Warehousing Value
Warehousing contributes value in the logistics process
-Traditional view
-Contemporary view
Contemporary view:
-the warehouse functions to mix inventory assortments to meet customer requirements
-Storage of products is held to a minimum
-Storage of inventory is waste in the LEAN warehouse
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
The Changing Role of the Warehouse
1.)Traditional Warehouses: Receiving, Put-away, Storage Operations, Picking and Shipping
2.)Distribution Centers: Scheduled Cross-docking, Special Handling,
Kitting Operations, Returns Handling, "Postponed" Manufacturing Steps
and Other value added
3.)Fulfillment Centers:
Dynamic Cross-docking, Mixed Mode Fulfillment, Multi-channel including
On-line Fulfillment, Distributed Order Management and Green Operations
(e.g., end of product life disposition, recycling, reclamation)
Warehousing types evolved to accommodate dynamic aspects of logistics
-Distribution centers
-Consolidation terminals
-Break-Bulk facilities
-Cross-docks
Strategic Warehousing
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
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
Consolidation and Break-Bulk Warehousing
Consolidation and Break-Bulk reduce transportation cost by increasing the size of the shipments.
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 then breaks the shipment down into individual deliveries to multiple destinations
The basic benefit of sorting is to reconfigure freight as it is being transported from origin to destination.
Three basic types sorting:
-Cross-docking
-Mixing
-Assembly
Sorting: Cross-docking
Cross-docking combines inventory from multiple origins into a pre-specified assortment for a specific customer
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.)
Sorting: Mixing
Mixing combines inventory from multiple origins (like cross-docking) but also adds items that are regularly stocked at the mixing warehouse
Sorting: Assembly
Assembly supports manufacturing operations
-Assembly occurs when products or components from 2nd Tier suppliers are
assembled by a warehouse located near the manufacturing plant
-Common assembly processes are packaging and color customizing
Seasonal Storage
Storage provides direct benefit by accommodating seasonal demand and/or production:
-Accommodates seasonal demand such as lawn furniture and toys
-Accommodates seasonal production such as agricultural products
Storage provides and inventory buffer, which allows production
efficiencies within the constraints imposed by material sources and
consumers.
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: Returning product following its useful life with the
objective of decomposing it into it component materials so they can be
effectively reused
-Disposal: for materials which cannot effectively be reused.
Typical List of Value-Added Services
-Cross-docking
-Customer returns
-Home Delivery
-In-transit
-Kan Ban
-Kitting
-Labeling
Warehouse Operations
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
Handling must optimize movement continuity and efficiency
-Receiving — Unloading the arriving vehicles
-In-Storage — Moving goods within the warehouse for storage (transfer)
or order selection (picking). Items may be moved to a staging area in
preparation for shipping
-Shipping — Verifying the order and loading the departing vehicles
Typically, these activities require the use of material handling equipment, e.g., lift trucks, conveyors, etc.
Storage
Storage plans should consider product velocity as a major factor in determining the warehouse layout.
It is essential that products be assigned a specific locations in the warehouse called slots
Slotting determines specific locations for the product based on:
Velocity: how fast the goods move
Weight: how heavy is the product
Special Storage Requirements: how large or small, does it require rack or bin 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
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
Contract Warehousing
-Contract warehousing combines elements of private and public operations
-Usually a long-term relationship or contract between a firm and the warehousing operator
-Long-term cost savings compared with public warehousing
-Often a firm's employees will work alongside the contract warehouse's employees (e.g., "man-in-the-plant" concept)
-Example: Novartis Pharmaceuticals contracted with DHL/Exel Logistics
since 2008 for a dedicated facility to handle all finished product US
warehousing & distribution
Public
Pros:
May attain lower operating costs than private facilities due to economies of scale
More flexibility in number and size of warehouses
Cons:
Potential for loss of some control over day-to-day activities
Do not work as well for products requiring very customized storage conditions
Private
Pros:
Full control over warehouse activities
Flexible scheduling based upon business needs
Not operated for profit, greater visibility to cost drivers
Cons:
May not be a company's core competency
Company may not benefit from economies of scale
Potential for less flexibility in facility configuration
Contract
Pros:
Control over warehouse activities, while leveraging warehousing expertise from the provider
Cons:
Due to nature of integration, cost of exit can be high
Network Deployment
-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?
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
Handling and Storage Efficiency
Warehouse decisions that determine handling and storage efficiency
-Site Selection
-Design
-Product Mix
-Expansion
-Material Handling
-Layout
-Sizing
-Warehouse Management System
-Accuracy and Audit
-Security
-Safety and Maintenance
Site Selection
Warehouse decisions that determine handling and storage efficiency:
-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
Warehouse Management Systems
Warehouse Management Systems (WMS) integrate procedures and software support to standardize storage and handling work procedures
-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
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
Warehouse Designs
-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