Sagesse University

Faculty of Economics and Business Administration

 
 
Thesis Title:
The Impact Of Shuttle Warehousing On The Water Bottling
Industries In Lebanon
  
MBA Thesis of:
Rony Nassar
 
 
Major:
Supply Chain Management
 
Sagesse University 2019
Table of content:
•Cover Page……………………………………………….….. Pg. 1
•Table of Content........................................................................Pg. 2
•Introduction……………………………...................................Pg. 3
•Literature review ……………...............................................Pg. 4-8
•Methodology…….………………..…………………………..Pg. 9
•Results ………………………......…………..……………Pg.10-11
•Conclusion …..………………...…..…………………………Pg.12
Introduction
In all brick and mortar industries, Warehouses are the most essential components
of any supply Chain, and since the supply Chain of a company is directly related
to its wellbeing, Sound warehousing, Storage and handling has become imperative.
In any warehouse or storage facility, skus (stock keeping units) are handled
systematically in order to level out the fluctuation of material flow caused
by different factors such as seasonality in demand, production scheduling,
transportation, and promotions.
Inventories have cost and every sku has a monetary value, thus how to store,
where and means of has become the highest cost driver in a supply chain.
Warehouse operations are repetitive, labor intensive activities. The capital and
operating costs of warehouses represent about 20- 25% of the logistics. Therefore,
improvements in the planning and control of warehousing systems can contribute
to the success or failure of any supply.
Being of a repetitive nature, time and effort spent in decision making for what
specific storage module serves a company best is a sound investment as it holds a
great short long-term effect on the company’s supply chain
In addition to Labor, land holds a high cost as well, thus, horizontal or vertical
warehousing is a complex decision that needs to be studied very carefully.
In This thesis, I will shed light on the impact of shuttle warehousing on water
bottling industries in Lebanon, using RIM NATURAL WATER as my case study
given that the former has different warehouses with different storage methods.
What is the impact of shuttle warehousing on water bottling companies in Lebanon?
Literature review
McKinnon (2009) explores how land use in the UK could change over the next 50
years examining future needs and its effect on logistics and warehousing.
His statistical comparative analysis shows that warehousing space requirements in the
UK kept on rising in the past 30 years and will continue to rise in the near future.
He argues that although the trend has been an increment of land for warehousing,
some warehousing models are going in the opposite direction whereas although more
physical inventory, be default, should require more space, vertical instead of
horizontal models change the rule.
McKinnon (2009) explains that conventional storage facilities are set to carry a
defined pallet position restricted by the height of typical facilities and the size of
the stored pallets and the maximum reach of typical forklifts. Whereas new storing
models have taken into consideration the advantage of vertical rather than horizontal
storage, thus devised suitable racking models like shuttle or satellite racking.
He explains that this allows 3 to 4 times higher facilities and this extended height
allows double or triple storage capacities as long as higher reach trucks are used.
McKinnon (2009) observes a relationship between vertical storage, inventory cost, land
cost, stored volumes and order picking time. He explains that higher / more vertical
storage results in decreased inventory and land cost and increases in stored volumes.
He adds that order picking, the most important warehousing activity becomes much
faster, thus also affecting the warehouse overall performance.
McKinnon (2009) states that, although vertical warehousing has no downside, it is
limited and can be used once for very storage facility as the height to facilities and
the extent reach pallet scan go is limited.
vertical warehousing models carry an added value and allows saving on land and
inventory costs, and serves in increasing warehouse performance.
Fumiand Schiraldi(2013) use various data sets to study the effect of different storage
Models on warehouse performance and logistics in general. They claim that 25% of
the logistics cost is warehousing and that it is mostly storage, allocation and tracing
tools cost.
Fumiand Schiraldi(2013) believe that the two main variables on which every
warehouse's performance is based on are the space required for items' allocation and
the time needed for their handling , thus this places smart storage models as top
significant.
They suggest slot warehousing or shuttle racking for storage of retail and fast
moving items, and suggest maximum height taking into consideration the sway of the
pallet and the frequency of throughput.
They deduce that the shuttle racking is the best option regardless of different criteria
like sku weight, size and dimension and that this racking module allows minimizing
cost and increasing warehouse performance.
They believe that vertical warehousing is just better than horizontal warehousing and
that any other variable doesn’t affect this equation.
Fumiand Schiraldi(2013) state also that shuttle warehousing allows the company an
advantage as it doesn’t affect the infrastructure of the facility.
Hanna and Maltz (1998) go through the different statistics in different warehouse models
to explain the advantage of vertical warehousing in logistics and its effect on the supply
chain of an enterprise using LTL motor company as their case study.
They claim that one of the most cost-incurring activities is order picking and believe
that it is directly proportional to a certain warehousing model and portray the various
costs of different models, emphasizing on capital and operating cost.
Hanna and Maltz (1998) study the change that occurred in LTL Motors Company, a
company that sells automotive spare parts, they describe the transition from traditional
horizontal warehousing model to a shuttle warehousing model.
They use the aforementioned case to show that the later model in warehousing displays
a brute advantage on the former model as it results in decrease of order picking mean
time, decrease in capital cost , decrease in operational cost and an increase in overall
inventory.
They also shed light on a disadvantage that comes with this change that is the
complexity of shuttle warehousing while compared with the traditional racking systems.
After comparing the two systems, typical standard racking versus shuttle or satellite
warehousing, Hanna and Maltz (1998) deduce that shuttle racking is more beneficial to
any company and serves an added value in the supply chain of it.
Hausman et al (1976) compare various data sets to compare between three different
warehousing models: pallet assignment, storage assignment and interleaving to deduce
which model serves as the best warehousing model. They define every model and
describe its attribute, stating that pallet assignment allows the best order picking in
operations of lesser skus and highest frequency of pallet movement. They describe
storage assignment as the best in operations of bigger number of skus and allows a
vaster inventory, however restricts the speed of order picking.
As far as interleaving model, they believe that it is a mix between the 2 former models
and allows an edger in 3pl warehousing, where different customers may have different
inventory categories and thus it provides an added value, where it allows a moderate
order lead time with a more diverse inventory maintaining the advantage of exceeded
pallet positions.
Hausman et al (1976) categorize warehousing models into two general categories: a
category that has surface storage or traditional racking and a second category that contains pallet
assignment, storage assignment and interleaving. They believe that the first category is
obsolete and a waste of land and capital, while the second category allows the three best
option for any warehouse.
Hausman et al (1976) deduce that as long as the traditional racking or surface storage
are no longer practiced, there is no right or wrong warehousing model, and that each
company needs to choose between the model that best served its logistical needs.
Graves et al (1977) use continuous analytical models and discrete evaluation to compare
performance of different storage assignment policies, they do us by testing different
through puts of different warehousing models. They use the availability of storage
facilities as a corner stone for choosing the best warehousing model and take into
consideration different inventory categories.
Graves et al (1977) use the lead order time as key performance index for any
warehouse model and thus emphasize on the need of having the right number of cranes.
They state that the highest number of cranes before order picking congestion
is the best choice and that the only restriction would then be the dimension of the
storage facility.
They claim that the best storage model is the one that allows most occupancy of
the storage facility in terms of height, given that the storage facility allows no more
expansion, so the more pallets positions available and bigger throughput allows the
most efficient order picking.
Graves et al (1977) states that having fast and numerous cranes allows the best
efficiency as it reduces the number of human resources needed thus reduces human
error and decreases the value the monthly pay role.
Graves et al (1977) believe that their analysis of different policies results in the
importance of automatic cranes and their impact on through put. They emphasizes the
effect of warehousing model on cutting down on human resources cost, while all the
rest fail to mention the human resources cost and solely mention the effect on
operational cost and order picking response time .
Graves et al (1977) shed light on human error and accuracy while the others
mention not the relationship between staff and the warehousing model.
In comparison and contrast: McKinnon (2009) and Graves et al (1977) believe that land

and / or storage facility is the most important factor while Fumiand Schiraldi(2013) ,
Hanna and Maltz (1998) and Housman et al (1976) claim that choosing the best
model for warehousing depends on the kind of inventory being used and the number
of skus involved.
As far as the traditional warehousing systems, Housman et al (1976) attack the
mentioned systems and claim using them to be primitive and holds a negative effect
on warehousing, while the rest suffice by comparing the later to more advanced
systems or simply non mentioning them at all.
Methodology
Based on the research question “what is the impact of shuttle warehousing on water
industries in Lebanon? I have used data prepared by the logistics department of Rim
Natural Spring Water in 2018 and performed an anova test.
•Data collection and data analysis

Standard Horizontal Racks/shelves Shuttle

2 1.5 4
Lead Order Picking Time (lopt)

3.5 2.6 4.5

Sustain MultipleSkus

4.2 3.9 3.8

System Complexity

2.2 3.6 4.9

Storage Area vs. Stored Skus

4.6 4.5 4.6

Cost Of Maintenance /Spare Parts

2.1 3 4.7
Cost Of Land

3.2 3.9 5
Cost Of Human Resources

21.8 23 31.5
 Results
Taking the anova test as a test to prove my null hypothesis, and to tell whether the means of
this test are significantly different.
Since our p-value is less than or equal to the significance level, in this case less than where
0.047 is less than 0.05 hence we can reject the null hypothesis and conclude that not all of
population means are equal. 
And we hereby deduce that the differences between some of the means are statistically
significant and hence we can say that we have 95% confidence level
So we compare the p-value to our significance level to assess the null hypothesis. The null
hypothesis states that the population means are all equal. Usually, a significance level α of 0.05
works well.
So in the case of shuttle vs. typical warehousing we can say that This ANOVA exercise tests
whether the average satisfaction mean of the warehouse modules are equal. That is, whether

Dependent Variable: score

Tukey HSD

95% Confidence Interval

Lower Upper
(I) Category Mean Difference (I-J) Std. Error Sig. Bound Bound
Standard Horizental Racks/shelves -0.17143 0.47001 0.930 -1.3710 1.0281
Shuttle -1.38571* 0.47001 0.022 -2.5853 -0.1862
Racks/shelves Standard Horizental 0.17143 0.47001 0.930 -1.0281 1.3710
Shuttle -1.21429*
0.47001 0.047 -2.4138 -0.0147
Shuttle Standard Horizental 1.38571* 0.47001 0.022 0.1862 2.5853
Racks/shelves 1.21429 *
0.47001 0.047 0.0147 2.4138
*. The mean difference is significant at the 0.05 level.
the average of traditional warehousing module = the average racks module = the
average of shuttle warehousing. Since the p-value of the F statistic is 0.022, we reject
the equality hypothesis at 5% significance level. This means that we have enough
evidence that one module has a significantly different average. It is important to
mention that if the significance level is 1%, the null hypothesis couldn’t be rejected
Conclusion
Given the test results provided by the anova test and the data presented in water
bottling companies , specifically Rim Natural Spring Water we deduce the below
Shuttle warehousing is the best option when it comes to warehousing for water bottling
industries , other than the factor of system complexity , shuttle warehousing hits lead
in the below factors
•Lead order picking time as it allows the fastest order picking
•Sustains multiple skus , it allows the biggest diversity of palletized inventory
•Storage area vs. stored skus , it permits the highest storage capacity of skus
•Cost of maintenance , it incurs the least cost of maintenance and spare parts
•Cost of and , being of a vertical nature , it requires the least amount of land
•Cost of human resources , it requires the least amount of labour as it is system oriented
Be as it may, my research suggest shuttle warehousing to be
the best storage module compared to classic and racking
systems.
Bibliography
•McKinnon, A., (2009). Logistics And Land: The Changing
LandUse Requirements Of LogisticalActivities, 14th Annual
Logistics Research Network Conference, 9th – 11th
September 2009, Cardiff Business School.
•Fumi, A., Scarabotti, L., and Schiraldi, M., (2013).
Minimizing Warehouse Space with a Dedicated Storage
Policy, International Journal of Engineering Business
Management, vol. 5, no. 21.
•Hanna, J., and Maltz, A., (1998). LTL Expansion into
Warehousing: A Transaction Cost Analysis, Transportation
Journal, vol. 38, no. 2, pp. 5-17.
•Hausman, W., Schwarz, L., and Graves, S., (1976).
Optimal Storage Assignment in Automatic Warehousing
Systems, Management Science Journal, Vol. 22, No. 6,
pp. 629-638.
•Graves, S., Hausman, W., and Schwarz, L., (1977).
Storage-Retrieval Interleaving in Automatic
Warehousing Systems, Management Science Journal,
vol. 23, no. 9, pp.935-945
•Table data : Rim Natural Spring Water , logistics dept,
(2018 )