Warehousing Decisions Chapter 8 Warehousing Decisions

The Nature and Importance of Warehousing Warehousing provides time and place utility (primarily time) for raw materials, industrial goods, and finished products, allowing firms to use customer service as a dynamic value-adding competitive tool. Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. The Role of the Warehouse in the Logistics System: A Basic Conceptual Rationale The warehouse is where the supply chain holds or stores goods. Functions of warehousing include: Transportation consolidation Product mixing Cross-docking Service Protection against contingencies Smoothing Chapter 8 Management of Business Logistics, 7th Ed.

Table 8-1 Warehouse Value-Adding Roles Chapter 8 Management of Business Logistics, 7th Ed.

Figure 8-1 Transportation Consolidation Chapter 8 Management of Business Logistics, 7th Ed.

Figure 8-2 Supply and Product Mixing Chapter 8 Management of Business Logistics, 7th Ed.

Figure 8-3 Basic Warehousing Decisions Chapter 8 Management of Business Logistics, 7th Ed.

Basic Warehouse Decisions: A Cost Trade-off Framework Ownership Public versus contract versus private Centralized or Decentralized Warehousing How many Location Size Layout What products where Chapter 8 Management of Business Logistics, 7th Ed.

The Ownership Decision Public warehousing costs mostly all variable. Private warehousing costs have a higher fixed cost component. Thus private warehousing virtually requires a high and constant volume. Chapter 8 Management of Business Logistics, 7th Ed.

The Ownership Decision Factors to consider Throughput volume (because of fixed costs) Stability of demand Density of market area to be served Security and control needs Customer service needs Multiple use needs of the firm Chapter 8 Management of Business Logistics, 7th Ed.

Table 8-2 Firm Characteristics Affecting the Ownership Decision Chapter 8 Management of Business Logistics, 7th Ed.

Figure 8-6 Basic Warehouse Operations Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. Public Warehousing Rationale for Public Warehousing Limited capital investment Flexibility Public Warehousing Services Bonded warehousing Field warehouses Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. Public Warehousing Public warehousing regulation: Liability Receipts Public warehousing rates based upon: Value Fragility Potential damage to other goods Volume and regularity Weight density Services required Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. Contract Warehousing Increasing phenomenon Compensation for seasonality in products. Increased geographical coverage. Ability to test new markets. Managerial expertise and dedicated resources. Less strain on the balance sheet. Possible reduction of transportation costs. Other issues discussed in Chapter 11. Chapter 8 Management of Business Logistics, 7th Ed.

The Number of Warehouses Factors Affecting the Number of Warehouses Inventory costs Warehousing costs Transportation costs Cost of lost sales Maintenance of customer service levels Service small quantity buyers Chapter 8 Management of Business Logistics, 7th Ed.

Table 8-3: Factors Affecting the Number of Warehouses Centralized Decentralized Substitutability Low High Product Value Purchase Size Large Small Special Warehousing Yes No Product Line Diverse Limited Customer Service Chapter 8 Management of Business Logistics, 7th Ed.

Basic Warehouse Operations Movement Receiving Put-away Order picking Shipping Storage Stock location Warehouse Management System (WMS) Chapter 8 Management of Business Logistics, 7th Ed.

Warehouse Layout and Design Develop a demand forecast. Determine each item’s order quantity. Convert units into cubic footage requirements. Allow for growth. Allow for adequate aisle space for materials handling equipment. Chapter 8 Management of Business Logistics, 7th Ed.

Warehouse Layout and Design Provide for the transportation interface. Provide for order-picking space. Provide storage space. Provide recouping, office, and miscellaneous spaces. Chapter 8 Management of Business Logistics, 7th Ed.

Figure 8-8 Warehouse Space Requirements Chapter 8 Management of Business Logistics, 7th Ed.

Warehouse Layout and Design Basic needs: Receiving Basic storage area Order selection and preparation Shipping Chapter 8 Management of Business Logistics, 7th Ed.

Warehouse Layout and Design Layout and Design Principles: Use one story facilities where possible. Move goods in a straight-line. Use the most efficient materials handling equipment. Use an effective storage plan Minimize aisle space. Use full building height. Chapter 8 Management of Business Logistics, 7th Ed.

Warehouse Layout and Design: Layout and Design Objectives Cubic capacity utilization Protection Efficiency Mechanization Productivity Chapter 8 Management of Business Logistics, 7th Ed.

Table 8-4: Warehouse Productivity Metrics Pounds or units per day Employees per pound moved Pounds unloaded per hour Pounds picked per hour Pounds loaded per hour Percentage of orders correctly filled Productivity ratio = pounds handled/day divided by labor hours/day Throughput = amt of material moved through the system in a given time period Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. Materials Handling Definition: Efficient short distance movement in or between buildings and a transportation agency. Four dimensions Movement Time Quantity Space Coordination Chapter 8 Management of Business Logistics, 7th Ed.

Objectives of Materials Handling Increase effective capacity Use building’s height and minimize aisle space Improve operating efficiency Reduce product handling Develop effective working conditions Reduce heavy labor Improve logistics service Reduce cost Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. Table 8-5: Principles of Materials Handling To effectively plan and control materials handling, the logistics manager should recognize some guidelines and principles. (* deserving special attention) Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. Packaging Interest in packaging is widespread Logistics Warehousing Transportation Size Marketing Production Legal Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. The Role of Packaging Identify product and provide information Improve efficiency in handling and distribution Customer interface Protect product Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. What Is Packaging? Consumer (interior) packaging Marketing managers primarily concerned with how the package fits into the marketing mix. Industrial (exterior) packaging Logistics managers primarily concerned with efficient shipping characteristics including protection, ability to withstand stacking when on a pallet, cube, weight, shape and other relevant factors. Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. Packaging Materials Table 8-6 presents a comparison of various packing material characteristics. Basic considerations include: Soft materials Plastic Environmental issues Recycling (reverse logistics) Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. Bar Coding Standard markings that can be read by automatic or handheld scanners that allow for labor saving logistical activities for all supply chain members. Bar Codes contain information regarding: Vendor Product type Place of manufacture Product price Chapter 8 Management of Business Logistics, 7th Ed.

Materials-Handling Equipment Appendix 8A Materials-Handling Equipment

Management of Business Logistics, 7th Ed. Dock Equipment Forklifts Dock bumpers Dock levelers Dock seals Trailer restraint systems Pallets Chapter 8 Management of Business Logistics, 7th Ed.

Pallets and Pallet Movers Chapter 8 Management of Business Logistics, 7th Ed.

Figure 8A-1 Forklift Truck Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. Figure 8A-2 Pallet Types Chapter 8 Management of Business Logistics, 7th Ed.

Other Materials Handling Equipment: Conveyors Types Roller or gravity style Belt style Advantages Assist in keeping inventory records an location Ability to move goods quickly and efficiently Disadvantages Very expensive Relatively inflexible Chapter 8 Management of Business Logistics, 7th Ed.

Other Materials Handling Equipment: Other Types Cranes (overhead and wheeled) Packers (COFC and TOFC) Automatic guided vehicles Advantages Ability to handle special movements quickly and efficiently Disadvantages Very expensive and limited use Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. Cranes Chapter 8 Management of Business Logistics, 7th Ed.

Figure 8A-3 Materials-Handling Equipment Top-running Chapter 8 Management of Business Logistics, 7th Ed.

Order-picking and Storage Equipment Picker-to-part systems - order picker must travel to the pick location within the aisle. Bin shelving Modular storage drawers Flow racks Mobile storage systems Order-picking vehicles Chapter 8 Management of Business Logistics, 7th Ed.

Order-picking and Storage Equipment Part-to-picker systems - the pick location travels through an automated machine to the picker. Carousels Horizontal Vertical Mini-load automated storage and retrieval systems (AS/RS) Chapter 8 Management of Business Logistics, 7th Ed.

Figure 8A-4 Order-Picking Equipment Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. Figure 8A-5 Mezzanines Chapter 8 Management of Business Logistics, 7th Ed.

Types of Materials Handling Equipment – A Design Perspective Flexible path Fork lifts, power lifts/skids Very flexible, but usually labor intensive Continuous-flow fixed path Conveyors, track-guided vehicles Expensive but capable; limited flexibility; need high volumes to be efficient Intermittent-flow fixed path Rail-mounted cranes Chapter 8 Management of Business Logistics, 7th Ed.

Equipment Selection Factors Physical attributes of the product and its packaging Characteristics of the facility Time requirements Sources of information Vendor sales force Company engineers Consultants Similar site visitation and inspection Chapter 8 Management of Business Logistics, 7th Ed.