Nur Kamaarum Adiwida Hemas Student February 2021 Approved by: Dr

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Nur Kamaarum Adiwida Hemas IMPROVING WAREHOUSE MANAGEMENT SYSTEM AT THE LARGEST HEAVY EQUIPMENT DISTRIBUTOR COMPANY IN INDONESIA WITH

SIMULATION-BASED OPTIMIZATION APPROACH

By

Nur Kamaarum Adiwida Hemas 21952029

MASTER’S DEGREE in

MASTER OF MECHANICAL ENGINEERING ENGINEERING MANAGEMENT concentration ENGINEERING AND INFORMATION TECHNOLOGY

SWISS GERMAN UNIVERSITY The Prominence Tower

Jalan Jalur Sutera Barat No. 15, Alam Sutera Tangerang, Banten 15143 - Indonesia

February 2021

Revision after Thesis Defense on 3^rd Feb 2021

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Nur Kamaarum Adiwida Hemas STATEMENT BY THE AUTHOR

I hereby declare that this submission is my own work and to the best of my knowledge, it contains no material previously published or written by another person, nor material which to a substantial extent has been accepted for the award of any other degree or diploma at any educational institution, except where due acknowledgement is made in the thesis.

Nur Kamaarum Adiwida Hemas

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Student February 2021

Approved by:

Dr. Eng. Sumarsono Sudarto, S.T., M.T., OCP

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Thesis Advisor February 2021

Dr. Eng. Aditya Tirta Pratama, S.Si., M.T.

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Thesis Co-Advisor February 2021

Dr. Maulahikmah Galinium, S.Kom., M.Sc

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Dean February 2021

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Nur Kamaarum Adiwida Hemas ABSTRACT

IMPROVING WAREHOUSE MANAGEMENT SYSTEM AT THE LARGEST HEAVY EQUIPMENT DISTRIBUTOR COMPANY IN INDONESIA WITH

SIMULATION-BASED OPTIMIZATION APPROACH

By

Dr. Eng. Sumarsono Sudarto, S.T., M.T., OCP, Advisor Dr. Eng. Aditya Tirta Pratama, S.Si., M.T., Co-Advisor

SWISS GERMAN UNIVERSITY

Warehouses plays a significant role in supply chains, so it’s needed to be excellence in customer service and organizations have to create more productive warehouses to fulfill customer needs. Warehouse productivity is not optimal as seen from the SLA achievement and manpower utilization which lead to inefficiencies in warehouse management system. This research aims to find out and analyze the cause of the problem and designing an improved warehouse management system for better productivity in term of SLA, manpower utilization and cost efficiency. In doing this research, a discrete event simulation was carried out because of the complexity. After processing the data and simulating existing conditions, the results obtained is the manpower utilization is quite low on average, at 54.89%, caused by some critical positions that have very low utilization. There are 9.46% items that processed during overtime hours, and average SLA achievement is 71.52%, where the achievement value of incoming SLA is very low. If the company consider manpower utilization and employee cost efficiency as priorities, adjusting number of manpower and merging some roles can be considered as the best scenario, whereas, if the company prioritizes the number of overtime items and SLA achievement as an indicator of success, then scenario of flow process simplification and defining new time standard could be carried out.

Keywords: Warehouse Management System, Discrete Event Simulation, Utilization, Service Level Agreement, Cost Efficiency

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Nur Kamaarum Adiwida Hemas DEDICATION

I dedicate this works to my beloved family, especially my husband, Zaky Aulia Rahman, who has supported and encouraged me, also to place where I work,

processed, and get development so far.

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Nur Kamaarum Adiwida Hemas ACKNOWLEDGEMENTS

First of all, I am grateful to the presence of God for establishing me to finish this research.

As the author, I wish to thank Dr. Eng. Sumarsono Sudarto, S.T., M.T., OCP as my advisor, for his guidance, patience, support, and advice during all the process of this thesis from the beginning until the end. I am sorry for the mistakes and flaws that I might have done. To Dr. Eng. Aditya Tirta Pratama, S.Si., M.T. - as my co-advisor, thank you very much for being patient, giving some inputs until this thesis finished.

Also, I would like to thank all of Swiss German University Lecturer, for the help, and support.

I thank all of my colleagues from MME UT and all project contributor. Thank you for the support, motivation, help and togetherness.

Last but not least important, I also would like to thank my family, especially my husband and parents, for being supportive and give chance to pursue new knowledge in Swiss German University. No words could ever be enough to describe my gratitude.

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Nur Kamaarum Adiwida Hemas TABLE OF CONTENTS

Page

STATEMENT BY THE AUTHOR ... 2

ABSTRACT ... 3

DEDICATION ... 5

ACKNOWLEDGEMENTS ... 6

TABLE OF CONTENTS ... 7

LIST OF FIGURES ... 9

LIST OF TABLES ... 11

CHAPTER 1 – INTRODUCTION ... 13

1.1 Background ... 13

1.2 Research Problems ... 21

1.3 Research Objectives ... 21

1.4 Research Questions ... 22

1.5 Significance of Study ... 22

1.6 Scope & Limitation ... 22

1.5.1 Scope ... 22

1.5.2 Limitation ... 22

1.6 Thesis Structure ... 22

CHAPTER 2 – LITERATURE REVIEW ... 25

2.1 Warehouse Management ... 25

2.1.1 Warehousing Flow Process ... 26

2.1.2 Warehouse Costs Categories ... 27

2.1.3 Warehousing Productivity Improvement ... 28

2.2 System ... 29

2.2.1 System Elements ... 29

2.2.2 System Variables ... 30

2.2.3 System Complexity ... 31

2.3 Simulation ... 31

2.3.1 Discrete Event Simulation ... 32

2.3.2 Input Data Processing ... 32

2.3.3 Model Verification ... 33

2.3.4 Model Validation ... 33

2.3.5 Output Analysis ... 34

2.4 Business Process Modeling and Simulation ... 35

2.5 Related Research ... 37

CHAPTER 3 – RESEARCH METHODS ... 41

3.1 Problem Identification ... 42

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3.4 Discrete Event Simulation Model Construction ... 42

3.5 Build Optimization Scenario ... 43

3.6 Output Analysis ... 43

3.7 Discussion, Conclusions & Recommendations ... 44

CHAPTER 4 – RESULTS AND DISCUSSIONS ... 45

4.1 Warehouse System Elements ... 45

4.1.1 Entities ... 45

4.1 2 Resources ... 45

4.1.3 Activities ... 45

4.1.4 Control ... 47

4.2 Specific Key Performance Indicator ... 47

4.3 Data Collection & Analysis ... 48

4.4 Warehouse Conceptual Model ... 54

4.4.1 Incoming Process ... 54

4.4.2 Outgoing Process ... 56

4.5 Existing System Simulation ... 57

4.5.1 Simulation Model ... 57

4.5.2 Number of Replication ... 60

4.5.3 Verification & Validation ... 61

4.5.4 Existing System Analysis ... 64

4.6 Scenario Development ... 66

4.6.1 Proposed Scenario ... 66

4.6.2 Scenario Analysis ... 69

4.7 Comparing System Analysis ... 76

CHAPTER 5 – CONCLUSIONS AND RECOMMENDATIONS ... 78

5.1 Conclusions ... 78

5.2 Recommendation ... 79

REFERENCES ... 80

CURRICULUM VITAE ... 82

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Nur Kamaarum Adiwida Hemas LIST OF FIGURES

Page

Figure 1. 1 Indonesian GDP by Industrial rigin at Current Prices 2015-2019 ... 13

Figure 1. 2 Growth of Indonesian Transport & Storage GDP vs National GDP ... 14

Figure 1. 3 Details of Transport & Storage Business in GDP Composition ... 14

Figure 1. 4 Company Productivity 2011-2020 ... 15

Figure 1. 5 Company OPEX Composition 2020 ... 16

Figure 1. 6 Warehouse Cost Contribution in Total Warehouse & Shipping Cost ... 17

Figure 1. 7 Warehouse Business Process - Level 0 ... 17

Figure 1. 8 Warehouse Business Process - Level 1 ... 18

Figure 1. 9 Total Number of Order Binning 2018 – Aug 2019 ... 18

Figure 1. 10 Total Number of Order Picking 2018 – Aug 2019 ... 18

Figure 1. 11 SLA Performance on Incoming Process (Jan-Sep 2019) ... 19

Figure 1. 12 SLA Performance on Outgoing Process (Jan-Sep 2019)... 20

Figure 2. 1 Literature Review Mind Map ... 25

Figure 2. 2 Warehouse Business Process - Level 0………..26

Figure 2. 3 Warehouse Business Process - Level 1………..26

Figure 2. 4 Business Process Modeling & Simulation Approach………36

Figure 3. 1 The flow diagram of methods ... 41

Figure 4. 1 Distribution Fitting Result for TO Number Goods Arrival ... 51

Figure 4. 2 Distribution Fitting Result for Quantity Goods Arrival ... 51

Figure 4. 3 Distribution Fitting for Interarrival Time (Goods Arrival) ... 51

Figure 4. 4 Distribution Fitting Result for TO Number Customer Demand ... 52

Figure 4. 5 Distribution Fitting Result for Quantity Customer Demand ... 52

Figure 4. 6 Distribution Fitting for Interarrival Time (Customer Demand) ... 53

Figure 4. 7 Receiving Conceptual Model ... 54

Figure 4. 8 QI Conceptual Model ... 55

Figure 4. 9 Binning Conceptual Model ... 55

Figure 4. 10 Picking Conceptual Model ... 56

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Figure 4. 12 Shipping Conceptual Model ... 57

Figure 4. 13 Receiving Simulation Model ... 58

Figure 4. 14 Quality Inspection (QI) Simulation Model ... 58

Figure 4. 15 Binning Simulation Model ... 59

Figure 4. 16 Picking Simulation Model ... 59

Figure 4. 17 Quality Control (QC) Simulation Model ... 60

Figure 4. 18 Shipping Simulation Model ... 60

Figure 4. 19 Syntax Error Verification ... 62

Figure 4. 20 Existing Manpower Utilization ... 64

Figure 4. 21 QI Process Simplification ... 67

Figure 4. 22 Binning Process Simplification ... 68

Figure 4. 23 TO Scanning & Bin Location Scanning Time Standard Change ... 68

Figure 4. 24 All System Comparison Result... 76

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Nur Kamaarum Adiwida Hemas LIST OF TABLES

Page

Table 1. 1 Research Timeline ... 24

Table 2. 1 Summary of Related Research ... 39

Table 4. 1 Manpower & Roles ... 45

Table 4. 2 Detail Description of Process in Warehouse Jakarta Branch... 46

Table 4. 3 Standard Lead Time for Incoming and Outgoing SLA ... 48

Table 4. 4 Process Time Recapitulation... 48

Table 4. 5 Goods Arrival Monthly Data Recapitulation ... 49

Table 4. 6 Customer Demand Monthly Data Recapitulation ... 50

Table 4. 7 Goods Arrival Distribution Fitting Recapitulation ... 52

Table 4. 8 Customer Demand Distribution Fitting Recapitulation ... 53

Table 4. 9 Probabilities of Special Conditions ... 53

Table 4. 10 Initial Replication Running Result... 60

Table 4. 11 Half Width Calculation ... 61

Table 4. 12 Number of Replication Calculation ... 61

Table 4. 13 Existing vs Simulation Model Output Comparison ... 62

Table 4. 14 t-Test Result for Goods Picked Data ... 63

Table 4. 15 t-Test Result for Demand Fulfilled Data ... 63

Table 4. 16 Employee Cost per Year for Existing System Simulation ... 65

Table 4. 17 Overtime Items for Existing System Simulation ... 65

Table 4. 18 Incoming SLA Achievement for Existing System Simulation ... 65

Table 4. 19 Incoming SLA Achievement for Existing System Simulation ... 66

Table 4. 20 Number of Manpower & Role Adjustment ... 67

Table 4. 21 Manpower Utilization Scenario 1 vs Existing ... 69

Table 4. 22 Employee Cost Scenario 1 vs Existing ... 70

Table 4. 23 Overtime Items Scenario 1 vs Existing ... 70

Table 4. 24 Incoming SLA Achievement Scenario 1 vs Existing ... 70

Table 4. 25 Outgoing SLA Achievement Scenario 1 vs Existing ... 71

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Table 4. 31 Manpower Utilization Scenario 3 vs Existing ... 74