Summary
¦ Finnforest has 2,000 product lines and makes 300 deliveries daily.
¦ It has implemented “chaotic warehousing” across its stock and storage management.
¦ Processing and storage is almost entirely bar code driven.
¦ The company is adopting a more cost-effective fork lift truck strategy.
A place for everything and everything in its place. That used to be the only practical approach to running a distribution business, especially one as big and complex as £241m-turnover timber and sheet materials giant Finnforest UK. To control an operation on this scale, with depots at four corners of the country, planing and treatment facilities, 2,000 product lines and around 300 deliveries to ship out daily, you needed to store most products most of the time in pretty much the same spot in the warehouse, otherwise you’d soon lose track.
But that’s changed. Advances in stock control and warehouse systems and technology enable companies to be far more fluid in how they use storage. Appropriately, given the mess working like this would have caused previously, the concept is called chaotic warehousing – and its impact can be far-reaching, as Finnforest UK is demonstrating. It has implemented the approach across stock and storage management and it’s now playing a key role in a major restructure of the business.
The company began to focus on warehousing strategy, to “optimise its assets and footprint”, in 2008.
Product seasonality
“Part of the challenge of storage in this business is product seasonality,” said managing director Roderick Allan. “Take decking. While you may need 10,000m³ in your decking bay at the start of the [gardening] season, from August to October that might drop to 1,000-1,500m³. But, traditionally, the same space has been dedicated to it all year round, regardless.
“My background is in engineering and manufacturing and we decided to analyse storage use as you would with any piece of manufacturing equipment. We found that seasonality, combined with other factors, meant it was around 40%. If you only got that level of utilisation from a machine, you’d kick yourself. It would mean you weren’t using it effectively or it was the wrong machine.”
Finnforest’s decision to move towards a mixture of fixed bin and chaotic warehousing to tackle this issue was not an “overnight Eureka moment”, more a logical evolution through investment and developments in stock and management systems over the previous decade.
“The first was our adoption of SAP business software in 1998, which we originally bought to deal with the Millennium Bug,” said Mr Allan. “It wasn’t an easy system to get to grips with, but we’ve learned to leverage its benefits and today our IT team have it doing exactly what we want in terms of collecting and ordering data and spitting it out in a form we can deal with for management and planning.”
Measuring sales information
Later the company added Advanced Planning and Optimisation (AOP) software to SAP, enabling it to “measure sales information to death” and making it “much, much better at forecasting, forward ordering and planning”.
This, in turn, was followed by the adoption of radio frequency (RF) picking technology, allowing processing and storage to be almost entirely bar code driven, a process completed in 2008.
“With bar code readers on fork lifts, data on product location in the warehouse, planing mills or treatment facilities is transmitted immediately via the RF technology to the SAP system,” said Mr Allan.
It was the convergence of all these strands, he added, that set the scene for introducing chaotic warehousing, as “it can only work if you’ve got the right technology and structures in place”.
The chaotic system was first conceived in US retail. Essentially it’s about letting the combination of warehouse data collection technology, stock control and management software optimise use of storage space, taking into account what the product is and the rate of sales. “You don’t necessarily apply it to staples, like 4×2, where you’ve got a constant volume of business,” said Mr Allan. “But with other products, you allow the computer to decide what goes where. It doesn’t matter which bay products are allocated to as the location is instantly recorded and your fork lifts can be directed to them automatically for picking. Basically it radically minimises wasted, dead space.”
Depot allocation
With the improved space utilisation and flexibility it gained from chaotic warehousing, Finnforest was convinced it could next shake up allocation of customers to depots.
“It had just evolved that our Tilbury site, for instance, was more focused on our B&Q business and Boston on merchant customers,” said Mr Allan. “This could result in scenarios such as products being processed at our Grangemouth treatment facility and trucked down to Tilbury for despatch back up to a B&Q in Scotland.”
The theory was that chaotic warehousing and the technology behind it would allow the depots to handle a more general mix of DIY and merchant orders. Geography and logistical efficiency would then dictate which customers they serviced.
From modelling and testing the new warehouse theories across the business, Finnforest also concluded that it no longer required six depots. That led to the announcement that it was closing the Port of Tilbury facility, comprising 44,000m² of warehousing (20% of its UK total) and 40,000m² of open storage.
“There were reasons why it was selected for closure specifically,” said Mr Allan. “We own Grangemouth, Widnes and Boston, whereas Tilbury is leased and the lease was up for renewal, plus we faced a £1m increase in port rates there. But fundamentally the decision came out of our overall business strategy.”
The head office team from Tilbury is transferring to new premises in Basildon, but the closure, which will be completed by the end of the year, will result in 116 redundancies.
“This is very regrettable, but the move is not about shedding jobs, in fact we’re creating 70 in other parts of the business, so we’ll still have a total workforce of 853,” said Mr Allan. “We’re also working closely with the port to help people find alternative employment.”
Finnforest’s new “dynamic multi-hub distribution” structure drops a ‘t’ onto the UK map. Widnes, supplied via its quay facilities at Hull, will handle business in the west and south, Boston in the east and south and Grangemouth Scotland and the north (and all three are additionally serviced by the King’s Lynn I-joist production and treatment facility).
To cope with increased throughput at these sites, Finnforest has installed new panel bar coding lines at Grangemouth and Boston and a panel saw at the latter. It has also built a new office at Widnes, a showcase of Kerto-Ripa roof panels, Finnforest glulam and Kerto beams and columns, and has applied to build a 6,500m² Kerto and glulam-framed warehouse in Boston.
No time to stand still
All this change, which Finnforest insists was essential to remain competitive, has undoubtedly been an upheaval, but that doesn’t mean it’s about to take time out to digest the changes.
“If you stand still in this business, you soon find yourself moving backwards,” said Mr Allan. “Our latest changes grew out of previous developments and they’ve now given us the tools to move to the next level.”
In fact, he said, the intense focus on warehouse efficiency is already resulting in further moves. The company is adopting a more cost-effective fork lift truck strategy, working a smaller fleet harder, and has also introduced ‘stepped’ or ‘staggered’ packs. The latter were the brainchild of operations director Mike Lomas and resulted from analysis of the average size of broken pack orders for different products. Dividers are now put in packs at these order size “sweet spots” so they can be delivered whole, or quickly and easily split by lift truck drivers.
Following their overhaul of the UK business, Mr Allan and his management team are also now working with colleagues in Finnforest’s merchant and DIY distribution in Finland and France to share best practice. So next, perhaps, we’ll see their particular brand of chaos spreading to the Continent.
