Unit 4: Warehouse Management

1. Supply Chain Management Unit 4: Warehouse Management Module 1: Introduction to Warehouse Operations

2. Learning Objectives • Determine the need for warehouses and inventory management • Identify the various types of warehouses • Identify and describe the different types of warehouse processes • Describe the Plight of the Warehouse Manager • Identify World-Class warehousing principles • Introduce industry specific professional organizations

3. QUESTION Why are warehouses and inventory management needed? • Storage of goods • Reduce transportation costs • Improve operational flexibility • Shorten customer lead times • Lower inventory costs

4. Storage of Goods This is the most basic operation performed by warehouses Evens out the flow of goods in the supply chain by storing goods until they are needed

5. QUESTION What is inventory? • Goods that support the production of raw materials and unfinished items • Items used for maintenance, repair, and operating supplies • Raw goods, finished goods and spare parts • Post-consumer items such as returns, scrap, and recyclable materials

6. Why is Inventory Management Needed? • Inventory is a necessity • Supports production and manufacturing activities • Covers for exceptions in the supply chain • Supports maintenance, repairs, and operations • Supports customer service activities • Supports post-consumer activities • Offers strategic opportunities to the supply chain • There are costs associated with having inventory • Holding costs • Setup costs • Purchasing costs • Balance inventory levels with cost of holding inventory • Minimize costs • Not too much excess inventory • Enough inventory to respond to demand when it is needed

7. Types of Warehouses • Raw Material Warehouse • Work in Process (WIP) Warehouses • Finish Goods Warehouses • Distribution Warehouses and Distribution Centers • Fulfillment Centers • Climate-Controlled Warehouses • Special Case (Foreign Trade Zone and Bonded Warehouses

8. Raw Material Warehouse These warehouses are generally large in scale and designed to hold large quantities of bulk materials. Two examples of raw materials warehouses might be petroleum warehouses that store raw crude oil and grain silos that house grains and corn.

9. Work In Process (WIP) Warehouse WIPs hold partially completed assemblies and products at various points along an assembly or production line. They can occupy a small footprint inside a factory or manufacturing center or can be located in a separate facility.

10. Warehouses - Other • Finished goods warehouses - Usually located near the manufacturing center, finished goods are stored here until there is a demand for them. • Distribution warehouses and distribution centers - collect and consolidate goods from many sources and then provide consolidated delivery into a network of common customers.

11. Warehouses - Other • Fulfillment warehouses and centers - receive goods from distribution centers and ship them to individual customers. • Climate Controlled Warehouses: Frozen foods, chilled foods, and products that must be maintained at a set temperature are shipped through climate-controlled warehouses.

12. Warehouses - Other Special Case Warehouses • Foreign Trade Zones (FTZs) - a designated area within the borders of the USA that is treated as being outside of U.S. Customs Territory for the purpose of customs duty payment. • Bonded Warehouse - Similar to an FTZ, a Bonded Warehouse is a secured facility under the control of U.S. Customs where imported materials are stored with the purpose of delaying the payment of tariffs and duties. There are, however, several key differences between a Bonded Warehouse and an FTZ.

14. Private vs. Public Warehouses • Private warehouses are warehouse facilities owned by a distributor or manufacturer and strictly used for their sole purposes. The inventory stored and the activities performed in these facilities support the goals of the organization. • Public warehouses seek economies of scale by sharing resources. They generally store and manage multiple customers’ inventories and can leverage the space and warehouse resources across these multiple customers.

15. Typical Warehouse Layout Bulk Storage Case Pick Storage Value-add Processing Area Staging Area for Receiving and Shipping Warehouse Layout • Receiving area • Staging area • Storage area • Value-add area

16. Receiving Area The receiving area of a warehouse contains dock doors sufficient to accommodate the conveyance equipment that delivers material into the warehouse facility.

17. Staging Area The staging area is the temporary containment of material for inspection, unpacking or packing, and repackaging of material for subsequent storage or shipment.

18. Storage Area Storage areas are where material is stored until needed. These areas are where warehouse material handling equipment such as racking, shelving and other storage media are set up.

19. Value-Add Area For warehouses that are performing value-added activities such as kitting, sequencing, repackaging, labeling, or minor sub-assembly, a designated area is set up to ensure that the appropriate amount of space necessary to perform the activities is available and to accommodate the equipment needed to perform these activities.

20. Warehouse Flow • Warehouses typically use one of three layouts: U-shape, Straight-thru, or Modular. • The U-shaped layout is the most popular layout. • A typical “U” formation brings material in the front of the warehouse, stores and/or processes it in the middle and back of the warehouse, and then ships it out the front of the warehouse. • The layout and thus the flow through the warehouse are dependent on the size of the facility; the number and placement of the dock doors; and the characteristics of the activity occurring in the warehouse.

21. Warehouse Operations • Receiving • Pre-packaging (optional) • Put-Away • Storage • Order Picking • Packaging and/or Pricing (optional) • Sortation and/or Accumulation • Unitizing and Shipping

22. Plight of Warehouse Management • More / smaller transactions • Manage more items • More product and service customization • More value-added services • More returns • More international orders Less time for ORDER PROCESSING/ MARGIN OF ERROR Less Skilled WMS Labor

23. World-class Warehousing PracticesTake Warehouses from Stage 1 to Stage 5

24. World-Class Warehousing Practices

25. Professional Organizations • International Warehousing Logistics Association (IWLA). WWW.IWLA.COM • Warehousing and Education Research Council (WERC). WWW.WERC.ORG • Council of Supply Chain Management Professionals (CSCMP). WWW.CSCMP.ORG • National Association of Foreign Trade Zones (NAFTZ). WWW.NAFTZ.ORG • American Society for Quality (ASQ). WWW.ASQ.ORG

26. Summary • Warehouses are a critical part of the supply chain. • Materials moving through the supply chain enter warehouses, where they are handled, stored, and ultimately shipped downstream to customers when needed. • Understanding the types of warehouses and the roles they play in the supply chain is a prerequisite to knowing when and why to select a particular type of warehouse to satisfy customer needs.

27. Summary, cont. • Most warehouses are configured to handle the same set of activities: receiving, prepackaging, put-away, storage, order picking, accumulation and sortation, packaging and/or pricing, and unitizing and shipping. • The key to successful implementation of best-practice warehousing operations requires obtaining and understanding a comprehensive item level analysis of the material being handled, and then using that information to make warehousing decisions