6.3 Material Handling and Inventory Management
way to reducing the lead time of orders. This area also includes operations of supply, stocking and delivery of spare parts necessary for after sales technical assistance (important operations for the customer service level and for the company’s final net operative result).
Topics related to transport systems both external and internal to the shop floor (Areas A and C) are not addressed here. We note only that in the general layout design of a plant, qualitative and quantitative incoming material and outgoing product flows are estimated. As a consequence, infrastructures necessary for connecting the plant to suppliers and commercial networks are considered.
Now, we focus on the internal handling operations (Area B), which are typi- cally managed by the factories, with rare exceptions. Material handling engi- neering is oriented towards searching for the best compromise between the two following opposing needs:
• full utilization of transport vectors operating in Area A, to minimize working costs;
• high frequency for feeding of production line, to operate with a lean flow according to ‘‘just in time’’.
For this purpose, the criteria for choosing transport means and calculating load sizes are:
(1) aggregating parts in container elements, calculating the size ofloading units, so that they are transferable under safe conditions by using normal means of handling, maintaining the same configuration during all handling operations along the logistic process and allocating containers directly at utilization points;
(2) choosing types of containersthat will assure protection of goods and make withdrawal and warehousing easier, according to standard operation instruc- tions and;
(3) organizing delivery batchesby joining more loading units, so that transport vectors can be well used, even through mixed deliveries (more element designs, collected and delivered according to planned transport paths).
Obviously, the size of the transported load for each mission will determine how low the cost of the transported unit will be, without considering other factors.
Handling systems used to feed direct materials into the productive process can be classified as:
1. Supports/Primary Containers, which sustain parts and group them together both in the transferal and warehousing phases; they are studied to save space and can be divided into the following types:
• standard pallet,on which the single parts or secondary containers are placed on top (if necessary, blocked for safety reasons through specific packaging solutions);
• standard containers with fixed sides (bud), with more layers of parts and eventual protective separators;
• special containers with collapsing sides, with intermediate layers engineered for positioning of parts.
These supports are of a standard modular shape and can be handled by forklift and stocked one on top of the other to save space in the warehouse. They are built of steel plate and are strong enough to be used and re-used over a long period of time and a wide range of transportation. Conversely,pre-printed insertsare spe- cific (normally built in reinforced resin), used for protecting elements from shocks and collision during handling.
For smaller elements,secondary containersare used (bins, standard or specific baskets), able to be handled manually and put on the standard pallets. Where necessary, protective films or recycling plastics or cartons, the utilization of which generates cost for exhaustion, are used for packaging.
Special containers with movable sidesare subject to time-based maintenance, because deterioration can generate severe quality defects in the production process.
It is necessary to check incoming and outgoing flows for each of the above recyclable supports, at every stage of the SC, to equilibrate interchangeability and finalize destinations.
2. Big containers, accessible through forklifts, inside of which are the above- mentioned primary containers, composing the loading unit.
These are universally used, both for multiple trans-boarding on transportation platforms or outdoor warehousing on factory loading docks.
3. Internal transport vectors, used for transfer of loads and elements, inside the plants, which can be classified in relation to the different ways of driving:
• manual vectors, such as: vehicles, small ro–ro carts, trans-elevator carts, trans-elevator equipment with fixed structures (cranes, hoist,…);
• automatic vectors,such as: continuous or power and free electro-mechanical transport systems, auto-motors cart with monorail or guided on floor tracks, programmed trans-elevator equipment, handling robot…
We will refer now specifically to final assembly lines for vehicles and mechanical groups, characterized by a high logistic complexity. Supply flow must correspond to the operative speed of the productive process, which is the hourly virtual productivity HVP, referring to each assembled component (k) and to the relative utilization coefficient (u), according to the bill of material.
Even though the decision as to the flow of all components/material to be fed into the general assembly line is one of the key activities in affording the success of a lean manufacturing system, we need first to clarify the concept of logistic complexity and a first important output that results from it.
We have already stated inChap. 2how technologically complex a vehicle is, referring to the bill of material, and in that section, we noted that this important document is also used to manage the material requirement planning process that we will approach later on in more detail. In a bill of material for mass production
of small cars, we have more or less 4,000 components with the potential to become more than 15,000 if we consider all the variants in options given to the customers.
As such, from a logistic point of view, we first have to consider that for all of those options, each component has to be delivered to the final assembly plants in the best condition for assembly and eventually managed in internal warehouses, transported to the final assembly line and finally mounted on the vehicles to become part of the product. So far, this is giving us a rough idea of what logistic complexity means Fig.6.4.
Practically, every piece (component or raw material purchased) to be delivered to a production process has got its own given Intrinsic Logistic Complexity, listed in order of importance:
1. thecostof the item: we have to consider that the more an item costs, the more the value of the inventory we will have to manage will increase and, from an economic point of view, only when it is part of the finished vehicle will we be able to see a return on that value by selling the car to the customers; practically, we are saying that the more expensive items are very complex to manage from a logistic point of view, since we should have the very minimum level of them in our internal processes, theoretically only those assembled on the vehicles, to minimize the cost of production
2. thephysical characteristicsof the item: physical dimensions, volume, weight, fragility, damageability and features that will eventually expire can determine special care from a logistic standpoint; let us think about the extra usage of space, physical efforts required for handling or specific handling means, usage of specific packaging, etc.; so far, when we have an item with these Fig. 6.4 A car passenger vehicle main component deployment
characteristics, we need to consider that stocking and handling may become hard to manage
3. the number of variationsof every single item: if the vehicle configurations permit special options for the customer, it could be that, for every single supply, we have a large number of variations (think about seats, wiring harnesses, wheels, cockpit modules…), and this could require extra-space usage on the final assembly lines, as well as in the warehouse, and could also oblige operators to engage in many NVAA (Non Value Added Activities, specifically walking).
So far, combining those three criteria, it is possible to assess the logistic complexity for every item included in the bill of material and assign a ranking to each of them. This exercise leads tomaterial classification, which represents the starting point for every decision made about the ideal material handling flows for every component in the final assembly process. We can imagine that an expensive, bulky item, with many variations, such as the seats, will stay at the top of the classification, while small, cheap and common nuts and bolts will occupy the last positions; thus, ideally, the seats will not be stored in our warehouse but directly supplied to the assembly workstation, while the bolts could also be managed from an internal warehouse to the assembly line.
We will reconsider this concept in Chap. 7, when we will examine global sourcing policies. In the following table, there is an example of how to create a material classification starting from the bill of material and how it is possible from a material classification to associate ideal flows with a single category of com- ponents. What is important to underline is that, while the first is intrinsic to the product (it is part of logistic complexity), the second is a logistic decision.
Table 6.1 Material classification example Class Part typology Sub
class
Sub group Examples
A A Expensive AA.1 Bulky and many Variations
Engines, axles, dashboards, gearboxes
AA.2 Bulky Side panels, spoilers, catalytic converter
AA.3 Many variations Junction boxes AA.4 Others (monodesign) Navigator system
B Bulky AB.1 Many variations Frames, cross members, wheels, noise insulation panels, tanks AB.2 Others (monodesign) Snorkel, doors
C Many
variations
AC Other Engine supports, hoses, small
Pipes, mirrors
B Normal B.1 High rotation Light, silent block
B.2 Low rotation Rotating light
C Small and
cheap
C Other Screws, bolts, nuts
In the example of material classification displayed in Table6.1, starting from the cost criteria and going through the other two, each item of the bill of material can be assessed and linked first to a specific class and then to a sub-class. Once we have identified all classes and sub-classes, it is possible to identify an ideal way of delivering the specific sub-classes to the line in order to follow the main guidelines for internal handling:
• In sequence flow
• Direct Flow: Just in Time by use of kanban card systems
• Indirect Flow: feeding from internal buffers or warehouses.
For concerns of external handling, a good match between the ideal delivery flow and the supplier’s geographical location will depend mostly on the global sourcing policies adopted by the company, a job for the Purchasing Department in collaboration with Logistics and the Supply Chain. This aspect will be examined in more detail inChap. 7.
Once we know the ideal policies for feeding parts and components to the process, we have to determine the properhandling unit(the quantity of elements/
goods we have to handle during a single handling) and thefeeding frequencyof each of them. For each element k (expressed in number of missions per hour), the frequency is determined by the ratio:
FFk= (u HVP)k/Uk, where Uk is the number of elements included in the handling unit.
The calculation ofUk should be consistent with the withdrawal condition of spaces and elements as foreseen in the technological layout.
The number of transport missionsnecessary to feed the manufacturing sys- tems with continuity, within a certain period of working time (working shift, week…), corresponds to:
OEEFFkPWT/N, where:
PWT is the system’s planned working time (hours) OEE is the system’s overall equipment efficiency
N is the number of handling units transported simultaneously, in relation to the capacity of carriers employed and the composition of transport of economic batches.
Criteria applied for inventory management corresponds to the logistics mentioned in the section on ‘‘basic concepts’’ at the end of this book (deterministic and stochastic/probability methods).
For this, it is fundamental to distinguish the utilization of intermediate stocks in the productive process:
(a) stocks necessary forproduction by batches, the management of which is based on economic batch or minimum sustainable batch policies, according to what is laid out in the section on ‘‘basic concepts’’;
(b) stocks necessary tomake two independent process stages, for compensating for differences in flow speed and limit interferences due to technical failures (first-in/first-out dynamic warehouses, known asdynamic buffers);
(c) stocks necessary to set sequences in mixed delivery, for machining and assembly (selective dynamic warehouses).
A particularly relevant function formaterial handlingsystems is related to the goods under financial control. In the following section, we will briefly describe operations dedicated to this management:
• goods received: incoming loads are received, goods are identified and relative containers are set in a preliminary inventory area;
• goods accepted:this is done in parallel with the receiving operation, verifying documentation of loads and operating statistic controls for administrative accountability;
• warehousing: goods are stocked in a specific area, assuring quick withdrawal times;
• goods preservation: goods are warehoused with specific protection during all necessary time;
• order withdrawal: the group of goods composing a single order are withdrawn, verified and gathered in loading units, in relation to dispatch;
• dispatching pre-set: goods are packaged, applying necessary protections to assure integrity of the load during transport and elaborating necessary financial/
administrative documentation;
• dispatching: necessary handling for final transportation loading.
Registrations done during receiving and dispatching generate active and passive invoicing, determining the economic evolution of warehouse inventories.
X
Function symbols fixed cycle transfers programmable cycle transfers simple dynamic
warehousing (FIFO logics intermediate stocks) selective dynamic warehousing (intermediate stocks with flow re- sequencing)
transfer and warehousing distributed
MOBILE TRANS-
ELEVATORS x
RO-RO CART TRAINS x
FIXED STRUCTURE
TRANS-ELEVATORS x x x
CONTINUOUS
TRANSPORTERS x x
«POWER AND FREE»
SYSTEMS x
SEQUENTIAL
AUTOMATIC VEHICLES x
AUTOMATIC GUIDED VEHICLES NUMERIC CONTROL TRANS-ELEVATORS
ROBOT MH SYSTEMS TYPOLOGIES
APPLICATIONS
Fig. 6.5 Shopfloor material handling delivery systems classification
In Fig.6.5, a resuming scheme for material handling systems on the shop floor is represented, in relation to logistic functions performed. Even if we don’t con- sider building characteristics for equipment (a specific topic of the Industrial Equipment module), the chart matches material handling system typologies in every application to the specific logistic function required in a matrix concept.
This scheme can be very useful for the setting-up ofmaterial handlingsystems on the shop floor.
We remember that, inSect. 4.1, we considered the workers involved in ware- house handling (indirect labour) as auxiliary functions. The relative requirement is determined based on the frequency and length of material handling operations, also considering features of handling means used.
Totalmaterial handlingcost, in the same integrated logistic process, includes:
1. dedicated labour cost, except that which is still included in standard operation descriptions and accounted in the direct labour standard time (ST);
2. functioning cost of handling means, including depreciations;
3. cost of dedicated information technology systems, including fees for func- tioning and depreciations;
4. consumables for packaging and cost of protection of goods;
5. burdens derived from working capital of the logistic process.
During project setting and outsourcing of services, solutions should be sought that minimize the global cost mentioned above, considering the same functionality of systems (productive and delivering capacity, attended service level…).
Considering the whole logistic process along the SC, including delivery to commercial networks, the global cost formaterial handlinggenerally ranges from 6 to 9 % of final product cost (passenger cars and commercial vehicles). Its incidence is relevant and should be controlled with rigour. It is obviously higher when production is far from the final products’ market destinations and when the infrastructure of an area in which an enterprise operates is not suitable for the transport of goods.