Chapter 8: Storage and Handling

Also Chapter 12 pp. 470-475

• Warehousing Purposes

• Warehouse Alternatives– Public, Private, Direct– Materials Handling– Costs

• Warehouse Layout

• Order Picking

Inventory

• Inventory (storage) is movement in time.– Transportation is movement in space.

• Inventory cost is 2nd largest component of logistics cost.– Generally 10-40% of total.

– $328 billion in U.S. in 2001

– Large companies have billions of $ in inventories.

• Nearly all logistics cost savings since 1987 have been from reduced inventories!

Why Store Goods?

• Economies of scale in production & transportation.

• Coordinate supply and demand.– Seasonal products.

• For example: 60% of toys are sold in holiday season.

• Note: <5% of toys are produced in U.S.

– Speculation.• Feb. 2002 - Ford wrote off $1 billion in precious metals.

• Customer service.

• Part of production.

Warehouse Purposes

• Holding inventory.– Safe storage of goods.

• Transshipment.

1. Consolidation.

2. Breakbulk.

TL

TL

LTL

LTL

LTL

LTL

Warehouse Purposes - cont.

• Transshipment.

3. Mixing.

LTL

TL

Velocity

• Cycle time and transit time are decreasing.

Cycle Time Transit Time 1990 83 hrs 54 hrs1995 58 hrs 41 hrs2000 49 hrs 37 hrs

• Turnover ratios are increasing.

Plant Field Warehouse Warehouse1990 8.8 8.91995 10.7 9.42000 11.2 10.2

Warehouse Alternatives

• Direct shipping (no warehousing).

• Private warehousing.+ Better control, Special needs, Future use of space.—High fixed cost, Constant size and location.

• Public warehousing. + Inexpensive for small amounts, Can vary size and

location, Can provide additional services (customs,etc.). —Less control.

• Combination of public and private.

• Storage in transit.

Products & Warehouse Alternatives

Private Public Direct

Durable goods 67% 20% 13%

Food products 57% 31% 12%

Paper 65% 10% 25%

Chemical 40% 38% 22%

Automotive 86% <10% <10%

Electronics 84% <10% <10%

Materials Handling

• Loading and unloading.

• Movement to and from storage.

• Order picking.

• Economies of scale: Larger loads are more efficient.– Pallets: 40” x 48” x 6”

– Slipsheets: 40” x 48”

– Containers: 8’ x 8’ x 20’, 8’ x 8’ x 40’

• Containers also function as warehouses.

Materials Handling Equipment

• Hand trucks.

• Forklifts.

• Automated systems:– Conveyers, Draglines, Automatic guided vehicles.

– ASR (Automated storage and retrieval systems).

• Container handling.– Expensive special purpose equipment.

• Bulk handling (coal, grain, etc.) requires special equipment.

Warehouse Costs

Fixed Variable

• Public 1 5

• Leased 2 4

• Private - Manual handling 3 3

• Private - Pallet/Forklift 4 2

• Private - Automated 5 1

• 1 = lowest cost

Warehouse Costs

cwt Handled

Tota

l Cos

t

Public

Private - AutomatedPrivate - Manual handling

Warehouse Costs

cwt Handled

Tota

l Cos

t

Public

Private - AutomatedPrivate - Manual handling

Use Private - AutomatedUse Private -

Manual handlingUse

Public

Warehouse Layout

• Divide floor space into areas for storage, aisles, packing, offices, etc.

• Tradeoff:– Ease of handling vs. Utilization of space.

– Minimize handling and maximize space utilization.

• Storage Layout for low turnover items.– Narrow aisles, wide and deep storage, high shelves.

• Layout for order picking.– Wide aisles, easy access to products.

• Guidelines on pp. 447-455 (Chapter 12).

Combination Layout

• Have one area for order picking with small amounts of fast moving products.

• Have another area for storage.

inbound

outbound

receiving

shipping

offices

Longer term storage

Longer term storage

Longer term storage

Order Picking Strategies

• Minimize travel time/distance in warehouse to fill orders.

• Sequence items for single pass order picking.

• Zoning: Divide stock into separate zones for different pickers.

– Divide order into sub-orders for each zone.

• Batching: Collect several orders and fill in one pass.

• Interleaving: Replace stock and fill orders on same pass.