Networking and Warehousing

Aims

New section – networks – 3 / 4 weeks, definite exam question

What you should know:

Basic network concepts, centralisation, cross-docking, consolidation

Supporting warehousing methods – replenishment, order v batch picking, unit loads

Order profiles!!

Important for subsequent sessions – eg can e-retailing and stores be serviced from same sites? Will increase in smaller store formats influence future network structures?

Layouts, industrial engineering

Case studies, videos

Subsequent weeks:

Detailed Sainsbury’s case study

Comparisons with Tesco and Co-operative Group – contrasting trends

Bring together in tutorial splitting into two groups?

Networks - Issues

Changes in structure over recent years Factors to consider Moves towards time-based competition and different

service objectives. Trends in cost trade offs Consolidation - wider product ranges, tailor to

customer demands later in chain. Cross-docking Tesco case study Sainsbury’s v Co-operative Group –(Compare the

distribution network strategy of major retailers egSainsbury’s with those with smaller store format companies eg Co-op)

Netto – automated DC – feedback on knowledge of handling systems

Issues within network planning: number of levels of sites and number of sites within each

level.

distribution of inventory between sites (e.g. centralisation of particular product ranges).

organisation of transport network (e.g. consolidation points).

roles and responsibilities around network.

Rationalise supplier base on basis of reliability, improved replenishment systems, cost and product quality.

customer information used to:

Retain high value customers

Move low value customers to low cost channels

Prevent sales and service decline

Retail Distribution NetworksWarehouses & RDC’s

• Number

• Location

• Size

• Ownership

• Investment

• Shared ?

• Composite

• Service

• Automation - (handling, order processing etc)

• Transport network e.g. consolidation points

• Distribution of inventory

• Integration

Factors

Product range Unit loads Supplier base Customer base Costs of resources Market positioning Gearing Current assets Throughputs Company strategy Financial support / incentives Competition

Grocery Network Structures

Traditional

• NDC - central inventory point serving RDC’s -

main slows, specialised, non foods

• RDC’s - key staging points between suppliers &

stores - composite, some slows & specialised

New Generation

• Consolidation Centres - close to regionally

concentrated small suppliers (typically chilled &

perishables) - combine loads

• Cross-docking

• Fulfilment factories

• Picking Centres - home shopping development

Centralised National Hub Operation Superstores catalysed

centralisation;

Larger quantities and own brands;

New technologies.

Improved transparency, backward integration, third party distributors.

Inventories concentrated into fewer sites whilst improving serviceability.

Factory Supplier Warehouses Retailer RDC's

Strores Consumers

Information Flows

CENTRALISED RETAIL NETWORKS

CENTRAL HUB

OPERATION

RDC

Consolidation

Centre

RDC

NDC International

Consolidation

Centre

Picking

Centre Store

Store

Store

Store

Home Shoppers

Suppliers

Suppliers

Suppliers

Suppliers

Suppliers

Home Shoppers

AN INTEGRATED RETAIL SUPPLY CHAIN NETWORK

Suppliers

Overview

Push v Pull Order Fulfillment

Lean operations

Complex DC’s

Continuous processing

Increased throughput

Synchronisation

Real time information

Sortation systems – batch picking

Consolidation

Designing a Superior Distribution

Network

Eg Sainsbury’s

Lidl?

Tactical - GeneralReview flows of goods, inventory plans and processes

within given configuration.

Determine optimal network allocating inventory and

assembly activities between sites and products.

Assign customers / suppliers to individual warehouses.

Specify safety stocks, batch sizes and order frequencies

based on agreed service objectives.

Operational

•Formalise supporting procedures and schedules (eg assembly,

despatch, routeing, supplier selection).

•Supply schedules to support individual production plants

•Routings between all distribution centres and final customers.

Supply chain planning attempts

Organise flows of products, services and information.

Model tangible outcomes around revenue growth, asset utilisation and cost reduction.

Assess how well activities are co-ordinated across the chain.

Reducing inventories.

Increasing manufacturing and distribution throughput.

Improving the return on assets at all levels.

Corporate business focus

International perspective

Transport

Delivery time, distance - labour, fuel etc

Overtime & overnight stay

requirements

Number, size & running cost of vehicles

Direct delivery v economies of scale

through improved utilisation in trunking

Supplier delivery of perishables to local

sites

TrendsIncreases in Transport Costs - Decentralisation

Fuel prices

Congestion

Environmental pressures

Shorter outbound journeys to customer, in smaller

trucks become more economic

Inbound journeys to centralised warehouse, full

loads in larger vehicles remain more economic

Key factor - utilisation v distance trade off

Local sourcing of goods may become more

appealing as freight costs increase - simulation

Consolidation Centre Benefits - Retailer

• More efficient use of RDC’s

• Greater potential for cross-docking

• Maximises full load deliveries into RDC’s

• Improves labour productivity

• Increased frequency of delivery

• Lower inventory levels

• Reduced time in stock - giving increased

shelf life to customer

• Greater product variety

• Improved product alignment to demand

Consolidation Centre Benefits -

Manufacturers & Transport ProviderManufacturer

• Greater market

penetration

• Small firms to service

multiples

• Ability to service more

RDC’s

• Enlargement of

potential territory

• Focus on core

competencies - not

transport

Transport

• More cost efficient full

load deliveries

• Single point deliveries

- reduced transport

costs

• Standardised routes -

improved scheduling

• Reduced distance with

poor utilisation

Adoption of efficient consumer response: the issue of mutuality

Sherah Kurnia et al, Supply Chain Management: Vol 6 . No 5 . 2001 . 230

Corporate Strategy and Warehousing

• The role of the warehouse.

• Its relationship towards corporate strategy.

• The warehouse’s importance in different

customer service models.

Warehousing and Company

Strategy

JIT

Demand pull, minimal

economic quantity,

reduce WIP, supplier

reliability, preventative

maintenance,

eliminate buffers

TQM

Long-term

commitment, war on

waste, continuous

improvement, TQC,

continuous training,

ergonomics

IMPROVING

WAREHOUSING

OPERATIONS

Reduction in lead

time, inventory and

throughput time

On-time delivery,

improved effectiveness,

and improved quality

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Decision / Performance

Criteria

Responsiveness

Quality

Cost

Investment +

Operational

Space/Equipment/Labor

Product quality

Order accuracy

Order flow time

throughput

fill rate

volume flexibility/storage capacity

mix flexibility

=> Multi-criteria Optimization Problem!

Sainsbury’s Fulfilment

factories (eg Waltham

Point)

Sainsbury’s Central

Warehouses for Slow

Movers (eg Stoke)Coop – centralisation and

perishables from composite

site (eg Coventry)Link to company strategy

and different site functions

Warehouse Operations

• Important storage and handling options.

• Picking equipment and supporting procedures.

• Warehouse returns operations.

• Warehouse layout models

• Legislation and health & safety issues

• Environmental factors.

Automation – Basic Movements and

Automation – ok???

WAREHOUSE

AUTOMATION

Bar Code /

Scanning Carousels

RDT

Radio Data

Terminals

Pick by Light

ROBOTICS

Inventory

Control

Terminals

REPLENISHMENT

Conveyors

Automated Guided

Vehicles

WMS

Warehouse

Management

Systems

RETRIEVAL

Automated Storage

and Retrieval

Systems

Miniloads

STORAGE

High Stackers,

VNA cranes and

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Warehouse Procedures and

Layouts

Receiving Shipping

Reserve Storage

and

Pallet Picking

Case

Picking

Broken

Case

Picking

Accumulation, Sortation & Packing

Cross-docking

Direct

putaway

to reserve

Direct

putaway

to primary

Replenishment Replenishment

Warehouse SystemIntake

Bulk storage

AS/RS

Cross-docking

AGV

Storage

Bulk - first

AS/RS

High density miniload -cartons

Carousels -slows

Picking

3 level flow rack with light

Carousels - slow

Bulk separate

Sorter

Input & despatch lanes

Real - Time Information

RF- Data

PBL

RF Data

Scanners

WMS

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www.mmh.com

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Storage

Controller

in-feed out-feedS/R Machine

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Pick by

Light,Carousels,

Live Storage

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Typical Sorter Layout - by Zones

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Batch Picking & Sortation• Typically 50-100 orders

• Collect as batch, convey to high speed sorter, divide into order chutes & load

into cages

• High volumes required to be cost effective: typical industries grocery

• E-retailing longer slow tail (sortation quicker payback)

Design for Flexibility Materials & information

flow

Efficient order taking,

picking and packing

Minimal time from web

order to shipping

Seasonal peaks

Automation when justified

throughput

Two functional areas;

processing orders and

returns

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Basic Warehouse Layout Models

• Throughflow - GI &Despatch at opposite sides direct flow of orders -

typically fast movers - large retailers

• Crossflow - GI & Despatch at same warehouse side - fast to slow movers

positioned in descending order & travel at right angle to bays

• Corner - as crossflow, except despatch at adjacent warehouse side :

products flow direct into despatch

• Inverted ‘T’ warehouse - GI & despatch at same warehouse side, bulk &

picking at opposite warehouse halves with central aisle for replenishment

General comment - simplistic (based on general warehouse square / rectangle, too few segments, starting point)

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AC Moore - Crafts

Pressures

SKU proliferation

12 – 15% growth p.a

Double handling – high labour costs

Transportation – not all sku’s at every

site

Order accuracy

Categorisation of lines

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AC Moore - Strategy

3 shifts 1st – receiving, putaway, picking; 2nd –replenishment and putaway, 3rd – replenishment (skeleton staff)

VNA – space utilisation Pick to light – fast movers, fed to sortation via

conveyors (250 picks / hr, 120 before) Second level – slow movers, pick instructions

from wireless terminals sent through WMS to conveyor

Third level – full case picks, paper pick 3 layers merge via shoe sorter Postpone pallet binding, wrapping etc Double throughput capacity

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AC Moore - Layout

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Aeriel case:

Congestion problems

Space utilisation issues

Radio frequency systems

Pick to light

Horizontal carousels

Travel times and distances

Zone and batch picking

Inventory tracking

Flowrack systems

Quality control issues.

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Aeriel case:

Stop and Shop case:

Cost reduction strategy

Throughput capacity issues

Service to store issues

Voice picking

Separation of perishable and non-perishables

Integration with WMS

Postponement of picking decisions

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Stop and Shop case:

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IKEA Varied inventory mix – more flexibility

New catalogue web and direct to customer lines

Extensive returns

2/3 overseas lines

Flat packed lines for dense storage and easy handling

Maximise flowthrough

Semi automated high bay – manned s/r trucks

Pallet conveyor

Warehouse reflects store design

Join products from high bay and cross-docking area

Different picking waves46

IKEA

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Simulation ModellingModels may be used to:

Examine alternative layouts

Assess truck and other material handling equipment needs

Calculate staffing levels and shift patterns

Review the effect of different stock levels

Determine correct product locations

Test without implementation ‘what if ? scenarios’

Compare & contrast different options