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Introduction to Warehousing

Chen Zhouczhou@isye.gatech.edu

School of ISyEFall, 2008

What is a warehouse

Warehouse: “a structure or room for the storage of merchandise or commodities” – Merriam-WebsterDistribution center (DC): flow through or cross docking centricReasons to have warehouse

Mostly discussed in inventory section

Reason to have DCsTransportation consolidationProduct positioningBreak balk…

In house warehouse or DC is normally a cost center

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References

Text BCh 1, 2, IntroCh 3 operationsCh 5 equipmentCh 6 – 6.2 COI, terrainCh 7, to page 63 order picking

Follow llink Warehouse & Distribution Science

Some functions of a distribution center (DC)

A structure that receives and distributesmerchandise or commodities.

Important element in supply chainConsolidationReduce wait time…

DC

From Factories

To Stores

X-dock

1 2 m

1 2 n

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Birdeye view: a X-dock and a DC In US (survey by SCL and Logistics Resources)

> 300,000 large warehouse or DCs2.5 million employeesCost > 5% of the Gross National ProductTLI survey of ~ 150 companies, median

Size: 150,000 ft2 (2.6 football fields)Height: 28 ft15 dock doors60 FTE564,000 lines/year, 60,500 orders/year, 9 lines/order5,001 skus, 3,502 activeInventory turns 5.1 Fill rate 97.1

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Examples in US

K-Mart DC: 2 mil ft2 (or about 35 football fields)Walmart

RDC at LaGrange: 1.3 mil ft2Port DC at Stateboro: 2 mil + 1.4 mil

American Cancer Society: 50,000 ft2

Examples where land is scarce

Often multi-story50,000 is considered good sizeUse high space efficiency and technology to compensate for lack of space

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Loads and handling Distribution network example: Whirlpool

Home appliancesRefrigerators, washer/driers, water heaters, microwave, etc.1500 skusRevenues > $10 bil

World wide, 39 manufacturing facilities in 13 countriesUS, 10 Factory Distribution Centers in USCustomers

Stores: Lowe’s, H H Gregg, BuildersIndividuals (< 5%)

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Whirlpool

10 Factories 10 RDCs 60 LDCs

StoresNew development Homes

Where to position inventories

Response time vs. costResponse timeCost

Land, economy of scale…Pooling effect example

1 RDC support n LDCsLDC demand iid, N(µ, σ) (not necessarily normal), CVLDC = µ /σ

nCVCVn LDC

RDCRDC == ,2σσ

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Atlanta DC

657,000 ft2 (14 football fields), 140,000 unit storageThroughput per day

Receiving 50 - 75 truckloadsShipping: 100 truckloads

Supports 7 + 1 LDCsHolds 4 weeks of inventory

KnoxvilleNashville

Atlanta

Montgomery

Jacksonville

Columbia

RaleighCharlotte

Walmart in US (2004)

~ 100,000+ merchandise skus~ 3,000 from far east, high % revenuesA lot from NAFTA countries288 bil revenue

4 port DCs: LA, Houston, Stateboro GA, James City VA50 Regional DCs (LaGrange in GA)3,000 stores and supercenters

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Supply Chain

Port To DC

Port DC

RDC

RDC

Port DC and RDC for Wal-Mart

400500People ~

100 cases/man hour45 cases/man hourProductivity15,000/hour25,000/dayThroughputSupport 85 storesSupport RDCs and storesFunction50,0003,000Skus ~

1.3 mil ft22 mil ft2 (35 football fielsds)Size

RDCPort DCMeasure

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RDC – X-dock vs. storage/pick

Response timeSystem wide inventory levelHandling cost

Port DC

LaGrange RDC

RDC

Trends

Value added services (in-sourcing)Customization (refrigerator door)Merge in transit…

ConsolidationsConveyorized merge and sortation systems

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Warehouse operation objectives

Minimize costs LaborSpace and utilitiesCapitalIT

Subject to constraintsFill rateThroughputTimely AccuracyVisibility

Which is the most important To a manager?

Operational decisions (some already in other modules)

How much stock in a DCSchedule of receiving & shipping, fleet routingWhere to put what: layoutStorage method: racks, mobile racks, floor, floor stack, …Order picking methodOrder picking equipment…

Inventory Management

SC

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Summary

Warehouses and DCs are necessary but often cost centersCan help to reduce cost and response times by

ConsolidationCoordinationValue added services

Delayed customizationMerge in transit

…

Major operational decisionsStorageOrder picking method…

Layout and Layout in Warehouse

Chen ZhouFall, 08

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A shop in a contract manufacturer An Airport

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Ealing hospital in London A warehouse

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Others

RestaurantsOfficesSchools…

The problemWhere and how much space is for which activity to optimize w.r.t …

An abstract problem

Consider: assign n equal sized activities into nlocations. What is the number of possible layouts?n!

If n = 15, 1.3 trillion!There can be additional complications

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Objective of layout

Facility costSpace utilizationOperating cost…

Most direct important quantitative objective

Average (total) material flowAverage people travel distance in an airport, hospital,

⎟⎠

⎞⎜⎝

⎛∑i

iiDwf

Who does layout?

IEs or other engineers in a companyConsulting firmsIndependent consultant

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Approaches

State of the industry: Systematic layout planning (SLP, Richard Muther, 60s)Its an qualitative, greedy algorithm with improvementQuantified then computerized versions

State of the art: applying optimization tools to solve sub-problems in SLP

SLP overview

Input data and activities

Flow of materials

Activity relationship

Relationship diagram

Space requirements

Space available

Space relationship diagram

Modifying considerations

Practical limitations

Develop layout alternatives

Evaluation

SLP flow chart

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E.g.

Green Chemical plans to construct a 4,000 ft2 (50' * 80') maintenance facility located in New Jersey. It stores pipes, fittings for its own 4 plants and other plants in the area. There will be 11 activities. An excellent Jacket IE was assigned the job to design a layout for the new building. She performed quantitative analysis of flows and a survey of the current employees. She summarized the data in a relationship chart. However, she was promoted to the assistant general manager. You are hired to continue her job. Please apply SLP procedure to get alternative block layouts.

Information collected

No Activity Name

Space required

1 Fittings 5502 Valve 6003 Hi-value item 5004 Tubing 2505 Misc Supplies 8006 Floor Dry 3007 Fabrication 4008 Pack and trash 2009 Office 20010 Dock 10011 Rest rooms 75 3975

50’

80’

Dock

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Information collected

AlgorithmSelect the activity with most As.Select an activity with A to the first activity, and with most A, then Es. Put it next to first, draw 4 lines. Repeat until all placed. Improve based on visual inspection.

Value Closeness NoA Absolutely

Necessary 2

E Essentially important

5

I Important 10O Ordinary

closeness OK 12

U Unimportant

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X Not desirable 1 Total = n(n-1)/2 55

I1 O

2 I3 O

3O3 O

3

E4

O4

O3O

3 E4

O4 O

4E4

X5

I5

O4

O4

I4

A4,6 I

4I6

I6

I7I

7E6

A4

I7

E7,8

11. Rest rooms, 75

10. Dock, 100

9. Office, 200

8. Pack and trash, 200

7. Fabrication, 400

6. Floor Dry, 300

5. Misc. Supplies, 800

4. Tubing, 250

3. Hi-value item, 500

2. Valve, 600

1. Fittings, 550

Code Reason 1 Highly similar 2 Similar 3 Related in orders 4 Movement of mtls 5 Security 6 Supervision 7 Personal convenience 8 Similar building services

O4 E

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Space relationship diagram (Activity relomitted)

AlgorithmSelect the activity with most As.Select an activity with A to the first activity, and with most A, then Es. Put it next to first, draw 4 lines, or a coarse lineRepeat until all placed. Improve based on visual inspection.

81 10372

11 95

4

1 2

3

6

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Block diagram 1 Fitting 2 Valve 6 Dry

4 tubing 7 Fabric 8 Pack 10 Dock

9 Office

11 Rest

5 Misc 3 $$

0 10 20 30 40 50

80

70

60

50

40

30

20

10

0

Distance measurement and objective function

From where to where? CentroidsDistance metrics

Objective function, between m*n nodes

∑∑= =

=n

i

n

jijijdfz

1 1

min

221

221 )()( :Euclidean yyxxdE −+−=

|||| :rRectilinea 2121 yyxxdR −+−=

⎪⎭

⎪⎬⎫

⎪⎩

⎪⎨⎧ −−

=yx

C vyy

vxxt ||,||max :Chebychev 2121

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E.g. Rectilinear distances between centroid

A B

C D E

x y A 2 5 B 5.5 4.5 C 1.4 2.3 D 3 1.5 E 5.5 1.5

3.210

4*5.36*5.1

4.110

4*26*1

=+

=

=+

=

c

c

y

x

B C D E A 4 3.3 4.5 7 B 6.3 5.5 3 C 2.4 4.9 D 2.5

Block layout Centroids

Rectilinear distances

Equal distance contours

In Euclidean distance, what is the shape of the contour that have equal distance to the point given?

Ryyxx =−+− 221

221 )()(

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In Rectilinear distance

Think of origin, and 1st quadrant, any point (x+ y) on a line that has constant distance to origin satisfies x + y = R

Ryyxx =−+− |||| 2121

Warehouse with single receiving/shipping

Consider pallet in single command operationsI/O is at the cornerEach location

1 trip to store, 1 trip to pickxs + ys + xp + yp = constant

S/R

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Warehouse with separate shipping/receiving

xs + ys + xp + yp = constantWhere are the locations with minimum travel?Where are the others?

R S

Another example

R

S

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Warehouse with docks on single side

Consider the average distances if loads are evenly distributed among docks

From center dock = ¼ L.From corner dock = ½ L.In between?

Other situatoins

Different R/S door locationsPallet-in, carton-out

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Layout Summary

SLP Divide and conquerGreedy heuristicsImprovement

ObjectivesDistance metricsEqual distance contours