WarehousingCopyright 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

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Warehousing overviewStrategic warehousing Warehouse operationsWarehouse ownership arrangementsWarehouse decisions

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Warehousing contributes value in the logistics processTraditionally viewed as a place to hold or store inventoryContemporary view is the warehouse functions to mix inventory arrangements to meet customer requirementsStorage of products is held to a minimum

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Evolution of strategic warehousingWarehouses were once viewed as a necessary evil, used to coordinate product supply with customer demandThe explosion of the consumer economy after WWII saw the rise of distribution networks for consumer goodsWarehousing shifted from passive storage to strategic assortment

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Warehousing types evolved to accommodate the dynamic aspectsDistribution centersConsolidation terminalsBreak-Bulk facilitiesCross-docks

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Strategic warehousing offers manufacturers a way to reduce dwell time of parts and materialsWarehousing is integral to just-in-time (JIT) and stockless production strategiesRequires strategically located warehouses across the globeAn important goal in warehousing is to maximize flexibilityRespond to ever-changing customer demand

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Strategic warehousing can provide both economic and service benefitsEconomic benefits of warehousing occur when overall logistics costs are reduced Consolidation and break-bulkSortingSeasonal storageReverse logisticsService benefits are justified by sales improvements that more than offset added costSpot-stockingFull line stockingValue-added services

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Consolidation and break-bulk reduce transportation costConsolidation 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

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Illustration of consolidation and break-bulk arrangementsFigure 10.1 Consolidation and Break-Bulk Arrangements

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Sorting involves reconfiguring freight as it flows from origin to destination

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Cross-docking is used extensively by retailers to replenish store inventoriesCross-docking combines inventory from multiple origins into a prespecified assortment for a specific customer

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Successful cross-docking is highly dependent on information technologyWalMart Distribution CenterProducts are received, selected, repackaged, and loaded for shipment w/o storage

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Mixing is usually performed at an intermediate location between origin and destinationMixing combines inventory from multiple origins (like cross-docking) but also adds items that are regularly stocked at the mixing warehouse StockInventory

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Assembly supports manufacturing operationsAssembly occurs when products or components from second-tier suppliers are assembled by a warehouse located near manufacturing plantCommon assembly processes are packaging and color customizing

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Seasonal storage provides direct benefit by accommodating production or demandSeasonal production include agricultural productsSeasonal demand includes lawn furniture and toysSeasonal storage allows production efficiencies within the constraints of seasonality

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Reverse logistics processingReverse logistics include activities supportingReturns managementRecalls or product that did not sellRemanufacturing and repairRepairing/refurbishing equipmentRemarketingSelling used equipmentRecyclingDisposal

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Service benefits of warehousingFull Line Stocking at United Electrics Distribution CenterSpot-stocking is the positioning of inventory for seasonal or promotional demandFull line stocking provides one-stop shopping capability for goods from multiple suppliersValue-added services include any work that creates a greater value for customersSee Table 10.1 for examples

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Typical list of value-added servicesTable 10.1 Value-Added Services

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Warehouse operations involve two major activities handling and storageObjective is toEfficiently receive inventoryStore it as requiredAssemble it into complete ordersMake a customer shipmentOperations will therefore emphasize product flow

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HandlingHandling must optimize movement continuity and efficiencyReceivingUnloading the arriving vehiclesIn-Storagemoving goods for storage (transfer) or order selection (picking)Shippingverifying the order and loading the departing vehicles

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Storage plans should make product velocity a major factorSlotting determines specific locations for the product based onVelocityhow fast the goods moveWeighthow heavy is the productSpecial Characteristicshow large or small, does it require rack or bin storage

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Warehouses must manage two classes of storageActive Storagestorage for basic inventory replenishmentFocuses on quick movementIncludes flow-through or cross-dock distributionExtended Storagestorage for inventory held in excess of period for normal replenishmentE.g. seasonal, speculative, or even commodities

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Warehouse ownership arrangementsPrivatewarehouse operated by the firm owning the productBuilding may be owned or leasedPublicservice company owns warehouse and hires out space and servicesUsually classed as General merchandiseRefrigeratedSpecial commodityHousehold goods and furniture

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Contract warehousing combines elements of private and public operationsUsually a long-term relationship or contract between a firm and the warehousing owner/operatorLong-term cost savings compared with public warehouse Often a firms employees will work alongside the contract warehouses Example is Kraft Foods who has contracted with AmeriCold Logistics since the late 1990s

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Network deployment is the combination of private, public and contract facilities used by a firmNetwork deployment strategy requires answering two questionsHow 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 requirementPublic facilities used to accommodate peak demand

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Warehouse decisions that determine handling and storage efficiencySite SelectionDesignProduct-Mix AnalysisExpansionMaterials HandlingLayoutSizingWarehouse management systemAccuracy and auditSecuritySafety and maintenance

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Site selection is driven by service availability and cost factorsIdentify broad geography where an active warehouse meets service, economic and strategic requirementsSelection and number of retail outlets drives location of support warehousesFinal selection should be preceded by extensive analysis

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Warehouse management systems encourage best practicesWarehouse management systems (WMS) integrate procedures and software support to standardize storage and handling work proceduresOne main use of WMS is to coordinate order selectionDiscrete selection is when a specific customers 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

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Other warehouse planning issuesInventory accuracy is typically maintained by annual physical counts or counting portions of inventory on a planned basisCycle counting is the audit of selected inventory on a cyclic schedule Audits are common to maintain safety, assure compliance to regulations and help improve proceduresSecurity issues involve protection from pilferage and damage

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Safety and maintenance issues must also be considered when planning warehouse designsAccident preventionComprehensive safety programs and training, accident investigation and follow upEnvironmental protectionSpill ( leak ) kits and spill plansMaintenanceScheduled maintenance of building, material handling equipment, and collision damage prevention