WAREHOUSE MANAGEMENT

Warehousing

A role beyond storage

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Definition That part of a firms logistics system that stores products at and between point-of-origin and point of consumption, and provides information to management of the status, condition, and disposition of items being stored.

The Changing Role of Warehousing

MANAGING INVENTORIES (The old mission)Warehouse Employee Skill DevelopmentWarehouse ComputerizationWarehouse Equipment AutomationDevelopment of an Integrated Perspective of Warehousing

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This slide portrays the changing role of warehousing from one of managing inventory to one of using information to more efficiently and effectively manage inventory through new worker skills, computerization and equipment automation.

Storage is the primary differentiator for the processes in warehouses, and many of the activities encountered revolve around putting products into storage and taking them out again, driven by customer orders

Controls are typically applied on both inbound receipts and outbound ordersTypical Processes - Warehouses

ReceivingPutawayStorageReplenishPickingLoading/ShippingInventory management

Qualityassurance

InboundOutbound

Operations in the WarehouseReceiving (receive, check, disburse)Put-away (transportation and placement)Storage (size, quantity)Order picking (basic service)Packaging and/or pricing (optional)

Sortation and/or accumulationPacking and shipping (checking, packaging, weighing, accumulating, loading)Cross-docking (optional)Replenishment (reserve storage, optional)

Warehouse FunctionsStock holdingConsolidationBreak bulkCross dockingPostponementAssortmentMixing / assemblingPackaging & labellingMaterial handlingOrder fillingInformation handling

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Types of Warehouses

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Storage Alternatives

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Typical Warehouse Layout

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Warehousing TrendsFocusing on the customerWarehouse adds value by keeping products availableDevelop partnership by information sharing, joint planning, and win-win agreements for futureConsolidationCompetitive advantage with reduced supplier baseFewer distribution centers allow economies of scale that can reduce operating costs, including inventory, space, equipment and laborContinuous flow of material and informationFrequent receiving and shipments puts greater demands on material handling, storage, and information systems

Warehousing TrendsValue-added servicesLabeling, customized packaging, servicing vendor-managed inventories, and electronic data interchangeInformation technologyBar coding, radio frequency data communication, warehouse management systemSpace compressionGreater emphasis on throughput results in more docks, staging, buffer, and sortation system spaceTime compressionBetter, cheaper , and faster battle cry of the futureIncrease service levels with same-day shipments with reduced SKUs and space requirements

Warehousing TrendsDistribution requirements planningMRP, MRP II, DRP, ERPDynamic distribution action plan Interchange information using networks and radio frequency devicesReverse logisticsProcess of receiving returned goods, determining product status, crediting customers and deliver recyclable material to manufacturing

Warehousing TrendsLeadershipOne individual with proactive role to take charge of warehouseDissociate from operational issues and concentrate on tactical and strategic issues.Cross dockingPreplanning incoming and out going shipments to move goods directly from receiving to shippingInformation processing systems must track and coordinate product movement

Warehousing Trends

EDI &InternetEDI communication by direct link

Warehousing TrendsVendor managed inventoryPOS system and integrated production operations to manage inventories and high level of customer serviceSuppliers to track and replenish inventoriesPaperless warehouseProduct movement tracked electronically Delivery challans, replenishment tickets, pick tickets replaced by electronic data capture and display devices

Warehousing TrendsSupply chain managementPartnering with suppliers and customersIn depth sharing of informationWillingness to invest in maintaining relationshipThird-party warehousingReduction in investment requirementsImproved customer serviceReduction in permanent labor forceOverall reduction in distribution cost

Warehousing TrendsCustomized warehousingCustomizing generic productsCompliance labeling, ticketing, bagging, and palletization.Value addition to the product or serviceOperations audit & performance measurementCustomer service, labor productivity, control systems, inventory accuracy, layout effectiveness, space utilization, storage systems & equipment utilization, warehousing facility, house keeping and safety

Warehouse Site Selection ProcessTraditionally, sales were key drivers in influencing warehouse site selection

Companies satisfied the needs of their sales force by building warehouses with the hope to increase market presence and hence revenue.

-Infrastructure, market, access, transportation cost, product, regulations, local levies.

Before making a site selection companies must closely examine the current distribution network and the impact of adding , subtracting or consolidating facilities for the entire organization.

Quantitative variables :Cost drivers, tangible and relatively easy to define. Demand potential and trends, consumption pattern, transportation costs, labour costs and facility costs Qualitative variablesMore difficult to understand and to measure. - Customer service levels

The Square Root LawThe square root law states that The total inventory in a system is proportional to the Square Root of the Number of Locations at which a product is stocked.It is recognized that the inventory tends to increase as the number of locations increase.An important assumption is the total customer demand remains same.

The Square Root Law mathematically is represented as under:

L = [(L1) x { (W2 W1) }], where

L= Total inventory in future warehousesL1= Total inventory in existing warehousesW1= Number of existing warehouses W2 = Number of future warehouses.

For example, In a company there are 40 warehouses and the existing inventory is 2,00,000 units. If the number of warehouses are reduced to 10 what will be impact on total inventory.L1= 2,00,000W1= 40 W2= 10

L= [(2,00,000) x { (10 40 )}] = 1,00,000 Thus, inventory will consist of 1,00,000 units giving a reduction of 50%.Conversely, if the number of warehouses are increased, the total inventory will increase.

Assumptions are

Inventory transfer from one warehouse to other is not done.Lead time does not vary.Customer service level does not change from any warehouse.Demand level is well distributed from all warehouse.

Warehouses as Distribution CentresDistribution strategies can be of following typesCross dockingMilk runsHub and spoke model

A Cross docking:Helps to reduce the amount of finished goods inventory that is required to be maintained as safety stock.Constraints of Cross DockingRequires a strong IT base and real time information sharing facilities e.g. Bar codes on cartons.Appropriate for products with large, and predictable demands.

B. Milk Runs :

A milk run is a route in which a truck either delivers product from a single to multiple retailers or goes from multiple suppliers to a single retailer.

Milk runs from single supplier to multiple retailers Retail Store 1

Retail Store 2Retail Store 3Retail Store 4Retail Store 5SupplierRetail Store 6

Milk runs from multiple suppliers to single retailer. S 1S 2S 3S 4S 5S 6Retail Store

Benefits/ Limitations of Milk RunsMilk runs help to reduce the the transportation costs by consolidating shipments to multiple stores on a single truck .Helps to reduce the amount of inventory to be kept as a safety stock in the warehouses.High degree of coordination and synchronization required among the members of supply chain.

C. Hub and Spoke ModelIn this model, the distribution hub is the location that holds inventory for a large region, with each spoke leading to smaller distribution centre, which houses inventory for a smaller region.The main driver of the hub and spoke model is the proximity to the customer, with the goal being to supply to a maximum numbers of customers in minimum time.

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This slide portrays the changing role of warehousing from one of managing inventory to one of using information to more efficiently and effectively manage inventory through new worker skills, computerization and equipment automation.*

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