Chapter 8

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. Management of Business Logistics, 7th Ed.

3. 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 The Role of the Warehouse in the Logistics System: A Basic Conceptual Rationale Management of Business Logistics, 7th Ed.

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

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

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

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

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 Management of Business Logistics, 7th Ed.

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. Management of Business Logistics, 7th Ed.

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 Management of Business Logistics, 7th Ed.

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

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

13. Public Warehousing • Rationale for Public Warehousing • Limited capital investment • Flexibility • Public Warehousing Services • Bonded warehousing • Field warehouses Management of Business Logistics, 7th Ed.

14. Public warehousing regulation: Liability Receipts Public warehousing rates based upon: Value Fragility Potential damage to other goods Volume and regularity Weight density Services required Public Warehousing Management of Business Logistics, 7th Ed.

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. Management of Business Logistics, 7th Ed.

16. 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 Management of Business Logistics, 7th Ed.

17. Table 8-3: Factors Affecting the Number of Warehouses Management of Business Logistics, 7th Ed.

18. Basic Warehouse Operations • Movement • Receiving • Put-away • Order picking • Shipping • Storage • Stock location • Warehouse Management System (WMS) Management of Business Logistics, 7th Ed.

19. 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. Management of Business Logistics, 7th Ed.

20. Warehouse Layout and Design • Provide for the transportation interface. • Provide for order-picking space. • Provide storage space. • Provide recouping, office, and miscellaneous spaces. Management of Business Logistics, 7th Ed.

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

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

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. Management of Business Logistics, 7th Ed.

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

25. 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 Management of Business Logistics, 7th Ed.

26. Materials Handling • Definition: Efficient short distance movement in or between buildings and a transportation agency. • Four dimensions • Movement • Time • Quantity • Space • Coordination Management of Business Logistics, 7th Ed.

27. Objectives of Materials Handling • Increase effective capacity • Use building’s height and minimize aisle space • Improve operating efficiency • Reduce product handling • Develop effective working conditions • Reduce heavy labor • Improve logistics service • Reduce cost Management of Business Logistics, 7th Ed.

28. Table 8-5: Principles of Materials HandlingTo effectively plan and control materials handling, the logistics manager should recognize some guidelines and principles.(* deserving special attention) Management of Business Logistics, 7th Ed.

29. Packaging • Interest in packaging is widespread • Logistics • Warehousing • Transportation • Size • Marketing • Production • Legal Management of Business Logistics, 7th Ed.

30. The Role of Packaging • Identify product and provide information • Improve efficiency in handling and distribution • Customer interface • Protect product Management of Business Logistics, 7th Ed.

31. 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. Management of Business Logistics, 7th Ed.

32. Packaging Materials • Table 8-6 presents a comparison of various packing material characteristics. • Basic considerations include: • Soft materials • Plastic • Environmental issues • Recycling (reverse logistics) Management of Business Logistics, 7th Ed.

33. 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 Management of Business Logistics, 7th Ed.

34. Appendix 8A Materials-Handling Equipment

35. Dock Equipment • Forklifts • Dock bumpers • Dock levelers • Dock seals • Trailer restraint systems • Pallets Management of Business Logistics, 7th Ed.

36. Pallets and Pallet Movers Management of Business Logistics, 7th Ed.

37. Figure 8A-1 Forklift Truck Management of Business Logistics, 7th Ed.

38. Figure 8A-2 Pallet Types Management of Business Logistics, 7th Ed.

39. 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 Other Materials Handling Equipment: Conveyors Management of Business Logistics, 7th Ed.

40. 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 Other Materials Handling Equipment: Other Management of Business Logistics, 7th Ed.

41. Cranes Management of Business Logistics, 7th Ed.

42. Figure 8A-3 Materials-Handling Equipment Top-running Management of Business Logistics, 7th Ed.

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 Management of Business Logistics, 7th Ed.

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) Management of Business Logistics, 7th Ed.

45. Figure 8A-4 Order-Picking Equipment Management of Business Logistics, 7th Ed.

46. Figure 8A-5 Mezzanines Management of Business Logistics, 7th Ed.

47. 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 Management of Business Logistics, 7th Ed.

48. 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 Management of Business Logistics, 7th Ed.