1. Chapter 8: Storage and Handling
Also Chapter 12 pp
Warehousing Purposes
Warehouse Alternatives
Public, Private, Direct
Materials Handling
Costs
Warehouse Layout
Order Picking

2. Inventory Inventory (storage) is movement in time.
Transportation is movement in space.
Inventory cost is 2nd largest component of logistics cost.
Generally 10-40% of total.
$328 billion in U.S. in 2001
Large companies have billions of $ in inventories.
Nearly all logistics cost savings since 1987 have been from reduced inventories!

3. Why Store Goods? Economies of scale in production & transportation.
Coordinate supply and demand.
Seasonal products.
For example: 60% of toys are sold in holiday season.
Note: <5% of toys are produced in U.S.
Speculation.
Feb Ford wrote off $1 billion in precious metals.
Customer service.
Part of production.

4. Warehouse Purposes Holding inventory. Transshipment.
Safe storage of goods.
Transshipment.
1. Consolidation.
2. Breakbulk.
LTL
LTL TL
LTL TL
LTL

5. Warehouse Purposes - cont.
Transshipment.
3. Mixing. TL
LTL

6. Velocity Cycle time and transit time are decreasing.
Cycle Time Transit Time
hrs hrs
hrs hrs
hrs hrs
Turnover ratios are increasing.
Plant Field
Warehouse Warehouse

7. Warehouse Alternatives
Direct shipping (no warehousing).
Private warehousing.
Better control, Special needs, Future use of space.
High fixed cost, Constant size and location.
Public warehousing.
Inexpensive for small amounts, Can vary size and location, Can provide additional services (customs,etc.).
Less control.
Combination of public and private.
Storage in transit.

8. Products & Warehouse Alternatives
Private Public Direct
Durable goods 67% 20% 13%
Food products 57% 31% 12%
Paper % % 25%
Chemical 40% 38% 22%
Automotive 86% <10% <10%
Electronics 84% <10% <10%

9. Materials Handling Loading and unloading.
Movement to and from storage.
Order picking.
Economies of scale: Larger loads are more efficient.
Pallets: 40” x 48” x 6”
Slipsheets: 40” x 48”
Containers: 8’ x 8’ x 20’, 8’ x 8’ x 40’
Containers also function as warehouses.

10. Materials Handling Equipment
Hand trucks.
Forklifts.
Automated systems:
Conveyers, Draglines, Automatic guided vehicles.
ASR (Automated storage and retrieval systems).
Container handling.
Expensive special purpose equipment.
Bulk handling (coal, grain, etc.) requires special equipment.

11. Warehouse Costs Fixed Variable Public 1 5 Leased 2 4
Private - Manual handling 3 3
Private - Pallet/Forklift 4 2
Private - Automated 5 1
1 = lowest cost

12. Warehouse Costs Total Cost cwt Handled Private - Manual handling
Public
Private - Manual handling
Private - Automated
Total Cost
cwt Handled

13. Warehouse Costs Total Cost cwt Handled Private - Manual handling
Public
Private - Manual handling
Private - Automated
Total Cost
Use Private -
Manual handling
Use Private - Automated
Use Public
cwt Handled

14. Warehouse Layout
Divide floor space into areas for storage, aisles, packing, offices, etc.
Tradeoff:
Ease of handling vs. Utilization of space.
Minimize handling and maximize space utilization.
Storage Layout for low turnover items.
Narrow aisles, wide and deep storage, high shelves.
Layout for order picking.
Wide aisles, easy access to products.
Guidelines on pp (Chapter 12).

15. Combination Layout
Have one area for order picking with small amounts of fast moving products.
Have another area for storage.
inbound
receiving
Longer term storage
Longer term storage
shipping
Longer term storage
outbound
offices

16. Order Picking Strategies
Minimize travel time/distance in warehouse to fill orders.
Sequence items for single pass order picking.
Zoning: Divide stock into separate zones for different pickers.
Divide order into sub-orders for each zone.
Batching: Collect several orders and fill in one pass.
Interleaving: Replace stock and fill orders on same pass.