Using System Dynamics in Wh Management-a Fast Fashion Case Study

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Using system dynamics in warehouse management: a fast-fashion case study Anna Corinna Cagliano, Alberto DeMarco and Carlo Rafele

Warehouse management

Purpose – The purpose of this paper is to present an analysis of how different sourcing policies and resource usage affect the operational performance dynamics of warehouse processes. Design/methodology/approach – The system dynamics (SD) methodology is used to model warehouse operations at the distribution centre of a leading fast-fashion vertical retailer. This case study includes a detailed analysis of the relationships between the flow of items through the warehouse, the assignment of staff, the inventory management policy, and the order processing tasks. Findings – Case scenario simulations are provided to define warehouse policies enabling increased efficiency, cost savings, reduced inventory, and shorter lead-times. Practical implications – The case study reaffirms that a flexible usage of human resources, outsourcing of selected warehouse operations, and sourcing from reliable manufacturers may result in important performance improvements for centralised warehousing. Originality/value – It is proved that SD is a valuable tool in the field of operations management, not only to support strategic evaluations but also to execute a detailed analysis of logistical processes and make scenario-based dynamic decisions at the operational level. Keywords Distribution management, Warehousing, Operations management, Fashion industry, Italy Paper type Case study

1. Introduction The increasing need to improve supply chain (SC) performance has been forcing warehouses to focus on integrating the production effort with the market (Frazelle, 2002; Baker, 2007). Receiving, transferring, handling, storage, packing, and expediting operations at the warehouse directly affect the effectiveness of a company as a whole as well as its quality and logistic service level (Rafele, 2004). In this sense, a proper warehouse management process has become critical to gain competitive advantage through better customer service and shorter lead times (De Koster, 1998). However, warehouse operations are confronted with a rising complexity tied to nonlinear relationships between performance factors (Faber et al., 2002) and face This study is part of the Miroglio SC reengineering project performed in conjunction with the research group for Engineering Systems and Logistics of Politecnico di Torino. The authors wish to acknowledge the Miroglio Group and, in particular, Mr Piero Abellonio, Logistic Director, for his active collaboration, support, and permission to publish this study. Journal of Manufacturing Technology Management Vol. 22 No. 2, 2011 pp. 171-188 q Emerald Group Publishing Limited 1741-038X DOI 10.1108/17410381111102207

JMTM 22,2


increasing costs associated with the need for reducing the time-to-market. This has led SC managers to undertake cost-saving sourcing strategies (De Koster and Warffemius, 2005) integrated with efficiency-oriented management policies (Maltz and DeHoratius, 2004). Increasing complexity and cost are particularly important to the mass apparel retail industry, where extremely short product life-cycles, seasonality, and unpredictable demand require effectual warehouse operations (Bruce and Daly, 2006). In fact, most of leading mass fast apparel retailers are fashion-followers that exploit the market by bringing new products to their stores as frequently as possible; therefore, a large variety of clothes of diverse sizes, shapes, colours, etc. are designed as late as possible to include the ultimate fashion trends and are produced and centrally distributed as quickly as possible to make them readily available to serve on store shelves in sufficient quantities to assure sales and replenishment (Christopher et al., 2004). This is the industry that has spawned the agile SC and the philosophy of the quick response as a set of production, centralised...
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