Progression of Warehousing Decisions Why Use Warehouses? Types of Warehousing Warehouse Operations

Warehousing

Transportation/Logistic Strategy

Progression of Warehousing DecisionsWhy Use Warehouses?Types of WarehousingWarehouse OperationsWarehousing InnovationsWarehouse LayoutPackaging

Introduction

Warehousing


Progression of Warehousing Decisions.

Should Warehouses Be Used?If Warehouses are Used, Should they be Public or Private?Where Should they be Located?What Should be their Capacities?How Many Should You Have?What Should be their Layout and Design?

Warehousing


Why Use Warehouses?

Cope with Variable Market ConditionsCope with Variable Sources of SupplyProduction EconomiesPurchasing EconomiesTransportation EconomiesCustomer Service

Warehousing


Warehouse Operations

Planning, Organizing, Staffing, Equipping, and ControllingHuman Resource ManagementBilling and Inventory Control Order FillingLocal DeliveryMaterial HandlingPackagingSafety, Security, MaintenanceMeasuring Warehouse Efficiency

Warehousing


J.N. Devin, "Cowboy After OSHA,“ 1972.

Warehouse Safety

Warehousing


WERC – Established 1978HousekeepingStorage HeightsAutomated Retrieval SystemsBar Codes, Scanners, EDI, RFID, etc.Narrow Aisle Equipment, Conveyors, etc.The Distribution Center ConceptAssembly, Product Maintenance, Repair, etc.Management ControlsCross Docking

Warehousing Innovations

Warehousing


Costs of Increasing Storage Heights

$

H1 Storage Height

Construction& Finance

Total Cost

Labor & Insurance

C1

Warehousing


$

Storage Height

Total Cost

Labor & Insurance

Effects of New Technology


C1

H1


Warehousing


$

Storage Height


C1

C2

H1 H2


Total CostLabor & Insurance


Warehousing


WERC – Established 1978HousekeepingStorage HeightsAutomated Retrieval SystemsBar Codes, Scanners, EDI, RFID, etc.Narrow Aisle Equipment, Conveyors, etc.The Distribution Center ConceptAssembly, Product Maintenance, Repair, etc.Management ControlsCross Docking

Warehousing Innovations

Warehousing

Transportation/Logistic Strategy8 4

Types of Warehousing

Private WarehousingPublic WarehousingContract WarehousingCross-Docking

Warehousing


Private vs Public Warehousing(Without Cost of Capital)

$ Public(All Variable Cost)

Private(Fixed + Variable Cost)

VolumeIndifferent Prefer PrivatePrefer Public

Warehousing


Indifference Point Between Public and Private(Without Cost of Capital)

ROI = 0

Private = Fixed Costs + Variable CostsPublic = Variable Costs

Example:Private Fixed Costs = $500,000/yearPrivate Variable Costs = $0.15/poundPublic Variable Costs = $0.25/pound

Indifference point is where both costs are equal

500,000 + .15X = .25X500,000 = .10XX = 5,000,000 pounds

Warehousing


Private vs Public Warehousing(With Cost of Capital)

$ Public(All Variable Cost)

Private(Fixed + Variable Cost)

VolumeIndifferent Prefer PrivatePrefer Public

Savings

Warehousing


Private = Fixed Costs + Variable CostsPublic = Variable Costs

Example:Private Fixed Costs = $500,000/yearPrivate Variable Costs = $0.15/poundPublic Variable Costs = $0.25/pound

Indifference point is where savings = desired ROI

Indifference Point Between Public and Private(With Cost of Capital)

SavingsAverage Investment = ROI

Warehousing


Desired ROI = Hurdle RateSavings = Public – PrivateAverage Investment = Initial Investment /2

Example:Hurdle Rate = 10%Investment = $8,000,000 Private Fixed Costs = $500,000/yearPrivate Variable Costs = $0.15/poundPublic Variable Costs = $0.25/pound


Warehousing


Hurdle Rate = 10%Investment = $8,000,000 Private Fixed Costs = $500,000/yearPrivate Variable Costs = $0.15/poundPublic Variable Costs = $0.25/pound

Savings = Public - Private


.25X - (500,000 + .15X) 4,000,000 = .10

Warehousing


Savings = Public – Private

.25X - (500,000 + .15X) 4,000,000 = .10


.25X - (500,000 + .15X) = .10 * 4,000,000

.25X - 500,000 - .15X = 400,000

.25X - .15X = 400,000 + 500,000

.10X = 900,000

X = 9,000,000

Warehousing


Greater ControlFlexibility (CS Needs, Space Use, etc.)Tax Benefits (Depreciation)Image to CustomersPotentially Lower Cost

Advantages of Private Warehousing

Warehousing


Lack of Flexibility (Fixed Size/Location)Capital RequirementsEquipment Maintenance/TrainingPotential Labor Problems

Disadvantages of Private Warehousing

Warehousing


Capital ConservationAbility to Meet Peak DemandReduced RiskFlexibility WRT VolumeAvoidance of Property TaxesAvoidance of Labor ProblemsPotentially Lower CostKnowledge of Exact Costs

Advantages of Public Warehousing

Warehousing


Lack of ControlDifficult CommunicationsNot Always AvailablePotentially Higher Cost

Disadvantages of Public Warehouses

Warehousing


Cross-DockingAn operations procedure that allows product to be delivered and received on one side of a facility, undergoes internal handling procedures at the receiving dock, distributing unit loads and moving the product to shipping docks on the other side of the facility where trucks or rail cars are waiting to be loaded for customer delivery.

Warehousing


Cross-Docking

Warehousing


Warehouse Layout

Angling vs On-the-SquareFixed vs Variable SlotsSpace Loading Techniques

Item PopularityItem SizeCube per Order IndexFamily GroupingsLinear ProgrammingSimulation

Warehousing


Cost of Fixed vs Variable Storage Slots

$

V1

Total Cost

Labor

Percent Variable

Space Utilization

C1

Warehousing


$ Total Cost

Space Utilization

Percent Variable


V1

C1 Labor


Warehousing


$Total Cost


V2V1

C1

C2

Percent Variable

Space Utilization

Labor


Warehousing


Angling vs On-the-SquareFixed vs Variable SlotsSpace Loading Techniques

Item PopularityItem SizeCube per Order IndexFamily GroupingsLinear ProgrammingSimulation

Warehouse Layout

Warehousing


Functions of Packaging

MarketingInformationPromotion

LogisticsContainmentProtectionApportionmentUnitizationConvenienceCommunication

Warehousing


Postponement

What is it?

Why do we do it?

Examples

Warehousing


Postponement

What is it?

A delayed differentiation strategy to reduce uncertainty and cost while satisfying customer needs.

Activities in the supply chain are delayed until a demand is realized.

Bucklin (1965) Model of Postponement /Speculation

Warehousing


Postponement

Why do we do it?

It has the potential to improve responsiveness while reducing inventory, transportation, storage, and obsolescence.

Insufficient inventory early in the product cycle can cost market share.

Products at the end of life cycle lose value quickly and risk obsolescence, which can lead to large inventory write-offs.

Progression of Warehousing Decisions Why Use Warehouses? Types of Warehousing Warehouse Operations

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