Warehouse Management

Warehouse Management

• Warehouses play an important role in Integrated Logistics Strategy and in building and maintaining good relationships between supply chain partners

• Warehouse smoothes out market supply and demand fluctuations
• When supply exceeds demand, a warehouse stores product in anticipation of customer requriements
• Warehouses can speed product movement to the customer by performing additional services such as marking prices, packaging product, or final subassembly

Warehouses vs. Distribution Centers

• Purpose of a warehouse is to store products until customers reqruie them
• Purpose of a distribution center is product throughput, not storage
• Bulk shipments come into a distribution center, are broken down into smaller shipments and then transported further in the supply chain
• Distribution centers normally serve a larger territory than a warehouse.

Rationale for Warehouses

• To achieve economies in transportation by moving higher volumes
• To obtain quantity purchase discounts
• To keep a supplier
• To meet changing market conditions
• To support Just-in-Time Programs throughout the integrated logistics system
• Warehousing buffers supply and demand

The Role of Warehousing

1. Acts as a reservoir for production overflow
• This function is also called 'Stockpiling'
• Stockpiling can be of two forms:
• Seasonal production, level demand
• Level production, seasonal demand
• Products that are produced seasonally (such as corn) and used throughout the year, are stockpiled until customers need it
• Products whose demands vary throughout the year can be warehoused to anticipate the peak season
  
2. Acts as product mixing site
• A variety of product lines can be stocked in warehouses
• When customers order a selection of products, warehouse picks all the products ordered and transports them as one shipment
• The distribution center supplies each retail outlet with a customized mix of products
  
3. Acts as a facilitator of production
• A warehouse can assist production by receiving a product almost complete, and then performing final subassembly based on local customer demand
  
4. Acts as safety valves
• Warehouses act as safety valves in plant strikes, supplier stockouts, or transportation delays.
  
5. Acts to smooth out production runs
• Total production cost per unit can be decreased significantly with long production runs
• The warehouse stores the product that outpaces current demand
  

Types of Warehouses

1. Private Warehousing
• The firm producing the goods owns private warehouses
• Goods are stored until they are delivered to a retail outlet
• It is preferable to have a private warehouse if high volumes of products need to be stored and a high degree of utilization required
• In private warehousing, the management has the ability to maintain physical control over the facility
• Firms can earn better income from renting or leasing excess space in private warehousing
  
2. Public Warehousing
• Public Warehouses rent space to individuals or firms needing storage
• Some public warehouses provide a variety of services including packaging, labeling, testing, inventory maintenance, local delivery, data processing, and pricing
• Leasing space in public warehousing reduces the capital investment required to establish a warehouse
• Leasing warehouses offers flexibility.  If a firm's market shifts to another region, it simply leases space in the new area
• A Bonded warehouse allows goods to be stored without paying trade tariffs and duties until they leave the warehouse.
  
3. Contract Warehousing
• This is a specialized form of public warehousing
• In addition to warehousing activities, a Contract warehouse provides a combination of Integrated Logistics Services
• Contract warehousing is a third party integrated logistics organization that provides higher quality services than are available from a public warehouse
• A Contract warehouse often replaces a private warehouse

Number of Warehouses

• Higher the number of warehouses near the market areas, the higher the customer service levels
• However, the warehouses are expensive
• The benefits of more warehouses and better customer service must be weighed against higher costs
• As the number of warehouses increases, transaction costs and stockout costs tend to decline
• There are three factors to be considered when evaluating the optimal number of warehouses:
1. The level of customer service required
2. The number of customers, their location, and buying habits
3. The amount and type of electronic communication taking place between producers and consumers

Warehouse Design

• There are five factors to be considered in warehouse design:
1. Land and building
2. Management and staff
3. Storage and landing equipment
4. Computers and software
5. Operating methods and procedures
• While designing warehouses, the following eight types of trade-offs have to be considered:
1. Fixed versus Variable slot locations for product storage
2. Horizontal ver4sus High-rise layout
3. Order picking versus Stock replenishment activities
4. Two or Multi-dock versus Single dock layout
5. Aisle space versus Rack space
6. Labor intensive operation versus Mechanized operation
7. Degree of Automated picking
8. Amount of Cross-Docking
• Break shipments up from incoming truck and load directly into outgoing truck
• Warehouse efficiency can be improved by focusing on the following ten activities:
1. Improving forecasting accuracy
2. Reducing or eliminating labor bottlenecks
3. Reducing the amount of product handling
4. Improving the product packaging
5. Smoothing out the variance in product flow in the warehouse
6. Installing improvement targets
7. Decreasing the distances traveled in the warehouse
8. Increasing the size of the units handled
9. Constantly seeking round-trip opportunities
10. Improving the cube utilization in the warehouse
    

Warehouse Information Systems

• EDI, automatic data collection, and radio-frequency systems have created advantages in warehousing, including improved customer service, lower costs, and improved operations
• These advantages come from computer interfaces in receiving, storing, quality control, order picking, error control, packing, and shipping
• Computerized warehousing operations have been developed and enhanced in requisitions, stock location, open orders, back orders, and work standards
• In large warehouses, paperless order picking systems have become more common
• Positive results from computerized order picking systems include improved pick productivity, reduced errors, improved throughput, better worker satisfaction, improved customer service levels, and a strategic competitive edge

Electronic Data Interchange (EDI)

• EDI refers to the exchange of machine-readable data in a standard format between one company's computer and another company's computer
• The result is a paperless transaction that offers several advantages
• EDI transactions save time because they are nearly instantaneous and use computers instead of people to move information, which reduces errors
• Improved customer service is achieved as data are transferred quicker, the order cycle time is reduced, and the product arrives faster
• Production can be scheduled better with supplier and customer orders.  By producing closer to supply and demand timing cycles, inventory carrying costs can be reduced
• Using EDI means that data need to be entered into the system only once.  After that, computers interface with each other without additional human intervention in the transfer of data.

Automatic Data Collection (ADC)

• ADC uses computer technology to enter information into a computer system with little or no human intervention
• The process enters data through machine-readable bar codes and scanners.  The result is a quicker and more accurate reading of data
• The application of ADC include work-in-process tracking, labor tracking, quality control, inventory control, and stock location

Radio Frequency Systems

• Radio Frequency (RF) technologies consit of terminals, network controller, and radio frequency units
• The terminals can be hand-held, vehicle mounted, or fixed data collectors
• RF units are transmitters/receivers that communicate with the terminals
• An RF system is a series of antennas placed under the roof of the facility
• Radio Frequency Systems benefit warehouse operations through operator productivity, decreased errors, better use of storage space, better control of stock rotation, and shorter order cycles

Reverse Logistics
Recycling

• Recycling supply chains use a four-stage process:
1. Collecting waste materials from recycling bins and delivering them to the entity responsible for recycling the used material
2. Processing the recyclables to create secondary raw materials
3. Using the secondary materials to manufacture new products
4. Returning the products to the marketplace
• The most common types of recyclable materials include aluminum, paper, glass, and plastic
• Two issues need to be considered:
1. Designing and effective reverse logistics system
2. Implementing a system that can handle the growth in volume that recycling programs generate
• Organizational structure for a reverse logistics system involves the following four participants
1. Collectors
• Collectors gather the recyclable material and deliver it to a recycling recovery center
  
2. Sorters
• The sorter separates materials into homogeneous groups.  Once sorted, these products must be sent to the appropriate processor
  
3. Processors
• Processors typically contract with a municipality to purchase one type of recyclable item (Example: Paper, Glass, or Aluminum) and transform into a secondary raw material and sent to remanufactures.
  
4. Remanufacturers
• Remanufacturers take fresh raw materials and combine them with secondary raw materials
• Once remanufacturing is complete, the result is a product that contains recycled materials
  

Overview of Reverse Logistics