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Ultron
Ultron was a large Indian conglomerate operating in various business verticals, one of which was
consumer electronics such as air-conditioners, washing machines, refrigerators, LCD/LED
televisions, microwave ovens and small home appliances. The company operated 16
manufacturing facilities and 62 warehouse facilities across India. Apart from its own consumer
electronics division, the company also acted as a distributor for several international consumer
electronics brands in India. Ultron’s revenue in 2013-14 was about USD 4.92 billion and its profit
was about USD 11.2 million.
Warehouse Overview
The company had four warehouses in the western Indian state of Gujarat, the largest of which
was located in Gandhinagar. This warehouse had originally been a manufacturing facility that
had relocated elsewhere. It had a capacity of 100,000 square feet or 9,290 square metres (see
Exhibit 1 for the layout of the warehouse).
All of Ultron’s warehouses across the country operated in a similar fashion. 2 All the warehouses
were multi-brand facilities, which housed products from more than one brand within the same
location. Apart from brands owned by Ultron, the warehouses held and distributed multi-
1
The FIFO method is used for inventory valuation. It assumes that the oldest goods are sold first since white goods
are subject to the risk of obsolescence.
2
Since Ultron’s warehouse operations were similar across its facilities, we use the Gandhinagar warehouse as an
example to illustrate the processes within an Ultron warehouse for the purposes of this case.
Prepared by Professor Debjit Roy and Mayank Pratap and Premm Raj H (PGP Students), Indian Institute
of Management, Ahmedabad.
Cases of the Indian Institute of Management, Ahmedabad, are prepared as a basis for classroom
discussion. They are not designed to present illustrations of either correct or incorrect handling of
administrative problems.
©2018 by the Indian Institute of Management, Ahmedabad
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branded products from partner companies. Overall, there were more than 500 SKUs grouped
under 12 different product categories from six brands (a sample SKU product list indicating the
average statistics per month in the Gandhinagar warehouse and corresponding SKU dimensions
are shown in Exhibits 2a and 2b. The product composition in the warehouse is shown in Exhibit
3).
Each warehouse was divided into several areas to store the products of different brands. The area
allocated for a brand was further divided into smaller areas for different product categories.
Products within a category were stacked one over each other based on the stacking norms
indicated on the packaging material of the product.
The vertical usable space in the warehouse was 24 feet, of which only 10-12 feet were utilised due
to the limitations imposed by the stacking norms (see Exhibit 1 for the dimensions of the
warehouse). Vertical expansion in the existing set-up was not an option. The floor utilisation of
the warehouse peaked at 90-100% during the Indian festival season, which ran from September
to November.
The warehouse operated one shift every day, starting at 9:30 am and ending at 6:30 pm. The
warehouse supervisors processed the order requests from retailers for each day starting at 9:30
am, based on the order invoice ID and location of dispatch. Dispatch of goods usually started at
12 noon every day. Vehicles owned by the warehouse facility were used to transport the goods
to retailers (see Exhibit 4 for a list of dispatch vehicles available at the warehouse). An internal
audit was performed every month to track the products within the warehouse.
The warehouse consisted of a mix of skilled and unskilled labour for its daily operations (see
Exhibit 5 for employee details for the Gandhinagar warehouse). The employees were trained to
perform all the operations within the warehouse such as loading, unloading, put-away and
picking. This cross-functional training increased labour productivity.
Warehouse Processes
Docking bays
There were four docking bays in the warehouse (Exhibit 1). Based on availability, each docking
station was used for either inbound or outbound operations. Apart from these, there was a spare
docking bay located at the rear of the warehouse that was rarely used. There was a significant
amount of space near the docking stations for the consolidation of order items, i.e., loading and
unloading products.
Inbound
Products manufactured in Ultron’s factory would arrive at the warehouse at any time of the day.
Every inbound product was scanned into the SAP-based inventory management system using its
serial (SR) number. No physical inspection of the products was done after their entry into the
warehouse and before updating the inventory management system. After the initial security
checks for relevant purchase order and product quantity were completed, the supervisors would
give the go ahead to unload the products and assign workers to carry out the job.
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Put-away
Once the goods were unloaded, the supervisors would assign workers to put away the products
in their respective locations within the warehouse. Manually operated hydraulic pallet trolleys
were used to move the goods to their destinations. Fourteen such trolleys were available within
the warehouse facility (see Exhibit 6 for a sample image of a trolley).
Picking
The warehouse supervisor generated a pick list containing the invoice ID, date of invoice and
model number and handed this over to the pickers. As there was no warehouse management
system in place, the picking was not done using serial numbers. Supervisors knew the exact
location of each model inside the warehouse and would direct the pickers to these locations.
Dual cycles
The warehouse followed dual cycles to reduce the transit time between successive picks or put-
aways. Unlike traditional single cycle put-away or picking operations, which were done
sequentially and caused considerable deadheading, in a dual cycle, both put-away and picking
tasks were combined in one cycle. An employee tasked with put-away of inbound goods was also
provided with a pick-list for picking, using which he could pick an item on his way back to the
consolidation area near the docking bays (see Exhibit 7). On an average, it took about five minutes
for an employee to make the trip from the consolidation area for put-away or picking and back.
The number of products that could be transferred in a cycle varied across categories (see Exhibit
8 for a list). In many cases, workers did not use a pallet to transport the goods in a trolley due to
the bulky nature of the goods, potentially causing damage to the protective packaging of the
goods while in transit within the warehouse.
Returns
Returns constituted about 1-2% of the total shipments from the warehouse. Products were
returned for a variety of reasons ranging from malfunction to obsolescence. In such cases, the
service department within the warehouse checked the products for potential defects and
corrected them in house; they were then sold as seconds at discounted rates.
Problems faced
1. Being a large appliance warehouse, the movement of goods within the warehouse was slow.
The average per unit SKU value was very high, thus, any damage caused to the goods while
moving them could prove to be expensive.
2. FIFO maintenance: Due to the lack of a warehouse management system, it was not possible
to track the aging of the products in the warehouse. Additionally, moisture within the
warehouse could damage the packaging of the goods if they were left unattended for a long
time. Repackaging of the goods would cost the warehouse an additional USD 7.5 per box.
3. In the current set-up, the location of a product could vary with time and usage. Products were
stored based on the availability of space within the warehouse. This could lead to low picking
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efficiency due to the lack of a warehouse management system to track the exact location of
any product within the warehouse. The large variety of SKUs and small quantities also added
to the low picking efficiency.
Options Available
To maintain FIFO and improve picking efficiency, Ahuja was considering the following options:
1. Mezzanine floor: Building a mezzanine floor would provide him sufficient space to demarcate
new goods from old ones. This space would also allow for double-deep storage with aisles on
both the sides, which would provide workers with access to every product stacked at a
particular location independently. The setting up and dismantling of the mezzanine floor,
which was a semi-permanent structure, would be relatively easy and not very time-
consuming. The capital investment required for setting up a mezzanine floor was USD 20-40
per square metre. In addition, lifts or vertical conveyors would be needed to move products
between the floors.
2. Colour coding: A colour coding system could be used to distinguish new and old inventories
in the warehouse. The colours could be used to identify the inventories based on the month
of the consignment’s arrival. This could help maintain FIFO as it would be easier to identify
the older inventories in the stack. However, it could also create complexity as there were more
than 500 SKUs across six brands. The cost of 100 colour- coded stickers was about USD 1.
Additional flows introduced by the transshipment of products between the warehouses and
customer returns could make the colour coding system difficult to implement.
3. Pallet flow rack system: A pallet flow rack system (as shown in the Exhibit 9) was another
potentially efficient solution to handle the FIFO problem in the warehouse. In this system, the
racks had an inclined structure to enable the flow of the pallet under gravity. Loading could
be done from the back of the racks and unloading from the front. Once a pallet was unloaded
from the front, the next pallet in the rack came to the unloading position (see Exhibit 2b for
the number of boxes that could be stored per product using one standard Euro pallet with a
dimension of 1,200 mm by 800 mm). The capital investment required to set up a pallet flow
rack system was USD 80-100 per square metre for one level of pallet rack space. However, not
all SKUs could be stored in pallet racks.
4. Dedicated fast pick area: Another option was to have a dedicated fast pick area for the critical
product categories where the frequency of picking and put-away was high. The older
inventories could be stacked in the dedicated fast pick area, while the new inventories could
be stacked at the back of the warehouse and shifted to the fast pick area as and when required.
The shifting of inventories from the storage to the fast pick area could be a problem during
the peak season when labour utilisation was high. No capital investment was required for this
option. Allocating the space required for each SKU in the fast pick area would be critical to
the success of this option.
The above options could be used to maintain FIFO in the warehouse, but to improve picking
efficiency, it was very important that the workers be able to identify to which part of the
warehouse they had to go to retrieve the inventory and how they could reach that location in the
shortest possible time. A racking system with a layout showing exactly where the product was
located in the warehouse would be useful. To reduce the time taken to access the various parts of
the warehouse, an efficient aisle configuration such as a cross-aisle or angled aisle could be used
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to optimise the pick path. This kind of a configuration required software support, which was
likely to be very costly.
Conclusion
The speed of the operations in the warehouse was fairly high due to the absence of additional
processes associated with a warehouse management system. Ahuja wondered whether these
were the only possible options to achieve FIFO at no additional software investment cost. He
wanted to decide on a course of action before his meeting with senior management the next
morning.
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Exhibit 2a: Warehouse Statistics: Average per month Data (October 2014)
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