Chapter 8 Warehousing Decisions. Chapter 8Management of Business Logistics, 7 th Ed.2 The Nature and...

Chapter 8

Warehousing Decisions

Chapter 8Management of Business Logistics, 7th

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.

The Role of the Warehouse in the Logistics System: A Basic Conceptual Rationale

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

Table 8-1Warehouse Value-Adding Roles

Figure 8-1Transportation Consolidation

Figure 8-2Supply and Product Mixing

Figure 8-3Basic Warehousing Decisions

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

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.

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

Ed. 11

Table 8-2 Firm Characteristics Affecting the Ownership Decision

Ed. 12

Figure 8-6 Basic Warehouse Operations

Ed. 13

Public Warehousing

Rationale for Public Warehousing Limited capital investment Flexibility

Public Warehousing Services Bonded warehousing Field warehouses

Ed. 14

Public Warehousing

Public warehousing regulation: Liability Receipts

Public warehousing rates based upon:

Value Fragility Potential damage

to other goods Volume and

regularity Weight density Services required

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.

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

Ed. 17

Table 8-3: Factors Affecting the Number of Warehouses

Factor Centralized Decentralized

Substitutability Low High

Product Value High Low

Purchase Size Large Small

Special Warehousing

Yes No

Product Line Diverse Limited

Customer Service Low High

Ed. 18

Basic Warehouse Operations

Movement Receiving Put-away Order picking Shipping

Storage Stock location Warehouse Management System

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.

Ed. 20

Provide for the transportation interface.

Provide for order-picking space.

Provide storage space. Provide recouping,

office, and miscellaneous spaces.

Ed. 21

Figure 8-8 Warehouse Space Requirements

Ed. 22

Basic needs: Receiving Basic storage

area Order selection

and preparation Shipping

Ed. 23

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.

Ed. 24

Warehouse Layout and Design: Layout and Design Objectives

Cubic capacity utilization

Protection Efficiency Mechanization Productivity

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

Ed. 26

Materials Handling Definition: Efficient short distance

movement in or between buildings and a transportation agency.

Four dimensions Movement Time Quantity Space

Coordination

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

Ed. 28

Table 8-5: Principles of Materials Handling To effectively plan and control materials handling, the logistics manager should recognize some guidelines and principles.(* deserving special attention)

Ed. 29

Packaging

Interest in packaging is widespread Logistics

Warehousing Transportation Size

Marketing Production Legal

Ed. 30

The Role of Packaging

Identify product and provide information

Improve efficiency in handling and distribution

Customer interface Protect product

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.

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)

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

Appendix 8A

Materials-Handling Equipment

Ed. 35

Dock Equipment

Forklifts Dock bumpers Dock levelers Dock seals Trailer restraint

systems Pallets

Ed. 36

Pallets and Pallet Movers

Ed. 37

Figure 8A-1 Forklift Truck

Ed. 38

Figure 8A-2 Pallet Types

Ed. 39

Other Materials Handling Equipment: Conveyors

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

Ed. 40

Other Materials Handling Equipment: Other

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

Ed. 41

Cranes

Ed. 42

Figure 8A-3 Materials-Handling Equipment Top-running

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

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)

Ed. 45

Figure 8A-4 Order-Picking Equipment

Ed. 46

Figure 8A-5 Mezzanines

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

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

Chapter 8 Warehousing Decisions. Chapter 8Management of Business Logistics, 7 th Ed.2 The Nature and...

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