Chapter 8

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					Chapter 8

            Warehousing Decisions
The Nature and
Importance of Warehousing

   Warehousing provides time and place utility
    (primarily time) for raw materials, industrial
    goods, and finished products, allowing firms to
    use customer service as a dynamic value-
    adding competitive tool.




Chapter 8       Management of Business Logistics, 7th Ed.   2
The Role of the Warehouse in the
Logistics System: A Basic Conceptual
Rationale

   The warehouse is       Functions of

    where the supply        warehousing include:
                              Transportation
    chain holds or stores      consolidation
    goods.                    Product mixing

                              Cross-docking

                              Service

                              Protection against
                               contingencies
                              Smoothing


Chapter 8      Management of Business Logistics, 7th Ed.   3
Table 8-1
Warehouse Value-Adding Roles




Chapter 8   Management of Business Logistics, 7th Ed.   4
Figure 8-1
Transportation Consolidation




Chapter 8   Management of Business Logistics, 7th Ed.   5
Figure 8-2
Supply and Product Mixing




Chapter 8   Management of Business Logistics, 7th Ed.   6
Figure 8-3
Basic Warehousing Decisions




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


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

Chapter 8   Management of Business Logistics, 7th Ed.          9
The Ownership Decision
   Factors to consider
      Throughput volume

         (because of fixed costs)

      Stability of demand

      Density of market area to be served

      Security and control needs

      Customer service needs

      Multiple use needs of the firm



Chapter 8      Management of Business Logistics, 7th Ed.   10
Table 8-2    Firm Characteristics
Affecting the Ownership Decision




Chapter 8   Management of Business Logistics, 7th Ed.   11
Figure 8-6
Basic Warehouse Operations




Chapter 8   Management of Business Logistics, 7th Ed.   12
Public Warehousing
   Rationale for Public Warehousing
      Limited capital investment

      Flexibility

   Public Warehousing Services
      Bonded warehousing

      Field warehouses




Chapter 8     Management of Business Logistics, 7th Ed.   13
Public Warehousing
   Public warehousing                Public warehousing rates
    regulation:                        based upon:
      Liability                            Value

      Receipts                             Fragility

                                            Potential damage to

                                             other goods
                                            Volume and

                                             regularity
                                            Weight density

                                            Services required


Chapter 8       Management of Business Logistics, 7th Ed.      14
    Contract Warehousing
     Increasing phenomenon
     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.   15
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.       16
    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

    Chapter 8        Management of Business Logistics, 7th Ed.             17
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.   18
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.    19
    Warehouse Layout and Design
   Provide for the
    transportation interface.
   Provide for order-
    picking space.
   Provide storage space.
   Provide recouping,
    office, and
    miscellaneous spaces.

    Chapter 8     Management of Business Logistics, 7th Ed.   20
Figure 8-8
Warehouse Space Requirements




Chapter 8   Management of Business Logistics, 7th Ed.   21
Warehouse Layout and Design
                                      Basic needs:
                                         Receiving

                                         Basic storage

                                          area
                                         Order selection

                                          and preparation
                                         Shipping




Chapter 8   Management of Business Logistics, 7th Ed.       22
    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.
      Use an effective storage plan

      Minimize aisle space.

      Use full building height.




     Chapter 8        Management of Business Logistics, 7th Ed.   23
Warehouse Layout and Design:
Layout and Design Objectives

        Cubic capacity
         utilization
        Protection
        Efficiency
        Mechanization
        Productivity



Chapter 8        Management of Business Logistics, 7th Ed.   24
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

Chapter 8       Management of Business Logistics, 7th Ed.   25
    Materials Handling
    Definition: Efficient short distance
     movement in or between buildings and a
     transportation agency.
    Four dimensions
       Movement

       Time

       Quantity

       Space

    Coordination
    Chapter 8    Management of Business Logistics, 7th Ed.   26
Objectives of Materials Handling
   Increase effective capacity
        Use building’s height and minimize aisle space
   Improve operating efficiency
        Reduce product handling
   Develop effective working
     conditions
   Reduce heavy labor
   Improve logistics service
   Reduce cost

Chapter 8            Management of Business Logistics, 7th Ed.   27
Table 8-5: Principles of Materials Handling
 To effectively plan and control materials handling, the logistics
manager should recognize some guidelines and principles.
(* deserving special attention)




Chapter 8          Management of Business Logistics, 7th Ed.         28
Packaging
   Interest in packaging is widespread
      Logistics

         Warehousing

         Transportation

         Size

      Marketing

      Production

      Legal


Chapter 8      Management of Business Logistics, 7th Ed.   29
The Role of Packaging
   Identify product and provide information
   Improve efficiency in handling and
    distribution
   Customer interface
   Protect product




Chapter 8      Management of Business Logistics, 7th Ed.   30
What Is Packaging?
   Consumer (interior) packaging
      Marketing managers primarily concerned
       with how the package fits into the
       marketing mix.
   Industrial (exterior) 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.   31
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.   32
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




Chapter 8       Management of Business Logistics, 7th Ed.   33
Appendix 8A

    Materials-Handling Equipment
Dock Equipment
   Forklifts
   Dock bumpers
   Dock levelers
   Dock seals
   Trailer restraint
    systems
   Pallets


Chapter 8       Management of Business Logistics, 7th Ed.   35
Pallets and Pallet Movers




Chapter 8   Management of Business Logistics, 7th Ed.   36
Figure 8A-1            Forklift Truck




Chapter 8   Management of Business Logistics, 7th Ed.   37
Figure 8A-2            Pallet Types




Chapter 8   Management of Business Logistics, 7th Ed.   38
Other Materials Handling
Equipment: Conveyors
   Types                                   Disadvantages
      Roller or gravity style                 Very expensive

      Belt style                              Relatively inflexible

   Advantages
      Assist in keeping

       inventory records an
       location
      Ability to move

       goods quickly and
       efficiently
Chapter 8         Management of Business Logistics, 7th Ed.             39
Other Materials Handling
Equipment: Other
   Types                               Advantages
      Cranes (overhead                    Ability to handle

       and wheeled)                         special
      Packers (COFC                        movements
       and TOFC)                            quickly and
      Automatic guided
                                            efficiently
       vehicles                         Disadvantages
                                           Very expensive

                                            and limited use
Chapter 8     Management of Business Logistics, 7th Ed.         40
Cranes




Chapter 8   Management of Business Logistics, 7th Ed.   41
Figure 8A-3  Materials-Handling
Equipment Top-running




Chapter 8   Management of Business Logistics, 7th Ed.   42
Order-picking and Storage
Equipment
   Picker-to-part systems - order picker must
    travel to the pick location within the aisle.
      Bin shelving

      Modular storage drawers

      Flow racks

      Mobile storage systems

      Order-picking vehicles




Chapter 8      Management of Business Logistics, 7th Ed.   43
    Order-picking and Storage
    Equipment
   Part-to-picker systems - the pick location
    travels through an automated machine to the
    picker.
      Carousels

         Horizontal

         Vertical

      Mini-load automated storage and retrieval

       systems (AS/RS)

    Chapter 8    Management of Business Logistics, 7th Ed.   44
Figure 8A-4
Order-Picking Equipment




Chapter 8   Management of Business Logistics, 7th Ed.   45
Figure 8A-5            Mezzanines




Chapter 8   Management of Business Logistics, 7th Ed.   46
    Types of Materials Handling
    Equipment – A Design Perspective
   Flexible path
      Fork lifts, power lifts/skids

      Very flexible, but usually labor intensive

   Continuous-flow fixed path
      Conveyors, track-guided vehicles

      Expensive but capable; limited flexibility;

       need high volumes to be efficient
   Intermittent-flow fixed path
      Rail-mounted cranes
    Chapter 8     Management of Business Logistics, 7th Ed.   47
    Equipment Selection Factors
   Physical attributes of the product and its
    packaging
   Characteristics of the facility
   Time requirements
   Sources of information
      Vendor sales force

      Company engineers

      Consultants

      Similar site visitation and inspection

    Chapter 8      Management of Business Logistics, 7th Ed.   48

				
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