1. Warehousing Reference Lecture 9 PMM

2. Additional Functions CONSOLIDATION 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) 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

3. CONSOLIDATION – How it Works? CUSTOMERCUSTOMER Product A Product B Product C Product D Product E Places Small Orders Product A Product B Product C Product D Product E LTL Trucks Product X Product Y Product Z CONSOLIDATION WAREHOUSE MANAGED BY A 3PL A, B, C, D, E A, B, X, Y, Z D, E, F, Y, Z AREA Benefits & Concerns With Consolidation?

4. Example

5. Additional Functions (contd…) BREAK BULK Warehouses that receive product in bulk, and then repackage the product based on customer requirements. In the case of containers with imported products, this generally requires the inspection and relabeling of product. Generally, special billing rules apply.

6. Example

7. Additional Functions (contd…) CROSS DOCKING Cross docking is a logistics procedure where products from a supplier or manufacturing plant are distributed directly to a customer or retail chain with marginal to no handling or storage time. Cross docking takes place in a distribution docking terminal; usually consisting of trucks and dock doors on two (inbound and outbound) sides with minimal storage space. The name ‘cross docking’ explains the process of receiving products through an inbound dock and then transferring them across the dock to the outbound transportation dock.

8. Additional Functions (contd…) POSTPONEMENT OF PRODUCTION PROCESSING This Functionality of warehousing enables postponement of commitment of products to customer until orders are received from them. This is utilized by manufacturers or distributors for storing products ready up to packaging stage. These products are packaged and labelled for the particular only on receipt of the order. For e.g. Asian Paints has 1000s of SKUs and its literally impossible to store all the SKUs in all of their retail stores. Basically, Asian Paints postpones the “coloring” part to last stage and hence any dealer/retailer when they order a color, can receive the paint within a days time

9. Additional Functions (contd…) STOCK PILING This function of warehousing is related to seasonal manufacturing or demand. In the case of seasonal manufacturing, certain raw materials are available during short periods of the year. Hence, manufacturing is possible only during these periods of availability, while the demand is full year around. This requires stockpiling of the products manufactured from these raw materials. An example is mango pulp processing. On the other hand, certain products like woolens are required seasonally, but are produced throughout the year, and thus need to be stockpiled as such.

10. 10 Factors Influencing Warehousing in the Future Time – The best warehouse operations are those designed to reduce every aspect of order cycle time. Quality – Users now expect performance that approaches perfection. Asset productivity – Reduce total cost, reuse, and recycle. New kind of workforce – Requirements for both management and labor will change significantly.

11. 11 Basic Warehousing Decisions 1. Which logistics system design should be adopted? 2. Should warehousing be owned, leased, rented, or some combination of these? 3. Should warehousing functions be subcontracted to a third party? 4. Should new materials handling equipment, or use labour intensive materials be installed? 5. How much capacity is required? 6. Where should warehouses be located? 7. What type of warehousing layout is appropriate?

12. Warehouse Strategies – Qualitative Decision Factors A warehouse designed for full-capacity will be utilized between 75% and 85% of the time. Thus 15% to 25% of the time, warehouse space will not be utilized to meet peak requirements (Similar to Pareto Principle?) Adjust internal policies and procedures to meet product and customer needs Ability to reduce material-handling and storage through application of advanced technologies Inventory located within proximity of the enterprise Co-locating with other firms serving the same industry Prompt adjustment with warehouse location and numbers in accordance to seasonal or permanent demand Number of Warehouses Types of Warehouses Warehouse Location Warehouse Layout & Design Please Note: There are more points. Find them!

13. Warehouse Strategies – Qualitative Decision Factors Location of major markets Nature of products being distributed Quality and variety of carriers serving the proposed site Quality & Quantity of labour available Cost of industrial land Potential for expansion Local tax structures Cost of construction Cost & availability of utilities Local government tax concessions or incentives

14. 14 Types of Warehousing Direct Store Delivery (market products directly to customers) Public Warehousing (to rent space) Private Warehousing (to own or lease space)

15. 15 Six types of Public Warehousing General Merchandise Warehouses for manufactured goods Refrigerated or Cold Storage Warehouses Bonded Warehouses Household Goods and Furniture Warehouses Special Commodity Warehouses Bulk Storage Warehouses Other options Cross-docking Contract Warehousing

16. Factors influencing Warehousing Two Aspects covered Size of Warehouses – Measured in terms of square footage or floor space – Measured in terms of cubic space of the entire facility Number of Warehouses

17. Factors Affecting the Size 1.Customer service levels – Higher the level, carry more stock 2. Size of market (served) – Wider the market, carry more stock 3. Number of products marketed – Full range of product need more space 4. Size of the products – Bulky one requires more space 5. Materials handling system used – Prepare turn round basin, aisle width 6. Throughput rate (i.e. inventory turnover) – Dedicated location for package/dispatch 7. Production lead time 8. Economies of scale 9. Stock layout 10. Aisle requirement 11. Office area in warehouse 12. Type of racks and shelves used 13. Level of pattern of demand

18. Determining Warehouse Size 1. Obtain monthly sales projection in the planning period 2. Convert sales revenue into volume by product group by months 3. Get the average inventory volume by considering turnover rate 4. Sum the total volume 5. Convert into area requirements by dividing the total volume by ceiling height 6. Discount by the utilization factor: aisle, gangway 7. Once a monthly figure on area requirement is obtained, a range of sizes is obtained 8. Match the range with the sales volume. Anything over a particular size is outsourced 9. Quantify the use of private and outsourced warehouse in dollars 10.The size that results in the least total warehouse operating expenses is the right size

19. Determinants of Storage Space Requirements These Situations Decrease the Need For Storage SpaceThese Situations Increase the Need for Storage Space Decrease in production or sales Decrease in number of SKUs Less volatile demand (including longer product life cycles) Customer handles store delivery Smaller manufacturing lot sizes Smaller purchase amounts Higher inventory turns Better information Quicker transportation Cross-docking Carrier performing consolidation Market or company expansion Shorter product life cycle Increase in number of SKUs Direct store delivery on a quick response basis Elimination of distributors Expansion into specialized products Import/export items Lengthened production process Increase in minimum manufacturing lot size Requirement for faster response time Inflation/forward buying

20. Deciding Number of Warehouses Costs of Lost Sales Inventory Costs Warehousing costs Transportation costs

21. Relationship Between Total Logistics Cost and the No. of Warehouses

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23. source http://books.google.co.in/books?id=sHzM4kaGTusC&pg=PA13&lpg=PA13&dq=stock piling+as+warehousing+function&source=bl&ots=v0iSBhLj4x&sig=eXv46HGKfTxysXh NVQsnEjX9mXk&hl=en&sa=X&ei=dXLaU- epL9GzuAS6j4DoDQ&ved=0CC4Q6AEwAg#v=onepage&q=stockpiling%20as%20ware housing%20function&f=false http://logisticssupplychainforum.blogspot.in/2010/03/logistics-warehouse- management-part-i.html