L – 5 Distribution Channel - Warehousing and Inventory Management.

The Link

WAREHOUSING / DC WAREHOUSING DISTRIBUTION CENTER Receive – Store – Pick and ship Receive - ship Low value added High value added Collects data in batches Collects data in real time Focus on minimizing the operational cost Focuses on maximizing the profit impact of meeting customer delivery requirement

Warehousing Decision Strategic Operational

Types of inventories Raw materials, components, and physical supplies Finished goods GIP / Materials to be disposed or Re-cycled

Why should firms hold inventories Achieve Transportation economies Achieve production economies Take advantage of quality of quality purchase, discount and forward buyers Maintain a source of supply Support firms customer service policies. Meet changing market conditions

Why should firms hold inventories… Overcome the time and space differentials that exist between producers and consumers Accomplish least total cost, commensurate with a desired level of CS. Support JIT programs of supplies and customers Offer product mix Provide temporary storage support

Uses of Warehouse Support Physical supplies and distribution Support manufacturing To mix products from multiple production facility To Break bulk or subdivide or other wise

Mechanism PUSH PULL WAREHOUSE FACTORY ( Serves to absorb excess production) PULL FACTORY WAREHOUSE DISTRIBUTION ( Flow thru center with positioning inventories closer to customers )

Functions of Warehouse Manufacturing Support Production Mix Consolidation Break bulk Warehousing and Transportation synergy Warehousing and production synergy

Factors influencing Warehouse Policies The Industry The firm philosophy Capital availability Product characteristics Economic condition Competition Seasonality of demand Use of JIT programs Production process in use.

Types of warehouses General Merchandise warehouse Refrigerated warehouse Bonded warehouse Household goods warehouse Special commodity warehouse Bulk storage warehouse

Functions of warehousing operation Movement Receiving Transfer or put away Order picking / selection Cross docking Shipping

Functions of warehousing operation Storage Temporary Storage Semi Temporary storage

Information System Information system Inventory level Throughput level Stock keeping locations Inbound / outbound shipments Customers data Facility and space utilization Personnel efficiency monitoring

Inefficiency in a warehouse Information system Redundant and excessive handling Poor utilization and space and cube Excessive maintenance cost and down time due to obsolete equipment Dated receiving and shipping and dock condition Obsolete computerized information handling of routine transactions

Public warehouse Advantages Disadvantages Ability to increase w/h space to cover peak season Lack of specialization Reduced risk Shortage of space – scalability limited Economies of scale communication Flexibility Tax advantage Specific know how of cost Minimal labor dispute Conservation of capital

Private warehouse Advantages Disadvantages Control Lack of flexibility Financial constrains Less costly Better use of human resources Tax benefit Intangible benefits

Factors affecting size of a warehouse Customer size level Size of market or market served Number of products marketed Size of products Material handling equipments Through put rate Production lead time Economies of scale Stock lay out Aisle requirement Office area in the warehouse Types of shelves / racks used Level and pattern of demand Processing / kit preparation area

Location analysis Market positioned Production positioned Intermediately positioned Models: Von Thunen model Weber's model Hoovers model Green Huts model Center of Gravity approach

Factors from micro perspective Quality and variety of transportation carrying the service site Quality and quantity of labor availability Labor rates Cost and quality of industrial land Potential for expansion Tax structure Building codes Nature of commodity and environment

Factors from micro perspective…. Cost of construction Cost of availability of utilities Cost of money locally Local government tax allowances and inducement to build.

Warehouse layout and design Increased output Improve product flow Reduce cost Improve service to customers Provide better working condition Safety SHE