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Warehousing and Transportation - Slide 1

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					                         Daily Plan-Day 3
5 Integrated Planning for a   What is integrated planning (ISCP)? (Process Models Reviewed)    Day 3 -
  Global Supply Chain         Recent Research – ISCP benefits.                                 AM
                              Sales and Operations Planning Maturity and Best Practices.
   Reference study:           Forecasting – How to predict the future.
   Supply Chain planning-14
   Production Planning -12
  Case Study or in-class      Exercise in Integrated Planning
  exercise 6
6 Warehousing and             How does warehousing support supply chain strategy?              Day 3 -
  Transportation Strategies   Warehouse Operations – design and control.                       PM
                              Building a SCOR card for warehousing
   Reference study:           Integrated Logistics and Transportation
   Warehousing -1
   Warehouse Operations I- 7
   Warehouse Operations II -8
   Transportation Overview -3
   Transportation Operation - 9
   Transportation Planning -10
   Case Study or in-class       Exercise in Warehousing / Transportation Strategy
   exercise 6
   Review the Maturity          Team Exercises in Supply Chain Management Maturity. A review of End of
   Assessment.                  the assessment results.                                         Each
                                                                                                Day
           Module Overview

• How does warehousing support supply
  chain strategy?
• Warehouse operations – design and control
• Building a SCOR card for the warehouse
• Integrated Logistics and Transportation
How does warehousing support
   supply chain strategy?
        Function of a Warehouse in a Supply Chain


•    A warehouse is the point in the supply chain
     where raw materials, work-in-process (WIP), or
     finished goods are stored for varying lengths of
     time.
•    Warehouses can be used to add value to a
     supply chain in two basic ways:
    1. Storage. Allows product to be available where and
       when its needed.
    2. Transport Economies. Allows product to be
       collected, sorted, and distributed efficiently.
             Storage Function

• Storage provides value through
  – Stockpiling. Accumulating material to lower
    per-unit cost of production and transportation
    by spreading fixed costs over more units.
  – Buffering. Holding safety stock to hedge
    against uncertainty in demand, production
    output, and transportation times.
  – Processing. Storage is sometimes a value-
    adding operation (e.g., wine).
            Transport Economies

• Consolidation of multiple small loads into a
  larger load gives access to economies of scale
  and density in transportation.
  – Full truckload (TL) shipments are less costly than
    less-than-truckload (LTL) shipments.
  – Waiting to accumulate a full load for TL shipment from
    origin to destination can cause excessive delay.
• Warehouses function as transshipment terminals
  for consolidation, cross-dock, and break-bulk
  activities.
               Types of Warehouses
• A public warehouse is a business that rents storage
  space to other firms on a month-to-month basis. They
  are often used by firms to supplement their own private
  warehouses.
• A warehouse can be used:
   – to store and transship raw materials at any point along the
     supply chain inbound to a production facility
   – to hold work in process (WIP) at the facility, and
   – to store and transship finished goods distributed from the facility.
• Raw material or finished goods warehouses can be used
  for consolidation, cross-docking, or breaking bulk
  purposes.
           Consolidation Warehouse
        Supplier
           A
                   A


        Supplier       Consolidation
                   B                   A   B   C   Customer
           B            Warehouse


                   C
        Supplier
           C



• A consolidation warehouse is used to combine multiple
  loads into a single load.
• Instead of costly LTL or infrequent TL shipments from
  each supplier directly to the customer, a consolidation
  warehouse provides less-costly and more frequent TL
  shipments to the customer.
                Cross-Dock Warehouse
     Supplier
                                                      Customer
        A        A
                     A                            C
                         A                    B
                                          A
     Supplier                Cross-Dock
                 B   B   B                A   B   C   Customer
        B                    Warehouse

                                          A
                         C                    B
                     C                            C
     Supplier    C
                                                      Customer
        C



• A cross-dock warehouse is used to mix freight
  so that TL shipments can be used for all
  transport between suppliers and customers.
  – Receiving and shipping are usually coordinated so
    that no storage is required at the warehouse.
               Break-Bulk Warehouse
                                                Customer

                                            A

        Supplier               Break-Bulk
                   A   A   A                A   Customer
           A                   Warehouse

                                            A

                                                Customer




• At a multi-market warehouse, a large long-distance TL
  shipment from a supplier to broken down into smaller
  loads that are delivered a short-distance to each
  customer.
• Multi-market warehouses are usually located close to or
  in each major market served.
Warehouse operations – design and
            control
            Typical Warehousing Activities
                                                        • Receiving (unloading,
                                                          verifying, inspecting)
                                                        • Putaway, cross-docking
               Replenish
Reserve
                   O
                               Forward Picking          • Order picking,
Storage        P i rd
                  ck er
                    in
                                        Order Picking     replenishment
                       g
                               Packing, Sorting         • Sortation, packing
  Putaway




                y




                                 & Unitizing
              wa




                                                        • Shipping (verifying,
              ta
            Pu




Receiving                          Shipping
                                                          loading)
                   Cross-docking
                                                        • Within storage areas:
                                                          consolidation,
                                                          rewarehousing, cycle
                                                          counting
          Typical Warehousing Activities


                        Reserve                          Forward        Order   Sort &
Receive   Putaway                         Replenish                                      Ship
                        Storage                            Pick         Pick    Pack




                                   Replenish
                    Reserve                        Forward Picking
                                      O
                    Storage        Pi rd
                                     ck er                  Order Picking
                                       in
                                         g
                                                   Packing, Sorting
                      Putaway




                                     y




                                                     & Unitizing
                                  wa
                                  ta
                                Pu




                    Receiving                          Shipping
                                       Cross-docking
                                Receiving

                          Reserve               Forward   Order   Sort &
      Receive   Putaway             Replenish                              Ship
                          Storage                 Pick    Pick    Pack


• Receiving introduces inventory into the
  warehouse and prepares it for storage or
  customer order fulfillment.
• It is the process of unloading, verifying,
  inspecting, and staging of material transported
  to a warehouse in preparation for putaway or
  cross-docking, sometimes including sorting and
  repackaging of the material.
                                      Putaway

                            Reserve               Forward   Order   Sort &
        Receive   Putaway             Replenish                              Ship
                            Storage                 Pick    Pick    Pack

• Putaway is the process of moving material from the receiving area to
  a storage location or, in the case of cross-docking, directly to the
  shipping area.
• A putaway algorithm is used in the WMS to search for and validate
  locations where each movable unit in the putaway queue can be
  stored.
• The efficiency of all subsequent warehouse operations depend on
  performance of the putaway algorithm.
• Inventory and location attributes are used in the algorithm to make
  the selection.
                           Replenishment

                           Reserve               Forward   Order   Sort &
       Receive   Putaway             Replenish                              Ship
                           Storage                 Pick    Pick    Pack


• Replenishment is the process of moving material from
  reserve storage to a forward picking area so that it is
  available to fill customer orders efficiently.
• Other types of in-plant moves include:
   – Consolidation: the process of combining several partially filled
     storage locations containing the same type of item into a single
     location or several orders into a single shipment.
   – Rewarehousing: the process of moving items to different storage
     locations to improve handling efficiency.
                           Order Picking

                          Reserve               Forward   Order   Sort &
      Receive   Putaway             Replenish                              Ship
                          Storage                 Pick    Pick    Pack


• Order picking is the process of removing
  material from storage in response to specific
  customer orders.
• Attributes not contained in the customer order
  are assigned using the preferences stored in the
  customer master file.
          Why is Order Picking Important?

                                                  • Order picking is the most
           Receiving
             10%
                                       Shipping
                                                    critical activity in most
                                        20%
                                                    warehouses because it is
Storage
 15%
                                                    the point at which customer
                                                    expectations are actually
                                                    filled.
                                                  • Order picking represents
                                                    55% of all operating costs in
                                                    a typical warehouse
                       Order Picking
                           55%
                Sortation and Packing

                          Reserve               Forward   Order   Sort &
      Receive   Putaway             Replenish                              Ship
                          Storage                 Pick    Pick    Pack


• Sortation is the process of merging, identifying,
  inducting, and separating items to be conveyed
  to specific destinations.
• Packing is the process of unitizing orders for
  shipment.
• Sortation and packing is only required after
  piece and case batch order picking.
                                     Shipping

                           Reserve                Forward   Order   Sort &
       Receive   Putaway              Replenish                              Ship
                           Storage                  Pick    Pick    Pack


• The process of staging, verifying, and loading orders to
  be transported from a warehouse.
• The ASN for each order is generated during the picking
  process and is sent to the customer.
• Customer-specific shipping instructions for each order
  are retrieved from the preferences stored in the
  customer master file.
• Carrier selection is made using the rate schedules
  contained in the carrier master file.
Building a SCOR card for the
         warehouse
         Key Performance Measures

• Financial (cost per unit); e.g.,
   – Cost per Order: (Total W/H Cost)/(Total Orders Shipped)
   – Days on Hand: (Avg. Inventory Value)/(Avg. Daily Sales)
• Productivity (units per man-hour); e.g.,
   – Orders per Hour: (Orders Picked & Packed)/(Total W/H Labor
     Hours)
• Cycle Time (hours per unit); e.g.,
   – Dock-to-Stock Time: (Total Receiving + Putaway Hours)/(Total
     Receipts)
   – Order Cycle Time: (Actual Ship Date) – (Customer Order Date)
   Key Performance Measures (Cont)

• Utilization (avg. units/capacity); e.g.,
   – Storage Utilization: (Avg. Occupied Space)/(Available Storage
     Space)
• Quality (%); e.g.,
   –   Order Fill Rate: (Orders Filled Complete)/(Total Orders Shipped)
   –   Order Accuracy: (Error-Free Orders)/(Total Orders Shipped)
   –   On-Time Delivery: (Orders On-Time)/(Total Orders Shipped)
   –   Loss: (Total Damage + Claims Loss)/(Total Sales)
Integrated Logistics and Transportation
    Integrated Logistics Defined

“The process of anticipating customer
needs and wants; acquiring the capital,
materials, people technology and
information needed to meets those needs
and wants; optimizing the network to fulfill
customer requests; and utilizing the
network to fulfill customer requests in a
timely way.”

                           Council of Logistics Management
    Integrated Logistics Defined

Managing the complexity of fulfillment in a
heavily regulated industry, where millions
of dollars in inventory could be jeopardized
by careless product handling or
compliance violations.
     Integrated Logistics Organization

• Centralized
  – Decisions made in one central location
• Decentralized
  – Decision made at different points in the supply
    chain
• Hybrid
  Logistics Systems Operating Objectives

• Operating Objectives
 – Rapid response
   • Information technology
   • Inventory reduction
   • Lack of tolerance to variance
  Logistics Systems Operating Objectives

• Operating Objectives
 – Minimum variance
   • Any unexpected event that disrupts the system.
   • May result from any point in the supply chain.
  Logistics Systems Operating Objectives

• Operating Objectives
 – Minimum inventory
   • Achieve customer service goals with lowest TOTAL
     cost
   • System wide view of inventory in the system
  The Role of Transportation in Integrated
                 Logistics
  Operating Objectives:
• Movement Consolidation
  – Transportation costs affected by:
    •   Type of product
    •   Size of shipment
    •   Distance traveled
    •   Mode of shipment used
  – Consolidation is a way to reduce these costs
  Logistics Systems Operating Objectives

• Operating Objectives
 – Quality
   • TQM
   • Logistics reversal and repeat
   • Application to entire supply chain
  Logistics Systems Operating Objectives

• Operating Objectives
 – Life cycle support
   • Guarantee of product effectiveness
   • Special considerations in pharmaceuticals
   • Product Recall and Return Logistics
           Warehouse Management System

                                                                   • The warehouse
                                   ERP
                                                                     management system
                         Item
                        Master
                                   Carrier
                                   Master
                                             Customer
                                              Master
                                                                     (WMS) is the software
                          File      File       File

           Purchase                                     Customer     system that enables



                                                                   Customer
Supplier




            Order                                        Order

                                                                     real-time, paperless
             ASN


                       Inventory
                                   WMS
                                             Location
                                                          ASN
                                                                     control of warehouse
                         Master
                          File
                                              Master
                                               File                  operations.

                      Material Handling Systems
                  WMS Files

• The inventory master file acts as the repository
  for all inventory in the warehouse.
• The location master file provides the link
  between the WMS’s logical representation of the
  warehouse and the physical layout of the
  warehouse.
• The item master file is used to identify valid
  items that are handled in the warehouse.
              WMS Files (cont)

• The carrier master file includes transportation-
  related information that is used for shipping
  completed orders.
• The customer master file is used to store
  customer preferences for how orders are to be
  shipped so that it does not need to be included
  in each order.
Team Exercise

1. Measure your S&OP Maturity.

2. Build a two year plan to improve it and
estimate the benefits.

				
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