facility layout design and cost analysis for return management in apparels sector

110 Pages·2017·3.05 MB·English

by  Prithiv Ramasamy

POLITECNICO DI MILANO
Facoltà di Ingegneria Meccanica
Master of Science in
Mechanical Engineering

FACILITY LAYOUT DESIGN AND COST
ANALYSIS FOR RETURN MANAGEMENT IN
APPARELS SECTOR

Supervisor: Prof. Riccardo Mangiaracina
MSc Thesis of:
PRITHIV RAMASAMY
ID. No. 837473

Academic Year 2015 – 2016

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ACKNOWLEDGEMENT

I would like to sincerely thank Prof. Riccardo Mangiaracina for his guidance, support and
encouragement as supervisor which helped me greatly in the successful completion of this thesis
work.
I wish to thank Prof. Alessandro Perego for providing the initial supports and
arrangement to meet Prof. Riccardo Mangiaracina and for his support and encouragement
towards the successful completion of this thesis.
I would like to thank Prof. Guido Jacopo Luca Micheli for giving me knowledge on
Industrial plant which helped me in completing my thesis
I would like to thank Prof. Andrea Tommaso Vania of Department of Mechanical Lecco
for giving the preliminary approval for the thesis and Mr. Sandro Morselli for his guidance for
the process involved during the start-up of my thesis.
Last but not the least, I would like to thank my parents and my friends who during these
years have comforted me morally and encouraged me to achieve my goals.

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ABSTRACT

Technical and business solutions for the recovery of products returns and to reuse them are
available these days. To have these technologies implemented in a real case scenario, a
feasibility study is always performed. Reverse logistics is one of such processes which has
become a main segment of the supply chain network. They have gained most important these
days because it is an efficient process for planning, implementing and controlling the flow of
returned products and information relating to the flow, in upstream of supply chain network.
Thus, in this process we must optimise and manage the flow from end customer to the
manufacturer so that it can become one of the after sales services and tends to develop towards
recycling. In this defective product returns, overstock or end of life products should be handled
carefully in a proper way. Apart from the customer satisfaction they always have a lot of
negative impact for the manufacturers, the main problem here is the return handling cost which
is more when compared to the outbound shipping cost and opening of the new facility location
which is a central issue of the reverse logistics networks. This paper will give an idea about the
steps involved in reverse logistics and the types of cost involved in this process. In particular,
we focus on reverse logistics process involved in the apparel industrial sector for which we are
proposing a new conceptual model for the betterment of both multi-channel & An online
retailer. In this article, we go much in detail on different elements and features of distribution
networks including warehouse management, transportation and establishment of new facilities
as well as existing centers. we propose cost-effective solution by using a Mixed integer linear
programming to find the best routing solution along with the facility layout planning and design
for the collection centers and centralized return centers. Where the Systematic layout planning
(SLP) is used for design of these logistics centers by deciding the position of work units and
maps out the initial position relationship chart. Through further amendments and adjustment,
we get the feasible layout plan. We also focus much in detail on optimal (internal) layout design
and assignment methods of storage system and at last we use a case study numerical elements
for validation of model.
Keywords: Facility Layout Planning, Reverse logistics, Warehouse Management, MILP

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ASTRATTO

Oggigiorno sono disponibili soluzioni tecniche e di business per il recupero dei prodotti resi e
per il loro riutilizzo. Per avere queste tecnologie implementate in uno scenario vero e proprio,
uno studio di fattibilità viene sempre eseguito.La logistica inversa è uno di questi processi che
è diventato un segmento principale della rete filiera. Essi hanno acquisito più importanza in
questi giorni perché è un processo efficiente per la pianificazione, attuazione e controllo del
flusso dei prodotti e delle informazioni relative al flusso di quelli restituiti, a monte della rete
della filiera. Così, in questo processo dobbiamo ottimizzare e gestire il flusso dal cliente finale
al produttore in modo che possa diventare uno dei servizi post-vendita e andare verso il
riciclaggio. Questi prodotti difettosi , overstock o obsoleti devono essere maneggiati con cura
in modo corretto. A parte il problema della soddisfazione del cliente, la logistica inversa ha
sempre molti effetti negativi per i produttori: Il problema principale è il costo di trattamento
di ritorno che è maggiore rispetto al costo di trasporto in uscita e all'apertura della struttura
della nuova sede, che è una questione centrale delle reti della logistica inversa. Questo articolo
vi darà un'idea circa i passi necessari nella logistica inversa e le tipologie di costo coinvolti in
questo processo. In particolare, ci concentriamo sul processo logistico inverso riguardo il
settore dell'abbigliamento industriale, per il quale stiamo proponendo un nuovo modello
concettuale per il miglioramento sia del multi-canale che del rivenditore online. In questo
articolo, si va molto più in dettaglio su diversi elementi e caratteristiche delle reti di
distribuzione, tra cui la gestione del magazzino, il trasporto e la creazione di nuove strutture,
nonché dei centri esistenti. Proponiamo una soluzione conveniente utilizzando una
programmazione intera mista per trovare la migliore soluzione di routing con la progettazione
del layout della struttura e del design per i centri di raccolta nei centri di ritorno centralizzati.
Quando viene utilizzata la sistematica pianificazione di layout (SLP) per la progettazione di
questi centri logistici, decidiamo la posizione delle unità di lavoro e delineamo la tabella
iniziale rapporto-posizione. Attraverso ulteriori modifiche e regolazioni, si ottiene la
planimetria fattibile. Ci concentriamo anche molto più in dettaglio su una soluzione ottimale
(interna) di progettazione di layout e di assegnazione dei metodi di stoccaggio e infiner si usano
elementi numerici di un caso di studio per la validazione del modello.

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SUMMARY OF THE PAPER
Purpose:
The aim of this paper is to study the return management process involved in handling the
returns of apparel products and to provide a reverse process network design, Facility layout
design, Storage system design in order to better facilitate the location and design of Centralized
& Regional return centers (warehouse), initial collection points, and to explore the cost
involved in the reverse process in the context of a multi-channel retailer (manufacturer) who

acts as a 3PL logistics provider for the single channel retailer (online retailer).
Introduction:
Return management is one of the main area of supply chain process. This is the area where the
return goods of all the industries are planned and managed. Designing and handling the returns
are not easy. Though it provides a fast response and better customer service. There are lot of
draw backs are involved while designing them. While in the case of apparel sector it is much
more difficult. This paper will give the idea on the return management, the steps involved in
the return management process. We will talk much in detail about the different types of
merchants like manufacturer, traditional retailer etc and their difference, what is commerce,
about traditional and e-commerce, their differences. These things will give an outline view on
the commerce channel.
Later this paper will give much information about what is mean by a logistic channel. How the
logistics channel operates and the steps involved in designing the reverse logistics network
design. We will go through the concept of how to design a facility (warehouse, factories) and
what are the departments a facility has and how the material flow between these department.
A detail study on the departments involved in a warehouse, types of storage system, picking
system and material handling system currently available in the market. How to design these
systems by selecting which will be the best and based on which parameter we should design
are seen. The material also talk about the different types of distribution network and the cost
involved in them.
The paper in the second part go in detail on the challenges involved in designing the return
management like uncertainty, environmental issue, communication problem, complexities of
reverse logistics network and customer’s problems.
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In the literature part, we will go through three mathematical and conceptual model proposed
by the researchers for facility planning under uncertainties. Muther’s systematic layout
procedure is studied for designing the facility layout. Single selective rack system is taken as
an example to how to design the storage system.
Design/methodology/approach:
First of all, the problem faced in apparel sector these days in reverse logistics is studied, how
much complications arriving in the designing of this system these days are studied. Later for
the better understanding an illustrative approach is done to say what are stuffs and areas we are
focusing onto get the result. Then a conceptual model and its objective is proposed. The steps
involved in the design of the return management is went through in detail for the proposed
model. We will also go through the cost involved in designing the RL network. A mathematical
model is developed by using mixed integer linear programming for both primary and local
distribution for our proposed model. To avoid the difficulty of uncertainty in predicting the
return rate a predictive model is proposed using normal distribution. Later a detailed layout for
how to design a regional and centralized return centers is proposed along with the essential
departments required in these centers. How the material flow between these department are
structured. A simulation model is developed by using Any logic PLE to know about the system
dynamics involved in these departments in the regional return center. A new storage system
model is designed by using the plastic tote as the unit of containerization and storage. For this
different types of configurations and solutions are framed.
Experimentation:

Experimentations are done based on numerical case scenarios and inputs taken from the
internet and based on statics for the steps involved in designing reverse logistics model. Where
predictive model for forecasting is used based on which initial collection point are selected and
validated. The calculation for the local distribution network is done based on travelling
salesman model using the cheapest insertion method. Muther’s systematic layout planning is
used to design the facility layout of regional return center and centralized return centers by
using the empty space within the existing facilities. The storage system design calculation is
done from the model we proposed from this paper which uses the plastic totes as a
containerization unit. In this a sensitivity analysis is done to choose the best configuration and
design available from the model, which can be implemented with less space and good space
utilization and the system dynamics is performed from the simulation model which we built
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gives the results on the minimum number of system and utilities required and their utilization
rate. From this we can find out the minimum number of space and utilities required for starting
the regional and centralized return center in an existing facility. With the help of sensitivity
analysis, a much more detailed study is done on the utilization rate and minimum number of
workers needed with considering the cost as a primary factor. We use the mathematical model
which we developed based on our conceptual model to calculate the best routing solution
available and a sensitivity analysis for the primary distribution network developed based on
our proposed model is performed to decide the opening and closing of new facilities and their
locations. This also gives us the idea on the parameters that controlling the cost. How the cost
is varying based on the changes in the potential goods and damaged goods and their effects on
facility planning. This experimentation will show all the steps involved in the reverse logistics
design and also about better view on the cost and how it varies based on what and where we
should focus more on the return management in apparel sector for reducing the cost.
Findings/Result:
The paper identifies solution for a single channel retailer (e- commerce) to deal with returned
products from customers by using a multi-channel retailer (Manufacturer) as their 3PL
provider. The case taken here are for the apparel sector. The paper also discusses about the
return management problems in the apparel market especially for a single channel retailer. It
also discusses the cost parameters involved.
The paper provides you with the cost optimization technique needed for Facility planning and
layout design, Storage system design to be adopted by the multi-channel retailer who will be
acting as the 3PL for the single channel retailer. The results which we obtained from the results
of our numerical case study from the paper.
1. In the case of regional distribution when the percentage of remaining potential goods
after resale is less than 70% we can operate our plant with two centralized return
centers. Thus, potential goods always have more impact on cost then the fault goods
and they determine whether to open or close the centralized return center.
2. In the designing of storage system based on our proposed design Configuration, A with
(U=V) square shaped longitudinal system always requires less space and have better
space utilization rate when compared to the other configurations.
3. In the case of system dynamics in Retail Store/ Regional return center. The changes in
the percentage of potential and damaged goods only had effect on the utilization rate.
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But they don’t have any impact on the potential workers. So, there is was no effect on
saturation rate.
The proposed method will also give the best solution practices for handling the returns of even
the multi-channel retailer. They can adopt this model and use the step involved in constructing
the return logistics network.
Thus, at last the paper give you better suggestion for reselling the apparel goods instead of re-

engineering which is much more cost efficient when compared to the later
Practical implications:
The procedure proposed here can help practitioners with their return management decisions.
The model presented is conceptual and all the experimentations and findings are based on that.
Application and validation is still required.

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Table of Contents

Introduction ............................................................................................................................ 16
1 Introduction to return management ................................................................................. 19
1.1 Types of merchant ......................................................................................................... 19
1.1.1 Manufacturers ......................................................................................................... 20
1.1.2 Traditional Retailer ................................................................................................. 20
1.1.3 Online Retailer ........................................................................................................ 20
1.1.4 Single channel retailer ............................................................................................ 20
1.1.5 Multi/ Omni channel retailer .................................................................................. 20
1.1.6 Managing the Returns.............................................................................................. 21
1.2 Logistic channel ........................................................................................................... 25
1.2.1 Distribution network ............................................................................................... 25
1.3 Warehouse System ......................................................................................................... 27
1.3.1 Types of storage system .......................................................................................... 27
1.3.2 Material Handling system........................................................................................ 32
1.3.3 Picking system ......................................................................................................... 33
1.3.4 Sorting ...................................................................................................................... 35
1.3.5 Packaging ................................................................................................................. 35
1.3.6 Transport Oder Consolidation.................................................................................. 35
1.4 Facility Layout design & planning ................................................................................ 35
1.4.1 Characteristics of an Effective Layout Design ........................................................ 36
1.4.2 Types of layout ........................................................................................................ 37
1.4.3 Material flow systems charts ................................................................................... 37
1.4.4 Systematic Layout Planning .................................................................................... 40
1.5 Steps involved in return management ............................................................................ 40
2 Return Management Challenges and Models .................................................................. 42
2.1 Challenges involved in Return Management ................................................................. 42
2.1.1 Uncertainty ............................................................................................................... 42
2.1.2 Complexities of the reverse logistics process .......................................................... 42
2.1.3 Environmental Issues and Communication ............................................................. 42
2.1.4 Customer Support .................................................................................................... 43
2.2 Models for Reverse Logistics Proposed in Literature ................................................... 43
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