Warehouse Management.ppt

WarehouseManagement 2 Isitonlyastoragefacility Awarehouseistypicallyviewedasaplacetostoreinventory However inmanylogisticalsystemdesigns theroleofthewarehouseismoreproperlyviewedasaswitchingfacilityascontrastedtoastoragefacility 3 ASampleWarehouse Video 4 BenefitsofWarehousing ConsolidationShipmentconsolidationisaneconomicbenefitofwarehousing Withthisarrangement theconsolidatingwarehousereceivesandconsolidatesmaterialsfromanumberofmanufacturingplantsdestinedtoaspecificcustomeronasingletransportationshipment Thebenefitsaretherealizationofthelowestpossibletransportationrateandreducedcongestionatacustomer sreceivingdock 5 ConsolidationWarehouses 6 ConsolidationWarehouses Theprimarybenefitofconsolidationisthatitcombinesthelogisticalflowofseveralsmallshipmentstoaspecificmarketarea Consolidationwarehousingmaybeusedbyasinglefirm oranumberoffirmsmayjointogetheranduseafor hireconsolidationservice Throughtheuseofsuchaprogram eachindividua1manufacturerorshippercanenjoylowertotaldistributioncostthancouldberealizedonadirectshipmentbasisindividually 7 Breakbulkwarehouses Breakbulkwarehouseoperationsaresimilartoconsolidationexceptthatnostorageisperformed Abreakbulkoperationreceivescombinedcustomerordersfrommanufacturersandshipsthemtoindividualcustomers Thebreakbulkwarehousesortsorsplitsindividualordersandarrangesforlocaldelivery Becausethelong distancetransportationmovementisalargeshipment transportcostsarelowerandthereislessdifficultyintracking 8 Breakbulkwarehouses 9 Processing Postponement Warehousescanalsobeusedtopostpone ordelay productionbyperformingprocessingandlightmanufacturingactivities Awarehousewithpackagingorlabelingcapabilityallowspostponementoffinalproductionuntilactualdemandisknown Forexample vegetablescanbeprocessedandcannedin brights atthemanufacturer Brightsarecanswithnopre attachedlabels 10 Processing Postponement Theuseofbrightsforaprivatelabelproductmeansthattheitemdoesnothavetobecommittedtoaspecificcustomerorpackageconfigurationatthemanufacturer splant Onceaspecificcustomerorderisreceived thewarehousecancompletefinalprocessingbyaddingthelabelandfinalizingthepackaging 11 Processing Postponement Processingandpostponementprovidetwoeconomicbenefits First riskisminimizedbecausefinalpackagingisnotcompleteduntilanorderforaspecificlabelandpackagehasbeenreceived Second therequiredleveloftotalinventorycanbereducedbyusingthebasicproduct brights foravarietyoflabelingandpackagingconfigurations 12 Stockpiling Theeconomicbenefitofstockpilingcomesfromtheneedofseasonalstorage Forexample lawnfurnitureandtoysareproducedyear roundandprimarilysoldduringaveryshortmarketingperiod Incontrast agriculturalproductsareharvestedatspecifictimeswithsubsequentconsumptionoccurringthroughouttheyear Bothsituationsrequirewarehousestockpilingtosupportmarketingefforts Stockpilingprovidesaninventorybuffer whichallowsproductionefficiencieswithintheconstraintsimposedbymaterialsourcesandthecustomer 13 VoiceDirectedDistribution TalkmanfromVocollect Video 14 ServiceBenefits Fivebasicservicebenefitsareachievedthroughwarehousing spotstock assortment mixing productionsupport andmarketpresence 15 SpotStock Underspotstocking aselectedamountofafirm sproductlineisplacedor spotstocked inawarehousetofillcustomerordersduringacriticalmarketingperiod Inparticular manufacturerswithlimitedorhighlyseasonalproductlinesarepartialtothisservice Ratherthanplacinginventoriesinwarehousefacilitiesonayear roundbasisorshippingdirectlyfrommanufacturingplants deliverytimecanbesubstantiallyreducedbyadvancedinventorycommitmenttostrategicmarkets 16 SpotStock Utilizingwarehousefacilitiesforstockspottingallowsinventoriestobeplacedinavarietyofmarketsadjacenttokeycustomersjustpriortoamaximumperiodofseasonalsales Suppliersofagriculturalproductstofarmersoftenusespotstockingtopositiontheirproductsclosertoaservice sensitivemarketduringthegrowingseason Followingthesalesseason theremaininginventoryiswithdrawntoacentralwarehouse 17 Assortment Anassortmentwarehousestocksproductcombinationsinanticipationofcustomerorders Theassortmentsmayrepresentmultipleproductsfromdifferentmanufacturersorspecialassortmentsasspecifiedbycustomers Inthefirstcase forexample anathleticwholesalerwouldstockproductsfromanumberofclothingsupplierssothatcustomerscanbeofferedassortments Inthesecondcase thewholesalerwouldcreateaspecificteamuniformincludingshirt pants andshoes 18 Assortmentvs SpotStock Thedifferentialbetweenstockspottingandcompletelineassortmentisthedegreeanddurationofwarehouseutilization Afirmfollowingastockspottingwouldtypicallywarehouseanarrowproductassortmentandplacestocksinalargenumberofsmallwarehousesdedicatedtospecificmarketsforalimitedtimeperiod Distributionassortmentwarehouseusuallyhasabroadproductline islimitedtoafewstrategiclocations andisfunctionalyear round Thecombinedassortmentsalsoallowlargershipmentquantities whichinturnreducetransportationcost 19 Mixing Inatypicalmixingsituation truckloadsofproductsareshippedfrommanufacturingplantstowarehouses Eachlargeshipmentenjoysthelowestpossibletransportationrate Uponarrivalatthemixingwarehouse factoryshipmentsareunloadedandthedesiredcombinationofeachproductforeachcustomerormarketisselected Whenplantsaregeographicallyseparated overalltransportationchargesandwarehouserequirementscanbereducedbymixing 20 ProductionSupport Productionsupportwarehousingprovidesasteadysupplyofcomponentsandmaterialstoassemblyplants Safetystocksonitemspurchasedfromoutsidevendorsmaybejustifiedbecauseoflongleadtimesorsignificantvariationsinusage Theoperationofaproductionsupportwarehouseistosupplyor feed processedmaterials components andsubassembliesintotheassemblyplantinaneconomicandtimelymanner 21 MarketPresence Whileamarketpresencebenefitmaynotbesoobvious itisoftencitedbymarketingmanagersasamajoradvantageoflocalwarehouses Themarketpresencefactorisbasedontheperceptionorbeliefthatlocalwarehousescanbemoreresponsivetocustomerneedsandofferquickerdeliverythanmoredistantwarehouses Asaresult itisalsothoughtthatalocalwarehousewillenhancemarketshareandpotentiallyincreaseprofitability 22 WarehouseOperatingPrinciples Onceithasbeendeterminedtouseawarehouse thenextstepisdesigningit Whetherthewarehouseisasmallmanualoperationoralargeautomatedfacility thefollowingthreeprinciplesarerelevant Designcriteria Handlingtechnology andStorageplan 23 DesignCriteria Warehousedesigncriteriaaddressphysicalfacilitycharacteristicsandproductmovement Threefactorstobeconsideredinthedesignprocessare thenumberofstoriesinthefacility heightutilization andproductflow 24 Numberofstoriesinthefacility Theidealwarehousedesignislimitedtoasinglestorysothatproductdoesnothavetobemovedupanddown Theuseofelevatorstomoveproductfromonefloortothenextrequirestimeandenergy Theelevatorisalsooftenabottleneckinproductflowsincemanymaterialhandlersareusuallycompetingforalimitednumberofelevators Whileitisnotalwayspossible particularlyincentralbusinessdistrictswherelandisrestrictedorexpensive warehousesshouldbelimitedtoasinglestory 25 Heightutilization Regardlessoffacilitysize thedesignshouldmaximizetheusageoftheavailablecubicspacebyallowingforthegreatestuseofheightoneachfloor Mostwarehouseshave20 to30 footceilings 1foot 12inch 1inch 2 54cm althoughmodernautomatedandhigh risefacilitiescaneffectivelyuseceilingheightsupto100feet Throughtheuseofrackingorotherhardware itshouldbepossibletostoreproductsuptothebuilding sceiling Maximumeffectivewarehouseheightislimitedbythesafeliftingcapabilitiesofmaterial handlingequipment suchasforklifts 26 Productflow Warehousedesignshouldalsoallowforstraightproductflowthroughthefacilitywhetheritemsarestoredornot Ingeneral thismeansthatproductshouldbereceivedatoneendofthebuilding storedinthemiddle andthenshippedfromtheotherend Straight lineproductflowminimizescongestionandconfusion 27 Handlingtechnology Thesecondprinciplefocusesontheeffectivenessandefficiencyofmaterial handlingtechnology Theelementsofthisprincipleconcern movementcontinuityandmovementscaleeconomies 28 Movementcontinuity Movementcontinuitymeansthatitisbetterforamaterialhandlerorpieceofhandlingequipmenttomakealongermovethantohaveanumberofhandlersmakenumerous individual shortsegmentsofthesamemove Exchangingtheproductbetweenhandlersormovingitfromonepieceofequipmenttoanotherwastestimeandincreasesthepotentialfordamage Thus asageneralrule fewerlongermovementsinthewarehousearepreferred 29 Movementscaleeconomies Movementscaleeconomiesimplythatallwarehouseactivitiesshouldhandleormovethelargestquantitiespossible Insteadofmovingindividualcases warehouseactivitiesshouldbedesignedtomovegroupsofcasessuchaspalletsorcontainers Thisgroupingorbatchingmightmeanthatmultipleproductsorordersmustbemovedorselectedatthesametime Whilethismightincreasethecomplexityofanindividual sactivitiessincemultipleproductsorordersmustbeconsidered theprinciplereducesthenumberofactivitiesandtheresultingcost 30 StoragePlan Accordingtothethirdprinciple awarehousedesignshouldconsiderproductcharacteristics particularlythosepertainingtovolume weight andstorage Productvolumeisthemajorconcernwhendefiningawarehousestorageplan High volumesalesorthroughputproductshouldbestoredinalocationthatminimizesthedistanceitismoved suchasnearprimaryaislesandinlowstorageracks Suchalocationminimizestraveldistanceandtheneedforextendedlifting Conversely low volumeproductcanbeassignedlocationsthataredistantfromprimaryaislesorhigherupinstorageracks 31 ASampleStorageArea 32 StoragePlan Similarly theplanshouldincludeaspecificstrategyforproductsdependentonweightandstoragecharacteristics Relativelyheavyitemsshouldbeassignedtolocationslowtothegroundtominimizetheeffortandriskofheavylifting Bulkyorlow densityproductsrequireextensivestoragevolume soopenfloorspaceorhigh levelrackscanbeusedforthem Ontheotherhand smalleritemsmayrequirestorageshelvesordrawers Theintegratedstorageplanmustconsiderandaddressthespecificcharacteristicsofeachproduct 33 AlternativeWarehouseStrategies Warehousealternativesinclude 1 Privatewarehouses 2 Publicwarehouses and 3 Contractwarehouses Aprivatewarehousefacilityisownedandmanagedbythesameenterprisethatownsthemerchandisehandledandstoredatthefacility Apublicwarehouse incontrast isoperatedasanindependentbusinessofferingarangeofservices suchasstorage handling andtransportation onthebasisofafixedorvariablefee Publicwarehouseoperatorsgenerallyofferrelativelystandardizedservicestoallclients 34 AlternativeWarehouseStrategies Contractwarehousing whichisevolvingfromthepublicwarehousesegment providesbenefitsofboththeprivateandpublicalternatives Contractwarehousingisalongterm mutuallybeneficialarrangementwhichprovidesuniqueandspeciallytailoredwarehousingandlogisticsservicesexclusivelytooneclient wherethevendorandclientsharetherisksassociatedwiththeoperation Importantdimensionsthatdifferentiatecontractwarehousingoperatorsfrompublicwarehouseoperatorsaretheextendedtimeframeoftheservicerelationship tailoredservices exclusivity andsharedrisk 35 PrivateWarehouses Aprivatewarehouseisoperatedbythefirmowningtheproduct Theactualfacility however maybeownedorleased Thedecisionastowhichstrategybestfitsanindividualfirmisessentiallyfinancial Oftenitisnotpossibletofindawarehouseforleasethatfitstheexactrequirementsofafirm 36 PrivateWarehouses Themajorbenefitsofprivatewarehousingincludecontrol flexibility cost andotherintangiblebenefits Privatewarehousesprovidemorecontrolsincetheenterprisehasabsolutedecision makingauthorityoverallactivitiesandprioritiesinthefacility Thiscontrolfacilitatestheabilitytointegratewarehouseoperationswiththerestofthefirm sinternallogisticsprocess 37 PrivateWarehouses Privatewarehousingisusuallyconsideredlesscostlythanpublicwarehousingbecauseprivatefacilitycostsdonothaveaprofitmarkup Thisperceivedbenefit however maybemisleadingsincepublicwarehousesoftenaremoreefficientormayoperateatlowerwagescales Privatewarehousinghasalsosomeintangiblebenefits particularlywithrespecttomarketpresence Aprivatewarehousewithafirm snameonitmayproducecustomerperceptionsofresponsivenessandstability Thisperceptionsometimesprovidesafirmwithamarketingadvantageoverotherenterprises 38 PublicWarehouses Onthebasisoftherangeofspecializedoperationsperformed publicwarehousesareclassifiedas 1 generalmerchandise 2 refrigerated 3 specialcommodity 4 bonded and 5 householdgoodsandfurniture Eachwarehousetypediffersinitsmaterialhandlingandstoragetechnologyasaresultoftheproductandenvironmentalcharacteristics 39 PublicWarehouses GeneralmerchandisewarehousesaredesignedtohandIegeneralpackagecommoditiessuchaspaper smallappliances andhouseholdsupplies Refrigeratedwarehouses eitherfrozenorchilled handleandmaintainfood medicalitems andchemicalproductswithspecialtemperaturerequirements Commoditywarehousesaredesignedtohandlebulkmaterialoritemswithspecialhandlingconsiderations suchastiresorclothing 40 PublicWarehouses Bondedwarehousesarelicensedbythegovernmenttostoregoodspriortopaymentoftaxesorduties Theyexertverytightcontroloverallmovementsinandoutofthefacilitysincegovernmentdocumentsmustbefiledwitheachmove Forexample cigarettesareoftenstoredinbondedwarehousespriortohavingthetaxstampapplied Thistacticsavesthefirmmoneybydelayingtaxpayments italsoreducesinventoryvaluesubstantially 41 PublicWarehouses Finally ahouseholdgoodsorfurniturewarehouseisdesignedtohandleandstorelarge bulkyitemssuchasappliancesandfurniture Ofcourse manypublicwarehousesoffercombinationsoftheseoperations 42 PublicWarehouses Fromafinancialperspective publicwarehousingmayhavealowervariablecostthancomparableprivatelyoperatedfacilities Thelowervariablecostmaybetheresultoflowerpayscales betterproductivity oreconomyofscale Publicwarehousescertainlyresultinlowercapitalcosts Whenmanagementperformanceisjudgedaccordingtoreturnoninvestment ROI theuseofpublicwarehousingcansubstantiallyincreaseenterprisereturn 43 PublicWarehouses Publicwarehousingoffersflexibilityinthatitiseasytochangethelocation size andnumberoffacilities allowingafirmtoquicklyrespondtosupplier customer andseasonaldemands Privatewarehousesarerelativelyfixedanddifficulttochangebecausebuildingshavetobeconstructedorsold Publicwarehousingcanalsooffersignificantscaleeconomiessincethevolumeforeachcustomerisleveragedwiththatofotherusers Thisresultsinhigh volumeoperationsthatcanspreadfixedcostsandjustifymoreefficienthandlingequipment 44 PublicWarehouses Apublicwarehousecanalsoleveragetransportationbyprovidingdeliveryofloadsthatrepresentmanypublicwarehousecustomers Forexample ratherthanhavevendorAandvendorBeachdelivertoaretailstorefromtheirownwarehouse apublicwarehouseservingbothvendorscoulddeliverasinglecombinedloadmoreefficiently 45 PublicWarehouses Apublicwarehousechargesclientsabasicfeeforhandlingandstorage Inthecaseofhandling thechargeisbasedonthenumberofcasesorpoundshandled Forstorage thechargeisassessedonthenumberofcasesorweightinstorageduringthemonth Suchchargesnormallyexceedthecostofprivatewarehousingifadequateprivatefacilityvolumeexists However wheneconomiesofscalearenotpossibleinaprivatefacility publicwarehousingmaybealow costalternative 46 ContractWarehouses Contractwarehousingcombinesthebestcharacteristicsofbothprivateandpublicoperations Thelong termrelationshipandsharedriskresultinlowercostthantypicalpublicwarehousearrangements Contractwarehouseoperationscanprovidebenefitsofexpertise flexibility andeconomiesofscalebysharingmanagement labor equipment andinformationresourcesacrossanumberofclients 47 ContractWarehouses Althoughitiscommonforcontractwarehouseoperatorstoshareresourcesacrossclientsinthesameindustrysuchasgroceryproducts itisnotcommonthatdirectcompetitorswillwanttoshareresources Contractwarehouseoperatorsarealsoexpandingthescopeoftheirservicestoincludeotherlogisticsactivitiessuchastransportation inventorycontrol orderprocessing customerservice andreturnsprocessing 48 ContractWarehouses Forexample RichProducts afrozenfoodmanufacturerinBuffalo NewYork hasincreasinglyutilizedcontractwarehousing Since1992 Richhashadalongtermcommitmentwitharefrigeratedwarehousinganddistributioncompany ChristianSalvesen forstorage handling anddistributionservicesatitsfacilitiesinNewYork ThenatureofthearrangementbenefitsbothpartiesandallowsRichtoexpanditsdistributionnetworkwithoutincurringanyfixedfacilitycost 49 ContractWarehouses Richisassuredthattherewillalwaysbestoragespaceforitsproducts ChristianSalvesendoesn thavetobeconcernedwithfillingspaceinitswarehousesandcanfocusonprovidingservice Moreover thelongerRichProductsutilizesChristianSalvesen sservices thebetterthecontractwarehousingfirmwillbeabletounderstandRich sbusinessneedsandprovidecustomizedservices 50 WarehousingStrategy Manyfirmsutilizeacombinationofprivate public andcontractfacilities Aprivateorcontractfacilitymaybeusedtocoverbasicyearroundrequirements whilepublicfacilitiesareusedtohandlepeakseasons Inothersituations centralwarehousesmaybeprivate whilemarketareaorfieldwarehousesarepublicfacilities Eachuseofwarehousecombinationswillbediscussednow 51 WarehousingStrategy Fullwarehouseutilizationthroughoutayearisaremotepossibility Asaplanningrule awarehousedesignedforfull capacityutilizationwillinfactbefullyutilizedbetween75and85percentofthetime Thusfrom15to25percentofthetime thespaceneededtomeetpeakrequirementsisnotutilized Insuchsituations itmaybemoreefficienttobuildprivatefacilitiestocoverthe75percentrequirementandusepublicfacilitiestoaccommodatepeakdemand 52 WarehousingStrategy Itmaybemoreefficienttobuildprivatefacilitiestocoverthe75percentrequirementandusepublicfacilitiestoaccommodatepeakdemand 53 WarehousingStrategy Thesecondformofcombinedpublicwarehousingmayresultfrommarketrequirements Afirmmayfindthatprivatewarehousingisjustifiedatspecificlocationsonthebasisofdistributionvolume Inothermarkets publicfacilitiesmaybetheleast costoption Inlogisticalsystemdesigntheobjectiveistodeterminewhatevercombinationofwarehousestrategiesmosteconomicallymeetscustomerserviceobjectives 54 WarehousingStrategy Anintegratedwarehousestrategyfocusesontwoquestions Thefirstconcernshowmanywarehousesshouldbeemployed Thesecondquestionconcernswhichwarehousetypesshouldbeusedtomeetmarketrequirements Formanyfirms theanswerisacombinationth