Warehousing Decisions Chapter 8 Warehousing Decisions

Management of Business Logistics, 7th Ed. Learning Objectives - After reading the chapter, you should be able to do the following: Discuss the strategic value-adding role warehousing plays in the logistics system. Explain the basic rationale for warehousing in light of transportation consolidation, product mixing, service, contingency protection, and smoothing. Develop an analytical framework for basic warehousing decisions. Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. Learning Objectives Distinguish between the different warehouse activities requiring space in the warehouse design. Discuss the major principles of warehouse layout design. Compare the use of private versus public warehousing. Explain public warehousing services, regulations, and pricing. Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. Learning Objectives Describe the decision-making approach used to determine the number of warehouses in the logistics system. Discuss the effect of materials handling and packaging on logistics. Describe the four dimensions and the objectives of materials handling. Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. Learning Objectives Discuss the different types of materials handling equipment and the criteria used to select this equipment. Explain the cross-functional role of packaging in a company. Discuss the role of packaging in the logistics system. Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. Learning Objectives Describe the various types of packaging materials available and their relative advantages and disadvantages. Explain the rationale for using bar codes to identify packages. Chapter 8 Management of Business Logistics, 7th Ed.

Logistics Profile: Grainger Industrial Supply Grainger is dedicated to providing excellent customer service using an effective network of warehouses and distribution centers providing same day or next day service. 13.6 million square feet in one national distribution center, two regional and six zone distribution centers, and 373 local branches 1.5 million customers, 220k SKUs, $4.5 billion in sales, 60k to 80k daily customer orders Chapter 8 Management of Business Logistics, 7th Ed.

The Nature and Importance of Warehousing In 1999, $75 billion, or 0.8 percent of GDP was spent on warehousing. The total supply of U.S. warehousing space in 1999 was 6.1 billion square feet, an increase from 1990 of 700 million square feet of space. Warehousing provides time and place utility 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.

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.

Figure 8-3 Basic Warehousing Decisions 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 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.

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 Up 23% per year in 2000 to $20.4 billion. 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.

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

Figure 8-7 The Computerized Warehouse 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.

Figure 8-9 Principles of Warehouse Layout Design 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. 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 Minimize aisle space 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. Figure 8-12 Utilization of a Warehouse’s Cubic Capacity: Principles of Warehouse Layout Design Chapter 8 Management of Business Logistics, 7th Ed.

Guidelines and Principles for Materials Handling To effectively plan and control materials handling, the logistics manager should recognize some guidelines and principles. Table 8-5 lists 20 of the most commonly accepted principles of effective materials handling. Asterisks mark those deserving special attention. Chapter 8 Management of Business Logistics, 7th Ed.

Table 8-5 Principles of Materials Handling 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 packaging Marketing managers primarily concerned with how the package fits into the marketing mix. Industrial 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.

Table 8-6 Comparison of Cushioning Materials 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.

Chapter 8: Summary and Review Questions Students should review their knowledge of the chapter by checking out the Summary and Study Questions for Chapter 8.

End of Chapter 8 and 8A Slides Warehousing Decisions