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warehousing Chapter 6
Part of firms logistics system that stores products at and between point of origin and point of consumption.
Term Warehousing is referred as transportation at zero miles per hour
Warehousing provides time and place utility for raw materials, industrial goods, and finished products, allowing firms to use customer service as a dynamic value-adding
competitive tool.
INTRODUCTION
Traditionally viewed as a place to hold or store
inventory
Contemporary view is the warehouse
functions to mix
inventory assortments
to meet customer
requirements
Storage of products is held to a minimum
Warehousing contributes value in
the logistics process
Warehouses were once viewed as a necessary evil,
used to coordinate product
supply with customer demand
The explosion of the consumer economy after
WWII saw the rise of
distribution networks for
consumer goods
Warehousing shifted from
passive storage to strategic
assortment
Evolution of strategic
warehousing
Warehousing types evolved to
accommodate the dynamic aspects
Distribution
centers
Consolidation
terminals
Break-Bulk
facilities
Cross-docks
Warehousing is integral to just-in-time (JIT) and stockless production strategies
Requires strategically located warehouses across the globe
An important goal in warehousing is to maximize flexibility
Respond to ever-changing customer demand
Product assortments
Value-added services
Shipment sequencing
Strategic warehousing offers
manufacturers a way to reduce
dwell time of parts and materials
Amazon Warehouse/Distribution Center in UK
Amazon Warehouse/Distribution Center in
US
Netflix Warehouse/Distribution Center
FedEx
Warehouse/Dis
tribution Center
Shipping
iPhone 5,
September 21,
2012
Strategic warehousing
Warehouse Operations
Warehouse ownership
arrangements
Warehouse decisions
Warehousing overview
Strategic Warehousing
Warehouse Operations
Warehouse Ownership Arrangements
Warehouse Management Decisions
Strategic Warehousing
Economic Benefits
Service Benefits
Warehouse Operations
Warehouse Ownership Arrangements
Warehouse Management Decisions
Strategic Warehousing Economic Benefits
Consolidation and Break-Bulk
Sorting
Seasonal Storage
Reverse Logistics
Service Benefits
Warehouse Operations
Warehouse Ownership Arrangements
Warehouse Management Decisions
Strategic Warehousing Economic Benefits
Consolidation and Break-Bulk
Sorting
Seasonal Storage
Reverse Logistics
Service Benefits
Warehouse Operations
Warehouse Ownership Arrangements
Warehouse Management Decisions
Plant 1
Plant 2
Plant 3
Consolidation
Warehouse Store B
Store C
Store A
Plant Break-Bulk
Warehouse Store B
Store C
Store A
Strategic Warehousing Economic Benefits
Consolidation and Break-Bulk
Sorting (cross-docking; in-transit mixing; sorting/sequencing)
Seasonal Storage
Reverse Logistics
Service Benefits
Warehouse Operations
Warehouse Ownership Arrangements
Warehouse Management Decisions
Plant 1
Plant 2
Plant 3
Distribution
Center Store B
Store C
Store A
Sorting by Distribution Center Cross Docking
Plant
Producing
Product 1
Transit Mixing Point Store B
Products 1, 2, 3
Store C
Products 1, 2, 4
Store A
Products 1, 3, 4
Sorting by In-Transit Mixing
Plant
Producing
Product 2
Plant
Producing
Product 3
Product 4
Supplier/
Vendor of
Component A
Order Assembly by
Sorting/Sequencing
Manufacturing
Plant 1
Components
A,B,C
Order Assembly by Sorting/Sequencing
Supplier/
Vendor of
Component B
Supplier/
Vendor of
Component C
Manufacturing
Plant 1
Components C, B
Manufacturing
Plant 1
Components
C,B,A
Strategic Warehousing Economic Benefits
Consolidation and Break-Bulk
Sorting
Seasonal Storage
Reverse Logistics
Service Benefits
Warehouse Operations
Warehouse Ownership Arrangements
Warehouse Management Decisions
Strategic Warehousing Economic Benefits
Consolidation and Break-Bulk
Sorting
Seasonal Storage
Reverse Logistics
Service Benefits
Warehouse Operations
Warehouse Ownership Arrangements
Warehouse Management Decisions
Reverse logistics
processing
Reverse logistics include activities supporting
Returns management Recalls or product that did not
sell
Remanufacturing and repair Repairing/refurbishing
equipment
Remarketing Selling used equipment
Recycling
Disposal
Typical list of value-added
services
Strategic Warehousing
Economic Benefits
Service Benefits
Warehouse Operations
Warehouse Ownership Arrangements
Warehouse Management Decisions
Strategic Warehousing
Economic Benefits
Service Benefits
Spot Stocking
Full Line Stocking
Value Added Services
Warehouse Operations
Warehouse Ownership Arrangements
Warehouse Management Decisions
Spot-stocking is the positioning of inventory for seasonal or promotional demand
Full line stocking provides one-stop shopping capability for goods from multiple suppliers
Value-added services include any work that creates a greater value for customers
Service benefits of
warehousing
Full Line Stocking at
United Electrics Distribution Center
Illustration of reverse
logistics flow
Storm super cell in Montana
Strategic Warehousing
Warehouse Operations
Warehouse Ownership Arrangements
Warehouse Decisions
Strategic Warehousing
Warehouse Operations
Product Handling
Product Storage
Warehouse Ownership Arrangements
Warehouse Decisions
Strategic Warehousing
Warehouse Operations
Product Handling
Product Storage
Warehouse Ownership Arrangements
Warehouse Decisions
Strategic Warehousing
Warehouse Operations
Product Handling
Receiving
In-Storage Handling
Shipping
Product Storage
Warehouse Ownership Arrangements
Warehouse Decisions
Strategic Warehousing
Warehouse Operations
Product Handling
Product Storage
Warehouse Ownership Arrangements
Warehouse Decisions
Handling must optimize movement continuity and efficiency ReceivingUnloading
the arriving vehicles
In-Storagemoving goods for storage (transfer) or order selection (picking)
Shippingverifying the order and loading the departing vehicles
Handling
Storage plans should make
product velocity a major factor
Slotting determines specific locations for
the product based on
Velocityhow fast the
goods move
Weighthow heavy is the
product
Special Characteristics
how large or small, does it
require rack or bin storage
Illustration of storage plan based on
product movement velocity
Storage Plan Based on Product Movement Velocity
Strategic Warehousing
Warehouse Operations
Product Handling
Product Storage
Active
Extended
Warehouse Ownership Arrangements
Warehouse Decisions
Active Storagestorage for basic inventory replenishment Focuses on quick movement
Includes flow-through or cross-dock distribution
Extended Storagestorage for inventory held in excess of period for normal replenishment E.g. seasonal, speculative,
or even commodities
Warehouses must manage
two classes of storage
Strategic Warehousing
Warehouse Operations
Warehouse Ownership Arrangements
Warehouse Decisions
Strategic Warehousing
Warehouse Operations
Warehouse Ownership Arrangements
Private Warehouses
Public Warehouses
Contract Warehouses
Warehouse Decisions
Strategic Warehousing
Warehouse Operations
Warehouse Ownership Arrangements
Private Warehouses
Public Warehouses
Contract Warehouses
Warehouse Decisions
Strategic Warehousing
Warehouse Operations
Warehouse Ownership Arrangements
Private Warehouses
Control
Operating Flexibility
Cost
Public Warehouses
Contract Warehouses
Warehouse Decisions
Strategic Warehousing
Warehouse Operations
Warehouse Ownership Arrangements
Private Warehouses
Public Warehouses
Contract Warehouses
Warehouse Decisions
Strategic Warehousing
Warehouse Operations
Warehouse Ownership Arrangements
Private Warehouses
Public Warehouses
Contract Warehouses
Warehouse Decisions
Active Storagestorage for basic inventory replenishment Focuses on quick movement
Includes flow-through or cross-dock distribution
Extended Storagestorage for inventory held in excess of period for normal replenishment E.g. seasonal, speculative,
or even commodities
Warehouses must manage
two classes of storage
Warehouse ownership
arrangements
Privatewarehouse operated by the firm owning the product
Building may be owned or leased
Publicservice company owns warehouse and hires out space and services
Usually classed as
General merchandise
Refrigerated
Bonded
Special commodity
Household goods and furniture
Contract warehousing combines
elements of private and public
operations
Usually a long-term relationship or contract
between a firm and the
warehousing owner/operator
Long-term cost savings compared with public warehouse
Often a firms employees will work alongside the contract
warehouses
Example is Kraft Foods who has contracted with AmeriCold
Logistics since the late 1990s
Network deployment strategy
requires answering two questions
How many warehouses should be
established?
Which warehouse ownership types
should be used in specific markets?
For example, when warehouse
utilization is not full throughout
the year
Use private or contract warehouse
to cover 75 percent requirement
Public facilities used to
accommodate peak demand
Network deployment is the
combination of private, public and
contract facilities used by a firm
Strategic Warehousing
Warehouse Operations
Warehouse Ownership Arrangements
Warehouse Decisions
Strategic Warehousing
Warehouse Operations
Warehouse Ownership Arrangements
Warehouse Decisions
Site Selection
Design
Size & Expansion Capabilities
Audit Activities
Security
Safety & Maintenance
Strategic Warehousing
Warehouse Operations
Warehouse Ownership Arrangements
Warehouse Decisions
Site Selection
Design
Size & Expansion Capabilities
Audit Activities
Security
Safety & Maintenance
Strategic Warehousing
Warehouse Operations
Warehouse Ownership Arrangements
Warehouse Decisions
Site Selection
Design
Size & Expansion Capabilities
Audit Activities
Security
Safety & Maintenance
Strategic Warehousing
Warehouse Operations
Warehouse Ownership Arrangements
Warehouse Decisions
Site Selection
Design
Size & Expansion Capabilities
Audit Activities
Security
Safety & Maintenance
Identify broad geography where an active warehouse meets service, economic and strategic requirements
Selection and number of retail outlets drives location of support warehouses
Final selection should be preceded by extensive analysis
Site selection is driven by
service availability and cost
factors
Illustration of straight-line
product flow to facilitate
velocity
Warehouse management systems (WMS) integrate procedures and software support to standardize storage and handling work procedures
One main use of WMS is to coordinate order selection
Discrete selection is when a specific customers order is selected and prepared for shipment as a single work assignment
Wave or batch selection is when orders are processed through zones of the warehouse assigned to specific employees
Warehouse management systems
encourage best practices
A summary of WMS
functionality and decision
support benefits
Other warehouse planning
issues
Inventory accuracy is typically maintained by annual physical counts or counting portions of inventory on a planned basis
Cycle counting is the audit of selected inventory on a cyclic schedule
Audits are common to maintain safety, assure compliance to regulations and help improve procedures
Security issues involve protection from pilferage and damage
Accident prevention Comprehensive safety
programs and training, accident investigation and follow up
Environmental protection Spill kits and spill plans
Maintenance Scheduled maintenance of
building, material handling equipment, and collision damage prevention
Safety and maintenance issues
must also be considered when
planning warehouse designs
What is the future of
warehouse management?
Will warehouses grow smaller in the future?
Offer a wider range of services?
Will final assembly of goods be increasingly done in warehouses?
What is your solution to the challenge of the last mile posed by Dr. Patrick Dixon?
Video link (7:45 min.)
http://www.youtube.com/watch?v=ZbPMaxNl3J4