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Warehousing Transportation/Logistic Strategy Progression of Warehousing Decisions Why Use Warehouses? Types of Warehousing Warehouse Operations Warehousing.

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Presentation on theme: "Warehousing Transportation/Logistic Strategy Progression of Warehousing Decisions Why Use Warehouses? Types of Warehousing Warehouse Operations Warehousing."— Presentation transcript:

1 Warehousing Transportation/Logistic Strategy Progression of Warehousing Decisions Why Use Warehouses? Types of Warehousing Warehouse Operations Warehousing Innovations Warehouse Layout Packaging Introduction

2 Warehousing Transportation/Logistic Strategy Progression of Warehousing Decisions. Should Warehouses Be Used? If Warehouses are Used, Should they be Public or Private? Where Should they be Located? What Should be their Capacities? How Many Should You Have? What Should be their Layout and Design?

3 Warehousing Transportation/Logistic Strategy Why Use Warehouses? Cope with Variable Market Conditions Cope with Variable Sources of Supply Production Economies Purchasing Economies Transportation Economies Customer Service

4 Warehousing Transportation/Logistic Strategy Warehouse Operations Planning, Organizing, Staffing, Equipping, and Controlling Human Resource Management Billing and Inventory Control Order Filling Local Delivery Material Handling Packaging Safety, Security, Maintenance Measuring Warehouse Efficiency

5 Warehousing Transportation/Logistic Strategy J.N. Devin, "Cowboy After OSHA,“ 1972. Warehouse Safety

6 Warehousing Transportation/Logistic Strategy WERC – Established 1978 Housekeeping Storage Heights Automated Retrieval Systems Bar Codes, Scanners, EDI, RFID, etc. Narrow Aisle Equipment, Conveyors, etc. The Distribution Center Concept Assembly, Product Maintenance, Repair, etc. Management Controls Cross Docking Warehousing Innovations

7 Warehousing Transportation/Logistic Strategy Costs of Increasing Storage Heights $ H1 Storage Height Construction & Finance Total Cost Labor & Insurance C1

8 Warehousing Transportation/Logistic Strategy $ Storage Height Total Cost Labor & Insurance Effects of New Technology Construction & Finance C1 H1 Costs of Increasing Storage Heights

9 Warehousing Transportation/Logistic Strategy $ Storage Height Construction & Finance C1 C2 H1H2 Costs of Increasing Storage Heights Total Cost Labor & Insurance Effects of New Technology

10 Warehousing Transportation/Logistic Strategy WERC – Established 1978 Housekeeping Storage Heights Automated Retrieval Systems Bar Codes, Scanners, EDI, RFID, etc. Narrow Aisle Equipment, Conveyors, etc. The Distribution Center Concept Assembly, Product Maintenance, Repair, etc. Management Controls Cross Docking Warehousing Innovations

11 Warehousing Transportation/Logistic Strategy 8 4 Types of Warehousing Private Warehousing Public Warehousing Contract Warehousing Cross-Docking

12 Warehousing Transportation/Logistic Strategy Private vs Public Warehousing (Without Cost of Capital) $ Public (All Variable Cost) Private (Fixed + Variable Cost) Volume Indifferent Prefer Private Prefer Public

13 Warehousing Transportation/Logistic Strategy Indifference Point Between Public and Private (Without Cost of Capital) ROI = 0 Private = Fixed Costs + Variable Costs Public = Variable Costs Example: Private Fixed Costs = $500,000/year Private Variable Costs = $0.15/pound Public Variable Costs = $0.25/pound Indifference point is where both costs are equal 500,000 +.15X =.25X 500,000 =.10X X = 5,000,000 pounds

14 Warehousing Transportation/Logistic Strategy Private vs Public Warehousing (With Cost of Capital) $ Public (All Variable Cost) Private (Fixed + Variable Cost) Volume Indifferent Prefer Private Prefer Public Savings

15 Warehousing Transportation/Logistic Strategy Private = Fixed Costs + Variable Costs Public = Variable Costs Example: Private Fixed Costs = $500,000/year Private Variable Costs = $0.15/pound Public Variable Costs = $0.25/pound Indifference point is where savings = desired ROI Indifference Point Between Public and Private (With Cost of Capital) Savings Average Investment = ROI

16 Warehousing Transportation/Logistic Strategy Desired ROI = Hurdle Rate Savings = Public – Private Average Investment = Initial Investment /2 Example: Hurdle Rate = 10% Investment = $8,000,000 Private Fixed Costs = $500,000/year Private Variable Costs = $0.15/pound Public Variable Costs = $0.25/pound Indifference Point Between Public and Private (With Cost of Capital)

17 Warehousing Transportation/Logistic Strategy Hurdle Rate = 10% Investment = $8,000,000 Private Fixed Costs = $500,000/year Private Variable Costs = $0.15/pound Public Variable Costs = $0.25/pound Savings = Public - Private Indifference Point Between Public and Private (With Cost of Capital).25X - (500,000 +.15X) 4,000,000 =.10

18 Warehousing Transportation/Logistic Strategy Savings = Public – Private.25X - (500,000 +.15X) 4,000,000 =.10 Indifference Point Between Public and Private (With Cost of Capital).25X - (500,000 +.15X) =.10 * 4,000,000.25X - 500,000 -.15X= 400,000.25X -.15X= 400,000 + 500,000.10X= 900,000 X= 9,000,000

19 Warehousing Transportation/Logistic Strategy Greater Control Flexibility (CS Needs, Space Use, etc.) Tax Benefits (Depreciation) Image to Customers Potentially Lower Cost Advantages of Private Warehousing

20 Warehousing Transportation/Logistic Strategy Lack of Flexibility (Fixed Size/Location) Capital Requirements Equipment Maintenance/Training Potential Labor Problems Disadvantages of Private Warehousing

21 Warehousing Transportation/Logistic Strategy Capital Conservation Ability to Meet Peak Demand Reduced Risk Flexibility WRT Volume Avoidance of Property Taxes Avoidance of Labor Problems Potentially Lower Cost Knowledge of Exact Costs Advantages of Public Warehousing

22 Warehousing Transportation/Logistic Strategy Lack of Control Difficult Communications Not Always Available Potentially Higher Cost Disadvantages of Public Warehouses

23 Warehousing Transportation/Logistic Strategy Cross-Docking An operations procedure that allows product to be delivered and received on one side of a facility, undergoes internal handling procedures at the receiving dock, distributing unit loads and moving the product to shipping docks on the other side of the facility where trucks or rail cars are waiting to be loaded for customer delivery.

24 Warehousing Transportation/Logistic Strategy Cross-Docking

25 Warehousing Transportation/Logistic Strategy Cross-Docking

26 Warehousing Transportation/Logistic Strategy Warehouse Layout Angling vs On-the-Square Fixed vs Variable Slots Space Loading Techniques Item Popularity Item Size Cube per Order Index Family Groupings Linear Programming Simulation

27 Warehousing Transportation/Logistic Strategy Cost of Fixed vs Variable Storage Slots $ V1 Total Cost Labor Percent Variable Space Utilization C1

28 Warehousing Transportation/Logistic Strategy $ Total Cost Space Utilization Percent Variable Cost of Fixed vs Variable Storage Slots V1 C1 Labor Effects of New Technology

29 Warehousing Transportation/Logistic Strategy $ Total Cost Cost of Fixed vs Variable Storage Slots V2V1 C1 C2 Percent Variable Space Utilization Labor Effects of New Technology

30 Warehousing Transportation/Logistic Strategy Angling vs On-the-Square Fixed vs Variable Slots Space Loading Techniques Item Popularity Item Size Cube per Order Index Family Groupings Linear Programming Simulation Warehouse Layout

31 Warehousing Transportation/Logistic Strategy Functions of Packaging Marketing Information Promotion Logistics Containment Protection Apportionment Unitization Convenience Communication

32 Warehousing Transportation/Logistic Strategy Postponement What is it? Why do we do it? Examples

33 Warehousing Transportation/Logistic Strategy Postponement What is it? A delayed differentiation strategy to reduce uncertainty and cost while satisfying customer needs. Activities in the supply chain are delayed until a demand is realized. Bucklin (1965) Model of Postponement /Speculation

34 Warehousing Transportation/Logistic Strategy Postponement Why do we do it? It has the potential to improve responsiveness while reducing inventory, transportation, storage, and obsolescence. Insufficient inventory early in the product cycle can cost market share. Products at the end of life cycle lose value quickly and risk obsolescence, which can lead to large inventory write-offs.


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