Instructor: Spyros Reveliotis

Office: Room 316, ISyE Bldng

tel #: (404) 894-6608

e-mail: spyros@isye.gatech.edu

homepage: www.isye.gatech.edu/~spyros

IE6202: Warehousing Systems

“Course Logistics”• Office Hours: 2-3:30pm MW (ow, an open-door policy will be

generally adopted, but an appointment arranged by e-mail is preferred)

• Grading policy:– Homework & Projects: 25%– Midterm I: 20% (Tent. Date: Thursday, Oct. 4)– Midterm II: 20% (Tent. Date: Thursday, Nov. 1)– Final: 35%– Exams closed-book, with 2 pages of notes per exam– Make-up exams and Incompletes: Only for very serious reasons, which

are officially documented.

“Course Logistics” (cont.)

• Course Reading Materials– J. Bartholdi and S. Hackman, “Warehouse and Distribution

Science”, Release 0.08, unpublished manuscript, 2000, URL: http://www.isye.gatech.edu/~jjb/wh/book/wh.pdf

– An assembled package of various books excerpts and papers on warehousing topics, available by the Georgia Tech bookstore

– Any other material distributed or cited in the lectures

– Books on reserve:• Tompkins et al., “Facilities Planning”, John Wiley & Sons, 1996.

• Heragu, S., “Facilites Design” PWS Publishing Co., 1997.

Course Objectives(What is this course all about?)

– An introduction to the fundamental concepts and techniques involved in the design and operation of contemporary warehouses and distribution centers

– In particular, a balanced development of the following issues:• Familiarization with contemporary warehouses and their operation

• A systematic exposition of the overall design, planning and control problem, as it arises in the context of contemporary warehouses

• The decomposition of the problem to a series of sub-problems, and the development of analytical/quantitative methodologies for addressing these sub-problems

• (Time permitting,) an introduction to the emerging issues and needs that arise from modern, globalized and internet-based economy.

Next...• Understanding the role of warehouses in contemporary distribution

networks• A description of the warehouse operations and equipment• A (conceptual) description of the major design, planning and control

problems arising in contemporary warehousing• Key References

– J. Bartholdi and S. Hackman, “Warehouse and Distribution Science”, Release 0.08, unpublished manuscript, 2000, URL: http://www.isye.gatech.edu/~jjb/wh/book/wh.pdf: Chpts 1-4

– G. Sharp, “Warehouse Management”, Chpt 81 in Handbook of Industrial Engineering, by G. Salvendy (ed.), John Wiley & Sons, NY, 2000.

– B. Rouwenhorst et. al., “Warehouse design and control: Framework and literature review”, European Journal of OR, Vol. 122, pgs 515-533, 2000.

– Tompkins et al., “Facilities Planning”, John Wiley & Sons, 1996: Chpt. 9

The role of warehousing in contemporary distribution networks

• Buffer: It holds inventory for downstream stages of the supply chain, in order to allow the entire production / distribution network to deal efficiently with the systematic and random variation in the network operations, or to exploit significant economies of scale.– Typical sources/examples of systematic variation

• product seasonalities (e.g., Toys R Us, CVS merchandise)

• cyclical / batched production due to large set-up costs

– Typical sources of random variation• variations in transportation times due to weather, traffic congestion,

bereaucracy, etc.

• variations in production times due to unreliable operations, unreliable suppliers

– Typical economies of scale involved• Price breaks in bulk purchasing

The role of warehousing in contemporary distribution networks

(cont.)• Consolidation center: It accumulates and consolidates

products from various points of manufacture within a single firm, or several firms, for combined shipment to common customers.

• Consolidation allows to control the overheads of transportation operations by:– allowing the operation of the carriers to their capacity, and

therefore, the more effective amortizing of the fixed transportation costs

– reducing the number of shipping and receiving operations

• Cross-docking: Consolidation without staging

The role of consolidation in contemporary distribution networks

Manufacturers Retailers

Manufacturers RetailersConsolidator

The role of warehousing in contemporary distribution networks

(cont.)• Value-Added-Processing (VAP): Increasingly, warehouses are

required to undertake some value-added-processing tasks like:– pricing and labeling– kitting (i.e., repackaging items to form a new item; e.g., “beauty”

products)– light final assembly (e.g., assembly of a computer unit from its

constituent components, delivered by different suppliers)– invoicing

• In general, this development is aligned to and suggested by the idea/policy of postponement of product differentiation, which allows for customized product configuration, while maintaining a small number of generic product components.

The major warehouse operations

• Inbound processes

– Receiving (~10% of warehouse operating costs): the collection of activities involved in

• the orderly receipt of all materials coming into the warehouse;• providing the assurance that the quantity and quality of such materials are as

ordered;• disbursing materials to storage or to other organizational functions requiring them.

– Put-away (~15% of warehouse operating costs): the act of placing merchandise to storage; it includes

• determining and registering the actual storage location(s)• transportation • placement

The major warehouse operations (cont.)• Outbound processes

– Processing customer orders (typically done by the computerized warehouse management system of the facility): This set of activities includes

• checking that the requested material is available to ship;

• if necessary, coordinating order fulfillment with other facilities of the distribution network;

• producing the “pick” lists to guide the order picking and the necessary shipping documentation;

• scheduling the order picking and the shipping activity.

– Order-picking (~55% of warehouse operating costs): the set of physical activities involved in collecting from the storage area the materials necessary for the fulfillment of the various customer orders, typically identified as:

• traveling (~55% of the order picking time)

• searching (~15% of the order picking time)

• extracting (~10% of the order picking time)

• documentation and other activities (~20 % of the order picking time)

The major warehouse operations (cont.)• Outbound processes (cont.)

– Checking: Checking orders for completeness (and quality of product)

– Packing: Packaging the merchandise in appropriate shipping containers, and attaching the necessary documentation / labels.

– Shipping: The activities of• preparing the shipping documents (packing list, address label, bill of lading);• accumulating orders to outbound carrier;• loading trucks (although, in many instances, this may be the carrier’s

responsibility).

– Others: Handling returns, and performing the additional value-added-processing supported by contemporary warehouses, as discussed in a previous slide.

Product concepts related to the characterization of material flow in a

contemporary warehouse

• Item (otherwise piece or each): The smallest unit of product sold by a distribution center, e.g.,– a 1-liter bottle of a soft drink

– a box of 100 paper clips

• Carton: a paperboard container holding identical product, usually of a size and weight allowing manual handling; example dimensions: 14x10x20in or 30x20x40cm.

• Tote: a container usually made of plastic and often used for storing and handling different products; usually similar in size to a carton, but re-usable.

Product concepts related to the characterization of material flow in a

contemporary warehouse (cont.)• Inner pack: several units of a product secured together and sold by the

distribution center as a unit, if many items are contained in a carton, and purchase quantities per item are large; a carton contains several inner packs.

• Pallet: a set of cartons or totes of identical product arranged in a cubical pattern and usually supported by a base that may be of wood or plastic; example dimensions are 40x48x54in and 80x120x100cm.

• Mixed unit load: a set of cartons or totes of different products arranged to a cubical pattern similar to a pallet, often wrapped or strapped for stability.

• Overpack: a large carton or tote containing different products; smaller than a pallet but larger than a carton, so that manual handling may be difficult.

Product concepts related to the characterization of material flow in a

contemporary warehouse (cont.)• Stock Keeping Unit (SKU): a set of product(s), packaged

in a pre-specified manner, that it is identified as a distinct entity for distribution purposes; e.g., – a 2-liter bottle of Coca-Cola Classic

– 6 2-liter bottles of Coca-Cola Classic packed in a carton

– 12-ounce cans of Coca-Cola Classic, packed 24 in a carton.

• Order: a document from a customer, requesting specific SKU’s in specific quantities.

• Line item: a “line” in an order document designating a specific SKU and quantity

A schematic representation of the warehouse material flow

Receiving Shipping

Reserve Storageand

Pallet Picking

CasePicking

BrokenCase

Picking

Accumulation, Sortation & Packing

Cross-docking

Directputawayto reserve

Directputawayto primary

Replenishment Replenishment

Operational Cost Breakdown

Receiving

Putaway

Order Picking

Others

15%

10%20%

55%

The major concerns underlying the organization of order-picking

• Establish an efficient operation by controlling the order-picking labor costs, especially those due to traveling, and

• maintain a high level of responsiveness to customer orders, while

• preserving the order integrity.

Quality

Costs

Responsiveness

How?

• By organizing the associated work-flow so that it presents

– high pick density, i.e., average number of picks per foot of travel

– short (order) flow time, i.e., the amount of time elapsed between the arrival of an order into the warehouse management system and the time it is loaded on the shipping carrier.