IE6202: Warehousing Systems

1. IE6202: Warehousing Systems Instructor: Spyros Reveliotis Office: Room 316, ISyE Bldng tel #: (404) 894-6608 e-mail: spyros@isye.gatech.edu homepage: www.isye.gatech.edu/~spyros

2. “Course Logistics” • Office Hours: 1:30-2:30pm TuTh (also an open-door policy will be generally adopted, but an appointment arranged by e-mail is preferred) • Grading policy: • Homework & Projects: 30% • Midterm: 30% (Tent. Date: Thursday, Oct. 17) • Final: 40% (Date: Monday, Dec. 9) • Exams closed-book, with 3 pages of notes per exam • Make-up exams and Incompletes:Only for very serious reasons, which are officially documented.

3. “Course Logistics” (cont.) • Course Reading Materials • J. Bartholdi and S. Hackman, “Warehouse and Distribution Science”, Release 0.1.2, unpublished manuscript, 2000, URL:http://www.isye.gatech.edu/~spyros • Lectures posted on the course Web-site accessed by my homepage • Material posted on the Georgia Tech Library electronic reserves • Books on reserve: • Tompkins et al., “Facilities Planning”, John Wiley & Sons, 1996. • Heragu, S., “Facilites Design” PWS Publishing Co., 1997. • Francis et al. “Facility Layout and Location: An analytical approach”, 2nd ed. Prentice Hall, 1992. • Askin and Standridge, “Modeling and Analysis of Manufacturing Systems”, John Wiley & Sons, 1993.

4. Course Objectives(What is this course all about?) • An introduction to the fundamental concepts and issues and algorithms involved in the design and operation of contemporary warehouses and distribution centers • In particular, a balanced development of the following issues: • A systematic exposition of the organization and operation of contemporary warehouses, and their role in the overall supply chain • A systematic presentation of the equipment involved, its basic attributes and functionality, and its connection to the sought efficiencies • A decomposition of the overall warehouse deisgn, operations planning and control problem to a series of sub-problems, and the development of analytical/quantitative methodologies for addressing these sub-problems • Implementation of (some of) these methodologies on some basic computational tools used in practice (mainly through the project assignments)

5. Next... • Understanding the role of warehouses in contemporary distribution networks • A description of the warehouse operations and equipment • A (conceptual) description of the major design, planning and control problems arising in contemporary warehousing • Key References • J. Bartholdi and S. Hackman, “Warehouse and Distribution Science”, Release 0.1.2, unpublished manuscript, 2000, URL: http://www.isye.gatech.edu/~spyros/: Chpts 1-4 • G. Sharp, “Warehouse Management”, Chpt 81 in Handbook of Industrial Engineering, by G. Salvendy (ed.), John Wiley & Sons, NY, 2000. • Tompkins et al., “Facilities Planning”, John Wiley & Sons, 1996: Chpt. 9 • B. Rouwenhorst et. al., “Warehouse design and control: Framework and literature review”, European Journal of OR, Vol. 122, pgs 515-533, 2000. • Yoon, C. S. and Sharp, G., “A structured procedure for analysis and design of order pick systems”, IIE Trans., Vol. 28, pgs 379-389, 1996

6. The role of warehousing in contemporary distribution networks • Buffer: It holds inventory for downstream stages of the supply chain, in order to allow the entire production / distribution network to deal efficiently with the systematic and random variation in the network operations, or to exploit significant economies of scale. • Typical sources/examples of systematic variation • product seasonalities (e.g., Toys R Us, CVS merchandise) • cyclical / batched production due to large set-up costs • Typical sources of random variation • variations in transportation times due to weather, traffic congestion, bereaucracy, etc. • variations in production times due to unreliable operations, unreliable suppliers • Typical economies of scale involved • Price breaks in bulk purchasing

7. The role of warehousing in contemporary distribution networks (cont.) • Consolidation center: It accumulates and consolidates products from various points of manufacture within a single firm, or several firms, for combined shipment to common customers. • Consolidation allows to control the overheads of transportation operations by: • allowing the operation of the carriers to their capacity, and therefore, the more effective amortizing of the fixed transportation costs • reducing the number of shipping and receiving operations • Cross-docking: Consolidation without staging

8. The role of consolidation in contemporary distribution networks Retailers Manufacturers Manufacturers Consolidator Retailers

9. The role of warehousing in contemporary distribution networks (cont.) • Value-Added-Processing (VAP):Increasingly, warehouses are required to undertake some value-added-processing tasks like: • pricing and labeling • kitting (i.e., repackaging items to form a new item; e.g., “beauty” products) • light final assembly (e.g., assembly of a computer unit from its constituent components, delivered by different suppliers) • invoicing • In general, this development is aligned to and suggested by the idea/policy of postponement of product differentiation, which allows for customized product configuration, while maintaining a small number of generic product components.

10. Warehouse classification by “customer type” • Factory warehouse:Interfaces production with wholesalers • small number of large orders daily • advance info about order composition • Retail Distribution warehouse: Serves a number of captive retail units • advance info about order composition • carton and item picking from a forward area • more orders per shift than consolidation/shipping lanes • Catalog Retailer: A warehouse filling orders from catalog sales • a large number of small (frequently single-line) orders • item and, sometimes, carton picking • daily composition of orders usually unknown • only statistical information available • Support of Manufacturing operations: A stock room providing raw material and/or work-in-process to manufacturing operations • many small orders • only statistical information available about order composition • stringent time requirements (e.g., response in 30 min)

11. Product concepts related to the characterization of material flow in a contemporary warehouse • Item (otherwise piece or each): The smallest unit of product sold by a distribution center, e.g., • a 1-liter bottle of a soft drink • a box of 100 paper clips • Carton: a paperboard container holding identical product, usually of a size and weight allowing manual handling; example dimensions: 14x10x20in or 30x20x40cm. • Tote: a container usually made of plastic and often used for storing and handling different products; usually similar in size to a carton, but re-usable.

12. Product concepts related to the characterization of material flow in a contemporary warehouse (cont.) • Inner pack: several units of a product secured together and sold by the distribution center as a unit, if many items are contained in a carton, and purchase quantities per item are large; a carton contains several inner packs. • Pallet: a set of cartons or totes of identical product arranged in a cubical pattern and usually supported by a base that may be of wood or plastic; example dimensions are 40x48x54in and 80x120x100cm. • Mixed unit load: a set of cartons or totes of different products arranged to a cubical pattern similar to a pallet, often wrapped or strapped for stability. • Overpack: a large carton or tote containing different products; smaller than a pallet but larger than a carton, so that manual handling may be difficult.

13. Product concepts related to the characterization of material flow in a contemporary warehouse (cont.) • Stock Keeping Unit (SKU): a set of product(s), packaged in a pre-specified manner, that it is identified as a distinct entity for distribution purposes; e.g., • a 2-liter bottle of Coca-Cola Classic • 6 2-liter bottles of Coca-Cola Classic packed in a carton • 12-ounce cans of Coca-Cola Classic, packed 24 in a carton. • Order: a document from a customer, requesting specific SKU’s in specific quantities. • Line item: a “line” in an order document designating a specific SKU and quantity

14. A schematic representation of the warehouse material flow Replenishment Replenishment Reserve Storage and Pallet Picking Case Picking Broken Case Picking Accumulation, Sortation & Packing Direct putaway to reserve Direct putaway to primary Receiving Shipping Cross-docking

15. The major warehouse operations • Inbound processes • Receiving (~10% of warehouse operating costs): the collection of activities involved in • the orderly receipt of all materials coming into the warehouse; • providing the assurance that the quantity and quality of such materials are as ordered; • disbursing materials to storage or to other organizational functions requiring them. • Put-away (~15% of warehouse operating costs): the act of placing merchandise to storage; it includes • determining and registering the actual storage location(s) • transportation • placement

16. The major warehouse operations (cont.) • Outbound processes • Processing customer orders (typically done by the computerized warehouse management system of the facility): This set of activities includes • checking that the requested material is available to ship; • if necessary, coordinating order fulfillment with other facilities of the distribution network; • producing the “pick” lists to guide the order picking and the necessary shipping documentation; • scheduling the order picking and the shipping activity. • Order-picking (~55% of warehouse operating costs): the set of physical activities involved in collecting from the storage area the materials necessary for the fulfillment of the various customer orders, typically identified as: • traveling (~55% of the order picking time) • searching (~15% of the order picking time) • extracting (~10% of the order picking time) • documentation and other activities (~20 % of the order picking time)

17. The major warehouse operations (cont.) • Outbound processes (cont.) • Checking: Checking orders for completeness (and quality of product) • Packing: Packaging the merchandise in appropriate shipping containers, and attaching the necessary documentation / labels. • Shipping: The activities of • preparing the shipping documents (packing list, address label, bill of lading); • accumulating orders to outbound carrier; • loading trucks (although, in many instances, this may be the carrier’s responsibility). • Others: Handling returns, and performing the additional value-added-processing supported by contemporary warehouses, as discussed in a previous slide.

18. …or in Yoon and Sharp’s representation... RECEIVING pallets (items totes) cases pallets cases overpacks mul PALLET RESERVE Breakdown function pallets pallets CASE PICK (items cases) pallets cases cases cases ITEM PICK totes (cases) items (items cases) totes SORTING A totes totes Consolidation Function SORTING B (items cases) totes totes cases overpacks UNITIZING totes cases overpacks mul pallets SHIPPING

19. Operational Cost Breakdown 10% 20% 15% 55%

20. The major concerns underlying the organization of order-picking • Establish an efficient operation by controlling the order-picking labor costs, especially those due to traveling, and • maintain a high level of responsiveness to customer orders, while • preserving the order integrity. Responsiveness Costs Quality

21. How? • By organizing the associated work-flow so that it presents • high pick density, i.e., average number of picks per foot of travel • short (order) flow time, i.e., the amount of time elapsed between the arrival of an order into the warehouse management system and the time it is loaded on the shipping carrier, • while providing the appropriate “mechanisms / procedures” to • maintain the order integrity.

22. Major mechanisms for increasing the pick density • Establishing a high SKU density, i.e., the number of SKU’s encountered per foot of travel. • In general, the effectiveness of this approach will depend on the characteristics of the stored product and the equipment involved in its storage and retrieval. • Maintaining a “forward” pick area, containing a certain quantity from each of the most popular SKU’s in the facility. • The implementation of this approach necessitates a systematic procedure for determining the items to be stored in the forward pick area and the associated amounts, in a way that it balances the incurred space and labor (replenishment) costs. • In case of a dynamically varying demand, the implementation of this idea might involve the frequent reconfiguration of the facility.

23. Major mechanisms for increasing the pick density • Batching the orders, i.e., have the workers retrieve more than one order at each trip in the storage area. • Requires an additional sortation process: • sort-while-pick: the picker carries a compartmentalized container that allows the separate accumulation of each order on its picking list • downstream sorting: sorting of the orders takes place at a dedicated station of the facility, possibly involving some sophisticated equipment (sorting conveyors). • Sortation implies additional space, labor and equipment costs • Batching is another complex economic decision, especially for “medium size” orders

24. Major mechanisms for reducing the order flow time • Maintaining a high pick density (which translates to a high level of worker productivity). • Appropriately parallelizing the order processing, i.e., have each order being processed by more than one worker. • A critical aspect for selecting the order parallelization scheme is the order work content, typically quantified as follows: • order work content = (number of picks in the order) x (average person-hours per pick) • If the total work of picking and loading an order is small enough, then orders are repeatedly assigned to the next available worker. • If the orders are large and/or span distant regions, then, they must be parallelized. • Parallelization typically involves a zoning scheme.

25. Warehouse zoning Zone: A part of the warehouse to which an order picker is restricted, e.g., a 40-aisle system divided into zones of 10 aisles each. In case of warehouse systems involving automated storage and retrieval equipment, a zone can be also defined by one unit of this equipment, e.g., a carousel. Zoning patterns: Progressive Zoning Parallel/Simultaneous Zoning To packing and shipping To sorting and consolidation Z1 Z2 Z3 Z4 Z5 Z1 Z2 Z3 Z4 Z5 Order Order

26. Combining Batching with Zoning:the resulting order-flow patterns • Single-order pick: one picker works on one order at a time until the order is filled • sort-while-pick, no zoning: one picker works on several orders at a time with a container/vehicle that has compartments for maintaining the order integrity • batch-picking with downstream sorting, no zoning: several orders are picked by one person completely, often applied with conveyor transport of items to the sorting area • single-order-pick with zoning, progressive or parallel: an order is split into sub-orders by zone and a picker in each zone fills the corresponding sub-order

27. Combining Batching with Zoning:the resulting order-flow patterns • sort-while-pick with zoning: an order is split into sub-orders by zone and a picker in each zone fills the corresponding sub-orders using a set of containers or a vehicle that has compartments for maintaining order integrity • batch picking with downstream sorting and zoning, usually simultaneous: several orders are split into sub-orders and the sub-orders for each zone are filled by the picker(s) operating in that zone

28. Pick Wave Planning • Time window: a portion of the day/shift during which a set of orders is released and fully processed, e.g., four 2-hour time windows in an 8-hour shift. • Pick wave: The set of orders processed during a time window. • Necessitated by, e.g., • a downstream sorting system that limits the number of orders that may be in process at any time (e.g., the number of streams/output chutes in a conveyor-based sortation system). • a forward pick area with a storage capacity insufficient to satisfy the entire daily demand, and therefore, must be replenished, but replenishment cannot occur simultaneously with picking activity for, e.g., safety or efficiency reasons. • Small time windows tend to cause workload imbalances and longer travel times, but they also lead to smaller equipment and/or space costs and smaller order completion times.