Case Study I - Warehouse Management... Storage Bottleneck

Background

A Canadian subsidiary of the world's renowned pharmaceutical companies successfully developed an infant vaccine that obtained approval from around the world regulatory agencies. The new vaccine was well received by the entire world due to its extremely low fatal rate and effective protection for the newborn and adolescent from many common fatal deceases. Because of the introduction of this new popular vaccine, the annual sales revenue increased 8 time. The annual vaccine volume throughput correspondently increased from 10 million doses to close to 100 million doses.

Owing to this sudden and rapid increase, the Canadian site needed huge investment to support with this rapid business/operation expansion. The HQs' priority, however, focused on manufacturing, R & D, regulatory Affairs, quality operations and packaging functions. Most of the funding were allocated to these functions.

Issue and Investigation

As usual, the logistics function was only allocated with very limited Capital funding to cope with this rapid and drastic expansion. Bottleneck was very quickly built up in the following warehouse operations - The warehouse capacity was not capable to handle this 10 times throughput - there was not enough storage space to carry all types of inventory - raw materials, packaging materials, WIP, and finish goods.

The company recruited a new VP, Supply Chain Management to resolve this logistics problem. The following were some of his findings after a series of studies and research.

1. The management could only allocate minimum capital budget to resolve this storage bottleneck issue. Thus, it is not possible to expand the warehouse footprint or building another warehouse.
2. The manufacturing environment was "Assemble-to-Order". The vaccine decoupling point was at the filled vial, thus about 25% of storage capacity was occupied by Work-in-Process semi-finished products, waiting for customers' orders for the final customized label and packaging process.
3. The storage practice/strategy was on Fixed Location (storage locations were assigned to designated types of produces)
4. The racking system was three-height while the warehouse ceiling was 25 feet height. The aisle width was 10 feet.
5. There were about 20% of the storage space were used for Block-stacking method (not on rack or stored on ground).

Question

If you were the VP, Supply Chain Management, how would you resolve this Storage Bottleneck problem with only limited Capital budget.