Background
One of our clients, a high-end car dealership, was about to embark on a five-site consolidation into one new facility. Seeking to avoid transferring known inefficiencies from the existing sites, the client engaged us at Cornerstone Consulting Organization (CCO) for assistance.
Also, storage capacity, both current and required, was not well-understood. Storage containers were not matched to usage rates and placed in inconvenient areas. Part consumption rates were not tracked or documented, often leading to delayed completion of repairs and expedited deliveries.
Combined, these factors created a significant, profit-limiting dilemma for the client.
Business Issue
- Consolidate five servicing locations into one mega center
- Slow intake for vehicle service and maintenance
- Significant idle time in repair and body shop
- Decentralized storage of critical replacement parts
- Non-optimal inventory staging, storage and warehouse layout
- Lack of urgency and accountability for performance
Methods Applied
Our consultants performed an initial assessment which included a comprehensive inventory study across all five locations which included the primary dealership, secondary dealership, certified pre-owned, body shop and the hub.
The total shelving space available was calculated by physically measuring each bin, shelf by shelf. A physical utilization estimate was conducted to determine the total space necessary for storage of current inventory and to identify any room for potential growth.
These two process steps were performed on all bulk bins and high density bins within the current locations. An SKU A-B-C analysis was conducted to evaluate the usage frequency of all parts to determine the proper min/max quantities, the proper location and the most suitable storage container. This information was a critical input to the design/layout of the new location.
CCO's Approach
- Conducted current-state warehouse capacity analysis
- Executed SKU A-B-C velocity analysis
- Applied fundamental plan-for-every-part methodology
- Completed I/E studies of parts flow and timing
- Evaluated bin sizing, shelving and part placements
- Assessed workflow automation techniques
Assertions & Findings
In evaluating the five separate locations, it was determined the total bulk bin space available was 15,964 sq.ft. with a utilization of approximately 54%. This equated to 8,620 sq.ft. of space used for bulk bin storage. In reference to high density bins, there was a total of 47 bins with a utilization of 48%. This translated to only 23 high density bins being used.
This usage evaluation also identified the current locations of the high velocity products, which were consumables such as oil, oil filters, wiper blades and other retail items. These items should be located very close to their point of use.
Results
To maximize shelving space available in the given floor plan, all bins were changed in height from 6’ to 8’.
High density bins were increased in number and were standardized on 4.5” drawers for practical storage of all smaller-sized items. The capacity of bulk storage in the upper level was increased to five available shelves. The changes in high density bins, allowed two Remstar Storage units to be eliminated. The non-specialty bulk bins were standardized on 48” by 24” size, with 8 shelves. This eliminated the less practical and restrictive 18” deep shelving. This reclaimed approximately 7,000 sq. ft of floor space for use as a wholesale picking area.
All high density bins were located in close proximity to the retail and service counters to minimize travel distance for smaller, high-usage items.
$200k - Capital Savings for specialized racking
$580k - Annual EBITDA Impact
$2 M - Project 5 Year NPV
1500% - Return Investment
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