6 page paper-Issue 3 (Due in 12 hours)

Logistics Consulting Plan

executive summary (COLLIN)

The logistics consulting team has established the logistical issues with Rector Property Management. The team has defined these in depth with data collection methods to determine the best solution to each issue. The team has completed research and presents its findings in this consulting document.

INTRODUCTION TO REPORT (COLLIN)

Rector Property Management (RPM) is a real estate company that acquires, renovates, and leases properties to citizens of Champaign-Urbana, Illinois. The CEO developed an acquisition strategy that focuses on buying properties in poor condition that are massively undervalued. He supervises the renovation and manages the project until completion, and then personally markets and leases each property. This business model was effective, but the company has grown to over 50 leases. His model for forecasting and distribution is no longer efficient.

background and client profilE (COLLIN)

The CEO built this company from the ground up. It started with one property in Kentucky with one lease to a company with over $500K in gross revenue. The company operates under the guidance of the CEO but relies on subcontractors to perform all renovation labor.

rpm today

The business currently conducts 12-14 renovations annually. Jason would like to triple that number over the next two years and needs a distribution system to do it. He also wants to reduce the cost of materials. RPM purchased its first commercial property and will have 900 square feet of space for inventory.

business GOALS

· Increase annual goal from 12 renovations per year to 30 per year by 2019

· Develop assessment and forecasting system to enhance renovation efficiency

· Emplace small warehouse to allow cost savings on bulk items (e.g. flooring)

· CEO shifts to a strategic management role working less than 15 hours per week

Objective (ENTIRE TEAM)

The logistics consulting team met with the CEO and established the following issues.

· Issue 1: CEO personally procures all supplies and distributes them to the various projects. This will not work with the future goals of the company. Tray and Kendrick have been assigned to resolve this issue.

· Issue 2: Logistics Assessment: CEO lacks a tool to conduct a thorough inspection of projects and makes multiple trips to buy supplies. Collin has been assigned to resolve this issue.

· Issue 3: Company has 900 square feet of unused storage space. RPM would like to create a small warehouse for high demand and bulk order items. Ryan, Keily, and Mike have been assigned to resolve this issue.

data COLLECTION PLAN (ENTIRE TEAM)

The team collected secondary data for quantitative analysis regarding the distribution and warehousing plan. This will include the review of the previous three years of purchasing to determine a plan for establishing a quality warehouse with a stockage recommendation. Additional research was conducted on the current portfolio of properties to establish geographic dispersion. This allowed the research team to make the best recommendation for distribution and storage. Additionally, the team worked with the CEO to provide an option of tools to conduct a complete review of a project to transfer to the logistics manager. This transfer of information should happen once, and it will allow the logistician to coordinate the purchase and transportation of all items efficiently.

issue 1 – DISTRIBUTION PLAN (tRAY & KEDRICK)

1. What are the costs associated with CEO transporting supplies?

a. Fuel and transport cost

b. CEO lost time cost

2. What are the options for new distribution plan?

a. Subcontractor conduct supply runs per project

b. Hiring distributor to transport all supplies

Issue 2 – FORECASTING AND ANALYSIS TOOL (cOLLIN)

1. How does the CEO capture requirements?

a. Develop option for analog and digital methods

b. Research options available (e.g. Phone Apps, Software. Etc.)

2. How does the CEO operationalize requirements for supplies and labor?

a. Define the flow of information and responsibilities.

b. Collaborate with small teams researching the distribution and warehousing plan to provide connectivity and seamless plan

issue 3 – wAREHOUSE PLAN (KEILY, MIKE, & rYAN)

3. Why is it important to improve warehouse capacity?

a. Improve organization

b. Redesign floor plan

c. Reduction of cost

4. How to determine warehouse capacity?

a. Size of current warehouse (length/width/height)

b. Anything that would obstruct warehouse storage

5. How to improve warehouse capacity?

a. Loft construction

i. Cost analysis of construction

b. Types of material stored

c. Shelving height for max usage of storage

6. Housekeeping requirements?

a. Climate control CBA

b. Reorganization of current items in the storage area

data research and anaLYsis (ENTIRE TEAM)

issue 1 – DISTRIBUTION PLAN (tRAY & KEDRICK)

1. Question: As RPM increases renovation projects from 12 to 14 in 2018 to at least 30 in 2019, a 150 percent year over year increase, what costs does the CEO and firm incur, and of those costs, which are most important to sustainable success?

a. Issue: Determine two disparate types of costs associated with the CEO performing these duties. First, there are monetary costs derived from driving from site to sites, such as fuel and vehicle maintenance. However, the more appropriate cost for consideration is in time or hours. Each hour the CEO spends procuring and delivering supplies is an hour he cannot dedicate to strategic managerial duties necessary to grow the business in an efficient manner. The CEO currently oversees 50 properties, with 12 under renovation at a time. His current model is not sustainable as the firm expands the business to 30 properties in renovation at any given time.

b. Research: Team 3 consultants performed multiple methods of data collection for research and data analysis. First, the team collected regional transportation data for the Champaign/Urbana, IL area. Data collected included fuel costs for the previous year within a 30-mile radius. Consultants needed to understand the geographic dispersion of the current home under renovation to accurately determine the CEOs driving habits, time spent performing these duties on average, the annual cost of fuel, and maintenance costs. Primary data collected was direct from the CEO. The CEO conducts between two and three supply runs weekly from Home Depot and various properties. With current properties spanning a 15-mile radius, he travels approximately 200 miles per month solely procuring and delivering supplies. Increasing properties to 30 in 2019 yields on average a 100-mile monthly increase if the CEO continues the current method of distribution. While there is an obvious monetary cost to driving for fuel and maintenance, projected to be approximately $1,800.00, the true negative impact comes in the form of opportunities lost due to the CEO’s time spent doing activities that are not strategic in nature. Finally, primary data suggests the CEO spends more than 12 hours per week conducting these activities. As the firm’s operations expand, he is on target to spend more than 30 hours per week, at minimum performing distribution. Thus, time as a resource is much more valuable than the money spent currently.

2. Question: What are options for a new procurement and distribution plan? Of the options, which one best positions RPM to increase the number of renovation projects while freeing its CEO to transition to a strategic manager?

a. The Team performed regional research to determine a procurement and distribution mechanism RPM could and should adopt to conduct these activities going forward. Identifying and implementing an industry best practice for the distribution function is, as the consultants believe, the single most impactful area that will allow the CEO to move to a strategic managerial role within RPM and streamline operations and logistics functions to support firm expansion. Primary and secondary data includes information from the likes of Home Depot and Lowes, Wal-Mart, and various commercial and residential property renovation firms in the region.

b. Research shows that businesses of similar size utilize home improvement centers for the procurement of materials. As such, these centers offer a variety of materials at one single location and offer bulk pricing in smaller quantities. For procurement and labor assignment, firms of similar size that use subcontractors make them responsible for delivery and procuring supplies as necessary. Currently, RPM deviates from these best practices since it employs subcontractors for labor; however, RPM performs all procurement and distribution in support of the various projects. Larger renovation firms hire Third-party logistics (3PLs) to perform these duties. In its current state, RPM does not exploit to the fullest potential, the advantage of employing subcontractors to conduct the full range of responsibilities they can accept. Alas, considering the results of data collection and analysis to explore options to streamline RPM’s procurement and distribution strategy, we recommend the following policy changes.

Issue 2 – FORECASTING AND ANALYSIS TOOL (cOLLIN)

1. Question: How does the CEO capture requirements? Answer: The CEO currently captures requirements by generally forecasting requirements and costs. He has personally conducted over fifty renovations, and he utilizes the past experience to forecast the new projects. These are rough estimates to work for the project, and the CEO has experienced no problems thus far with completing projects within budget. He does have some issues tracking the budget real time, and analyzing costs on past projects. This is due to the lack of historical project management data and the inability to provide exact lists of labor and resources per renovation.

2. Issue: Develop option for analog and digital methods Research: Several options were researched for potential implementation. Below are three options that are available. One is a created template that will capture requirements, costs, and overall budget. The second option is Mavenlink. This is an option that has project management and forecasting capabilities with the enhanced feature of linking to QuickBooks.

ADOBE TEMPLATE

MAVENLINK

BUILDERTREND

3. Question: How does the CEO operationalize requirements for supplies and labor? Answer: The CEO uses verbal and written communication to coordinate for labor. He organizes most tasks in his head and sends personnel to complete large, broad projects. He provides vision and utilizes their experience together to finish the project. This method works for his current amount of labor, but it will not be sufficient after the increase in projects. This needs to be rolled into his forecasting system to ensure the maximum use of resources.

issue 3 – wAREHOUSE PLAN (KEILY, MIKE, & rYAN)

1. Question: Why is it important to improve warehouse capacity?

Answer: When you can store more items in your warehouse, it means you can order more products from Home Depot in a single transaction. This will give you the chance to save money on bulk orders. If your current warehouse layout is forcing you to stock similar items or you simply don’t have enough room for all items you’re carrying, it can be difficult to keep your warehouse organized. By optimizing your storage space to increase your overall capacity, you will improve the organization of your products. This will make it easier for you to find and pick products, which can reduce the amount of time it takes to complete an order.

2. Question: How to determine warehouse capacity?

Answer: Even though measuring your warehouse storage capacity involves some basic math, it’s still not the easiest or most precise equation. To calculate your storage capacity, you’re going to figure the ratio of the cubic storage capacity of storage space divided by the total cubic volume of the part of your building that’s used for storage. To determine the volume of your storage area, you’ll measure the dimensions of its length, width, and maximum stack height, making allowances for things such as lights or sprinklers, which may reduce your maximum stack height. Next, you’ll calculate a storage capacity for every storage area (such as every row or bin) in your warehouse and add them together. The number you end up with is your “theoretical” storage capacity. Your theoretical storage capacity is not your actual storage capacity because it doesn’t account for things such as the room necessary to move products or pallets in and out of their storage positions.

3. Question: How to improve warehouse capacity?

Answer: There are many warehouse storage organization ideas that you can implement in your facility. Here are some ideas about how you can increase warehouse storage capacity at your location. Use a Warehouse Inventory Management System is one of the most vital tools you have at your disposal to increase your storage capacity is a warehouse management system, or WMS. A WMS provides information about your inventory and storage space in real time. It can help you free up storage space by identifying obsolete inventory that can be donated or discarded. You can also use your WMS to organize the products in your inventory because your system will assign floor and shelving locations for your products based on their sales volumes and unit load dimensions.

4. Question: How can accountability be enhanced in the warehouse?

Answer: Accountability in the warehouse is essential in ensuring that products are handled well and are not stolen or damaged. It also ensures that accidents do not harm the employees and lead to unnecessary costs and compromised workforce. Physical management is very vital in ensuring accountability. Due to the expanding nature of the business, the CEO needs a manager to oversee work in the warehouse while he handles the acquisition and marketing and sales aspect. The first thing that the warehouse manager should do is provide training and educational courses to the workforce. This training is bound to educate the employee on the safe ways to handle the equipment and products, ways to protect themselves, motivate them to be responsible, as well as train them on the basic activities required from them. Secondly, the manager needs to document the procedures and policies clearly. Instead of merely keeping these procedures and policies in the manager's files or office, the manager should strategically place them in the warehouse to guide the employees and act as reminders of what is needed. Thirdly, the warehouse manager must ensure that he or she provides consistent and fair workforce supervision. Fairness in this aspect depicts ensuring that he or she does not favor certain employees when assigning roles or in appraisal exercises. Fairness is vital because it enhances motivation across the entire workforce. Lastly, disciplinary measures need to be established, clearly communicated, and used whenever necessary. One important thing to note is that punishment should be dealt out when an employee disregards the procedures or policies and not only when negative effects, such as accidents, have occurred from the act. This ensures adherence to the procedures and policies as well as minimizing accidents

With the fact that buying in bulk of common items will result in cost savings, the development of a warehouse/storage space is a very viable option. Developing and managing a warehouse space comes with certain regulatory requirements, especially from Occupational Safety and Health Organization (OSHA). The research and analysis conducted on this front focused on OSHA regulations and requirements as well as the most functional use of the available space.

OSHA requires that all warehouse aisle widths are at least 3 feet wider than the widest Material Handling Equipment (MHE) being used. A normal human being is considered to be 2 feet wide according to OSHA. This results in a 5 feet minimum aisle width for Rector Property Management. OSHA also requires no overhead storage (ceiling hangings) over any pedestrian walkways. Further OSHA requirements are standard for all business functions, not specifically warehouses, and these are a clean and functional work area. This is very simple and simply means that aisles must be kept free of debris and hazards.

The research conducted with the warehouse space revolved around the size of the space, which was measured to be 22 feet by 27 feet with 14-foot ceilings. The space also has two 10 foot bay doors that will ease access to bulky items. This space size is ideal for an “M” design in warehouse storage with a single walkway that connects both sides of the warehouse, leaving enough aisle space on the main avenues to allow a truck to back into the bay doors to ease loading of bulky or heavy items. We also determined that RPM will install a roughly 3 foot by 3-foot wash basin in the top corner of the space, this will also assist RMP in meeting OSHA requirements for cleanliness.

RECOMMENDATIONS AND IMPLEMENTATION PLAN (ENTIRE TEAM)

issue 1 – DISTRIBUTION PLAN (tRAY & KEDRICK)

Utilize Home Depot’s online ordering service and flat rate delivery service.

PROCUREMENT: Home Depot offers an online ordering service that will afford RPM the ability to place materials orders for specified quantities without physically visiting the store. The CEO already has an existing professional relationship with this local store, and Home Depot employees are very familiar with the items most in demand according to his purchasing habits since he established the firm. Moreover, as an inventory management strategy, he and the vendor can enjoy a push-pull replenishment method to ensure items he needs remain in demand. There is a myriad of benefits to using Home Depot’s online ordering service. Chief among them is that orders for multiple properties can be fulfilled in each order and the CEO eliminates two to three visits to the store each week.

DISTRIBUTION: Home Depot offers a delivery service that charges a flat rate of $79 USD per delivery location in a 38 ft trailer. This mechanism also provides invaluable time and costs savings for the CEO, who should focus attention more on growing the business as a strategic manager. By implementing Home Depot’s procurement and distribution services, he immediately gains 12 hours minimum each week, or 48 hours per month now and 120 hours as the firm expands renovations to 30 projects in 2019.

Issue 2 – FORECASTING AND ANALYSIS TOOL (cOLLIN)

Thorough research was conducted with all options available for RPM. The following are the recommendations and implementation guidance moving forward if accepted.

I recommend that Jason adopt a BuilderTrend as his project management and logistics forecasting tool. I have conducted virtual training and two live demonstrations with a representative and believe this will accomplish all significant tasks for the company. Some of the highlights listed below.

1. The software has an incredible phone app which allows access to all the features of the website. I have shown in the pictures to the right a screen allowing a small project added and a resources list for a renovation.

2. The app links directly to QuickBooks. This allows budgets to transfer, but more importantly, it allows workers timesheets to transfer to payroll. It will even specifically state the different property they are working on for performance reviews, exact cost vision, and LLC payment.

3. Jason currently manages 7-11 subcontractors, and this can become tedious when plans change early in a project. The effect can have him rescheduling multiple parties and just wasting time. This system allows Jason to change one schedule, and all parties are notified of the changes via text, email, and on the app. This allows this to understand their role and stay on track.

4. Lists can be generated on the app which allow a budget to be created and for the shopping list to be generated. This can then be transferred to the 3PL/Operations Manager for action.

Further research was conducted on Appfolio and Buildium which are two very popular systems for property managers. I would highly suggest that RPM move to Appfolio after they exceed the 100 property threshold. The marketing, management, leasing, and data analysis are incredible. This system does not, however, have a good project management system for managing renovations. I was severely disappointed but impressed that they were forthcoming. They recommended we not go their system at this time.

Implementation would be straightforward if you choose this item. Zach Rehmeier from BuilderTrend has been incredibly helpful and would provide your services. The next project you have would utilize this system, and he would help you the entire way. After you pleasant experience, you can decide if this is something you want for the future.

issue 3 – wAREHOUSE PLAN (KEILY, MIKE, & rYAN)

I recommend that the RPM CEO buys items in bulk instead of buying individual items. Below are the items he purchases frequently with the individual cost versus the bulk cost/bulk discount.

Store SKU	Item type	Base Cost	Bulk discount	Total	With discount	Amount Saved
1000014444	Shaker Assembled 36x34.5x24 in. Base Kitchen Cabinet with Ball-Bearing Drawer Glides in Java	$278	10% if you buy 10	$2,780.0	$2,502.00	$278
1000014437	Shaker Assembled 24x34.5x24 in. Base Kitchen Cabinet with Ball-Bearing Drawer Glides in Java	$195	10% if you buy 10	$1,950.0	$1,754.00	$196
1000014457	Shaker Assembled 24x30x12 in. Wall Kitchen Cabinet in Java	$149	10% if you buy 10	$1,490.0	$1,341.00	$149
1000014462	Shaker Assembled 30x30x12 in. Wall Kitchen Cabinet in Java	$170	10% if you buy 10	$1,700.0	$1,530.00	$170
1000014475	Shaker Assembled 36x30x12 in. Wall Kitchen Cabinet in Java	$199	10% if you buy 10	$1,990.0	$1,800.00	$190
1002213590	Metro Gris Interlocking 12 in. x 12 in. x 8 mm Glass Stone Mesh-Mounted Mosaic Tile (10 sq. ft. / case)	$69.80	15% on each case	$69.80	$59.33	$10.47
1000725632	Clarkston 44 in. Indoor Brushed Nickel Ceiling Fan with Light Kit	$49.97		$49.97
1000018833	Valencia 8 ft. Laminate Countertop in Typhoon Ice	$117		$117
TOTAL BASE COST	$1,228	TOTAL BULK COST	$10,146.8	TOTAL AMOUNT SAVED	$993

1) Home Depot provides a service called Volume Pricing Discounts for Professionals. This service allows the CEO to request the items he needs which will then allow Home Depot to pick the items for the customer. If the items equal more than $1.5K this will then trigger the bidding process that Home Depot will initiate to lower the total cost of the items requested.

2) Home Depot has also bought out companies like Wilmar and Supplyworks, which are wholesale companies that provide builders huge discounts when buying in bulk. Home Depot Sales associates in Champagne, IL has also expressed their interest in being able to look up items for RPM on this website if given a list of items needed.

For RPM to achieve their renovation goals the CEO must designate a person to control his forecasting and warehouse management. If RMP is able to forecast items that is needed per renovation they will able to streamline the process of renovation and bring the overhead cost down. For Mr. Rector to receive all of these cost savings deals from Home Depot he has to allow Home Depot roughly a week to research better savings and offers. With a forecasting tool, I believe RPM will be able to make their renovation goals and even double it when all of the processes are in place.

We recommend turning the current roughly 900 square foot storage space into a functional warehouse. This will result in the purchase of multiple storage units to store the items. We have conducted extensive research and recommend using U-Line for purchasing the warehouse shelving. U-Line is a leading distributor of warehouse shelving for a good price. We recommend the purchase of nine (9) Heavy Duty Storage Shelves from U-Line. These measure 72x36x96, which is 8 feet of height, giving plenty of vertical storage space as well as ample overhead clearance on the top shelf as well as enough space to perhaps add ceiling storage in the future (pending structural evaluation of ceiling for such storage). The price for one is $721, which puts the total cost for these shelves at $6,489. We also recommend the purchase of one (1) Cantilever Rack for the storage of bulk wood planks, trim, plumbing pipes and like items. The cost of this rack will be $6,655. This brings the total cost to $13,144 for all recommended shelving and racks. The guidance received from RPM was that the company wanted to be able to pay back the cost of the warehouse in the savings over a 10 year period. This is not going to be a problem, in fact with estimated savings of around $100,000 a year, the total warehouse cost of $13,144 will be made in savings within the first year.

The implementation of the warehouse is pretty straightforward and simple. First and foremost all flooring should be cleaned and mopped before shelving is installed. RPM should also ensure that there is plenty of lighting across the entire space for both safety and ease of identifying products. The floor should also be clearly marked with directions of travel as well as the openings of the bay doors, this will comply with OSHA requirements as well. All inventory that resides in the warehouse should be loaded into the inventory management tool developed by our team. Whenever an item or items leave the warehouse, this should also be reflected in the tool. Inventory management is the biggest part of warehouse management and also extremely important in the overall cost savings to ensure the right products are being stored. The most used items (top 10) our team identified should be located closest to the doors which will save time and man-hours in the picking and transportation of the items. The management of the warehouse is really quite simple as long as inventory management principles and safety requirements are followed.

DISCLAIMER

This material is based upon work conducted by the students below. Any opinions, findings, conclusions, or recommendations are those of the authors and do not reflect the views of Florida Institute of Technology, its employees or its administration. Mr. Breaux has used U-Line in the past for warehousing operations but is in no way affiliated with or being paid by the company for the endorsement of the products.

4/4/2018

Logistics Consulting Plan

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