There are many factors which influence profitability for a Citrus Industry processor. Demand and raw product quality/availability surely are near the top of the list. The process itself gets a lot of attention relative to cost reduction. One area which does not get a lot of attention, however, is warehousing. The warehouse has historically been a “foster child” so to speak.
If warehousing continues to be considered a necessary evil, its effect on profitability of total operations will obviously be negative. If warehousing is given some much needed attention, the negative effect can be minimized and, in fact, can even help improve profitability. An example might demonstrate this claim: A processing plant is relatively land-locked and needs to expand to meet plan goals. Thirty (30) to forty (40) percent of existing plant area is utilized for warehousing. In many cases, productivity in these existing warehouses is poor, maintenance costs are higher than they might be, and cube utilization can be poor. A land-locked plant which must expand suggests big capital costs or debt service for additional land and buildings. Why not zero in on the relatively unproductive utilization of 30 to 40 percent of existing space. If we can improve cube utilization alone, we might free up enough space to accommodate process expansion on the site. If we can do this with a corresponding productivity increase, we effectively lower operating cost and capital cost or debt service. In the profit equation, lower cost means higher profits.
Product is stored as concentrate in tank farms, as concentrate in drums, in totes in some cases, as frozen single-strength slabs or in the many finished package configurations. There is not much we can do about improving tank farm space utilization, so we will concentrate on storage of unit loads (drums, frozen single-strength slabs or palletized finished unit loads).
Given the time we have to address the topic, we will zero in on drum storage. The principles discussed can be applied on any unit load configuration.
To adequately address warehouse optimization, product storage configuration and method of operation must be evaluated. These two (2) variables cannot be independently developed. To a degree, each is affected by changes in the other.
SORA has developed a systematic approach to the analysis of warehousing operations that recognizes this interrelationship. This analysis in general consists of a series of proprietary computer programs and algorithms that are individually customized to suit the particular needs of a client while at the same time maintaining the inter-linked relationship.
This methodology is further explained and the date collection requirements are defined in this paper. An example is provided which demonstrates the results of proper analysis and provides sufficient budgetary and “rule-of-thumb” data for implementation of preliminary analysis of your own needs.
Paper published with permission.
