warehousing Management and materials handling strategies

The Company: Eco BottleYou have just been hired as the Director of Logistics for Eco Bottle (EB). In your newrole, you will have responsibility for general logistical planning including functions suchas inbound and outbound freight and any logistics-related functions within EB.EB is a ten year old Canadian manufacturer of premium refillable water bottles. EB islocated in Winnipeg Manitoba where their manufacturing facility, warehouse, andadministrative offices are contained within a single building. EB employs seventy staffmembers, 35 of them dedicated to manufacturing, 15 to warehouse operations, and theremaining 25 in various administrative positions.EB has positioned their product in the ‘premium’ category and is enjoying year over yeargrowth. Their primary product is a 750 ml refillable water bottle that is manufacturedusing two primary raw materials: stainless steel for the body of the bottle and highdensity plastic for the removable lid. EB has spent considerable effort on research anddevelopment and the bottle is considered to be industry leading in its ability to maintainboth hot and cold temperatures.75% of EB’s sales are done through an online distributor called Skyway who maintainsdistribution centres in Calgary AB, Mississauga ON, and Montreal QC. Skywayspecializes in selling athletic and outdoor goods direct to Canadian consumers and usessmall package providers and couriers to provide a one or two-day delivery to mostCanadian households. EB currently ships product over the road to Skyway’s distributioncentres and if ordered in TL quantity, EB pays for the freight expense. When LTLquantities are ordered, EB charges the freight expense to Skyway. The remaining 25% ofsales are done through a small group of boutique specialty stores across Canada thathave requested the product specifically to stock. These sales are normally low volumeand shipped via a small package or courier service to the boutique specialty store.Business Case Assignment Part oneThanks to strong demand for their premium water bottles, EB has outgrown their current facility inWinnipeg, MB. For ten years they have operated out of their single location that housed their offices,manufacturing facility, and their warehouse. The facility is 200,000 square feet and has 75,000 squarefeet dedicated to manufacturing, 75,000 square feet to warehousing, and 50,000 square feet to officespace. The facility is leased from a commercial real estate corporation and the current lease expires intwelve months. EB’s warehouse is setup to accommodate standard pallets (48 x 40) in ten rows of steelracking with ten foot wide aisles between the racks. The racks do extend four pallet positions high. EBpurchased these racks second hand from a local supplier when they were establishing the warehouse. Allof the product is palletized coming from manufacturing and EB owns three forklifts and two manualpump trucks. One of the forklifts is used as a spare in case one of the other forklifts isn’t working. All ofthe forklifts are less than two years old and aside from routine maintenance, they haven’t had majorbreakdown issues yet. EB operates a two 8-hour shifts per day for both production and warehousingbetween 7:00 am and 3:00 pm for the first shift and 2:30 pm and 10:30 pm Monday to Friday.Manufacturing has requested additional room for a new set of production machines to increase capacityhowever this would require taking almost all of the space allocated for the warehousing operation. EB hasadvised their commercial landlord that they are considering expansion and taking on a new warehousethat would allow for manufacturing to expand. The commercial landlord provided two potential optionsfor buildings that are within one kilometer of their current facility. The first option is a 100,000 squarefoot warehouse that could be leased and privately operated by EB. The second is an option to use a publicwarehousing that is operated by a separate tenant of the commercial landlord. In this space, the publicwarehousers has indicated they have up to 100,000 square feet that they could dedicate to EB and wouldcharge them a flat rate for the storage area each month and then separately for the amount of producthandling that is required.You have been asked to prepare a preliminary report that will detail the advantages anddisadvantages of expanding their warehousing operation to either a new privately operated warehouse orinto the public alternative. Also, management is interested in any way that they could optimize theexisting storage area possibly to provide more room for manufacturing.Specifically, you have been asked to:1. Describe the advantages and disadvantages of the two new warehousing options.2. Discuss potential materials handling strategies for reducing the amount of space that the existingwarehouse operation occupies within EB’s building.