Part 8- Warehouse management and operations Flashcards
Warehouse management and operations
- a warehouse was normally viewed as just a place to store inventory - today is it more than that, a switching facility where where other value-added activities are carried out as well
- such as consolidation, break bulk, cross-docking, reverse logistics, kitting- labelling, assembling etc
- in the past warehousing implemented that goods were stored for a long time- today goods tend to pass through warehouses rather than staying for too long
Kitting
receiving different parts from different suppliers and then assembling them in a kit
Economic needs of warehousing
- seasonal production (ie agricultural commodities)
- seasonal demand (ie snow blowers and lawnmowers)
- production economies of scale (producing lots or batches)
- quick supply (warehouse closer to customers)
- continuous production (raw materials and components)
- price stabilization
Types of warehouses (by customer classification)
- factory warehouse (for finished goods, connection with distributors)
- retail distribution warehouse
- catalog retailer warehouse (have large number of small orders)
- support of manufacturing operations warehouse (raw materials, components and work in process goods)
Types of warehouses (by role of supply chain)
- distribution centers (distribute FG for retailers)
- consolidation (goods from several sources)
- break bulk (delivery to multiple destinations)
- cross-docking
- reverse logistics
Types of warehouses (by ownership type)
- public warehouse (for rent, not owned by the government!!)
- private warehouse
- contract warehouse (rented based on a customers contract)
- bonded warehouse (for imported goods that have not paid customs duties yet- where the ports are/close to the airport)
- government warehouse (owned by the government)
- co-operative warehouse
Company’s strategy for warehousing (ownership type)
May vary by sector, volume, seasonality, competitive strategy etc.
Normal strategy:
1) Private or contract facilities for basic year-round requirements and public facilities for peak seasons requirements
2) Depending on the location, it may be better to use either private or public warehousing
3) Warehouse strategy may be differentiated by customer or product
Warehouse features
- automated warehouses (from small conveyor belt to fully automated)
- climate-controlled warehouses (controlling temperature, humidity, dirt etc) to store frozen products, flowers, sensitive computer products, agricultural products, medical products etc
Warehouse economic benefits
Warehousing provides specific economic benefits:
- the more warehouses = the greater inventory costs but the lower costs of lost sales (due to being closer to the customers the customer service can be better = lower threat of losing customers)
- more warehouses reduce transportation costs as it becomes more efficient
- have a suitable number of warehouses where the total cost function is minimized
Other warehouse benefits
- consolidation
- break bulk
- accumulation, mixing and sorting
- postponement (of partly production)
- allocation (matching on-hand inventory to customer orders in the packaging configuration desired by the customer)
- market presence (commercial advantage)
Consolidation warehouse
Plant A
+
Plant B —> CW —> Customer A, B & C
+
Plant C
A consolidation warehouse is a third-party storage facility where several small shipments are gathered together and sorted into groups based on destination, so that each group can be sent out as one larger, consolidated shipment
Break bulk warehouse
……………………………….. Customer A
………………………………………..+
Plant A –> BBW –> Customer B
………………………………………..+
…………………………………Customer C
Breaking bulk is a simple process that allows companies to store inventory in large quantities without using expensive storage facilities. Companies can break bulk by mixing various sizes of their products together, breaking down large shipments into smaller lots, or by combining different brands in the same lot.
Accumulation warehouse
Plant A ……………………Customer A
+……………………………………+
Plant B —> AW —> Customer B
+ ………………………………….+
Plant C ……………………Customer C
An inventory accumulation is an excess of inventory that a business owner has difficulty moving after an unplanned event adversely affects sales. For example, a sudden slowdown in the economy results in fewer customers, or road construction or a new competitor redirects foot traffic away from your business.
Warehouse design and layout
The first decision is where to locate the warehouse. Then:
- size of facility
- numbers of stories in the facility
- cube utilization (tradeoff between handling costs and costs associated with warehouse space)
- product flow (as straight as possible)- product received at one end of the building, stored in the middle and shipped in the other end (minimize confusion and congestion)
Warehouse layout should:
- be designed to maximize flow of material, people, equipment and information
- move groups of cases rather than individual
- high-volume sales products should be stored near primary aisles
- heavy items stored low to the ground
- bulky or low-density products should be stored in open floor space/ in high-level racks
- the layout will depend on the size of the pallets used
Material handling
The material handling equipment will be based on physical and volume characteristics of the products to be handled.
Objectives of material handling:
- Increase warehouse cube utilization using as much height as possible, keep aisle space to a minimum, improve operating efficiency, increase load per move and improve speed of response.
- material handling costs depend on all movements of materials carried out (incoming transport, storage, finding and picking up products and outgoing transport)
