Improving the Flow of Returnable Transport Items at Dynapac - Through the introduction of traceability and a fleet sizing formula

Abstract: Background: Companies can lower their environmental impact and reduce their costs by considering reverse logistics in their operations. In the area of physical distribution, reverse logistics is concerned with the reusage of load carriers used for the transportation of goods. Dynapac Compaction Equipment AB, is a company which uses returnable load carriers (racks), for the transport of large and heavy components purchased from their suppliers in order to obtain better stackability as well as minimizing the damage of goods during transportation. Occasionally Dynapac experiences problems with delayed shipments of components from their suppliers, which are due to the fact that suppliers do not have access to a sufficient amount of racks. This can in turn result in production stoppages at Dynapac, which is very costly and can delay deliveries to the end customer. Problem Discussion and Research Questions: Currently, Dynapac has no means of identifying where the racks are located in the closed return-loop between them and their suppliers. This means that they are unable to certify that the right number of racks are available at the suppliers’ sites exactly when they are needed. In order to provide Dynapac with better control of their flow of racks and thereby minimize the risk for production stoppages the following research questions were developed: ' What does the current material and information flow of racks at Dynapac look like? ' How can the flow of racks at Dynapac be improved in terms of traceability and control? ' Which parameters determine the correct number of each type of rack that is required in the system? ' How many racks of each type should optimally be in the system? Purpose: The purposes of this study are two-folded. The first purpose is to improve the control and traceability of the flow of racks between Dynapac and its suppliers, in order to certify that racks are available where they are needed, when they are needed. The second purpose is to find a way to determine the number of racks of each type required in the system, that is, to determine the optimal fleet size for each type of rack. Method: As the studied system is complex and intertwined, where the flow of racks is dependent on external as well as internal factors, a holistic view was necessary in order to find a suitable solution for Dynapac. Therefore a systems approach was taken. As a first step, a rich theoretical framework was compiled in order to gain a thorough understanding of the mechanisms of return systems as well as how to determine fleet size. Thereafter, exploratory semi-structured interviews were held with employees to gain their views on the problem and a selection of three racks of different complexity to study in more detail was also made. Quantitative data was also collected, where Dynapac’s ERP system served as a main source. A mapping of the flow and a benchmarking study of three other companies were then performed. Next, the data gained from this, together with the theoretical framework, was used as a basis for analysis of the flow, which led to the development of improvement suggestions. The mapping of the flow was also used, together with the operational data that had been gathered for the three selected racks, to determine which parameters that impact the performance of the flow of racks for a given fleet size. These identified parameters, together with the theoretical inventory control framework, was then used to develop a formula for the calculation of the minimum fleet size of racks. Next step was to test this formula on the three selected racks to evaluate its applicability and a recommendation regarding fleet size could then be made to Dynapac. Conclusions: Today, Dynapac has one person who is responsible for the operational work with racks. There is a lack of clear rack handling routines to support this work. One of the main problems is that Dynapac does not control the flow of racks themselves, but instead they are shipping empty racks according to supplier orders. The flow will be improved if a tracking system(balance-based booking system) is implemented in Dynapac’s ERP system, together with barcodes on racks and scanners at different points in the flow. This will enable Dynapac to know exactly where their racks currently are in the flow. Dynapac can also eliminate the dependency on supplier orders and take control of the flow by introducing shipment reorder points for each supplier that is decided by Dynapac. Furthermore, internal and external communications need to be improved by the introduction of a flow owner, who takes on the responsibility for the overall performance of the flow and certifies that new routines are followed. Lastly, the external storage area should be reorganized to obtain a better layout. Demand rate, shipping quantity, safety and transportation times are some of the parameters affecting the fleet size of racks that is needed in order for the system to work optimally and without stock-outs. These parameters were taken into account when developing a formula for minimum fleet size. Dynapac’s demand rate of racks and the transportation time between Dynapac and their suppliers are the parameters which have the largest impact on fleet size. Keywords: