warehousing

Chapter 6

INTRODUCTION
Part of firms logistics system that stores products at and between point of origin and point of consumption.

Term Warehousing is referred as transportation at zero miles per hour

Warehousing provides time and place utility for raw materials, industrial goods, and finished products, allowing firms to use customer service as a dynamic value-adding competitive tool.

Warehousing contributes value in the logistics process

Traditionally viewed as a place to hold or store inventory Contemporary view is the warehouse functions to mix inventory assortments to meet customer requirements
Storage of products is held to a minimum

Evolution of strategic warehousing

Warehouses were once viewed as a necessary evil, used to coordinate product supply with customer demand The explosion of the consumer economy after WWII saw the rise of distribution networks for consumer goods
Warehousing shifted from passive storage to strategic assortment

Warehousing types evolved to accommodate the dynamic aspects Distribution centers Consolidation terminals Break-Bulk facilities Cross-docks

Strategic warehousing offers manufacturers a way to reduce dwell time of parts and materials
Warehousing is integral to justin-time (JIT) and stockless production strategies
Requires strategically located warehouses across the globe

An important goal in warehousing is to maximize flexibility

Respond to ever-changing customer demand
Product assortments Value-added services Shipment sequencing

Amazon Warehouse/Distribution Center in UK

Amazon Warehouse/Distribution Center in US

Netflix Warehouse/Distribution Center

FedEx Warehouse/Dis tribution Center Shipping iPhone 5, September 21, 2012

Warehousing overview
Strategic warehousing Warehouse Operations Warehouse ownership arrangements Warehouse decisions

 Strategic Warehousing Warehouse Operations

Warehouse Ownership Arrangements

Warehouse Management Decisions

 Strategic Warehousing
Economic Benefits Service Benefits

Warehouse Operations
Warehouse Ownership Arrangements

Warehouse Management Decisions

 Strategic Warehousing
Economic Benefits
Consolidation and Break-Bulk Sorting Seasonal Storage Reverse Logistics

Service Benefits

Warehouse Operations
Warehouse Ownership Arrangements Warehouse Management Decisions

 Strategic Warehousing
Economic Benefits
Consolidation and Break-Bulk Sorting Seasonal Storage Reverse Logistics

Service Benefits

Warehouse Operations
Warehouse Ownership Arrangements Warehouse Management Decisions

Plant 1

Store A Plant 2

Consolidation Warehouse

Store B Store C

Plant 3

Store A Plant

Break-Bulk
Warehouse Store B Store C

 Strategic Warehousing
Economic Benefits
Consolidation and Break-Bulk Sorting (cross-docking; in-transit mixing; sorting/sequencing) Seasonal Storage Reverse Logistics

Service Benefits

Warehouse Operations
Warehouse Ownership Arrangements Warehouse Management Decisions

Sorting by Distribution Center Cross Docking

Plant 1

Distribution Plant 2 Center

Store A Store B Store C

Plant 3

Sorting by In-Transit Mixing

Plant Producing Product 1 Store A

Products 1, 3, 4

Plant Producing Product 2

Transit Mixing Point

Product 4

Store B Products 1, 2, 3

Plant Producing Product 3

Store C Products 1, 2, 4

Order Assembly by Sorting/Sequencing

Supplier/ Vendor of Component A Supplier/ Manufacturing Plant 1 Components A,B,C

Vendor of Component B
Supplier/

Order Assembly by Sorting/Sequencing

Manufacturing Plant 1 Components C, B

Vendor of Component C

Manufacturing Plant 1 Components C,B,A

 Strategic Warehousing
Economic Benefits
Consolidation and Break-Bulk Sorting Seasonal Storage Reverse Logistics

Service Benefits

Warehouse Operations
Warehouse Ownership Arrangements Warehouse Management Decisions

 Strategic Warehousing
Economic Benefits
Consolidation and Break-Bulk Sorting Seasonal Storage Reverse Logistics

Service Benefits

Warehouse Operations
Warehouse Ownership Arrangements Warehouse Management Decisions

Reverse logistics processing

Reverse logistics include activities supporting
Returns management
Recalls or product that did not sell

Remanufacturing and repair

Repairing/refurbishing equipment

Remarketing
Selling used equipment

Recycling Disposal

Typical list of value-added services

 Strategic Warehousing
Economic Benefits Service Benefits

Warehouse Operations
Warehouse Ownership Arrangements

Warehouse Management Decisions

 Strategic Warehousing
Economic Benefits Service Benefits
Spot Stocking Full Line Stocking Value Added Services

Warehouse Operations Warehouse Ownership Arrangements Warehouse Management Decisions

Service benefits of warehousing

Spot-stocking is the positioning of inventory for seasonal or promotional demand Full line stocking provides one-stop shopping capability for goods from multiple suppliers
Value-added services include any work that creates a greater value for customers

Full Line Stocking at United Electrics Distribution Center

Illustration of reverse logistics flow

Storm super cell in Montana

 Strategic Warehousing Warehouse Operations Warehouse Ownership Arrangements Warehouse Decisions

 Strategic Warehousing Warehouse Operations

Product Handling Product Storage

Warehouse Ownership Arrangements

Warehouse Decisions

 Strategic Warehousing Warehouse Operations

Product Handling Product Storage

Warehouse Ownership Arrangements

Warehouse Decisions

 Strategic Warehousing Warehouse Operations

Product Handling
Receiving In-Storage Handling Shipping

Product Storage

Warehouse Ownership Arrangements Warehouse Decisions

 Strategic Warehousing Warehouse Operations

Product Handling Product Storage

Warehouse Ownership Arrangements

Warehouse Decisions

Handling
Handling must optimize movement continuity and efficiency
ReceivingUnloading the arriving vehicles In-Storagemoving goods for storage (transfer) or order selection (picking) Shippingverifying the order and loading the departing vehicles

Storage plans should make product velocity a major factor

Slotting determines specific locations for the product based on
Velocityhow fast the goods move Weighthow heavy is the product Special Characteristics how large or small, does it require rack or bin storage

Illustration of storage plan based on product movement velocity

Storage Plan Based on Product Movement Velocity

 Strategic Warehousing Warehouse Operations

Product Handling Product Storage
Active Extended

Warehouse Ownership Arrangements Warehouse Decisions

Warehouses must manage two classes of storage

Active Storagestorage for basic inventory replenishment
Focuses on quick movement Includes flow-through or cross-dock distribution

Extended Storage storage for inventory held in excess of period for normal replenishment
E.g. seasonal, speculative, or even commodities

 Strategic Warehousing Warehouse Operations Warehouse Ownership Arrangements Warehouse Decisions

 Strategic Warehousing Warehouse Operations Warehouse Ownership Arrangements

Private Warehouses Public Warehouses Contract Warehouses

Warehouse Decisions

 Strategic Warehousing Warehouse Operations Warehouse Ownership Arrangements

Private Warehouses Public Warehouses Contract Warehouses

Warehouse Decisions

 Strategic Warehousing Warehouse Operations

Warehouse Ownership Arrangements

Private Warehouses
Control Operating Flexibility Cost

Public Warehouses Contract Warehouses

Warehouse Decisions

 Strategic Warehousing Warehouse Operations Warehouse Ownership Arrangements

Private Warehouses Public Warehouses Contract Warehouses

Warehouse Decisions

 Strategic Warehousing Warehouse Operations Warehouse Ownership Arrangements

Private Warehouses Public Warehouses Contract Warehouses

Warehouse Decisions

Warehouses must manage two classes of storage

Active Storagestorage for basic inventory replenishment
Focuses on quick movement Includes flow-through or cross-dock distribution

Extended Storage storage for inventory held in excess of period for normal replenishment
E.g. seasonal, speculative, or even commodities

Warehouse ownership arrangements

Privatewarehouse operated by the firm owning the product
Building may be owned or leased

Publicservice company owns warehouse and hires out space and services
Usually classed as
General merchandise Refrigerated Bonded Special commodity Household goods and furniture

Contract warehousing combines elements of private and public operations

Usually a long-term relationship or contract between a firm and the warehousing owner/operator
Long-term cost savings compared with public warehouse Often a firms employees will work alongside the contract warehouses Example is Kraft Foods who has contracted with AmeriCold Logistics since the late 1990s

Network deployment is the combination of private, public and contract facilities used by a firm
Network deployment strategy requires answering two questions
How many warehouses should be established? Which warehouse ownership types should be used in specific markets?

For example, when warehouse utilization is not full throughout the year
Use private or contract warehouse to cover 75 percent requirement Public facilities used to accommodate peak demand

 Strategic Warehousing Warehouse Operations Warehouse Ownership Arrangements Warehouse Decisions

 Strategic Warehousing

Warehouse Operations
Warehouse Ownership Arrangements

Warehouse Decisions
Site Selection Design Size & Expansion Capabilities Audit Activities Security Safety & Maintenance

 Strategic Warehousing Warehouse Operations Warehouse Ownership Arrangements Warehouse Decisions

Site Selection Design Size & Expansion Capabilities Audit Activities Security Safety & Maintenance

 Strategic Warehousing

Warehouse Operations
Warehouse Ownership Arrangements

Warehouse Decisions
Site Selection Design Size & Expansion Capabilities Audit Activities Security Safety & Maintenance

 Strategic Warehousing Warehouse Operations Warehouse Ownership Arrangements Warehouse Decisions

Site Selection Design Size & Expansion Capabilities Audit Activities Security Safety & Maintenance

Site selection is driven by service availability and cost factors

Identify broad geography where an active warehouse meets service, economic and strategic requirements
Selection and number of retail outlets drives location of support warehouses Final selection should be preceded by extensive analysis

Illustration of straight-line product flow to facilitate velocity

Warehouse management systems encourage best practices

Warehouse management systems (WMS) integrate procedures and software support to standardize storage and handling work procedures One main use of WMS is to coordinate order selection
Discrete selection is when a specific customers order is selected and prepared for shipment as a single work assignment Wave or batch selection is when orders are processed through zones of the warehouse assigned to specific employees

A summary of WMS functionality and decision support benefits

Other warehouse planning issues

Inventory accuracy is typically maintained by annual physical counts or counting portions of inventory on a planned basis
Cycle counting is the audit of selected inventory on a cyclic schedule

Audits are common to maintain safety, assure compliance to regulations and help improve procedures Security issues involve protection from pilferage and damage

Safety and maintenance issues must also be considered when planning warehouse designs
Accident prevention
Comprehensive safety programs and training, accident investigation and follow up

Environmental protection
Spill kits and spill plans

Maintenance
Scheduled maintenance of building, material handling equipment, and collision damage prevention

What is the future of warehouse management?

Will warehouses grow smaller in the future?
Offer a wider range of services? Will final assembly of goods be increasingly done in warehouses?

What is your solution to the challenge of the last mile posed by Dr. Patrick Dixon?
Video link (7:45 min.) http://www.youtube.com/watch?v=ZbPMaxNl3J4