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WAREHOUSING

Module II08.801: Facilities Planning and Management S8 Industrial Engineering

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Warehousing contributes value in the logistics process

• Traditionally viewed as a place to hold or store inventory

• Contemporary view is the warehouse functions to mix inventory arrangements to meet customer requirements– Storage of products is held

to a minimum

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Evolution of strategic warehousing

• Warehouses were once viewed as a necessary evil, used to coordinate product supply with customer demand

• The explosion of the consumer economy after WWII saw the rise of distribution networks for consumer goods

• Warehousing shifted from passive storage to strategic assortment

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Warehousing types evolved to accommodate the dynamic aspects

• Distribution centers• Consolidation terminals• Break-Bulk facilities• Cross-docks

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Strategic warehousing

Offers manufacturers a way to reduce dwell time of parts and materials

• Warehousing is integral to just-in-time (JIT) and stockless production strategies

– Requires strategically located warehouses across the globe

• An important goal in warehousing is to maximize flexibility

– Respond to ever-changing customer demand

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Strategic warehousing

• Economic benefits of warehousing occur when overall logistics costs are reduced

– Consolidation and break-bulk– Sorting– Seasonal storage– Reverse logistics

• Service benefits are justified by sales improvements that more than offset added cost

– Spot-stocking– Full line stocking– Value-added services

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Consolidation and break-bulk reduce transportation cost

• Consolidation 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 arrangements

Figure 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 inventories

• Cross-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 technology

WalMart Distribution Center

• Products 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 destination

• Mixing combines inventory from multiple origins (like cross-docking) but also adds items that are regularly stocked at the mixing warehouse

Stock

Inventory

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Assembly support to manufacturing operations

• Assembly occurs when products or components from second-tier suppliers are assembled by a warehouse located near manufacturing plant

• Common assembly processes are packaging and color customizing

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Seasonal storage provides direct benefit by accommodating production or demand

• Seasonal production include agricultural products

• Seasonal demand includes lawn furniture and toys

• Seasonal storage allows production efficiencies within the constraints of seasonality

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Reverse logistics processing

• Reverse logistics include activities supporting– Returns management

• Recalls or product that did not sell

– Remanufacturing and repair• Repairing/refurbishing equipment

– Remarketing• Selling used equipment

– Recycling– Disposal

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Service benefits of warehousingFull Line Stocking at United

Electric’s Distribution Center

• Spot-stocking is the positioning of inventory for seasonal or promotional demand

• Full line stocking provides one-stop shopping capability for goods from multiple suppliers

• Value-added services include any work that creates a greater value for customers

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Typical list of value-added services

Table 10.1 Value-Added Services

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Warehouse operations involve two major activities – handling and storage

• Objective is to– Efficiently receive inventory– Store it as required– Assemble it into complete

orders– Make a customer shipment

• Operations will therefore emphasize product flow

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Handling

• Handling must optimize movement continuity and efficiency– Receiving—Unloading the

arriving vehicles– In-Storage—moving goods

for storage (transfer) or order selection (picking)

– Shipping—verifying the order and loading the departing vehicles

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Storage plans should make product velocity a major factor

• Slotting determines specific locations for the product based on– Velocity—how fast the

goods move– Weight—how heavy is the

product– Special Characteristics—

how large or small, does it require rack or bin storage

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Warehouses must manage two classes of storage

• Active Storage—storage for basic inventory replenishment– Focuses on quick movement– Includes flow-through or cross-

dock distribution• Extended Storage—storage

for inventory held in excess of period for normal replenishment– E.g. seasonal, speculative, or

even commodities

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Warehouse ownership arrangements

• Private—warehouse operated by the firm owning the product– Building may be owned or leased

• Public—service company owns warehouse and hires out space and services

– Usually classed as • General merchandise• Refrigerated• Special commodity• Household goods and furniture

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Warehouse decisions that determine handling and storage efficiency

• Site Selection• Design• Product-Mix Analysis• Expansion• Materials Handling• Layout• Sizing• Warehouse management system• Accuracy and audit• Security• Safety and maintenance

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Site selection is driven by service availability and cost factors

• Identify broad geography where an active warehouse meets service, economic and strategic requirements

• Selection and number of retail outlets drives location of support warehouses

• Final selection should be preceded by extensive analysis

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Warehouse management systems encourage best practices

• Warehouse management systems (WMS) integrate procedures and software support to standardize storage and handling work procedures

• One main use of WMS is to coordinate order selection– Discrete selection is when a specific customer’s 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 issues

• Inventory accuracy is typically maintained by annual physical counts or counting portions of inventory on a planned basis

– Cycle counting is the audit of selected inventory on a cyclic schedule

• Audits are common to maintain safety, assure compliance to regulations and help improve procedures

• Security issues involve protection from pilferage and damage

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Safety and maintenance issues must also be considered when planning warehouse designs

• Accident prevention– Comprehensive safety programs

and training, accident investigation and follow up

• Environmental protection– Spill ( leak ) kits and spill plans

• Maintenance– Scheduled maintenance of

building, material handling equipment, and collision damage prevention

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Warehouse Operating Principles

Once it has been determined to use a warehouse, the next step is designing it.

Whether the warehouse is a small manual operation or a large automated facility, the following three principles are relevant:

Design criteria, Handling technology, and Storage plan.

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Warehouse Operating Principles

Once it has been determined to use a warehouse, the next step is designing it.

Whether the warehouse is a small manual operation or a large automated facility, the following three principles are relevant:

Design criteria, Handling technology, and Storage plan.

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Design Criteria

Warehouse design criteria address physical facility characteristics and product movement. Three factors to be considered in the design process are: the number of storey's in the facility, height utilization, and product flow.

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Number of storey in the facility

The ideal warehouse design is limited to a single storey so that product does not have to be moved up and down The use of elevators to move product from one floor to the next requires time and energy.

The elevator is also often a bottleneck in product flow since many material handlers are usually competing for a limited number of elevators.

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Height utilization

Regardless of facility size, the design should maximize the usage of the available cubic space by allowing for the greatest use of height on each floor Most warehouses have 20- to 30-feet ceilings, although modern automated and high-rise facilities can effectively use ceiling heights up to 100 feet.

Through the use of racking or other hardware, it should be possible to store products up to the building's ceiling Maximum effective warehouse height is limited by the safe lifting capabilities of material-handling equipment, such as forklifts.

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Product flow

Warehouse design should also allow for straight product flow through the facility whether items are stored or not.

In general, this means that product should be received at one end of the building, stored in the middle, and then shipped from the other end.

Straight-line product flow minimizes congestion and confusion.

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Handling technology

The second principle focuses on the effectiveness and efficiency of material-handling technology.

The elements of this principle concern: movement continuity and movement scale economies.

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Movement continuity

Movement continuity means that it is better for a material handler or piece of handling equipment to make a longer move than to have a number of handlers make numerous, individual, short segments of the same move.

Exchanging the product between handlers or moving it from one piece of equipment to another wastes time and increases the potential for damage.

Thus, as a general rule, fewer longer movements in the warehouse are preferred.

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Movement scale economies

Movement scale economies imply that all warehouse activities should handle or move the largest quantities possible. Instead of moving individual cases, warehouse activities should be designed to move groups of cases such as pallets or containers.

This grouping or batching might mean that multiple products or orders must be moved or selected at the same time.

While this might increase the complexity of an individual's activities since multiple products or orders must be considered, the principle reduces the number of activities and the resulting cost.

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Storage Plan

A warehouse design should consider product characteristics, particularly those pertaining to volume, weight, and storage.

Product volume is the major concern when defining a warehouse storage plan.

High-volume sales or throughput product should be stored in a location that minimizes the distance it is moved, such as near primary aisles and in low storage racks.

Conversely, low-volume product can be assigned locations that are distant from primary aisles or higher up in storage racks.

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A Sample Storage Area

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Product Deterioration

Within the warehouse, a number of factors can reduce a product or material to a non-usable or non-marketable state.

The most obvious form of product deterioration is damage from careless transfer or storage.

Another major form of deterioration is non-compatibility of products stored in the same facility.

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Product Deterioration…

The primary concern is deterioration that results from improper warehouse work procedures.

A constant concern is the carelessness of warehouse employees.

In this respect, the forklift truck may well be management's worst enemy.

Regardless of how often operators are warned against carrying overloads, some still attempt such shortcuts when not properly supervised.

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Product Deterioration…

In one situation, a stack of four pallets was dropped off a forklift truck at the receiving dock of a food warehouse. Standard procedure was to move two pallets per load.

The value of the damaged merchandise exceeded the average daily profit of two supermarkets.

Product deterioration from careless handling within the warehouse is a form of loss that cannot be insured against and constitutes a 100 percent cost with no compensating revenue.