Chapter 09 - Warehousing
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Transcript of Chapter 09 - Warehousing
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CHAPTER 9:Warehousing
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• Strategic warehousing • Warehouse operations• Warehouse ownership
arrangements• Warehouse decisions
Warehousing overview
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• Traditionally viewed as a place to hold or store inventory
• Contemporary view is the warehouse functions to mix inventory assortments to meet customer requirements– Storage of products is held
to a minimum
Warehousing contributes value in the logistics process
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• Warehouses were once viewed as a necessary evil, used to coordinate product supply with customer demand
• The explosion of the consumer economy after WWII saw the rise of distribution networks for consumer goods
• Warehousing shifted from passive storage to strategic assortment
Evolution of strategic warehousing
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Warehousing types evolved to accommodate the dynamic aspects
• Distribution centers• Consolidation terminals• Break-Bulk facilities• Cross-docks
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• Warehousing is integral to just-in-time (JIT) and stockless production strategies– Requires strategically located
warehouses across the globe• An important goal in
warehousing is to maximize flexibility– Respond to ever-changing
customer demand• Product assortments• Value-added services• Shipment sequencing
Strategic warehousing offers manufacturers a way to reduce dwell time of parts and materials
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• Economic benefits of warehousing occur when overall logistics costs are reduced – Consolidation and break-bulk– Sorting– Seasonal storage– Reverse logistics
• Service benefits are justified by sales improvements that more than offset added cost– Spot-stocking– Full line stocking– Value-added services
Strategic warehousing can provide both economic and service benefits
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Consolidation and break-bulk reduce transportation cost
• Consolidation occurs when a warehouse receives materials from a number of sources and combines them into exact quantities for a specific destination
• Break-bulk occurs when a warehouse receives a single large shipment and arranges for delivery to multiple destinations
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Illustration of consolidation and break-bulk arrangements
Figure 9.1 Consolidation and Break-Bulk Arrangements
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Figure 9.2 - Sorting involves reconfiguring freight as it flows from origin to destination
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• Cross-docking combines inventory from multiple origins into a prespecified assortment for a specific customer
Cross-docking is used extensively by retailers to replenish store inventories
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• Products are received, selected, repackaged, and loaded for shipment w/o storage– Used with general merchandise
& food• Enabled by conveyors &
sortation equipment• Used in large distribution
centers (800K to 1,200K sq.ft.)
Successful cross-docking is highly dependent on information technology
WalMart Distribution Center
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• Mixing combines inventory from multiple origins (like cross-docking) but also adds items that are regularly stocked at the mixing warehouse
Mixing is usually performed at an intermediate location between origin and destination
Stock
Inventory
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• Assembly occurs when products or components from second-tier suppliers are assembled by a warehouse located near manufacturing plant
• Common assembly processes are packaging and color customizing
Assembly supports manufacturing operations
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• Seasonal production include agricultural products
• Seasonal demand includes lawn furniture and toys
• Seasonal storage allows production efficiencies within the constraints of seasonality
Seasonal storage provides direct benefit by accommodating production or demand
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Reverse logistics processing
• Reverse logistics include activities supporting– Returns management
• Recalls or product that did not sell– Remanufacturing and repair
• Repairing/refurbishing equipment– Remarketing
• Selling used equipment– Recycling– Disposal
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Illustration of reverse logistics flow
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• Spot-stocking is the positioning of inventory for seasonal or promotional demand
• Full line stocking provides one-stop shopping capability for goods from multiple suppliers
• Value-added services include any work that creates a greater value for customers– See Table 10.1 for examples
Service benefits of warehousing
Full Line Stocking at United Electric’s
Distribution Center
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Typical list of value-added services
Table 10.1 Value-Added Services
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• Objective is to– Efficiently receive inventory– Store it as required– Assemble it into complete
orders– Make a customer shipment
• Operations will therefore emphasize product flow
Warehouse operations involve two major activities – handling and storage
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• Handling must optimize movement continuity and efficiency– Receiving—Unloading the
arriving vehicles– In-Storage—moving goods
for storage (transfer) or order selection (picking)
– Shipping—verifying the order and loading the departing vehicles
Handling
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Storage plans should make product velocity a major factor
• Slotting determines specific locations for the product based on– Velocity—how fast the goods
move– Weight—how heavy is the
product– Special Characteristics—
how large or small, does it require rack or bin storage
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Illustration of storage plan based on product movement velocity
Figure 9.3 Storage Plan Based on Product Movement Velocity
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• Active Storage—storage for basic inventory replenishment– Focuses on quick movement– Includes flow-through or cross-
dock distribution• Extended Storage—storage
for inventory held in excess of period for normal replenishment– E.g. seasonal, speculative, or
even commodities
Warehouses must manage two classes of storage
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Warehouse ownership arrangements
• Private—warehouse operated by the firm owning the product– Building may be owned or leased
• Public—service company owns warehouse and hires out space and services– Usually classed as
• General merchandise• Refrigerated• Bonded• Special commodity• Household goods and furniture
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Contract warehousing combines elements of private and public operations
• Usually a long-term relationship or contract between a firm and the warehousing owner/operator– Long-term cost savings compared
with public warehouse– Often a firm’s employees will work
alongside the contract warehouse’s – Example is Kraft Foods who has
contracted with AmeriCold Logistics since the late 1990’s
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• Network deployment strategy requires answering two questions– How many warehouses should
be established?– Which warehouse ownership
types should be used in specific markets?
• For example, when warehouse utilization is not full throughout the year – Use private or contract
warehouse to cover 75 percent requirement
– Public facilities used to accommodate peak demand
Network deployment is the combination of private, public and contract facilities used by a firm
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Warehouse decisions that determine handling and storage efficiency
• Site Selection• Design• Product-Mix Analysis• Expansion• Materials Handling• Layout• Sizing• Warehouse management system• Accuracy and audit• Security• Safety and maintenance
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• Identify broad geography where an active warehouse meets service, economic and strategic requirements
• Selection and number of retail outlets drives location of support warehouses
• Final selection should be preceded by extensive analysis
Site selection is driven by service availability and cost factors
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Illustration of straight-line product flow to facilitate velocity
Figure 9.4 Basic Warehouse Design
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Two examples illustrating the integration of handling equipment with final layout
Figure 9.5 Layouts A and B
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• Warehouse management systems (WMS) integrate procedures and software support to standardize storage and handling work procedures
• One main use of WMS is to coordinate order selection– Discrete selection is when a specific customer’s order is
selected and prepared for shipment as a single work assignment – Wave or batch selection is when orders are processed through
zones of the warehouse assigned to specific employees
Warehouse management systems encourage best practices
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Illustration of the range of activities coordinated by an advanced WMS
Figure 9.6 Warehouse Management System Functionality
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A summary of WMS functionality and decision support benefits
Table 9.2 WMS Functionality and Decision Support
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Other warehouse planning issues
• Inventory accuracy is typically maintained by annual physical counts or counting portions of inventory on a planned basis– Cycle counting is the audit of selected
inventory on a cyclic schedule • Audits are common to maintain
safety, assure compliance to regulations and help improve procedures
• Security issues involve protection from pilferage and damage
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• Accident prevention– Comprehensive safety programs
and training, accident investigation and follow up
• Environmental protection– Spill kits and spill plans
• Maintenance– Scheduled maintenance of
building, material handling equipment, and collision damage prevention
Safety and maintenance issues must also be considered when planning warehouse designs
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What is the future of warehouse management?
• Will warehouses grow smaller in the future?– Offer a wider range of services?– Will final assembly of goods be increasingly done in
warehouses?• What is your solution to the “challenge of the last
mile” posed by Dr. Patrick Dixon?– Video link (7:45 min.)
http://www.youtube.com/watch?v=ZbPMaxNl3J4