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Warehouse-Design-Ha-Tuan-Nghiep-s3536474

Warehouse and Distribution Channels (Royal Melbourne Institute of Technology)

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Course/Unit code Assignment Assignment Group/Session name (if applicable)

number due date
OMGT2196 2 5th May 2020 Group 1 - SG
Course/Unit name Program title

Warehouse and Distribution Channels Logistics and Supply Chain Management

Lecturer/Teacher’s name Tutor / Marker’s name (if applicable)

Dr. Scott Douglas McDonald

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Family name Given name Student number Student signature Date

Ha Tuan Nghiep s3536474 Nghiep 5th May 2020
Ho Nguyen Nien Giao s3778482 Giao 5th May 2020
Nguyen Thi Mai Anh s3794043 Anh 5th May 2020
Nguyen Nguyen Khoi s3818504 Khoi 5th May 2020
Doan Tran Minh Chau s3740877 Chau 5th May 2020
Nguyen Minh Tuan s3751590 Tuan 5th May 2020
Further information relating to the penalties for plagiarism, which range from a notation on your student file to expulsion from
the University, is contained in Regulation 6.1.1 ‘Student Discipline’ www.rmit.edu.au/browse;ID=11jgnnjgg70y and Academic
Policy: ‘Plagiarism’ www.rmit.edu.au/browse;ID=sg4yfqzod4

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Executive Summary
The most optimal location for WAHD’s warehouse is the Cat Lai 2 Industrial Zone. The industrial zone is very close
to the two biggest seaports in Vietnam and Ho Chi Minh City (HCMC). The layout of the warehouse is inspired by
the famous U-shaped layout (many agree that the U-shaped is the most common and offers best “ratio of building-
to-land use” while being resilience to sudden changes in workload.

The total area of the warehouse is 20,000 m2 with 200m in width and 100m in length. The warehouse is divided into
four main areas which are “Main Area”, “Truck Parking Zone”, “Staff Parking Zone” and “Picnic Zone”.

The “Main Area” (13,200 m2) is further divided into two zones which are “Storage Zone” and “Operation Zone”.

The “Storage Zone” (9,000 m2) is utilized for holding 5 main types of product (Cotton, Jean, Wool, Leather and
Mixed Inventories) and the “Folklifts Parking Area” (500 m2 of the 9,000 m2).

The “Operation Zone” (4,200 m2) is utilized for “Unloading-Loading Area” (1000m2), “Receiving-Shipping Area”
(1000m2), “Cross-docking Area” (800m2), “Equipment, CCTV and Temperature Control Room” (1,300 m2) and
“WC” (100 m2).

The “Truck Parking Zone” (2,600 m2) is utilized for incoming and outgoing trucks as well as the “Laundry and
Repair Department (400 m2).

The “Staff Parking Zone” (1,925 m2) is utilized for parking cars and motorbikes of staffs as well as the “Office”
(600 m2).

The “Picnic Zone” (1,575 m2) is utilized for the “Clinic” (200 m2), “Machine Maintance” (500 m2), “Electricity
Room” (300 m2) and “General Area” (575 m2)..

There are 5 main flows in the warehouse:

The first movement describes shipments of new products/materials, goods meant for “Cross-docking” and damage
goods coming into the warehouse through the Inbound Dock.

The second movement describes the handling of products meant for cross-docking.

The third movement describes goods being move from the “Receiving - Staging Area” to the “Storage Zone”.

The fourth movement describes the retrieval of goods from the inventory and delivery of such goods to the
“Shipping- Staging Area”.

The fifth the movement describes the practice of loading the goods onto the trucks and confirming that all paper
works are sufficient.

The Value-Added Service of the warehouse are “Labeling” and “Packaging”.

There will be 60,000 - 80,000 units of clothes in the warehouse. Therefore, a sequence of “Type of item- Gender-
Size-Color-Unique Identifier” for generating SKUs was developed. Regarding warehouse operation, WAHD is
recommenced to use ANSI-ASQ Z.14 for Quality Control as well as Double ABC Analysis and Product Affinity
Analysis for Inventory Control. The warehouse is also equipped with modern equipment such as plastic pallets,
push-back rack, industrial washing machines and counter balance folklifts as well as technology such as RFID, ERP
and LED Corn Light Bulbs. A list of suggestions such as “Drug-free environment”, “Wear Safety Equipment At All
Time”, “Always Label Hazardous Areas”and “Appropriate Safety Training” was developed to ensure maximum
safety for all employees.

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I. Introduction:
In recent years, Vietnam has transformed into the land of opportunities and attracted
ample attention from international retailers (Deloitte 2019; Lee and Nguyen 2017; Marketing
Interactive 2015). Amongst all the sectors interested by the international retailers, the fashion
industry is the most desirable (Vietnam Investment Review 2018; Nayak and Padhye 2015). The
Vietnamese fashion sector is expected to reach a revenue of 772 million euro in 2020 and
accompanied by an annual growth rate of 6.9%; resulting in a revenue of 943 million euro in
2024 (Statista 2019). The term “Fashion” is a “cross-sector concept” that comprises of numerous
industries such as “apparel, footwear, leather, jewellery, perfumes, and cosmetics” (Brun et al
cited in Macchion et al 2015). In line with the scope of the assignment, the report will discuss
only about the “Apparel (Clothing)” element of fashion only.

The recent survey from Deloitte (2020) revealed that 50% of surveyed consumers will
spend more on clothing while another 40% will maintain their current expenditure; signifying a
robust future growth for the Clothing industry. Additionally, the Vietnamese youth is becoming
more connected to Western brands and associates the consumption of Western products as an act
of being global citizens (Pham and Richard; Strizhakova et al., cited in Nhan and Le 2019).
Recognizing the immense potential of the industry, Warehouse Aiming HD (the biggest Apparel
retailer in France) expressed its interest in securing the market. The master plan of the company
is to establish a strong foothold in Ho Chi Minh City (HCMC) before expanding into other
regions. The company wishes to establish a state-of-the-art warehouse to reduce future reliance
on 3PLs. As such, the company presented the assignment to its Logistics First Division (RMIT
Group 1 Warehouse team) to design a warehouse layout and report their findings and
justifications. Warehouse design involves numerous complex “interrelated decisions” that can
effects the feasibility of the project (Yener and Yazgan 2019). Therefore, the report will focus on
determine the location, layout, product flows, operation, equipment, SKU and level of product
assortment as well as future growth.

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II.Warehouse Location:
A warehouse cannot and must not be blindly set up without serious consideration on the
location. The location is what dictates the effectiveness, efficiency, speed and cost of the supply
chain; additionally, once committed, the decision is irreversible (iThink Logistics 2020; Muha,
Sever and Sokolovskij 2018). As such, the goals of determining the appropriate location are to
minimize the initial total cost and future transportation cost while best serve the demand (You et
al,. 2019; Hamidi et al., 2017). In that vein, the work of Singh, Chaudhary and Saxena (2018) as
well as Kumar and Singh (2014) revealed that “sufficient space”, “advantageous traffic
connections with suppliers and key markets” and “close proximity to ports” are some of the key
considerations. In light of that, the Cat Lai 2 Industrial Zone would be the golden site for
Warehousing Aiming HD (WAHD). The rationale is that the industrial zone is modern and
eminently close to the vicinity of two biggest seaports in Vietnam and HCMC (see Table 1).

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III.Warehouse Layout:
Order picking is considered as the most time-consuming, work-intensive and expensive
process in the warehouse; estimating to be around 50 - 75% of total warehouse operating costs
(Masae, Glock and Grosse 2020; Richards 2017; Matusiak, De Koster and Saarinen 2017;
Tompkins et al., 2010). Therefore, establishing an appropriate layout will reduce the lead time,
travelling time and expenses as well as increase efficiency of the operation (Van Gils et al,. 2018;
De Koster, Johnson and Roy 2017). In that vein, the U-shaped was chosen for the warehouse of
WAHD (see Figure 1). The U-shaped warehouse is the most common and it offers best “ratio of
building-to-land use”; moreover, activities within the U-shaped are not severely affected even by
a change in workload (Jamena 2019; Centrix 2019; Logistics Bureau 2017). The total area of the
warehouse is 20,000 m2 with a length of 100m and a width of 200m.

Figure 1: Warehouse Layout

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3.1 Main area:

The main area will be the biggest in the project; occupying up to 13,200 m2 (165*80)
which is roughly 66% of the total area. The main area is where the bulk of activities will
occurred. Therefore, the main area is further divided into two zones named “Storage zone” and
“Operation zone”. The two zone feature some important components such as , “Storage area”
and “Forklifts Parking area”.

3.1.1 Storage Zone:

The storage zone (9,000 m2) is biggest within the main area and is utilized to hold 5 main
product categories which are “Cotton”, “Jean”, “Wool”, “Leather” and “Mixed Inventories” and
the “Forklifts Parking area” (500 m2 of the 9,000 m2).

3.1.2 Operation Zone:

The operation zone (4,200 m2) is the second biggest area within the main area and is
utilized for the following areas:

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3.2 Truck Parking Zone:

The truck parking zone (2,600 m2) is mainly utilized for coming and outgoing trucks as
well as the “Laundry and Repair Clothing Department” (400 m2 of the 2,600 m2). The “Laundry
and Repair Clothing Department” is utilized mainly for when damage products are returned, aka
Reverse Logistics. After the goods are repaired and proper washed/dried/ironed, they will be feed
back into the “Operation Zone” and then “Storage Zone”.

3.3 Staff Parking Zone:

The parking zone (1,925 m2) is a more special area comparing to the rest as this zone is
utilized for both parking cars and motorbikes as well as for the “Office”. As mentioned in section
“3.1.2 Operation Zone”, the “Office” can be accessed through a door in this zone. Nevertheless,
in a technical sense, the bulk of the “Office” is actually in the parking zone. The area of the
“Office” is 600 m2 of the 1,925 m2 and is equipped clear glass door and windows; allowing the
managers/officers to observe all the activities in the “Main Area”.

3.4 Picnic Zone:

The picnic zone (1,575 m2) consists of “Clinic” (200 m2), “Machine Maintenance” (500
m2), “Electricity Room” (300 m2) and “General Area” (575 m2) where the employees can
unwind.

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IV. Flow of goods:

The layout is designed to offer flexible and efficient flow of products that are coming in
or going out of the warehouse. There are 5 crucial movements in the warehouse:

(1) The first movement describes shipments of new products/materials, goods meant for
“Cross-docking” and damage goods coming into the warehouse through the Inbound
Dock. In the one hand, the new products/materials and goods for cross-docking will be
unloaded and inspected in the “Unloading area” and go straight to the “Receiving -
Staging Area” for handling. On the another hand, the damage goods will go straight for
the “Laundry and Repair Department” before going back to the “Receiving - Staging
Area”.

(2) The second movement describes the handling of products meant for cross-docking.
Cross-docking is a logistics practice of “moving an inbound shipment to an outbound
shipment” where speed is the most important element (Abivin 2020; Hinz 2011).

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Therefore, this movement is in a higher priority than others. This type of products will be
immediately moved from “Receiving - Staging Area” to the “Outbound Dock” to reduce
travel distance and lead time.

(3) The third movement describes goods being move from the “Receiving - Staging Area” to
the “Storage Zone”. It should be noted that clothes are highly sensitive to temperature
and humidity; therefore, the warehouse environment will no warmer than 23°C, with a
relative humidity of 55C (Safestore 2018). The environment will be regulated by the
Temperature Control Room (see section 3.1.2).

(4) The fourth movement describes the retrieval of goods from the inventory and delivery of
such goods to the “Shipping- Staging Area”. The goods will received further inspection
and packaging before going to the “Outbound Dock”.

(5) The fifth the movement describes the practice of loading the goods onto the trucks and
confirming that all paper works are sufficient. The trucks will then be on its journey to
the customers.

V. Warehouse Operation:

5.1 Quality Control:

Quality control is a critical element in the warehouse operation; the process ensures all
incoming and outgoing products meet the standard set by the company and is performed
throughout various stages (Shukla 2016; Belyh 2015). For the case of WAHD, the report
suggests the use of ANSI-ASQ Z.14, quality control procedures established by American
National Standards Institute (ANSI) and the American Society for Quality (ASQ), for the
inspection of incoming goods (ASQ 2020; Ge 2019). The ANSI-ASQ Z.14 is mainly concerns
with two tables which are “Sampling Plan” and “Acceptable Quality Levels” as well as “Type of
defects” (see Appendix 1, 2, 3 & 4).

To illustrate, assuming WAHD will receive a shipment of 8,000 jeans. WAHD wants a
GIL 2 inspection with 0% of critical defects, 2% of major defects and 4% of minor defects.
Based on the “Sampling Plan” table, the sample size would be 200 jeans. Next the “Acceptable
Quality Levels” will reveal that the acceptable major defects is 4 jeans and minor defects is 8

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jeans; anything above this means the shipment will not be accepted. Regarding outgoing goods,
the inspection level should be 100% to ensure high customers’ satisfaction.

5.2 SKUs and Level of product assortment:

Stock Keeping Unit or SKUs refers to the code number assigned to every single item of
inventory specifically as function, style, size, colour, and, usually, location (van Kampen,
Akkerman and Van Donk 2012). WAHD desires to store 60,000 - 80,000 units of clothes in its
warehouse. Therefore, there will be 60,000 - 80,000 SKUs in the warehouse. WAHD wants to
sell 4 main variable of clothes (Cotton, Jean, Wool and Leather) that comes in 6 sizes (XS, S, M,
L, XL, XXL) and different colors for Man, Woman and Children. In light of that, the following
sequence for generating SKUs was developed:

The following codes were also developed:

--> The first Small Black Jean for Man in record will have a SKU of JN - MN - S - BK - 0001.

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5.3 Inventory Control:

One of the most common methods is the ABC analysis since it is easy to understand
(Tunney 2019). The ABC analysis divides the inventory into 3 followings categories:

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In the case of WAHD, the report proposes that the company should utilize the “Double
ABC Analysis” and “Product Affinity Analysis” proposed by Bentz (2017) to have a more
comprehensively view on the inventory. The “Double ABC Analysis” is done in two stages. After
the first ABC is analysis conducted on sales revenue, it is advantageous to conduct another ABC
analysis on the picking frequency. For instance:

5.3.1 Double ABC Analysis:

Accordingly, the “Double ABC Analysis” when utilized will provide the following data:

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The data obtained can then be further scrutinized to engender the following information:

5.3.1 Product Affinity Analysis:

The rationale for this analysis stems from the observation of the WAHD management
board. It was observed that sometimes customers would purchase other products that were not in
their original shopping list. This analysis can be utilized to see which type of products are most
commonly bought together (Bentz 2017); thus, engendering much needed support in the storing
process of “Mixed Inventories”.

5.4 Value-Added Services:

Since WAHD is a new in the market, it will only offer two basic value-added services for
the time being. Nerveless, WAHD is planning to quickly expand its value-added services later
on. With that being said, the two services offered here are “Labeling” and “Packaging”

 Labeling will be conducted based on the customers’ preferences of brands’ logos, price tags,
product size, country of origin, barcodes, or special instructions.

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 Packaging will be conducted based on the nature of the products to ensure maximum
protection (Benjamin 2018). For instance (Focus Technology 2020; Kazzi 2016):

VI. Equipment and Technology:

6.1 Equipment:

The warehouse will utilize a wide range of equipment; however, this section will only
mention few most important ones.

 Pallet:

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 Rack system:

The work of Southern States Enterprises (2019) posited that there are 4 main rack
systems that are ideal for clothing warehouses which “Pallet flow rack”, “Push back rack”,
“Carton flow rack”. For WAHD, we recommended the Push back rack.

 Folklifts:

WAHD is recommended to use Mitsubishi counterbalance forklifts for its warehouse.

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 Washing machines:

6.2 Technology:

 RFID

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 ERP

 LED Corn Light Bulbs

VII. Safety:
At WAHD, the company values the safety of employees before any monetary values.
Therefore, the warehouse must offer maximum safety measures and practices to guarantee that
employees are far from being harmed during their work process (Nazareth Pallet Company
2015). Therefore, it is recommended that WAHD adhere to the following:

 Ensuring a Drug-free Environment:

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The statistics suggested that employees who take substance will be “ more three times
more likely to have accidents at work” (Azareth Pallet Company 2015). Not stopping there, drug
abuse will also reduce productivity and lower morale of the user himself as well as other
employees (Tomo Drug Testing 2016). Consequently, WAHD should conduct five-panel drug
tests at random intervals (Azareth Pallet Company 2015).

 Wearing Safety Equipment At All Time:

Warehouse managers/supervisors must ensure that employees in the warehouse are

required to wear protective apparels, headgear and shoes; and must rigorously enforce the rules
(Davies 2018). These equipment will prevent the employees against falling objects (Safety
Equipment n.d). For instance:

 Always Label Hazardous Zones:

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Dangerous objects, pathways and equipment should be clearly labeled so that employees
are well ware of dangerous surroundings; thus, reducing the likelihood of an accident (Cherry's
Material Handling n.d). For instance”

Source: Adapted from Black Dog Sign Company (n.d).

 Appropriate Safety Training:

The advancement of automation and robots is “bringing workers in contact with

machines more and more” (Safety By Design 2020). Hence, safety training sessions are crucial
for all employees (ProLogistix 2017). In that vein, it is recommended that WAHD follow the
OHSA guild (developed by U.S. Department of Labor) (OHSA n.d). Regarding training
frequency, WAHD should provide at least 1 safety training session per year to ensure that all
employees are clear with the guideline and safety expectations. Furthermore, WAHD should re-
train its employees in cases of “new equipment is introduced, an accident occurs, or if the
operator is operating the equipment in an unsafe manner” (Atlantic Training 2019).

VIII. Limitation and Conclusion:

Through careful research and analysis, the report was able to design the most optimal
layout for the warehouse of WAHD. The location chosen in the report is the Cat Lai 2 Industrial

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Zone which is very close to the two biggest seaports in Vietnam and HCMC. Therefore, reducing
initial investment cost and future transportation cost while maintaining the ability to fulfil the
demands. The layout of the warehouse is inspired by the famous U-shaped layout, which ensures
flexible flows of product and adaptable operation to the sudden changes in workload.

The report also suggests that WAHD utilizes the ANSI-ASQ Z.14 for Quality Control as
well as Double ABC Analysis and Product Affinity Analysis for inventory control. Additionally,
a sequence for generating SKUs was also developed. The warehouse is then equipped with up-to-
date equipment and state-of-the-art technology. These equipment and technology are capable of
ensuring smooth operation and providing support in the Value-Added Services of WAHD. Lastly,
a list of suggestions was developed to ensure maximum safety for the employees.

The limitation of the study was that it did not provide any cost analysis and feasibility
study. The rationale was that the budget and knowledge of suppliers were absent. Therefore,
providing just the prices from theory and suggested prices online might not be the most optimal
choices. In order to accurately conduct the cost analysis and feasibility study, the First Logistics
Division has to work with other departments such as the Finance Department, Procurement
Department and HR Department. Furthermore, analyzing deeply into costs is outside of the
scope of the assignment given to Logistics First Division by WAHD.

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X. Appendix:

Appedix 1: Sampling Plan (Burkhart 2019).

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Appedix 2: Acceptable Quality Levels (Burkhart 2019).

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Appedix 3: Explanation of the Tables

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Appendix 4: Three types of defects (Anjoran 2020; Knack 2019).

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