Chapter 7 Warehousing Decisions

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Chapter 7Warehousing Decisions
Note Dr. Steven Rutner is the initial writer of
these lecture notes.
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Warehouse or Distribution Center

• Warehouse
• Place to store commodities
• Seasonal
• Speculative
• Distribution
• Consolidation and break bulk of shipments
• Assortment
• Processing/postponement (private labels example)

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Distribution Center Functions

• Consolidation
• Break Bulk
• Service / Product Availability (pick when needed)
• Protection Against Contingencies
• Smoothing Manufacturing Operations
• Cross Docking

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Product mixing
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In Transit Mixing
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Assembly
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Additional Functions

• Service / Product Availability (pick when needed)
• Protection Against Contingencies
• Smoothing Manufacturing Operations
• Cross Docking

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Throughput

• basic measure of DC activity
• Quantity (volume) into a DC Quantity out of a
  DC over a period of time
• Cases per month (for example)

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Strategic DC Questions

• How many and where located?
• Centralized (few) vs. decentralized (many)
• Large vs. small
• Location factors
• Which products to be carried at each?
• Which customers to be serviced by which DC?
• Target customer service objectives for each
  facility and the network?
• Role of Private vs. Public vs. Contract
  operations.

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Percent of Goods Stored by Location
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Distribution Center Size and Location

• Basic Question How Large is Large?
• Example Large DC may be 2 million sq.ft.
• 1 acre approximately equals 1 football field

Florida
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Warehouse Functions

• Receiving
• Storage
• Picking
• Order Assembly
• Shipping
• Office

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Ownership DecisionFactors to Consider

• Cost
• Level of throughput will be critical
• Fixed vs. variable cost (next slide)
• Flexibility
• Ability to adapt quickly
• Reduce risk
• Services Available
• Managerial Responsibilities/Degree of Control
  Desired

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Cost Comparison Between Private and Public
Warehousing
Public Warehousing
Total Cost
Private Warehousing
Fixed Costs
Volume of Throughput
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Factors Affecting theOwnership Decision
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Types of Public Warehouses

• General Merchandise
• Refrigerated
• Household Goods and Furniture
• Special Commodity
• Bulk Storage

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Legal Forms of Warehousing

• Uniform Warehouse Receipts Act
• Negotiable
• Non-negotiable
• Why would you use each?

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Factors Influencing Public Warehouse Rates

• Space basis per time period
• Product value
• Fragility
• Damage to other goods
• Volume and Regularity
• Weight density
• Services

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Example Services of Public Warehousing Operations

• Marketplace coverage
• Satisfy critical customer service or storage
  requirements
• Service parts distribution
• Break-bulk/broken case handling
• Reverse distribution/recalls/returns
• Cross-docking

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Interesting Examples of Public Warehousing

• Product has unique storage requirements
• Unique customer service demands
• Insurance policy wont permit storage in private
  warehouse (e.g., tires)
• Broken case handling needed.
• Products with high transportation costs for small
  orders
• Excess product from recalls

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What is Third Party Contract Logistics?

• Use of outside distribution companies (carriers,
  warehouses, or third-party freight managers) to
  perform all or part of a companys material or
  product distribution functions
• Transportation
• Storage
• Inventory control
• Customer service
• Logistics information networks

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Reasons for Using Contract Warehousing

• Seasonality
• Increase Geographic Coverage
• Flexibility in Testing New Markets
• Gain Management Expertise
• Permit Off-Balance-Sheet Financing
• Reduce Transportation Costs

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Example Distribution Center
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DC Layout and Design Principles

• One-story best for distribution
• Straight-line flow when possible
• Use efficient materials handling equipment
• Maximize use of building height
• Aisle space to a minimum
• Item-location strategies
• Randomized vs. dedicated storage
• Complementarily
• Compatibility
• Popularity

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Increased Automationin DC Operations
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Technology in Warehousing, 1999
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Example Cracker Barrel DC

• Gift Shop items of 760m or 22 of rev.
• 100k items per day to 260k at Xmas peak
• 1 DC ships to 250 stores in 28 states
• 250k sq.ft. with 130k increase in 1997
• Equipment includes
• bar coding, conveyors, inv. system, high
  stackers, paperless pick system
• Stores items by size and popularity
• One story with aisles for fork lifts

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Materials Handling and Packaging
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Function of Material Handling

• Storage
• Space utilization
• Floor space
• Cubic space (fig 8-2)
• Minimize dead space (fig 8-3)
• Movement
• Minimize times handled
• Minimize damage
• Minimize manual handling
• Facilitate picking
• Expedite throughput (fig 8-4)
• Reduce cost

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Material Handling Principles

• Organize to obtain maximum operating efficiency
• Integrate activities from vendor to customer
• Design to optimize materials flow
• Simplify handling by minimizing movement or
  equipment
• Use gravity whenever possible
• Make optimum utilization of building cube

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Material Handling Principles

• Increase movement unit size
• Mechanize material handling
• Automate where possible
• Equipment selection
• Standardize sizes and handling
• Select equipment with widest adaptability
• Reduce deadweight

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Material Handling Principles

• Plan optimization utilization scale
• Plan preventative maintenance schedule
• Replace obsolesce equipment
• Provide maximum control over storage and
  retrieval abilities
• Use equipment to increase capacity and throughput
• Minimize expense per unit handled
• Provide a safe working environment

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Fork lifts

• P. 293
• Rough terrain
• Narrow isle
• Compression wheel
• Power source
• Electric
• Natural gas
• Gasoline
• Clamp
• Forks
• Pickers

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Extension Lift
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Narrow Aisle
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Picking lift
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Battery from Forklift
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Aisle Guides
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Medium Terrain
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Pallets

• Construction
• Wood
• Plastic
• Composition
• Nail or glue
• Design
• Size
• Structure (figure 8-6)

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Pallet Type Comparison

• Table 8 2
• Durability
• Repairable
• Recyclable
• Application

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Dock Terms

• Dock Bumpers
• Dock Levelers
• Dock Seals
• Trailer Restraint systems

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Conveyors

• Rollers - gravity fed
• Wheels powered
• Belt powered for gaining elevation
• Automatic gates for switching packages
• Bar code readers for identifying packages
• In line scales for weighing cartons
• Multilevel
• Narrow aisle requirements

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Conveyor design determines

• Size of package you can carry
• Weight of package you can carry
• Height of package you can move (Center of gravity)

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Cranes

• Moving large items
• Containers

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Towlines

• Line in floor can power or guide vehicle
• Like cable cars in San Francisco
• Can also control movement for automatic storage
  and retreival

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Order Picking

• Picker to part
• Picker travels to part location
• Similar to grocer store
• Part to picker
• Parts moved to where picker stands

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Picker to Part
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Picker to part (Fig 8-8)

• Bins
• Drawers
• Flow racks replenish from back, pick from front
• Order picking vehicles
• Mobile storage shelves

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Mobile storage systems (Library)
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Part to Picker

• Workers travel 70 of time in picker to part
  systems
• Carousels (fig 8 8)
• Automatic storage and retrieval systems (fig 8-8)
• Mezzanines second row of pickers in area above

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Types of Material Handling Equipment

• Flexible path equipment forklift
• Continuous-flow fixed-path equipment
• Intermittent-flow, fixed path equipment cranes
• Slurry coal pipelines, tomatoes
• Dry bulk flour, sugar, coffee, aspirin,

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Packaging

• Identification

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Pallet Identification
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Protection
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Handling efficiency
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Handling Effeciency
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Space Utilization
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Space Utilization
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Purpose of package

• Consumer packaging or interior packaging
• Industrial or exterior packaging

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Packaging Material

• Comparison of Cushioning Materials
• Automate
• Light
• Provide information
• Attractive
• Limited space
• Reduce pilferage
• Minimize tampering
• Know if it has been opened

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Packaging Materials

• Peanuts
• Air bubbles
• Shrink wraps
• Foam
• Molded to shape foam

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Recycling Issues

• Sheer volume of solid waste (fig 8 10)
• State and Federal Laws are mandating percent
  recyclables
• Look behind any large merchants docks
• Sometimes if you pickup boxes from recycle bin
  you reduce percent recycled

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Lifecycle of package

• Plant
• Warehouse
• Transportation unit
• Retail outlet
• Home or place of use
• Recycle destination

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Bar Coding

• There are many different standards
• Standard for industry so anyone meeting standards
  can be part of system
• Self identification of anything

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Identify loading dock
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Identify Pallet
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Identify Work Assignment
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Identify Who Work is Assigned to and Packages in
Truck
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Barcode Standards

• http//www.makebarcode.com/specs/speclist.html
• Observe wide range of barcodes
• Now DLA is experimenting with small transmitting
  chips that can be embedded onto object that can
  be read from a distance - Implications

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Containers

• The standards that created intermodal shipping
• 10, 20, 40 foot lengths
• Weatherproof
• Standard lifting and securing positions
• http//www.conrail.de/conrail_container_standards_
  re.html
• Food grade container standards
• http//vm.cfsan.fda.gov/dms/qa-ind2d.html

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Double Stack Rail Car

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Cranes in Port Unloading Containers

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Trucking Companies use Containers

• Transfer to rail for long hauls

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Straddle Cranes

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Track Crane

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Container lift