1. Introduction
Progression of Warehousing Decisions
Why Use Warehouses?
Types of Warehousing
Warehouse Operations
Warehousing Innovations
Warehouse Layout
Packaging

2. Progression of Warehousing Decisions.
Should Warehouses Be Used?
If Warehouses are Used, Should they be Public or Private?
Where Should they be Located?
What Should be their Capacities?
How Many Should You Have?
What Should be their Layout and Design?

3. Why Use Warehouses? Cope with Variable Market Conditions
Cope with Variable Sources of Supply
Production Economies
Purchasing Economies
Transportation Economies
Customer Service

4. Warehouse Operations
Planning, Organizing, Staffing, Equipping, and Controlling
Human Resource Management
Billing and Inventory Control
Order Filling
Local Delivery
Material Handling
Packaging
Safety, Security, Maintenance
Measuring Warehouse Efficiency

5. Warehouse Safety
J.N. Devin, "Cowboy After OSHA,“ 1972.

6. Warehousing Innovations
WERC – Established 1978
Housekeeping
Storage Heights
Automated Retrieval Systems
Bar Codes, Scanners, EDI, RFID, etc.
Narrow Aisle Equipment, Conveyors, etc.
The Distribution Center Concept
Assembly, Product Maintenance, Repair, etc.
Management Controls
Cross Docking

7. Costs of Increasing Storage Heights$
Total Cost
Labor &
Insurance C1
Construction
& Finance
Storage Height H1

8. Costs of Increasing Storage Heights Effects of New Technology$
Total Cost
Labor &
Insurance C1
Construction
& Finance
Storage Height H1

9. Costs of Increasing Storage Heights Effects of New Technology$
Total Cost
Labor &
Insurance C1 C2
Construction
& Finance
Storage Height H1 H2

10. Warehousing Innovations
WERC – Established 1978
Housekeeping
Storage Heights
Automated Retrieval Systems
Bar Codes, Scanners, EDI, RFID, etc.
Narrow Aisle Equipment, Conveyors, etc.
The Distribution Center Concept
Assembly, Product Maintenance, Repair, etc.
Management Controls
Cross Docking

11. Types of Warehousing Private Warehousing Public Warehousing8 4
Types of Warehousing
Private Warehousing
Public Warehousing
Contract Warehousing
Cross-Docking

12. Private vs Public Warehousing
(Without Cost of Capital)
Public $
(All Variable Cost)
Private
(Fixed + Variable Cost)
Prefer Public
Indifferent
Prefer Private
Volume

13. (Without Cost of Capital)
Indifference Point Between Public and Private
(Without Cost of Capital)
Private = Fixed Costs + Variable Costs
Public = Variable Costs
Example:
Private Fixed Costs = $500,000/year
Private Variable Costs = $0.15/pound
Public Variable Costs = $0.25/pound
Indifference point is where both costs are equal
500, X = .25X
500,000 = .10X
X = 5,000,000 pounds
ROI = 0

14. Private vs Public Warehousing
(With Cost of Capital) $
Public
Savings
(All Variable Cost)
Private
(Fixed + Variable Cost)
Prefer Public
Indifferent
Prefer Private
Volume

15. Indifference Point Between Public and Private
(With Cost of Capital)
Private = Fixed Costs + Variable Costs
Public = Variable Costs
Example:
Private Fixed Costs = $500,000/year
Private Variable Costs = $0.15/pound
Public Variable Costs = $0.25/pound
Indifference point is where savings = desired ROI
Savings
Average Investment
= ROI

16. Indifference Point Between Public and Private
(With Cost of Capital)
Desired ROI = Hurdle Rate
Savings = Public – Private
Average Investment = Initial Investment /2
Example:
Hurdle Rate = 10%
Investment = $8,000,000
Private Fixed Costs = $500,000/year
Private Variable Costs = $0.15/pound
Public Variable Costs = $0.25/pound

17. Indifference Point Between Public and Private
(With Cost of Capital)
Hurdle Rate = 10%
Investment = $8,000,000
Private Fixed Costs = $500,000/year
Private Variable Costs = $0.15/pound
Public Variable Costs = $0.25/pound
Savings = Public - Private
.25X - (500, X)
4,000,000
= .10

18. Indifference Point Between Public and Private
(With Cost of Capital)
Savings = Public – Private
.25X - (500, X)
4,000,000
= .10
.25X - (500, X)
= .10 * 4,000,000
.25X , X
= 400,000
.25X X
= 400, ,000
.10X
= 900,000 X
= 9,000,000

19. Advantages of Private Warehousing
Greater Control
Flexibility (CS Needs, Space Use, etc.)
Tax Benefits (Depreciation)
Image to Customers
Potentially Lower Cost

20. Disadvantages of Private Warehousing
Lack of Flexibility (Fixed Size/Location)
Capital Requirements
Equipment Maintenance/Training
Potential Labor Problems

21. Advantages of Public Warehousing
Capital Conservation
Ability to Meet Peak Demand
Reduced Risk
Flexibility WRT Volume
Avoidance of Property Taxes
Avoidance of Labor Problems
Potentially Lower Cost
Knowledge of Exact Costs

22. Disadvantages of Public Warehouses
Lack of Control
Difficult Communications
Not Always Available
Potentially Higher Cost

23. Cross-Docking
An operations procedure that allows product to be delivered and received on one side of a facility, undergoes internal handling procedures at the receiving dock, distributing unit loads and moving the product to shipping docks on the other side of the facility where trucks or rail cars are waiting to be loaded for customer delivery.

24. Cross-Docking

25. Cross-Docking

26. Warehouse Layout Angling vs On-the-Square Fixed vs Variable Slots
Space Loading Techniques
Item Popularity
Item Size
Cube per Order Index
Family Groupings
Linear Programming
Simulation

27. Cost of Fixed vs Variable Storage Slots$
Total Cost
Labor C1
Space Utilization V1
Percent Variable

28. Cost of Fixed vs Variable Storage Slots Effects of New Technology$
Total Cost
Labor C1
Space Utilization V1
Percent Variable

29. Cost of Fixed vs Variable Storage Slots Effects of New Technology$
Total Cost
Labor C1 C2
Space Utilization V1 V2
Percent Variable

30. Warehouse Layout Angling vs On-the-Square Fixed vs Variable Slots
Space Loading Techniques
Item Popularity
Item Size
Cube per Order Index
Family Groupings
Linear Programming
Simulation

31. Functions of Packaging
Marketing
Information
Promotion
Logistics
Containment
Protection
Apportionment
Unitization
Convenience
Communication

32. Postponement
What is it?
Why do we do it?
Examples

33. Postponement What is it?
A delayed differentiation strategy to reduce uncertainty and cost while satisfying customer needs.
Activities in the supply chain are delayed until a demand is realized.
Bucklin (1965) Model of Postponement /Speculation

34. Postponement Why do we do it?
It has the potential to improve responsiveness while reducing inventory, transportation, storage, and obsolescence.
Insufficient inventory early in the product cycle can cost market share.
Products at the end of life cycle lose value quickly and risk obsolescence, which can lead to large inventory write-offs.