Don't Try Anything Funny

May 1, 2001
Philip Morris embarks on a $60-million-plus retrofit, and reaps the benefits of lower cost and increased uptime -- no kidding.

Don’t Try Anything Funny

Production lines have been fodder for comedians for decades. Remember Chaplin and his widgets in "Modern Times," Lucy and her chocolates in "I Love Lucy," and "The Poor Soul" and his layer cakes on the Jackie Gleason Show? It was funny watching these characters try to keep up with conveyor belts as management revved up production by the minute.

But conveyor belts can go only so fast before customer demand outpaces them. That’s when a decision must be made: Retrofit production with faster material handling equipment or re-engineer your entire internal supply chain and put it in a bigger plant. The problem is, while you’re doing those things, customers are still ratcheting up demand — if you’re lucky.

Philip Morris produces up to 700 million cigarettes a day at its Richmond, Virginia, manufacturing center. A couple years ago its logistics team decided it would be easier to keep pace with demand by increasing product flow through this 29-year-old plant than to build a new facility and risk falling significantly behind in production.

This was a risky decision and there was nothing funny about it. An older building does not make for easy material handling retrofits. Conventional wisdom tells you that products and orders are unique and new facilities and systems should be designed and built around them. Retrofits pose challenges. (Just read our features starting on page 36 to get a good fix on them.) Staying in an existing building when your product mixes and customer demand are on the rise requires material handling expertise and a good understanding of the trade-offs you’re making between performance and other perceived benefits.

In Philip Morris’ case, the facility was originally a warehouse built for utilities and demands that were different from those associated with the modern systems they planned to install. Today’s automation needs cleaner, uninterrupted power and a more intricate utility infrastructure.

Still, Steve Hunter, manager of operations logistics for Philip Morris, figured that with the newer, faster cigarette manufacturing equipment they were adopting and the right material handling systems interfacing with it, the company could make the existing facility work. The company took advantage of these efficiencies by closing two of its stocking operations and consolidating the packaging lines at this site.

Philip Morris also decided to get out of the distribution center business and leave that to a third-party logistics firm (Chicago-based DSC). The Richmond facility would make cigarettes, package them, palletize them and flow them to a nearby DSC distribution center.

To equip this facility for its new role, Philip Morris embarked on a $60-plus-million retrofit project with HK Systems. To make best use of space, they ripped out their old automatic storage and retrieval system (AS/RS), installed 12 gantry palletizers, 14 automatic guided vehicles (AGVs) and miles of case and sortation conveyor.

With material handling now in synch with high-speed production, Philip Morris doubled this plant’s capacity. It also cut 82 manual labor positions and raised uptime from 90 percent to 99.5 percent.

There was nothing revolutionary about the material handling equipment itself, and Hunter says that ensures long-lasting success. In fact, he passes along this advice for anyone considering a retrofit project:

"Keep it simple and standardized. This minimizes your training and the number of spare parts you have to stock. Go out and look at everything that’s available, then draw a line in the sand and stick with whatever you decide to go with for the long haul."

I shared this story with you in this space because it’s a good lead-in to our retrofit issue. Consider it a warm-up — and a warning to keep the material handling comedy in Hollywood.

Tom Andel

chief editor

[email protected]

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