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WAREHOUSING DECISION

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WAREHOUSING DECISION

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WAREHOUSING DECISION

  1. 1. Chapter 8 Warehousing Decisions
  2. 2. Learning Objectives - After reading the chapter, you should be able to do the following:  Discuss the strategic value-adding role warehousing plays in the logistics system.  Explain the basic rationale for warehousing in light of transportation consolidation, product mixing, service, contingency protection, and smoothing.  Develop an analytical framework for basic warehousing decisions.
  3. 3. Learning Objectives  Distinguish between the different warehouse activities requiring space in the warehouse design.  Discuss the major principles of warehouse layout design.  Compare the use of private versus public warehousing.  Explain public warehousing services, regulations, and pricing.
  4. 4. Learning Objectives  Describe the decision-making approach used to determine the number of warehouses in the logistics system.  Discuss the effect of materials handling and packaging on logistics.  Describe the four dimensions and the objectives of materials handling.
  5. 5. Learning Objectives  Discuss the different types of materials handling equipment and the criteria used to select this equipment.  Explain the cross-functional role of packaging in a company.  Discuss the role of packaging in the logistics system.
  6. 6. Learning Objectives  Describe the various types of packaging materials available and their relative advantages and disadvantages.  Explain the rationale for using bar codes to identify packages.
  7. 7. 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
  8. 8. The Nature and Importance of Warehousing  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.  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.
  9. 9. 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
  10. 10. Table 8-1 Warehouse Value-Adding Roles
  11. 11. Figure 8-1 Transportation Consolidation
  12. 12. Figure 8-2 Supply and Product Mixing
  13. 13. Basic Warehouse Decisions: A Cost Trade-off Framework  Ownership  Public versus contract versus private  Centralized or Decentralized Warehousing  How many  Location  Size  Layout  What products where
  14. 14. Figure 8-3 Basic Warehousing Decisions
  15. 15. The Ownership Decision  Public warehousing costs mostly all variable.  Private warehousing costs have a higher fixed cost component.  Thus private warehousing virtually requires a high and constant volume.
  16. 16. The Ownership Decision  Factors to consider  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
  17. 17. Table 8-2 Firm Characteristics Affecting the Ownership Decision
  18. 18. Public Warehousing  Rationale for Public Warehousing  Limited capital investment  Flexibility  Public Warehousing Services  Bonded warehousing  Field warehouses
  19. 19. 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
  20. 20. 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.
  21. 21. 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
  22. 22. Table 8-3: Factors Affecting the Number of Warehouses Factor Centralized Decentralized Substitutability Low High Product Value High Low Purchase Size Large Small Special Warehousing Yes No Product Line Diverse Limited Customer Service Low High
  23. 23. Basic Warehouse Operations  Movement  Receiving  Put-away  Order picking  Shipping  Storage  Stock location  Warehouse Management System (WMS)
  24. 24. Figure 8-6 Basic Warehouse Operations
  25. 25. Figure 8-7 The Computerized Warehouse
  26. 26. 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.
  27. 27. Warehouse Layout and Design  Provide for the transportation interface.  Provide for order- picking space.  Provide storage space.  Provide recouping, office, and miscellaneous spaces.
  28. 28. Figure 8-8 Warehouse Space Requirements
  29. 29. Figure 8-9 Principles of Warehouse Layout Design
  30. 30. Warehouse Layout and Design  Basic needs:  Receiving  Basic storage area  Order selection and preparation  Shipping
  31. 31. 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.
  32. 32. Warehouse Layout and Design: Layout and Design Objectives  Cubic capacity utilization  Protection  Efficiency  Mechanization  Productivity
  33. 33. Table 8-4: Warehouse Productivity Metrics  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
  34. 34. Materials Handling  Definition: Efficient short distance movement in or between buildings and a transportation agency.  Four dimensions  Movement  Time  Quantity  Space  Coordination
  35. 35. Objectives of Materials Handling  Increase effective capacity  Minimize aisle space  Reduce product handling  Develop effective working conditions  Reduce heavy labor  Improve logistics service  Reduce cost
  36. 36. Figure 8-12 Utilization of a Warehouse’s Cubic Capacity: Principles of Warehouse Layout Design
  37. 37. 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.
  38. 38. Table 8-5 Principles of Materials Handling
  39. 39. Packaging  Interest in packaging is widespread  Logistics  Warehousing  Transportation  Size  Marketing  Production  Legal
  40. 40. The Role of Packaging  Identify product and provide information  Improve efficiency in handling and distribution  Customer interface  Protect product
  41. 41. What Is Packaging?  Consumer packaging  Marketing managers primarily concerned with how the package fits into the marketing mix.  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.
  42. 42. Packaging Materials  Table 8-6 presents a comparison of various packing material characteristics.  Basic considerations include:  Soft materials  Plastic  Environmental issues  Recycling (reverse logistics)
  43. 43. Table 8-6 Comparison of Cushioning Materials
  44. 44. 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
  45. 45. 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.
  46. 46. End of Chapter 8 and 8A Slides Warehousing Decisions
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