Chapter 8: Storage and Handling Also Chapter 12 pp. 470-475 Warehousing Purposes Warehouse Alternatives Public, Private, Direct Materials Handling Costs Warehouse Layout Order Picking

Inventory Inventory (storage) is movement in time. Transportation is movement in space. Inventory cost is 2nd largest component of logistics cost. Generally 10-40% of total. $328 billion in U.S. in 2001 Large companies have billions of $ in inventories. Nearly all logistics cost savings since 1987 have been from reduced inventories!

Why Store Goods? Economies of scale in production & transportation. Coordinate supply and demand. Seasonal products. For example: 60% of toys are sold in holiday season. Note: <5% of toys are produced in U.S. Speculation. Feb. 2002 - Ford wrote off $1 billion in precious metals. Customer service. Part of production.

Warehouse Purposes Holding inventory. Transshipment. Safe storage of goods. Transshipment. 1. Consolidation. 2. Breakbulk. LTL LTL TL LTL TL LTL

Warehouse Purposes - cont. Transshipment. 3. Mixing. TL LTL

Velocity Cycle time and transit time are decreasing. Cycle Time Transit Time 1990 83 hrs 54 hrs 1995 58 hrs 41 hrs 2000 49 hrs 37 hrs Turnover ratios are increasing. Plant Field Warehouse Warehouse 1990 8.8 8.9 1995 10.7 9.4 2000 11.2 10.2

Warehouse Alternatives Direct shipping (no warehousing). Private warehousing. Better control, Special needs, Future use of space. High fixed cost, Constant size and location. Public warehousing. Inexpensive for small amounts, Can vary size and location, Can provide additional services (customs,etc.). Less control. Combination of public and private. Storage in transit.

Products & Warehouse Alternatives Private Public Direct Durable goods 67% 20% 13% Food products 57% 31% 12% Paper 65% 10% 25% Chemical 40% 38% 22% Automotive 86% <10% <10% Electronics 84% <10% <10%

Materials Handling Loading and unloading. Movement to and from storage. Order picking. Economies of scale: Larger loads are more efficient. Pallets: 40” x 48” x 6” Slipsheets: 40” x 48” Containers: 8’ x 8’ x 20’, 8’ x 8’ x 40’ Containers also function as warehouses.

Materials Handling Equipment Hand trucks. Forklifts. Automated systems: Conveyers, Draglines, Automatic guided vehicles. ASR (Automated storage and retrieval systems). Container handling. Expensive special purpose equipment. Bulk handling (coal, grain, etc.) requires special equipment.

Warehouse Costs Fixed Variable Public 1 5 Leased 2 4 Private - Manual handling 3 3 Private - Pallet/Forklift 4 2 Private - Automated 5 1 1 = lowest cost

Warehouse Costs Total Cost cwt Handled Private - Manual handling Public Private - Manual handling Private - Automated Total Cost cwt Handled

Warehouse Costs Total Cost cwt Handled Private - Manual handling Public Private - Manual handling Private - Automated Total Cost Use Private - Manual handling Use Private - Automated Use Public cwt Handled

Warehouse Layout Divide floor space into areas for storage, aisles, packing, offices, etc. Tradeoff: Ease of handling vs. Utilization of space. Minimize handling and maximize space utilization. Storage Layout for low turnover items. Narrow aisles, wide and deep storage, high shelves. Layout for order picking. Wide aisles, easy access to products. Guidelines on pp. 447-455 (Chapter 12).

Combination Layout Have one area for order picking with small amounts of fast moving products. Have another area for storage. inbound receiving Longer term storage Longer term storage shipping Longer term storage outbound offices

Order Picking Strategies Minimize travel time/distance in warehouse to fill orders. Sequence items for single pass order picking. Zoning: Divide stock into separate zones for different pickers. Divide order into sub-orders for each zone. Batching: Collect several orders and fill in one pass. Interleaving: Replace stock and fill orders on same pass.