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CHAPTER 9: Warehousing.

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Presentation on theme: "CHAPTER 9: Warehousing."— Presentation transcript:

1 CHAPTER 9: Warehousing

2 Warehousing overview Strategic warehousing Warehouse operations
Warehouse ownership arrangements Warehouse decisions

3 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

4 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

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

6 Strategic warehousing offers manufacturers a way to reduce dwell time of parts and materials
Warehousing is integral to just-in-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

7 Strategic warehousing can provide both economic and service benefits
Economic benefits of warehousing occur when overall logistics costs are reduced Consolidation and break-bulk Sorting Seasonal storage Reverse logistics Service benefits are justified by sales improvements that more than offset added cost Spot-stocking Full line stocking Value-added services

8 Consolidation and break-bulk reduce transportation cost
Consolidation occurs when a warehouse receives materials from a number of sources and combines them into exact quantities for a specific destination Break-bulk occurs when a warehouse receives a single large shipment and arranges for delivery to multiple destinations

9 Illustration of consolidation and break-bulk arrangements
Figure 9.1 Consolidation and Break-Bulk Arrangements

10 Figure 9.2 - Sorting involves reconfiguring freight as it flows from origin to destination

11 Cross-docking is used extensively by retailers to replenish store inventories
Cross-docking combines inventory from multiple origins into a prespecified assortment for a specific customer

12 Successful cross-docking is highly dependent on information technology
Products are received, selected, repackaged, and loaded for shipment w/o storage Used with general merchandise & food Enabled by conveyors & sortation equipment Used in large distribution centers (800K to 1,200K sq.ft.) WalMart Distribution Center

13 Mixing is usually performed at an intermediate location between origin and destination
Mixing combines inventory from multiple origins (like cross-docking) but also adds items that are regularly stocked at the mixing warehouse Stock Inventory

14 Assembly supports manufacturing operations
Assembly occurs when products or components from second-tier suppliers are assembled by a warehouse located near manufacturing plant Common assembly processes are packaging and color customizing

15 Seasonal storage provides direct benefit by accommodating production or demand
Seasonal production include agricultural products Seasonal demand includes lawn furniture and toys Seasonal storage allows production efficiencies within the constraints of seasonality

16 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

17 Illustration of reverse logistics flow

18 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 See Table 10.1 for examples Full Line Stocking at United Electric’s Distribution Center

19 Typical list of value-added services
Table 10.1 Value-Added Services

20 Warehouse operations involve two major activities – handling and storage
Objective is to Efficiently receive inventory Store it as required Assemble it into complete orders Make a customer shipment Operations will therefore emphasize product flow

21 Handling Handling must optimize movement continuity and efficiency
Receiving—Unloading the arriving vehicles In-Storage—moving goods for storage (transfer) or order selection (picking) Shipping—verifying the order and loading the departing vehicles

22 Storage plans should make product velocity a major factor
Slotting determines specific locations for the product based on Velocity—how fast the goods move Weight—how heavy is the product Special Characteristics—how large or small, does it require rack or bin storage

23 Illustration of storage plan based on product movement velocity
Figure 9.3 Storage Plan Based on Product Movement Velocity

24 Warehouses must manage two classes of storage
Active Storage—storage 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

25 Warehouse ownership arrangements
Private—warehouse operated by the firm owning the product Building may be owned or leased Public—service company owns warehouse and hires out space and services Usually classed as General merchandise Refrigerated Bonded Special commodity Household goods and furniture

26 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 firm’s employees will work alongside the contract warehouse’s Example is Kraft Foods who has contracted with AmeriCold Logistics since the late 1990’s

27 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

28 Warehouse decisions that determine handling and storage efficiency
Site Selection Design Product-Mix Analysis Expansion Materials Handling Layout Sizing Warehouse management system Accuracy and audit Security Safety and maintenance

29 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

30 Illustration of straight-line product flow to facilitate velocity
Figure 9.4 Basic Warehouse Design

31 Two examples illustrating the integration of handling equipment with final layout
Figure 9.5 Layouts A and B

32 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 customer’s 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

33 Illustration of the range of activities coordinated by an advanced WMS
Figure 9.6 Warehouse Management System Functionality

34 A summary of WMS functionality and decision support benefits
Table 9.2 WMS Functionality and Decision Support

35 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

36 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

37 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.)

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