Warehousing Decisions

1
Chapter 8

• Warehousing Decisions

2
The Nature and Importance of Warehousing

• Warehousing provides time and place utility
  (primarily time) for raw materials, industrial
  goods, and finished products, allowing firms to
  use customer service as a dynamic value-adding
  competitive tool.

3
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

4
Table 8-1Warehouse Value-Adding Roles
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Figure 8-1Transportation Consolidation
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Figure 8-2Supply and Product Mixing
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Figure 8-3Basic Warehousing Decisions
8
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

9
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.

10
The Ownership Decision

• Factors to consider
• Throughput volume
• (because of fixed costs)
• Stability of demand
• Density of market area to be served
• Security and control needs
• Customer service needs
• Multiple use needs of the firm

11
Table 8-2 Firm Characteristics Affecting the
Ownership Decision
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Figure 8-6 Basic Warehouse Operations
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Public Warehousing

• Rationale for Public Warehousing
• Limited capital investment
• Flexibility
• Public Warehousing Services
• Bonded warehousing
• Field warehouses

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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

15
Contract Warehousing

• Increasing phenomenon
• 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.

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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

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Table 8-3 Factors Affecting the Number of
Warehouses
Factor Centralized Decentralized
Substitutability Low High
Product Value High Low
Purchase Size Large Small
Special Warehousing Yes No
Product Line Diverse Limited
Customer Service Low High
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Basic Warehouse Operations

• Movement
• Receiving
• Put-away
• Order picking
• Shipping
• Storage
• Stock location
• Warehouse Management System (WMS)

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Warehouse Layout and Design

• Develop a demand forecast.
• Determine each items order quantity.
• Convert units into cubic footage requirements.
• Allow for growth.
• Allow for adequate aisle space for materials
  handling equipment.

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Warehouse Layout and Design

• Provide for the transportation interface.
• Provide for order-picking space.
• Provide storage space.
• Provide recouping, office, and miscellaneous
  spaces.

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Figure 8-8 Warehouse Space Requirements
22
Warehouse Layout and Design

• Basic needs
• Receiving
• Basic storage area
• Order selection and preparation
• Shipping

23
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.
• Use an effective storage plan
• Minimize aisle space.
• Use full building height.

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Warehouse Layout and Design Layout and Design
Objectives

• Cubic capacity utilization
• Protection
• Efficiency
• Mechanization
• Productivity

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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

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Materials Handling

• Definition Efficient short distance movement in
  or between buildings and a transportation agency.
• Four dimensions
• Movement
• Time
• Quantity
• Space
• Coordination

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Objectives of Materials Handling

• Increase effective capacity
• Use buildings height and minimize aisle space
• Improve operating efficiency
• Reduce product handling
• Develop effective working
• conditions
• Reduce heavy labor
• Improve logistics service
• Reduce cost

28
Table 8-5 Principles of Materials Handling To
effectively plan and control materials handling,
the logistics manager should recognize some
guidelines and principles.( deserving special
attention)
29
Packaging

• Interest in packaging is widespread
• Logistics
• Warehousing
• Transportation
• Size
• Marketing
• Production
• Legal

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The Role of Packaging

• Identify product and provide information
• Improve efficiency in handling and distribution
• Customer interface
• Protect product

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What Is Packaging?

• Consumer (interior) packaging
• Marketing managers primarily concerned with how
  the package fits into the marketing mix.
• Industrial (exterior) 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.

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Packaging Materials

• Table 8-6 presents a comparison of various
  packing material characteristics.
• Basic considerations include
• Soft materials
• Plastic
• Environmental issues
• Recycling (reverse logistics)

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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

34
Appendix 8A

• Materials-Handling Equipment

35
Dock Equipment

• Forklifts
• Dock bumpers
• Dock levelers
• Dock seals
• Trailer restraint systems
• Pallets

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Pallets and Pallet Movers
37
Figure 8A-1 Forklift Truck
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Figure 8A-2 Pallet Types
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Other Materials Handling Equipment Conveyors

• Types
• Roller or gravity style
• Belt style
• Advantages
• Assist in keeping inventory records an location
• Ability to move goods quickly and efficiently

• Disadvantages
• Very expensive
• Relatively inflexible

40
Other Materials Handling Equipment Other

• Types
• Cranes (overhead and wheeled)
• Packers (COFC and TOFC)
• Automatic guided vehicles

• Advantages
• Ability to handle special movements quickly and
  efficiently
• Disadvantages
• Very expensive and limited use

41
Cranes
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Figure 8A-3 Materials-Handling Equipment
Top-running
43
Order-picking and Storage Equipment

• Picker-to-part systems - order picker must travel
  to the pick location within the aisle.
• Bin shelving
• Modular storage drawers
• Flow racks
• Mobile storage systems
• Order-picking vehicles

44
Order-picking and Storage Equipment

• Part-to-picker systems - the pick location
  travels through an automated machine to the
  picker.
• Carousels
• Horizontal
• Vertical
• Mini-load automated storage and retrieval systems
  (AS/RS)

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Figure 8A-4 Order-Picking Equipment
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Figure 8A-5 Mezzanines
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Types of Materials Handling Equipment A Design
Perspective

• Flexible path
• Fork lifts, power lifts/skids
• Very flexible, but usually labor intensive
• Continuous-flow fixed path
• Conveyors, track-guided vehicles
• Expensive but capable limited flexibility need
  high volumes to be efficient
• Intermittent-flow fixed path
• Rail-mounted cranes

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Equipment Selection Factors

• Physical attributes of the product and its
  packaging
• Characteristics of the facility
• Time requirements
• Sources of information
• Vendor sales force
• Company engineers
• Consultants
• Similar site visitation and inspection