Chapter 8
Warehousing Decisions
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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.
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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
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Table 8-1Warehouse Value-Adding Roles
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Figure 8-1Transportation Consolidation
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Figure 8-2Supply and Product Mixing
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Figure 8-3Basic Warehousing Decisions
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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
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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.
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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
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Table 8-2 Firm Characteristics Affecting the Ownership Decision
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Figure 8-6 Basic Warehouse Operations
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Public Warehousing
Rationale for Public Warehousing Limited capital investment Flexibility
Public Warehousing Services Bonded warehousing Field warehouses
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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
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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.
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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
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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
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Basic Warehouse Operations
Movement Receiving Put-away Order picking Shipping
Storage Stock location Warehouse Management System
(WMS)
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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.
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Warehouse Layout and Design
Provide for the transportation interface.
Provide for order-picking space.
Provide storage space. Provide recouping,
office, and miscellaneous spaces.
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Figure 8-8 Warehouse Space Requirements
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Warehouse Layout and Design
Basic needs: Receiving Basic storage
area Order selection
and preparation Shipping
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Warehouse Layout and Design
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.
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Warehouse Layout and Design: Layout and Design Objectives
Cubic capacity utilization
Protection Efficiency Mechanization Productivity
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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
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Materials Handling Definition: Efficient short distance
movement in or between buildings and a transportation agency.
Four dimensions Movement Time Quantity Space
Coordination
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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
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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)
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Packaging
Interest in packaging is widespread Logistics
Warehousing Transportation Size
Marketing Production Legal
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The Role of Packaging
Identify product and provide information
Improve efficiency in handling and distribution
Customer interface Protect product
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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.
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Packaging Materials
Table 8-6 presents a comparison of various packing material characteristics.
Basic considerations include: Soft materials Plastic Environmental issues Recycling (reverse logistics)
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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
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Dock Equipment
Forklifts Dock bumpers Dock levelers Dock seals Trailer restraint
systems Pallets
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Pallets and Pallet Movers
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Figure 8A-1 Forklift Truck
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Figure 8A-2 Pallet Types
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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
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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
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Cranes
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Figure 8A-3 Materials-Handling Equipment Top-running
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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
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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)
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Figure 8A-4 Order-Picking Equipment
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Figure 8A-5 Mezzanines
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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
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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