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.)