Analysing the Current State of a Warehouse

-A Framework Based on VSM, Activity Profiling and

Benchmarking

Ida Wessman and Maja Brring

Master Thesis for M.Sc. in Mechanical Engineering
Faculty of Engineering, Department of Industrial Management and Logistics

Supervisor: Joakim Kembro, Lund University

Acknowledgements
This thesis is conducted during the spring of 2014 as a final part of our Masters
Degree in Mechanical Engineering at Lund University, Sweden. The thesis has
been conducted on behalf of Lund University and Alfa Laval AB.
We would like to thank our supervisor Joakim Kembro at the Department of Industrial Management and Logistics, Lund University for valuable comments and
feedback during the project. We would also like to thank all employees at Alfa
Laval that have been a part of this project. A special thank to Bertil Ljungberg,
Lean Manufacturing Specialist at Alfa Laval for the support during the project and
the Friday meetings attendees for initiating the project.
Lund, May 2014

Ida Wessman

Maja Brring

Abstract
The 21st century has brought significant changes to the market. The ability to deliver the right product at the right time with the right price is no longer just crucial
for a companys competitive success, in the long-term perspective it will decide if
the company will survive on the market at all. A warehouse has a major impact on
a firms service levels, response times and overall cost. To meet customer requirements and to keep up with the ever-changing market there is a need of improving warehouse operations.
For this study, a framework with Value Stream Mapping (VSM) in combination
with Activity Profiling and Benchmarking is developed. VSM visualises the flow
of material and information in a process and it is a concept commonly used for
industrial improvements. The use of VSM in warehouses is however lagging behind. Activity Profiling is used to understand the activities and operations connected to a warehouse and Benchmarking is the process of gathering and sharing
assessments of performance. It is believed that the combination will give a more
comprehensive result compared to applying only one of the concepts. To meet the
purpose of the thesis a case company is used, Alfa Laval in Lund. Alfa Laval has
two warehouses at the site that will be used to examine and evaluate the framework. The purpose of the study is to investigate how the framework is applicable
to present a current situation analysis of a warehouse. The aim of combining the
three different concepts is to create a framework that takes several aspects into
account in order to establish a fair picture of the warehouse state.
For this study the research process onion serves as an outline for the methodology. Data collection is in the centre of the model and the core of this method. Interviews, observation and secondary data have been used for the data collection to
receive a fair picture of the current state in the two warehouses at Alfa Laval.
With the framework data are analysed and improvement areas are identified. A
proposal is given of where Alfa Laval could build a new warehouse at the site. It is
then analysed how the three concepts contributed to given recommendations and
identified improvements. The three concepts complement each other in many ways
and it is recommended to use them together when evaluating the current warehouse state and to find areas of improvement.
Key Words: Value Stream Mapping, Activity Profiling, Benchmarking, Warehousing, Warehouse design, Lean warehouse, Distribution centre and Warehouse
management

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Sammanfattning
Under 2000-talet har betydande frndringar skett p marknaden. Ett fretags
frmga att leverera rtt produkt, i rtt tid och till rtt pris r inte lngre bara
viktigt fr fretagets framgng utan kommer ocks vara avgrande fr fretagets
lngsiktiga verlevnad p marknaden. Med hjlp av ett lager kan fretaget pverka
sina serviceniver, svarstider och kostnader. Fr att mta kundernas krav och fr
att hlla jmna steg med den stndigt frnderliga marknaden finns det ett behov
hos fretag att frbttra sin lagerverksamhet.
Under detta examensarbete har ett ramverk baserat p Value Stream Mapping
(VSM), Activity Profiling och Benchmarking utvecklats. De tre koncepten r
kombinerade fr att ta hnsyn till flera aspekter och fr att kunna presentera en
verklighetstrogen bild av hur lagerverksamheten fungerar. VSM r ett verktyg som
kartlgger fldena av material och information. Konceptet r vanligt frekommande fr utvrdering av tillverkningsprocesser men anvndningen av konceptet i
logistik- och lagersammanhang r inte lika utbrett. Activity Profiling anvnds fr
att frst de operationer och aktiviteter som ingr i en lagerverksamhet. Benchmarking innebr att man samlar in information om sin verksamhet och jmfr mot
ett idealt vrde. Kombinationen av koncepten antas bidra till ett bttre helhetsresultat n om bara ett av koncepten hade anvnts. Syftet r att utvrdera ramverkets
lmplighet fr att presentera en nulgesanalys av ett lager. Fr att kunna utvrdera
ramverket har det applicerats p Alfa Lavals tv lager i Lund.
Fr denna studie har en forskningsmetodik som kallas fr the research process
onion anvnts. Intervjuer, observationer och andrahandsdata har anvnts som
datainsamlingsmetoder fr att f en verklighetstrogen bild av lagerverksamheten
p Alfa Laval i Lund.
Med hjlp av ramverket analyseras sedan nulget och frbttringsomrden identifieras. Ett frslag ges ocks p var Alfa Laval skulle kunna placera ett nytt lager.
Vidare analyseras hur de tre koncepten bidragit till det givna frslaget och till att
ge frslag p frbttringar. De tre koncepten kompletterade varandra p ett givande stt under studien och rekommendationen r att de tre koncepten ska anvndas
tillsammans fr att f en helhetsbild av en lagerverksamhet.
Skord: Value Stream Mapping, Activity Profiling, Benchmarking, Warehousing,
Warehouse design, Lean warehouse, Distribution centre och Warehouse management.

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Table of Contents
1

Introduction ......................................................................................................1
1.1 Background ........................................................................................................ 1
1.2 Purpose and Research Questions........................................................................ 2
1.3 Description of Case Company ............................................................................ 3
1.4 Delimitations ...................................................................................................... 4
1.5 Structure of Thesis ............................................................................................. 4

2 Methodology.........................................................................................................5
2.1 Introduction ........................................................................................................ 5
2.2 Research Philosophy .......................................................................................... 6
2.3 Research Approach ............................................................................................ 7
2.4 Research Strategy ............................................................................................... 8
2.4.1 Case Study Design ............................................................................. 9
2.5 Time Horizon ..................................................................................................... 11
2.6 Data Collection Methods .................................................................................... 12
2.7 How the Study was Performed ........................................................................... 13
2.8 Credibility in Research ....................................................................................... 17
2.8.1 Qualitative and Quantitative Data ..................................................... 17
2.8.2 Reliability .......................................................................................... 18
2.8.3 Validity .............................................................................................. 18
2.8.4 Generalizability ................................................................................. 19
2.8.5 Objectivity ......................................................................................... 19

3 Frame of Reference ..............................................................................................20

3.1 Warehouse Operations ....................................................................................... 20
3.2 Explanation of the Framework ........................................................................... 21
3.3 Value Stream Mapping ....................................................................................... 22
3.3.1 Waste ................................................................................................. 22
3.3.2 Product Family Matrix ....................................................................... 24
3.3.3 Map the Current State ........................................................................ 25
3.3.4 Map the Future State .......................................................................... 26
3.3.5 Why VSM? ........................................................................................ 27
3.4 Actvity Profiling ................................................................................................. 28
3.4.1 Customer Order Profiling .................................................................. 29
3.4.2 Purchase Order Profiling ................................................................... 30

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3.4.3
3.4.4
3.4.5
3.4.6
3.4.7

Item Activity Profiling ....................................................................... 30

Inventory Profile ................................................................................ 31
Calendar-Clock Profile ...................................................................... 31
Activity Relationship Profile ............................................................. 32
Investment Profile .............................................................................. 33

3.5 Benchmarking .................................................................................................... 33

3.5.1 Warehouse Performance Measures.................................................... 33
3.5.2 The Gap Analysis .............................................................................. 35
3.6 How to Adapt the Framework ............................................................................ 37

4 Identifying the Current State ................................................................................39

4.1 Introducing the Case........................................................................................... 39
4.1.1 Identified Problem Areas in the Warehouses .................................... 40
4.2 VSM ................................................................................................................... 41
4.2.1 Identification of Customers and Suppliers ........................................ 41
4.2.2 Mapping the Current State ................................................................. 43
4.3 Activity Profiling ................................................................................................ 49
4.3.1 Utilisation .......................................................................................... 56
4.4 Benchmarking .................................................................................................... 58
4.4.1 In-time Delivery Accuracy ................................................................ 58
4.4.2 Picking Accuracy ............................................................................... 59
4.4.3 Receiving Accuracy and Supplier Quality ........................................ 59
4.4.4 Picking Productivity .......................................................................... 60
4.4.5 Warehouse Cost ................................................................................. 61

5 Identifying Areas of Improvement .......................................................................62

5.1 The Warehouse Performance Gap Analysis ....................................................... 62
5.2 VSM ................................................................................................................... 63
5.3 Activity Profiling ................................................................................................ 65
5.4 Benchmarking .................................................................................................... 67
5.4.1 World-Class Measures ....................................................................... 69

6 Recommendations ................................................................................................70
6.1 VSM ................................................................................................................... 70
6.2 Activity Profiling ................................................................................................ 71
6.3 Benchmarking .................................................................................................... 72
6.4 The Combination of the Concepts ...................................................................... 73
6.5 A Suggestion for the Future State ...................................................................... 73
6.6 The Gap Analysis for a Future State .................................................................. 76

7 Analysis of Framework ........................................................................................77

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7.1 VSM ................................................................................................................... 77

7.2 Activity Profiling ................................................................................................ 78
7.3 Benchmarking .................................................................................................... 79
7.4 The Framework .................................................................................................. 80

8 Conclusions ..........................................................................................................83
8.1 Answering the Research Questions .................................................................... 83
8.2 Future research ................................................................................................... 88

References ...................................................................................................................89
Appendix A .................................................................................................................92

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List of figures
Figure 1 - The research process onion (Saunders et al., 2003: 83) .......................... 5
Figure 2 - The research philosophy is divided into three areas shown in the figure:
positivism, realism and interpretivism (Saunders et al., 2003: 83-85) .................... 6
Figure 3 - The three prevailing research approaches within logistics: inductive,
deductive and abductive (Kovcs and Spens, 2005)................................................ 7
Figure 4 - Case study design (Voss et al., 2002) ................................................... 10
Figure 5 - Three data collection methods were used during this study and those
are: observations, interviews and secondary data (Saunders et al., 2003) ............. 13
Figure 6 - A description of how the study was performed .................................... 15
Figure 7 - The three concepts that will be used in order to evaluate a warehouse
and the warehouse operations ................................................................................ 21
Figure 8- A product family matrix (Rother and Shook, 2004: 4) .......................... 24
Figure 9 - Different symbols used when mapping a value stream (Bicheno, 2009:
66-74; Rother and Shook, 2004: 9-34) .................................................................. 25
Figure 10 - An example of VSM (Rother and Shook, 2004: 9-34) ....................... 26
Figure 11- An example of activity relationship profile (Frazelle, 2002a: 42-43).. 32
Figure 12 - An example of a warehouse performance gap analysis (Frazelle,
2002a: 55-58) ......................................................................................................... 35
Figure 13 - How to adapt the framework and what each concept contributes with37
Figure 14 - A PHE and the different products included ........................................ 39
Figure 15 - The figure presents customers and suppliers for warehouse A
(Workshop with warehouse A) .............................................................................. 41
Figure 16 - Customers and suppliers for warehouse B are presented (Workshop
with warehouse B) ................................................................................................. 42
Figure 17 - Presents the material flows at the site in Lund (Participant observations
in the warehouses and at the yard) ......................................................................... 43
Figure 18 - VSM of warehouse A (VSM with warehouse A) ............................... 45
Figure 19 - Placement of activities in warehouse A (VSM with warehouse A) .... 45
Figure 20 - VSM of warehouse B (VSM with warehouse B) ................................ 47
Figure 21 - Shows were different activities are located in warehouse B (VSM with
warehouse B) ......................................................................................................... 47
Figure 22 Item popularity distribution warehouse B .......................................... 49
Figure 23 - Item popularity distribution warehouse B ........................................... 50

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Figure 24 - The different colours describe how often one pallet position in the
warehouse is visited ............................................................................................... 51
Figure 25 - Warehouse A: first level ..................................................................... 51
Figure 26 - Warehouse A: second level ................................................................. 52
Figure 27 - Warehouse A: third level .................................................................... 52
Figure 28 - Warehouse B: first level ...................................................................... 53
Figure 29 - Warehouse B: second level ................................................................. 53
Figure 30 - Warehouse B: third level..................................................................... 53
Figure 31 - Lines per order distribution warehouse A ........................................... 55
Figure 32 - Lines per order distribution warehouse B ........................................... 55
Figure 33 - Suppliers delivering products with poor quality ................................. 60
Figure 34 - Warehouse Performance Gap analysis for warehouse A and B .......... 62
Figure 36 - Steps that should be removed in warehouse B according to the VSM 64
Figure 35 - Steps that should be removed in warehouse A according to the VSM 64
Figure 37 - How to store products warehouse A ................................................... 66
Figure 38 - How to store products warehouse B ................................................... 66
Figure 39 - A future state for the warehouse at Alfa Laval ................................... 74
Figure 40 - Warehouse layout inside the warehouse ............................................. 75
Figure 41 - Warehouse performance gap analysis of the future state .................... 76
Figure 42 - Describes how the framework should be applied ............................... 81
Figure 43 - Wastes identified by each concept and the order that the framework
should be performed .............................................................................................. 84
Figure 44 - Which of the concepts that evaluate the different warehouse operations
............................................................................................................................... 85

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