Supply Chain Logistics Management Chapter 13: Warehouse Management

ECONOMIC BENEFITS OF WAREHOUSING Consolidation Break-bulk or cross dock Processing/Postponement Stockpiling Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

WAREHOUSE BENEFITS CONSOLIDATION Plant A Consolidation Warehouses Customers A B C Plant B Plant C Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

WAREHOUSE BENEFIT DISTRIBUTION ASSORTMENT Plant A Customer A Customer B Plant B Distribution Center Customer C Plant C Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

WAREHOUSE BENEFIT BREAK BULK OPERATION Customer A Plant A Break Bulk Warehouse Customer B Customer C Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

SERVICE BENEFITS OF WAREHOUSING Spot stock Assortment Mixing Production support Market presence Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

WAREHOUSING BENEFITS IN-TRANSIT MIXING Customer W A-B-C-D Plant A Customer X A-B-C-D Warehouse Transit Mixing Point Customer Y A-B-C Plant B Product D Customer Z A-B Plant C Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

WAREHOUSING BENEFITS MANUFACTURING SUPPORT Vendor A Vendor B Assembly Plant Manufacturing Warehouse Vendor C Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

WAREHOUSING ALTERNATIVES Options Private Public Contract Other Select warehousing option with best strategic fit Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

SHARE OF WAREHOUSE BUSINESS Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

DECISION FACTORS Strategy Type of need Information system Control Product characteristics Culture Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

STRATEGY Full line Centralized postponement Utilization of current capacity and resources Market presence Segment focused Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

USE OF ALTERNATIVES (Percent of Facilities) Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

WHO USES THE MOST FACILITIES? Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

TYPE OF NEED Turn inventory Promotional inventory Speculative inventory Custom services and activities Seasonal Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

INFORMATION SYSTEM Communication capabilities System compatibility Handling technologies Activity based costing Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

CONTROL Customs and bonding Temperature Secrecy Lot control and recall Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

PRODUCT CHARACTERISTICS Handling characteristics Storage characteristics Speed of movement Flexibility Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

NEW WAREHOUSES WILL BE: Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

CULTURE Unionization Expertise Industry experience and economies Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

VALUE-ADDED WAREHOUSING Packaging Refined unitization Adjust pallets or shrink-wrap Change containers Production specialization Product climatization Recall capability Market confidentiality Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

TRADITIONAL HANDLING Palletizing, put away, storage, replenishment, selection and loading for shipment Food industry products handled up to 17 times in SC and in DC 4.3 times Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

CROSS-DOCKING Products received, selected, repackaged, loaded for shipment w/o storage Enabled by conveyors & sortation equipment Used with general merchandise & food Fast moving products replenished using POS/planagram systems Used in large (800K to 1,200K sq.ft..) DCs Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

FOOD INDUSTRY Less Impediments to C-D Scanning data-<OC Better category mgt. & tracking systems Expansion forward w/mfg. pre-assembly multi-SKU pallets Bar-code scanning at case & pallet levels Advanced ship EDI transactions Automated replenishment programs Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

CROSS-DOCKING RESULTS MFG. added costs +$.10 /case Average distributor cost savings $.35 /case Break down store sorted cases saves $.50 to $.55/case Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

ECR PILOT C-D TESTS RETAIL & WHOLESALE <Inventory carrying costs <Storage & processing space <Product handling(damage, shrinkage, out of date products, returns, DC labor costs Improved sales through displays >Logistics savings to product sales support Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

STUDY OF C-D IN INDUSTRY Only 76% space of traditional Only 57% of direct labor Case/hour increases Up to 75% Excellent payback periods Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

CONTRACT WAREHOUSING Storage space, software systems, labor & management dedicated to a specific shipper’s logistics system Resources customized to a specific client’s requirements Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

DIFFERENTIATION CONTRACT VS. PUBLIC Productivity sharing Business relationships Real estate arrangements Pricing agreements Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

INTEGRATED LOGISTICS SERVICES Mission-Provide services to meet all or significant part of a shipper’s total logistical requirements Titles-Third party logistics, contract logistics, logistics utilities, and integrated logistics service providers Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

CONSIDERATION OF QUALITATIVE DECISION FACTORS Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

TECHNOLOGY Remote Computing Automatic TrailerUL EDI Radio Frequency Sortation Systems HiDensity Unit Load Automatic Storage Scanning Pick-to-Light M’tl Handling Auto. Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

WAREHOUSING IN FUTURE TOPIC OF WORKSHOP Evolutionary cycles Become paperless Become shelfless Become seamless External factors Global networks People Third party Technology Reverse logistics Company examples Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

CONCLUSION Warehouse strategy is evolving to more focused and flexible Technology and expertise are key warehouse alternative determinants Operating and industry synergies are more important factors Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.