Right since we started the Operations Management course (you can read about my first impressions here), I knew it was going to be a great learning experience. Operations Management is everywhere, be it production facilities, eCommerce portals, repair centers, restaurants, hotels, road-side flower shops, warehouses, everywhere! On the warehouses; we had a chance to see the operations at an actual warehouse in action on our recent field trip to Huawei facility near Budapest. But before that, let me reflect a little on the background.
For last decade or so, Hungary has been attracting a lot of interest from multinational companies wanting to set up manufacturing facilities and warehouses in the country. Back in 2002, even before Hungary became part of EU, Indian businesses were being advised to set up their warehouses in Hungary. There were also announcements by major European auto makers to open their warehouses in Hungary around that time. Due to its central location, low setup and operating costs, Hungary provided a gateway to Europe to multinational companies.
Huawei, the world’s largest networking equipment manufacturer started its European supply centre in Hungary in 2009 and went through a major upgrade in 2013. The leaders from both sides welcomed this strategic investment. On a more technical note, a warehouse presents huge challenges in terms of goods arrival, tracking, inventory turnovers, making sure parts are made available when and where they are needed, etc. The Biatorbágy warehouse caters mainly to European, Middle Eastern and North African markets and stores networking equipment, antennas, cables and other spare parts.
We were scheduled to visit Huawei on Friday afternoon. Biatorbágy is just 20 minutes’ drive from Budapest and looks like a typical industrial neighborhood. The tour started as per schedule and Huawei staff led us to the warehouse. The revamped warehouse handles a throughput of about 75 trucks per day. Most of the inventory is actually raw material and only 15-20% of the area is used for storing finished goods.
The raw material section is just piles of boxes and cartons stacked from floor to ceiling, there were small vehicles with lifts moving the boxes. Moving on we came to the light manufacturing section. They also call it no-touch manufacturing, basically assemblies requiring minimum manual intervention. It’s interesting if you see from Postponed Manufacturing point of view and how it takes place in real life. Few antenna parts are taken from the raw materials area, another part comes from Pécs, they are all assembled in this no-touch manufacturing area and moved to finished goods section.
Finished Goods section was next and this is where most of the action was happening. There are labelling stations all over the place, a large whiteboard displays the next departures, all the material gets loaded onto the trucks and leaves the facility. This brought us to the end of the tour and the number lovers as we are, we wanted to know more! So, here you go.. the 30,000 sqm warehouse has an inventory turnover of 8 to 10 per year, the facility employs 75 people per shift in 3 shifts to handle roughly 45 incoming and 30 outgoing trucks per day. But the most interesting part is, Huawei’s role in this whole operation is only to supervise, DHL is the company behind the actual operations. DHL employs the people and uses its own IT infrastructure.
I think there are still opportunities to increase efficiency, it may be worth considering a fully automated warehouse, something like Zappos. Here is a very nice video of Kiva Systems Robots that have been deployed at many warehouses across the United States. Just so you know, Kiva Systems is now part of Amazon!
This was a very informative trip to mark the end of Operations Management course, hope we can organize more such trips in future! Thanks to everyone involved in the organization.