1. Warehousing Decisions
Chapter 8
Warehousing Decisions

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.

7. 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.

8. 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.

9. 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.

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

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

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

13. 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.

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

15. 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.

16. 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.

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

18. 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.

19. 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.

20. 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.

21. 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.

22. 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.

23. 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.

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

25. Figure 8-7 The Computerized Warehouse
Chapter 8
Management of Business Logistics, 7th Ed.

26. 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.

27. 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.

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

29. Figure 8-9 Principles of Warehouse Layout Design
Chapter 8
Management of Business Logistics, 7th Ed.

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

31. 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.

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

33. 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.

34. 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.

35. 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.

36. Management of Business Logistics, 7th Ed.
Figure Utilization of a Warehouse’s Cubic Capacity: Principles of Warehouse Layout Design
Chapter 8
Management of Business Logistics, 7th Ed.

37. 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.

38. Table 8-5 Principles of Materials Handling
Chapter 8
Management of Business Logistics, 7th Ed.

39. 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.

40. 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
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Management of Business Logistics, 7th Ed.

41. 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.

42. 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.

43. Table 8-6 Comparison of Cushioning Materials
Chapter 8
Management of Business Logistics, 7th Ed.

44. 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.

45. 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.

46. End of Chapter 8 and 8A Slides
Warehousing Decisions