Tesco – Capacity Planning for Distribution Centre

The Scenario

Tesco operated a major distribution centre with 26 truck loading decks handling 20 vehicles arriving every hour. Deliveries for individual supermarkets needed to be selected, marshalled and loaded within 60 minutes. The existing loading system was totally manual, using pickers and fork-lift trucks.

Due to increasing capacity needs, Tesco engaged with a material handling company to design the expanded facility. This company proposed a novel loading system using automatically guided vehicles (AGVs) to deliver prepared cages of goods. This system would have to be integrated with the existing manual facility, accessing the same warehouse and loading decks.

The Challenge

Tesco’s Project Director did not have confidence that the simple spreadsheet calculation of the planned additional capacity could accurately represent the likely outcome as it could not show dynamic interactions within a system comprising hundreds of movements per hour between the warehouse and the loading dock. The following questions arose:

• What would be the key issues involved in operating the two systems side-by-side?
• If the two systems could be successfully integrated, how could the optimum operating protocol be devised?
• How many AGVs would be needed (between 15 and 20 were proposed)?
• Where might AGVs and fork lifts interfere, causing delays and how could this be minimised?
• How can collisions be avoided (Health and Safety issue)?
• Where might loading bottlenecks occur, reducing anticipated performance?
• Would the target 60 minute turnaround be reliably met under different operating conditions?

Tesco needed an independent assessment of the impact of the proposed changes and of whether efficiency and loading time targets would be met. The materials handling supplier recommended Paragon Simulation.

The Solution

Tesco commissioned Paragon to produce a model. Paragon worked with Tesco’s and the supplier’s input, to accurately model the proposed facility. Paragon was asked not only to construct and run the model, but also to report results and to make a recommendation. The resulting model was a plan view animation of the facility with the AGV system in place. AGV movement, acceleration/deceleration, delay time caused by interference between the old (fork lift) and new loading systems and location of problems (to aid further analysis) were all represented. As the model ran, statistics were recorded on key performance parameters.

Different methods of running the systems side-by-side could be set up, run (with varying load levels) and results compared quickly and easily using the Paragon Information
Manager.

The Benefits

The outcome of the project was a confirmation from Paragon to Tesco that the proposed solution could work and deliver the required results.

In very short project timescales (just 15 days from start to finish), Paragon were able to give Tesco the assurance they needed and key input on how best to integrate systems and operate the new facility.

There was also an immediate cost saving because the simulation model showed that two fewer AGVs were needed than indicated by the original spreadsheet calculations – a
total saving of £160,000.