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L – 5 Distribution Channel - Warehousing and
Inventory Management.
The Link
WAREHOUSING / DC
WAREHOUSING DISTRIBUTION CENTER
Receive – Store – Pick and ship Receive - ship
Low value added High value added
Collects data in batches Collects data in real time
Focus on minimizing the operational cost
Focuses on maximizing the profit impact of meeting customer delivery requirement
Warehousing Decision
• Strategic
• Operational
Types of inventories
• Raw materials, components, and physical supplies
• Finished goods
• GIP / Materials to be disposed or Re-cycled
Why should firms hold inventories
• Achieve Transportation economies
• Achieve production economies
• Take advantage of quality of quality purchase, discount and forward buyers
• Maintain a source of supply
• Support firms customer service policies.
• Meet changing market conditions
Why should firms hold inventories…
• Overcome the time and space differentials that exist between producers and consumers
• Accomplish least total cost, commensurate with a desired level of CS.
• Support JIT programs of supplies and customers• Offer product mix• Provide temporary storage support
Uses of Warehouse
• Support Physical supplies and distribution• Support manufacturing• To mix products from multiple production facility• To Break bulk or subdivide or other wise
Mechanism
PUSH
FACTORY WAREHOUSE
( Serves to absorb excess production)
PULL
FACTORY WAREHOUSE DISTRIBUTION
( Flow thru center with positioning inventories closer to customers )
Functions of Warehouse
• Manufacturing Support
• Production Mix
• Consolidation
• Break bulk
• Warehousing and Transportation synergy
• Warehousing and production synergy
Factors influencing Warehouse Policies
• The Industry• The firm philosophy• Capital availability• Product characteristics• Economic condition• Competition• Seasonality of demand• Use of JIT programs• Production process in use.
Types of warehouses
• General Merchandise warehouse
• Refrigerated warehouse
• Bonded warehouse
• Household goods warehouse
• Special commodity warehouse
• Bulk storage warehouse
Functions of warehousing operation
• Movement– Receiving– Transfer or put away– Order picking / selection– Cross docking– Shipping
Functions of warehousing operation
• Storage – Temporary Storage– Semi Temporary storage
Information System
• Information system – Inventory level– Throughput level– Stock keeping locations– Inbound / outbound shipments– Customers data– Facility and space utilization– Personnel efficiency monitoring
Inefficiency in a warehouse
• Information system – Redundant and excessive handling– Poor utilization and space and cube– Excessive maintenance cost and down time
due to obsolete equipment– Dated receiving and shipping and dock
condition– Obsolete computerized information handling of
routine transactions
Public warehouse
Advantages Disadvantages
Ability to increase w/h space to cover peak season
Lack of specialization
Reduced risk Shortage of space – scalability limited
Economies of scale communication
Flexibility
Tax advantage
Specific know how of cost
Minimal labor dispute
Conservation of capital
Private warehouse
Advantages Disadvantages
Control Lack of flexibility
Flexibility Financial constrains
Less costly
Better use of human resources
Tax benefit
Intangible benefits
Factors affecting size of a warehouse
• Customer size level• Size of market or market served• Number of products marketed• Size of products• Material handling equipments• Through put rate• Production lead time• Economies of scale• Stock lay out• Aisle requirement• Office area in the warehouse• Types of shelves / racks used• Level and pattern of demand• Processing / kit preparation area
Location analysis
• Market positioned• Production positioned• Intermediately positioned
Models:Von Thunen modelWeber's modelHoovers modelGreen Huts modelCenter of Gravity approach
Factors from micro perspective
• Quality and variety of transportation carrying the service site
• Quality and quantity of labor availability• Labor rates• Cost and quality of industrial land• Potential for expansion• Tax structure• Building codes• Nature of commodity and environment
Factors from micro perspective….
• Cost of construction
• Cost of availability of utilities
• Cost of money locally
• Local government tax allowances and inducement to build.
Warehouse layout and design
• Increased output
• Improve product flow
• Reduce cost
• Improve service to customers
• Provide better working condition
• Safety
• SHE