1. Consolidation Warehousing Aubrey Blacker Brigham Young University

2. Agenda: Define Consolidation Warehousing How can it be used in your organization? Nuts and Bolts How it Works Real-World Example Exercise

3. What is Consolidation Warehousing? A form of warehousing that pulls together small shipments from a number of sources (often plants) in the same geographical area and combines them into larger, more economical, shipping loads intended for the same area -Like Carpooling!

4. Small, flexible shipments in- Large, economical shipments out

5. How can Consolidation Warehousing be used in your organization?

6. How would implementing Consolidation Warehousing affect your organization’s… Profitability? Delivery Time? Inventory Levels? Customer Satisfaction? Reputation within the industry?

7. Nuts and Bolts Consolidation warehouses are constructed at a strategic location between manufacturers and customers Third-Party Logistics Providers (3PLs) manage and maintain the consolidation warehouse and the information system needed to run it –Goal: Maximize transportation utilization and minimize costs Warehouses can either be client-dedicated or multi- user facilities

8. How it Works: 1.Customer places several small orders from multiple manufacturers in the same area

9. How it Works 2. Several Less-than-truckloads (LTL) of product from manufacturers in the same area arrive at the consolidation warehouse

10. How it Works 3. The 3PL strategically consolidates these small orders from multiple manufacturers into one full Truck Load (TL) headed to the customer using tactical transportation modeling tools

11. How it Works Tactical Transportation Modeling Tools –Input = Customer and purchase order date requirements –Look to minimize cost by selecting: Most appropriate mode of transportation Most appropriate carrier within that mode of transportation –Optimize routes and generate a detailed load plan

12. How it Works 4. Customer receives product orders from various manufactures in one transaction -As load size increases, shared transportation costs among manufactures decreases

13. Benefits of Consolidation Warehousing Lower shipping costs for participants More efficient transportation No capital investment required –Reduces risk Allows manufactures to focus on their core competencies Lower product costs for customers Lower inventory levels required

14. Concerns associated with Consolidation Warehousing Manufacture’s and customer’s information systems must be aligned with the 3PLs –Could be costly Takes immediate control of product transportation out of the manufacturer’s hands Requires collaboration among suppliers, customers and carriers –May be hard to coordinate

15. A Real World Example Frozen Food Industry

16. A Real World Example Situation: Retailers wanted smaller, more frequent shipments –More profitable because it keeps inventory levels down Truck shortage –Shipping LTLs became very costly

17. A Real World Example 3PLs provided dry, refrigerated/frozen warehouse space to keep products fresh –Managed required product information by using: Barcodes Scanning Instant Messaging Internet Other internet-based information systems

18. A Real World Example Multiple Manufacturers in the same area used these consolidation warehouses to combine LTL deliveries to retailers

19. A Real World Example Result: CW maximized truck utilization –Solved capacity shortage issue in the trucking industry And minimized costs/maximized profitability –Decreased shipping costs –Helped retailers maintain low inventories and retain high profits

20. An Exercise The Penny Game!

21. Summary Consolidation Warehousing = pulling together small shipments from a close geographical area and combining them to make larger, more economical, shipments to the customer –Used to minimize transportation costs and maximize efficiency –Beneficial for manufacturers and retailers –Applicable across many industries

22. Readings list Bozarth, Cecil C., Handfield, Robert B. Introduction to Operations and Supply Chain Management. Pearson Prentice Hall, United States of America, 2005. Frazelle, Edward H. Supply Chain Strategy. Blacklick, OH, USA: McGraw-Hill Education Group, 2001. p 228. http://site.ebrary.com/lib/byuprovo/Doc?id=10041412&ppg=240 “Chill Challenge”. Food Logistics Age. July 2005. Cygnus Business Media Inc. “US Logistics 2005”. Transport Intelligence Ltd. June 2005 USL0506. Warehousing Education and Research Council (WERC): www.werc.orgwww.werc.org