Modelling and evaluating strategies to reduce bale handling costs in a cooperative cotton warehouse

Abstract

Cooperatively owned cotton warehouses have unique inventory management issues. Unlike some other agricultural commodities, cotton is stored and marketed on an identity preserved individual basis. Unlike other warehouses which are continuously replenished, cotton warehouses are loaded once a year then slowly unloaded as orders for specific bales are received. The warehouse is configured in rows that can only be accessed from a single direction which necessitates moving non-targeted bales to reach a targeted bale. All of those factors create unique issues in simulating warehouse operations. The purpose of this study is threefold. 1. Develop a method for simulating activity at a cotton warehouse. 2. Test alternative management strategies for loading and order fulfillment processes. 3. Test a change in the marketing framework the warehouse is managing within by allowing bales to be substituted based on a quality tolerance system. These purposes are important because the warehouse can become more efficient in terms of bale handling costs. A more profitable warehouse, when it is cooperatively owned, will pass savings on to the grower owners. This study begins with a summary of the design of the simulation program. The next step of the research examined alternative warehouse loading strategies. Loading the warehouse according to gin code resulted in the highest cost savings of around $499,000 per cycle. The next research step examined order fulfilment strategies. Changing from fulfilling orders in 20 order groups to 30 order groups saved the warehouse about $34,000 per cycle. The final component of the research examined the effect of allowing the warehouse to substitute bales within a small quality tolerance range. Allowing substitution of bales based on a quality tolerance lead to a $1,300,000 savings per cycle of the warehouse. All these savings contribute to the mission of preserving value for the grower-owner once it passes through the cooperative form of the cotton warehouse.