What is the current utilisation of resources across MR Ltd?

Select and define the areas within MR Ltd where you believe that method study is a
suitable means of improving productivity.

Performance data
The Supervisors believe the following currently apply:
1.

Warehouse CBT can move about 15 pallets per hour per operation.

2.

Each Picker can manage about 150 cartons per hour (which includes moving picked
pallet to despatch area).

3.

Transport Vehicles currently average 3 deliveries per week, and around 45000
miles per annum. (The Transport Supervisor is aware vehicles are not always fully
loaded, but says "customer service is King around here").

RL4 M4A:12

NOTE: You should be looking at those areas where resources of people, space and equipment
are used. Do not try to use standards which can be calculated from formal methods of
investigation, - just use the historical standards.

Note: See the following information to aid analysis.

ANALYSIS DATA - PERFORMANCE

You may find the following performance data will help in your analysis.

Warehouse Performance Data

Fixed Times

Simple Manual Operations

Pick up/Put down
Truck Operations
Pick up/Put down
Hoist up/Hoist down

20 seconds per piece/package.

65 seconds per piece/package.

6 seconds/metre
19.7 seconds/metre

Variable Times

Man walking, empty handed

Man walking with HPT

30.5m/min

Man driving CBT

122m/min

Man driving other trucks

91.5m/min

Transport performance data

61m/min

- Loading/Unloading

Fixed Time
10 mins per stop
(eg, stopping vehicle, opening doors, documentation, etc.)
And, to cover physical unloading per piece/package, add the following:Fixed/Variable Times, as warehouse performance data.

Travel Times

Average Road Speeds

Motorway
80 kph
Class 2 Roads
75 kph
Urban Roads
40 kph.
Distance. (Crow Fly Factor) Straight line plus 20 per cent.

RL4 M4A:13

IMPROVEMENT DATA
You may find the following data useful for improvement purposes.

Warehouse
Capital Cost

Cost per annum

CBT LPG
CBT Electric

$32000
$25000

$16000
$12000

Narrow Aisle Reach Truck (NART)

$44000

$16000

Turret Truck (TT)

Multi Level Picker Truck (MLPT)

$80000
$40000

$24000
$18000

Conveyor

$1500 per metre

$150 per metre p.a.

Racking - Normal APR

$120 per pallet space

$12.00 per pallet space

Racking - Drive In

$200 per pallet space

$20.00 per pallet space

Racking - Flow

$300 per pallet space

$35.00 per pallet space

Aisle Width requirements

Shortside

Longside

3.3m
2.5m
1.5m

3.0m
2.13m
1.32m

CBT
NART
TT/MLPT

(Based on pallet 1.0 x 1.2m)

RL4 M4A:14

Building changes
CAPITAL COST

COST PER ANNUM

FIRE EXIT

$2000

GOODS DOOR

$20000

$2000

OPEN CANOPY

$500 per square metre

$30 per square metre

SPACE HEATING

$40 per square metre

$20per square metre

WAREHOUSE EXTENSION $1000 per square metre

$55 per square metre

YARD EXTENSION

$60 per square metre

$600 per square metre

Transport

TYPE

TONNES
3.5T GVW
RIGID
7.5T GVW
RIGID
17T GVW
RIGID
24T GVW
RIGID
32T GVW
ARTIC/12M TRAILER
35T GVW
Drawbar/2 bodies
38T GVW
ARTIC/12M TRAILER
12 METRE TRAILER
DRAWBAR DEMOUNT
BODY
DRAWBAR TRAILER

CAPITAL FIXED COST

COST PER ANNUM

CAPACITY

VARIABLE
COST PER
KM

PALLETS

1.75

$45000

$5000

$1.00

3.5

10

$56000

$12000

$1.00

11

14

$120000

$40000

$1.65

16

14

$240000

$88000

$1.95

19

24

$480000

$140000

$2.70

21

28

$550000

$150000

$3.00

24
-

24
24
14

$490000
$45000
$25000

$140000
$4500
$2500

$2.30
$0.50
$0.30

$15000

$2500

$0.24

Note: Fixed costs exclude people.

Variable costs include maintenance.
Pallet capacity based on size of 1.0 x 1.2 x 2.5 metres.

RL4 M4A:15

IMPROVED PERFORMANCE - QUESTION (4)

Carry out work measurement/time study in those areas of MR Ltd that you feel are
appropriate.

Using the cost elements given above and apply these to improve ALL operations to
produce better operational costings.

Note: Your answer should show storage costs, warehouse handling costs for each part
of the overall operation, and transport costs for each customer.

Draw up a budget for MR Ltd for the next year based on the current cost elements but
applied to the improved operation.

How you present the budget is up to you but it should identify the individual costs for
each part of the business. (Note: You do not need to consider income, as this is not
available to you).

FUTURE OPERATIONAL QUESTIONS (5)

The Managing Director of Mr Ltd is looking to expand, and requires your outline
recommendations on these possible future changes: 1.

The effect of a two-fold volume increase.

2.

The introduction of different product types.

3.

The introduction of Europallets.

Volumes
Current volumes are to double.

Product
Introduce to same customer base the following:

Toxic chemicals, in plastic kegs, weighing 30 kilos each keg.

Paint in aerosols, in cartons, weighing 10 kilos each carton. (No volume
indications available.)

RL4 M4A:16

Pallets
Possible changes to Euro-pallets (1.2 x 0.8 metres).
[Recall the Managing Director is looking for your outline recommendations only on the
above].

FUTURE TASK REQUIREMENTS (6)

Using the information to you along with any previous calculations that you have made,
what are: The current resource use?
The intended resource use (i.e. after your improvements)?

OVERALL PROJECT OUTPUTS

1. You are required to answer ALL questions within the above sections and formulate
your responses into a professionally written and presented Group Project Report
which will be submitted for assessment at the end of the Block Course.
2. Your report must be summarised to a Powerpoint presentation that all members of
your group will present part of to the class on the last day of the Block Course. You
will be given a fixed time to present and will be stopped once you exceed the time.
This Powerpoint will also be submitted and assessed at the end of this block
course.
3. You will individually be required to submit your own assessment of the work
contributions that each of the other team members of your project team made to the
overall work effort.
4. WORKLOAD you will be expected to work outside class hours to complete this
Group Project. It is over to each group as to how much time they will allocate.
Consider this project in the same manner as one you would do in the workplace.

RL4 M4A:17