Warehousing Decisions Chapter 8 Warehousing Decisions

Contents: Warehousing General concept of warehousing A) Deciding warehousing.. B) Its environment … Basic Warehouse Operations Warehouse Layout and Design Materials Handling Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. 1. Warehousing Why we need warehousing 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. In 1999, $75 billion, or 0.8 percent of GDP was spent on warehousing. The total supply of U.S. warehousing space in 1999 was 6.1 billion square feet, an increase from 1990 of 700 million square feet of space. Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. A general environment of Warehouse in a business setting, how complex is it … Chapter 8 Management of Business Logistics, 7th Ed.

Logistics Profile: Grainger Industrial Supply Grainger is dedicated to providing excellent customer service using an effective network of warehouses and distribution centers providing same day or next day service. 13.6 million square feet in one national distribution center, two regional and six zone distribution centers, and 373 local branches 1.5 million customers, 220k SKUs, $4.5 billion in sales, 60k to 80k daily customer orders Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. 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 Chapter 8 Management of Business Logistics, 7th Ed.

A) Deciding warehousing.. The role of warehousing in: 1. Transportation Inbound Versus outbound logistics ….see next slide 2. Supply and product mixing Product mix Versus Supply mix Chapter 8 Management of Business Logistics, 7th Ed.

Figure 8-1 Transportation Consolidation Chapter 8 Management of Business Logistics, 7th Ed.

Figure 8-2 Supply and Product Mixing Chapter 8 Management of Business Logistics, 7th Ed.

Managerial Questions: The ownership of Warehousing: Shall we own or rent a warehouse, how to management them? Based on “trade-off” vlaue Chapter 8 Management of Business Logistics, 7th Ed.

Basic Warehouse Decisions: A Cost Trade-off Framework 1. Ownership 1a Public versus 1b contract versus 1c private 2. Centralized or Decentralized Warehousing How many Location Size Layout What products where Chapter 8 Management of Business Logistics, 7th Ed.

The Ownership Decision: 1a Versus 1c 1a. Public warehousing costs mostly all variable. 1c. Private warehousing costs have a higher fixed cost component. Thus private warehousing virtually requires a high and constant volume. Chapter 8 Management of Business Logistics, 7th Ed.

The Ownership Decision: 1a Vs 1c Other Factors to consider for 1a or 1c: Throughput volume Stability of demand Density of market area to be served Security and control needs Customer service needs Multiple use needs of the firm Their characteristics … see next slide Chapter 8 Management of Business Logistics, 7th Ed.

Table 8-2 Firm Characteristics Affecting the Ownership Decision Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. 1a Vs 1b characteristics of: 1a Public Warehouse 1b contract Warehouse Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. 1a. Public Warehousing Rationale for Public Warehousing Limited capital investment Flexibility Public Warehousing Services Bonded warehousing tax/tariffs deferment pay only when ready to sell Field warehouses co uses inventory as a form of collateral for a loan its regulations & rate based requirement … next slide Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. 1a. 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 Chapter 8 Management of Business Logistics, 7th Ed.

1b.Contract Warehousing Up 23% per year in 2000 to $20.4 billion. 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. Chapter 8 Management of Business Logistics, 7th Ed.

2a Centralized Vs 2b Decentralized Warehousing Their decision features include: Substitutability alternative choices Product Value capital cost Purchase Size dimensional of goods Special Warehousing special facility Product Line special equipment? Customer Service % of customer satisfaction See next slide for comparison …. Chapter 8 Management of Business Logistics, 7th Ed.

2a Centralized Vs 2b Decentralized Warehousing Factor Centralized Decentralized Substitutability Low High Product Value Purchase Size Large Small Special Warehousing Yes No Product Line Diverse Limited Customer Service Chapter 8 Management of Business Logistics, 7th Ed.

How many warehouses should we have? Their decision features include: Inventory costs Warehousing costs Transportation costs Cost of lost sales Maintenance of customer service levels Service small quantity buyers Their comparison …. Chapter 8 Management of Business Logistics, 7th Ed.

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 Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. The logical flow for selecting type of warehousing….. Chapter 8 Management of Business Logistics, 7th Ed.

Figure 8-3 Basic Warehousing Decisions Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. B) Its environment … B1. Basic Warehouse Operations B2. Warehouse Layout and Design B3. Materials Handling + appendix B4. Packaging B5. Bar Codes Chapter 8 Management of Business Logistics, 7th Ed.

B1. Basic Warehouse Operations Movement Receiving Put-away Order picking Shipping Storage Stock location Warehouse Management System (WMS) Chapter 8 Management of Business Logistics, 7th Ed.

Figure 8-6 Basic Warehouse Operations Chapter 8 Management of Business Logistics, 7th Ed.

Figure 8-7 The Computerized Warehouse Chapter 8 Management of Business Logistics, 7th Ed.

B2. 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. Chapter 8 Management of Business Logistics, 7th Ed.

B2. Warehouse Layout and Design 6. Provide for the transportation interface. 7. Provide for order-picking space. 8. Provide storage space. 9. Provide recouping, office, and miscellaneous spaces. … see next slide for layout …. Chapter 8 Management of Business Logistics, 7th Ed.

Figure 8-8 Warehouse Space Requirements Chapter 8 Management of Business Logistics, 7th Ed.

Principles of 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. Minimize aisle space. Use full building height. Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. Their level of significant …… Chapter 8 Management of Business Logistics, 7th Ed.

Figure 8-9 Principles of Warehouse Layout Design Most Common Acceptable priority (see next slide) Chapter 8 Management of Business Logistics, 7th Ed.

The flow of Warehouse Layout and Design Basic needs: Receiving Basic storage area Order selection and preparation Shipping One dimensional design Chapter 8 Management of Business Logistics, 7th Ed.

Warehouse Layout and Design: Layout and Design Objectives Cubic capacity utilization Max use od space Protection Stay away hazardous materials Efficiency 1 space, 2 labor cost Mechanization Automation vs obsolescence Productivity Materials/labor cost See next slide ….. Chapter 8 Management of Business Logistics, 7th Ed.

Table 8-4: Warehouse Productivity Metrics Pound handled 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 Labor cost Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. B3. Materials Handling Definition: Efficient short distance movement in or between buildings and a transportation agency. Four dimensions Movement Horizontal vs vertical Time Traveling time between locations Quantity How much can carry/various of goods Space Required space Coordination – between all parties involved Chapter 8 Management of Business Logistics, 7th Ed.

B3. Objectives of Materials Handling Increase effective capacity see next slide Minimize aisle space Reduce product handling Develop effective working conditions Reduce heavy labor Improve logistics service Reduce cost Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. Figure 8-12 Utilization of a Warehouse’s Cubic Capacity: Principles of Warehouse Layout Design Chapter 8 Management of Business Logistics, 7th Ed.

B3. Guidelines and Principles for Materials Handling To effectively plan and control materials handling, the logistics manager should recognize some guidelines and principles. Table 8-5 lists 20 of the most commonly accepted principles of effective materials handling. Asterisks mark those deserving special attention. …. See next slide…. Chapter 8 Management of Business Logistics, 7th Ed.

Table 8-5 Principles of Materials Handling Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. B4. Packaging Interest in packaging is widespread 1. Logistics Warehousing Transportation Size 2. Marketing attractiveness 3. Production related costs on how goods are placed 4. Legal confine with env. Rules and regulations Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. B4. The Role of Packaging Identify product and provide information Make it more appearing to customers Improve efficiency in handling and distribution physical dimensions, strength, shapes Customer interface Integrate/compatible with customers’ handling systems Protect product Adequate of product production Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. What Is Packaging? 1. Consumer packaging Marketing managers primarily concerned with how the package fits into the marketing mix. 2. Industrial 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. Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. Packaging Materials Table 8-6 presents a comparison of various packing material characteristics. Basic considerations include: Soft materials Plastic Environmental issues Recycling (reverse logistics) Chapter 8 Management of Business Logistics, 7th Ed.

Table 8-6 Comparison of Cushioning Materials Chapter 8 Management of Business Logistics, 7th Ed.

Management of Business Logistics, 7th Ed. B5. 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 An important system for SCM environment Chapter 8 Management of Business Logistics, 7th Ed.

Chapter 8: Summary and Review Questions Students should review their knowledge of the chapter by checking out the Summary and Study Questions for Chapter 8.

Table 8-1 Warehouse Value-Adding Roles Chapter 8 Management of Business Logistics, 7th Ed.

End of Chapter 8 and 8A Slides Warehousing Decisions