11-1

The Storage and Handling System

Chapter 11CR (2004) Prentice Hall, Inc.

“The day soldiers (subordinates) stop bringing you their problems is the day you have stopped leading them.”

Colin Powell

11-2CR (2004) Prentice Hall, Inc.

PL

AN

NIN

G

OR

GA

NIZ

ING

CO

NT

RO

LL

ING

Transport Strategy• Transport fundamentals• Transport decisions

Customer service goals

• The product• Logistics service• Ord. proc. & info. sys.

Inventory Strategy• Forecasting• Inventory decisions• Purchasing and supply

scheduling decisions• Storage fundamentals• Storage decisions

Location Strategy• Location decisions• The network planning process

PL

AN

NIN

G

OR

GA

NIZ

ING

CO

NT

RO

LL

ING

Transport Strategy• Transport fundamentals• Transport decisions

Customer service goals

• The product• Logistics service• Ord. proc. & info. sys.

Inventory Strategy• Forecasting• Inventory decisions• Purchasing and supply

scheduling decisions• Storage fundamentals• Storage decisions

Location Strategy• Location decisions• The network planning process

Storage Fundamentals in Inventory Strategy

11-3

The Storage SystemExcept where customer service is a concern:

Storage is an economic convenience, not a necessity

Reasons for storage

Transportation and production costs can be reduced

Better coordination of supply and demand

Storage can be an integral part of the production process

Storage may enhance sales

Storage Functions

Holding

Consolidation

Break-bulk

Mixing (merge-in-transit)

11-4CR (2004) Prentice Hall, Inc.

The Storage System (Cont’d)

Storage Space Alternatives

Ownership Leasing Rental In-transit

Note Storage functions are performed in an attempt to reduce transportation, production, and purchasing costs, which justify their added expense.

Note Storage functions are performed in an attempt to reduce transportation, production, and purchasing costs, which justify their added expense.

11-5CR (2004) Prentice Hall, Inc.

Manufacturer A

Manufacturer A & B

Manufacturer A, B & C

Manufacturer A, B, C & D

Per

cent

age

of u

sabl

e w

areh

ouse

cap

acity

Time, months

Balancing the Load on a Public Warehouse

0

20

40

60

80

100

120

J F M A M J J A S O N D

Consolidation warehouse

A

A B C D

B

C

D

Manufacturer A

Manufacturer B

Manufacturer C

Manufacturer D

10,000 lb.

8,000 lb.

15,000 lb.

7,000 lb.

40,000 lb.

Customer

Consolidation Warehouse

Similar to a merge-in-transit

facility

11-6

CR (2004) Prentice Hall, Inc.

Distribution warehouse

Manufacturer Customer B

Customer C

Customer A

Low rate TL shipment

LTL

LTL

LTL

Distribution, Break Bulk, or Pool Point Warehouse

Warehouse may or may not hold inventories

11-7

CR (2004) Prentice Hall, Inc.

Storage Cost SavingsDirect shipments to customers

MANUFACTURER

SHIPPING WEIGHT

(lb.)LTL RATE TO CUSTOMER COST

A 10,000 $2.00/cwt. $200

B 8,000 1.80 133

C 15,000 3.40 510

D 7,000 1.60 112

Total $966

11-8

Storage Cost Savings (Cont’d)Shipments through a distribution center

MANUFACTURERSHIPPING

WEIGHT (lb.)

LTL RATE TO DISTRIBUTION

CENTERTOTAL LTL

A 10,000 $0.75 $75

B 8,000 0.60 48

C 15,000 1.20 180

D 7,000 0.50 35

Total 40,000

DISTRIBUTION WAREHOUSE

CHARGE

TL RATE FROM DISTRIBUTION

WAREHOUSE TO CUSTOMER TOTAL TL COST

$10 $1.00/cwt. $100 $185

8 1.00 80 136

15 1.00 150 345

7 1.00 70 112

$778 11-9

11-10CR (2004) Prentice Hall, Inc.

Space Comparison

Ownership alternative•Less expensive under high utilization•High degree of control over operations•Benefits of real estate ownership•Space may be converted to uses other than storage

Rental alternative•No fixed investment•Lower cost under seasonal or low utilization of an owned facility

•Location flexibility

11-11CR (2004) Prentice Hall, Inc.

The Materials Handling SystemMaterials Handling Functions Loading and unloading

Movement to and from storage

Order filling

Materials-Handling Considerations Load unitization

Space layout

Storage equipment

Movement equipment

11-12CR (2004) Prentice Hall, Inc.

A Low Throughput, Holding Warehouse

Semipermanentstorage bay Product

Inbound andoutbound

CR (2004) Prentice Hall, Inc.

Semi-permanent storage bay

Product

Order picking and product mixing bays

Inbo

und

Out

boun

d

A

B

C

D

C AReplenishment

Order-picking route

A High Throughput, Distribution Warehouse

11-13

11-14CR (2004) Prentice Hall, Inc.

Storage/Handling Systems

Manual handling system

Forklift truck-pallet system

Conveyorized system

Automated storage and retrieval system

11-15

Semipermanent storage bay Product

Inbound and outbound

A

B

C Order-picking route

Order PickingArea System

CR (2004) Prentice Hall, Inc.

CR (2004) Prentice Hall, Inc.

Semipermanent storage bay

Product

Order picking and product mixing bays

Inbo

und

Out

boun

d

A

B

C

D

C A

Replenishment

Order-picking route

Order PickingModified Area System

11-16

11-17

Shipping and ReceivingO

utgo

ing

load

s

Inco

min

g lo

ads

Audit spurfor loadchecking

To auxiliarystorage areas

Automated cranestorage and orderpicking

An Automated Warehouse

CR (2004) Prentice Hall, Inc.

11-18CR (2004) Prentice Hall, Inc.

Economics of Storage/Handling Alternatives

Private warehousing,automated handling

Publicwarehousing

Private warehousing,pallet-forklift truckhandling

Leased warehousing

a b c d

Co

st t

o c

om

pa

ny,

$

Annual system throughput, cwt.0

a Economical range for public warehousing.b Economical range for leased warehousing, manual handling.c Economical range for private warehousing, pallet-forklift truck handling.d Economical range for private warehousing, automated handling.

11-19CR (2004) Prentice Hall, Inc.

Virtual Warehousing

•Don’t hold all inventories needed for sale in company’s warehouse•Ship selected items directly from suppliers•Reduces investment in inventories•Requires a first-rate order management system•May require sharing critical information with vendors