Intelligent%20Management%20of%20Container%20Terminals%20%20Chuqian%20Zhang

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Distribution Centers
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Outline

• the call for distribution centers
• warehouses versus distribution centers
• types of distribution centers
• examples of distribution centers
• Foxconn, Wal-mart, Shiseido

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Old DaysPoint-to-point Transportation
Suppliers
Retailers




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Recent Days Distribution Centre
shorter transportation distance, more complex
co-ordination
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Amazon

• Fulfillment by Amazon
• Amazon serving as the fulfilling center for
  retailers
• Amazon Warehouse's processing

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Differences Between a Warehouse a Distribution
Center
The material is from the book A Stitch in
Time Lean Retailing and the Transformation of
Manufacturing Lessons from the Apparel and
Textile Industries .
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Differences Between a Warehouse a Distribution
Center
Warehouse DC
purpose
cost
equipment
personnel
throughput
time in store

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Differences Between a Warehouse a Distribution
Center

• objective
• warehouse primarily for storage
• distribution center primarily for consolidating
  goods from suppliers (vendors, shippers) to
  retailers (buyers, consignees)
• throughput in general DC larger than warehouse
• time in site in general DC shorter than
  warehouse
• operations in a distribution center
• 60 to 70 cross docked and 30 to 40 reopened,
  repackaged
• more value-added services to lessen operations in
  retailers
• minimum quality and quantity check on retailers
• practically shelf ready goods for retailers

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Differences Between a Warehouse a Distribution
Center

• equipment
• more automated equipment in DC automatic
  identification, storage, retrieval, distributing,
  sorting, unitizing systems
• cost (in 1997)
• a warehouse US8 to US10 million
• a distribution center US60 to 70 million
• to convert a warehouse to a DC US10 to 25
  million

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Differences Between a Warehouse a Distribution
Center

• personnel
• a warehouse more, especially male, on
  traditional operations such as loading,
  unloading, receiving and inspection, putaway,
  picking and packing, moving goods around
• a distribution center
• less traditional workers by the help of
  electronics, electrical, and mechanical equipment
  
• more personnel on information technology and
  equipment maintenance

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The Call for Distribution Centers
Material is from the book A Stitch in Time
Lean Retailing and the Transformation of
Manufacturing Lessons from the Apparel and
Textile Industries .
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Largest U.S. Retail Chains on the 2012 Global
Powers of Retailing List
Wal-Mart (1st. US446.95 B (2012)) The Kroger Company (5th US 90.374 B (2012)) Costco (7th US 99.1 B (2012))
Home Depot (8th US 70.395 B (2012)) Walgreens (9th US 71.633 B (2012) drug store) Target (11th US 69.865 B discount department stores)
CVS Caremark (13th US 107.10 B (2011) drug stores) Best Buy (19th US 50.70 B (2012) consumer electronics) Lowe's (20th US 50.2 B (2012) home improvement appliances)
Sears Holdings (22nd US 41.567 B (2012) department stores, discount stores) Safeway (24th US 43.63 B (2011) supermarkets) Amazon.com (28th US 61.09 B (2012))
SuperValu (31st US 36.1 B (2012) supermarket, grocery) Rite Aid (33th US 25.2 B (2011) drug store) Publix (35th US 27.178 B (2011) )
Macy's (36th US 24.892 B (FY2009) department store) --- ---
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Changes

• retailers of mid 20th century Macys, Sears,
• as late as 1991, Sears 1st retailer in the world
• retailers of the 21st century Wal-mart, ..
• reasons for the change?

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Societal Development

• first transcontinental railway of US in 1869
• early days
• late 19th to early 20th century
• railway system for long distance transportation
  in large volume
• telegraph (1844) and later telephone (1876) for
  quick information flow for long distance
• development in material technology and
  electro-mechanical equipment

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Societal Development

• improvement in in production and transportation
  (though still slow in todays standard)
• development of cities
• shopping of the era department stores, for
  middle to upper class
• a venue with large variety of products on one
  hand and the elegant European boutiques feel on
  the other hand
• successful formula low cost by economies of
  scale, marketing to attract shoppers, pricing at
  the right amount
• examples Macys, Sears, etc.

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Societal Development

• effect on retailing apparels as an example
• traditional apparel retailing before mid 20th
  century
• relative long range forecast
• large volume, low frequency
• successful formula merchandising - right product
  mix to provide affordable, desirable goods
• formula no longer work after mid 20th century

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Recent News for Department Stores

• Macys filed for Bankruptcy in 1992, but
• Web headings for Sears
• 2009 Aug 4 Why Sears will (and should) End up in
  Bankruptcy?
• 2011 Dec 29 Is Sears Headed for Bankruptcy?
• 2012 Jan 12 Tears for Sears American Icon in
  Trouble.
• Why?

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Societal Development

• starting mid 20th century
• quicker in transportation
• development of the automobile industry and the
  highway systems
• possibility of moving medium amount of goods for
  a couple of hundred miles by trucks
• containerization
• communization of air transport
• computer for information flow and processing
• moving of residents from downtown to suburban
  areas

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Societal Development

• shopping of the era discount stores in suburban
  areas
• daily necessities for suburban residents
• successful formula economies of scale,
  convenience, low cost by simple decoration,
  efficient logistics, and advanced information
  technology

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Problems for Traditional Apparel Retailing Since
mid 20th Century

• product proliferation hard to predict actual
  demand accurately
• change of customer behavior leading to many
  styles
• over capacity, e.g., increasing in retail space
  per capita
• 5.3ft2 (1964) ? 9ft2 (1974) ? 16ft2 (1988) ?
  19ft2 (1996) (Mexico 0.3ft2)
• reduction in consumer expenditure
• 1710 (1992) ? 1698 (1994) 14.3 (1967) ? 28.7
  garments (1995)
• expensive costs in markdowns, stock-outs, and
  inventory holding
• estimate in 1985 14 billion on markdowns, 6
  billion on loss of sales, and 5 billion on
  inventory holding

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The Call for Lean Retailing

• traditional retailing model being out of date
• the needs for quick response retailing
• universal numbering system of goods
• automatic identification
• standards across firms
• information flow and processing
• modern distribution centers

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Different Types of Distribution Centers
The material is from the book???????????.
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Different Types of Distribution Centers

• classified by different methods
• by temperature
• by operator
• by goods
• by functionality

ambient, refrigerated, freezing
manufacturers, retailers, perishables,
import traders, wholesalers, 3-party logistics
service providers, truckers, couriers, sea
freight service providers, air freight service
providers
food, daily necessarity, medicine,
cosmetics, electrical appliances, 3C products,
books, apparels, shoes, auto parts
regional, front, cross docking
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Different Types of Distribution Centers

• operations and equipment changed with nature of
  DC

for
in DC
10,000
6,000
3,000
40
10
---
60
60
30
---
30
70
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Different Types of Distribution Centers

• operations equipment changed with nature of DC
• examples
• DC for food and vegetables
• temperature control air conditioning 15?C to
  18?C refrigerated 0?C to 5?C freezer -25?C
• cross-docking mode for fresh food
• special design trucks
• DC of manufacturers
• smaller number of SKU in larger quantity

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Different Types of Distribution Centers

• operations equipment changed with nature of DC
• examples
• DC of 3-party logistics service providers
• consolidation of multiple types of goods
• more building up and breaking down services
• value added services
• .

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The e-Hub of Foxconn
Part of the material is from the book?????????.
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The Distribution Center of Foxconn for Dell

• Foxconn
• one of the best 3C-product manufacturers
• services including design, development, and
  after-sales services in addition to manufacturing
  and assembling
• performance in 2010
• revenue US116 billion
• profit US2.74 billion
• profit margin 2.36

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The Distribution Center of Foxconn for Dell

• Dell one of the best among direct sales and
  e-business
• designing and selling computers and their
  peripherals
• providing before- and after-sales services for
  her products
• performance in fiscal year 2011
• revenue US61.5 billion
• net profit US3.1 billion (number changed with
  the accounting system)
• profit margin 5

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The Distribution Center of Foxconn for Dell

• the fast growing Dell (50 annually) required
  flexibility from its suppliers
• demand a target, but possible to adjust upwards
• components possible to change with the ever
  expanding market
• capacity of supplier
• not taken up fully by Dell and possible to expand
  quickly
• vendor managed inventory
• suppliers responsible for inventory (component
  value reduced by 0.5 to 1 per week)
• only parts and components sent to factories for
  assembly being paid by Dell

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The Distribution Center of Foxconn for Dell

• e-Hub of Foxconn
• a distribution center with information processing
  capability beside the manufacturing and assembly
  plants
• full information on production schedule and
  statue
• inventory
• zero for manufacturing and assembly plants
• less than 2 days for e-Hub
• accurate forecasting of demands by e-Hub
• 100 containers of parts and components per week

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Distribution Centers of WalMart
The material is from the book Sam Walton
Made in America.
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Distribution Centers of WalMart

• by 1992
• 20 distribution centers, total area 18,000,000 sq
  ft
• 4 distribution plans running by WalMarts fleet
• all stores
• within one day drive from a distribution center
• placing orders in computer
• 80K SKU, providing 86 goods (competitors 50 to
  65)
• lead time 2 days (competitors 5 days)
• transportation cost 3 (competitors 4.5 to 5)

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Distribution Centers of WalMart

• a typical distribution center
• 1.1 million sq ft (23 foot fields 150 acres ?
  60.7 hect.)
• 200,000 boxes every day by 600 to 800 persons
• docks 135 incoming and 30 outgoing
• 24 hours per day
• technologically advanced
• computerized system
• real-time status and location information for all
  items
• 8.5 miles lazer directed conveyor belts

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Distribution Centers of WalMart
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A Distribution Center of Shiseido
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Shiseido

• the oldest and the 4th largest cosmetics company
  in the world
• 40,563 employees worldwide at 2011

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Products of Shiseido Old Days

• toothpaste, vitamin tablet, ice cream, skin care
  products, face powders, hair tonic, cold cream,
  fragrances, lotion

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Products of Shiseido - Nowadays

• skin care
• make-up
• fragrance
• body care
• sun care
• hair care
• men

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Statistics
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The Challenge faced by a Distribution Center

• serve several hundred franchised stores
• many products, of small sizes
• minimal inventory in stores
• each store
• multiple orders per day
• multiple deliveries per day

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The Challenge Faced by a Distribution Center

• economies of scale in delivery
• full truckloads by consolidating goods for stores
  
• challenges to store, pick, sort the small items

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Schematic Diagram of the Distribution Center
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In the Distribution Center

• boxes to hold small pieces for transportation

• automatic storage, transportation, and sorting

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In the Distribution Center

• automatic storage, transportation, and sorting

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In the Distribution Center

• automatic storage, transportation, and sorting

• computerized control

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A Distribution Center of Amazon
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