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The Reject Shop turns to predictive simulation

By Retail Technology | Tuesday February 25 2014

Australian retailer refines distribution processes and improves pallet management by 15% with analysis carried out using a predictive simulation platform

Founded in 1981 as a ‘seconds’ store in South Yarra, Victoria, The Reject Shop now operates in the discount retail sector and currently has over 250 stores throughout Australia, two distribution centres in Victoria and Queensland and over 3,500 employees.

Following a period of significant growth, in 2012 The Reject Shop decided to capitalise on its success through the creation of an additional distribution centre in Western Australia. 

In order to optimise the design for the new distribution centre, the retailer decided to take a close look at its existing warehousing operations. 

Building upon an ongoing continual improvement programme, The Reject Shop selected predictive simulation to investigate its existing operations and assess the performance of the proposed new warehouse design and its internal processes.

Capitalising on success
“Having experienced the benefits of predictive simulation in previous projects we knew it could enhance The Reject Shop’s existing improvement programme by allowing us to test our ideas and modifications in a risk free, low cost, virtual environment,” comments Darren O’Connor, The Reject Shop chief information officer.

The retailer’s primary warehouse, located in Victoria has 12,500 racking locations over five levels; pick and put processes; and voice-based processing, and was quickly identified as the most appropriate centre to focus on. 
Working with Malvern, Victoria-based consultancy Novatech Solutions, The Reject Shop analysed performance throughout its warehouse operations, assessing areas such as put, pick and pallet processes. The conclusions derived were then applied to the design programme for the new distribution centre, informing decisions on layout, labour, material flow and operational processes that would run in the new facility.
Building a model practice

Novatech Solutions developed a model of The Reject Shop’s new facility using WITNESS, the predictive simulation platform from Lanner. The model was used to run a number of experimental scenarios which tested different design options for the distribution centre, including the development and testing of a new pallet allocation algorithm for the warehouse, and a comparison of two different processing options. 
Specifically, the project team looked at placement strategies for pallets throughout the multi-dimensional storage area by modelling the associated time and therefore cost of accessing storage areas. This model was used to find a new placement algorithm that improves access times to pallets by up to 15% depending on the usage level of the warehouse.
Another key challenge was managing the pick process for the high volumes of stock-keeping units (SKUs) passing through the distribution centre. The combination of visual and statistical outputs from the model assessed strategies for structuring the pick processes in the warehouse and identified that a put process (where SKUs are moved directly to delivery containers) would deliver substantial benefit. 
Harnessing powerful platform

“WITNESS was highly successful in creating a platform from which future projects and changes can be tested and evaluated before rolling out to the real-world operations,” commented O’Connor. “Of the scenarios investigated, the changes to the warehouse management system algorithms and SKU handling strategies have delivered the greatest benefit. WITNESS provides a powerful tool during implementation and testing – and its ability to run and optimise multiple scenarios is a key strength.” 
The recommendations from this project made have assisted the design of the new distribution centre, ensuring it operates at maximum efficiency and will support The Reject Shop’s continued growth. In addition, the conclusions will be implemented incrementally across the business as a whole to drive more performance, supporting best practice and facilitating continued profitability for the retailer.

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