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LB-7: Warehousing
1. Introduction
1. Abstract
2. Description
3. Learning Objectives

2. Lectures
1. Coyle, John J. Supply Chain Management: a Logistics Perspective. 8th Edition.
2009. Chapter 11: Distribution – Managing Fulfillment operations. P. 460-515.
(H)
2. Understanding Warehouse Costs and Risks. Ackerman Warehousing Forum.
Vol. 24. Number 7. June 2009. (M)

(H) / (M) / (L) = High / Medium / Low importance based on teacher’s experience
1. Introduction: Abstract

• Warehousing is a critical logistics function that manages the storage

and handling of materials, work-in-process, and finished goods
within supply chain

• The warehousing function provides economic benefits, such as

transaction efficiencies and the consolidation and breaking bulk of
inventories

• Plays a critical role in meeting customer requirements for the timely

delivery of goods and services.
1. Introduction: Description

The Goal & Focus of this Learning Block is the following:

• knowledge of the management of warehouse processes and

Warehousing operations in the supply chain
Processes • The different types of warehousing options, basic warehousing
storage and handling operations

• Strategic planning issues, and the effects of warehousing design

and service decisions on total logistics costs and customer service
Warehousing
• Proper management of these distribution activities is vital to the
Concepts fulfillment of customer demand and the ultimate success of a
supply chain
1. Introduction: Learning Objectives

The Learning Objectives of this block are the following:

1. Describe the basic concepts of warehousing management and its essential role in demand fulfillment

2. Identify the key elements and processes in managing warehousing operations and how they interact

3. Identify principles and strategies for planning and managing warehouse operations

4. Identify principles and strategies for designing materials handling operations within a warehousing
facility

5. Explain the critical role of technology in managing warehouse operations and product flows

6. Discuss how to assess the performance of warehousing operations using standard metrics and
frameworks
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INTRO: This chapter introduces warehouse management.

Topics:
-Introduction
-The role of Distribution Operations in SCM
-Distribution Planning and Strategy
-Distribution Execution
-Distribution Metrics
-Distribution Technology
-Summary
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Introduction

• Distribution in the 21th century focuses on the continuous flow of product

to fulfill customer requirements at lowest possible cost . It is no longer
focuses on long-term storage.

• The goal is to serve the supply chain quickly and accurately

• Running efficient distribution facilities and networks is critical

• Levers for supply chain to be competitive: cost reducing opportunities such

as limiting handling, consolidation facilities and streamlining inventories
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The role of Distribution Operation in Supply Chain Management

Challenges:
• Production and consumption are not perfectly synchronized: transportation of
individual units is too expensive, and coordination of activity between such a luger
number of origin and destination is very complex.
• Effectiveness and efficiency of the distributions operations: shorter lead times can
be achieved, product availability increased and delivery cost reduced.

To overcome challenges:
• Balancing supply and demand: distribution facilities can stockpile inventory to buffer
supply and demand
• Protecting against uncertainly: forecast errors, supply disruptions, demand spikes
• Allowing quantity purchase discounts: distribution facilities can handle the quantities
reducing the purchase cost per unit
• Supporting production requirements: if a manufacturing operation can reduce costs via
long production
• Promoting transportation economies: fully utilizing containers is less expensive per unit
than shipping small quantities at a time
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Distribution Facility Functionality
In traditional distribution operations, there are four primary functions to carry out:
• Accumulation: involves the receptions of goods from a variety of sources, and
allows to consolidate orders and shipments for productions and fulfillment process.

• Sortation: In the receiving, goods are segmented according to their characteristics

(lot number, stock-keeping unit (SKU) number, case pack size, expiration date, etc.)
and prepared for safe storage. Proper sortation is essential for the effective
management of inventory and quick fulfillment of customer orders.
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Distribution Facility Functionality
• Allocation focus on matching available inventory to customer orders. The order is
compared to inventory levels, and available units are retrieved from storage according
to the quantity request by the customer. This break-bulk capability promotes product
availability for multiple customers. (Enable the less than pallet/case order)

• Assortment: Involves the assembly of customer orders for multiple SKUs held in the
distribution facility. The facility provides a product mixing capability, allowing customer
to quickly order a variety of items from a single locations
Avoids the cost of placing numerous orders
and having them shipped from different
locations
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Distribution Facility Functionality
• Sequencing. Delivery of materials, parts, and components directly to the assembly
station along the production line. Warehouse Operators are acting as fourth – party
logistics providers (4PL). Working closely with planning and production to understand
the master production schedule and inbound materials requirements so that each part
may be sequenced to arrive precisely when the assembly plant requires.

• Postponement: Forecasting at its most accurate is by nature less than 100 % percent
perfectly matched with future demand. In this manner an aggregate forecast is
calculated and “ the generic” components or products are produced and
warehoused, however, the final customization of the product to meet the needs of
individual segments is delayed or postponed until actual orders are received from
the customers segments.
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Question
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Distribution Tradeoffs
Focus on the important capabilities, functionality and value-adding roles of distribution operations.
It is up to supply chain managers to determinate how to balance customer service and costs.
Different interactions must be considered:
• Tradeoffs between distribution & transportation: no DCs in the supply chain (product sent
directly to individual customer from plants) would involve high transportation costs. However,
too many warehouses involve also an increase operations costs
• Tradeoffs between distribution & inventory: more DCs involve higher inventory costs. This tends
to occur because the safety stock rise
• Tradeoffs between distribution & customer service: the more DCs, the better customer service.
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Distribution Tradeoffs
For internal efficiency targets to be met, it is necessary to make conscientious financial and
performance tradeoff between resources
• Space vs equipment: the more space used for distributions operations, the more equipment will
be needed (good leverage of space: using vertical capacity)
• Equipment vs people: the higher the use of equipment to automate materials handling, the less
labor is needed. More manual operations, more people are needed
• People vs space: It is difficult for a small team to operate a sizeable facility unless there is
significant use of materials handling and flow automation

Distribution goals also impact resource requirements

• Demand for faster response will require a larger workforce
• Higher safety stock will require higher space in the facility to be handled
• Increased order accuracy will require the use of automated systems
• Increased demand will require more space, more people and/or equipment
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Distribution Challenges
Chief among these challenges are: labor availability issues, demand variation and increasing
customer requirements..

• Distribution is a labor-intensive activity: Well-trained employees, competitive wages with

limited opportunity for growth, the result of this smaller labor pool to find quality employees.
Finding capable employees, training them to be productive and retaining them requires great
effort of the part of the organization.
• Demand variation is another challenge. Many products are seasonal. Without some ability to
smooth out demand, it is difficult to effectively utilize the space and equipment and retain
labor through years. It is critical to balance with products that have alternated primary selling
season and/or stable year-round demand products.
• Customers have learned that DCs can provide value-added service, their requirements have
increased: expect their suppliers to provide smaller batches, more frequent and faster
fulfillment of orders. Together, these trend place a great deal of pressure on DCs to maximize
speed and service while keeping costs under control
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Distribution Planning and Strategy
A series of interrelated distribution planning decisions must be made to ensure that the strategy can
be executed at a reasonable cost while supporting supply chain demands
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Capability Requirements
• When establishment a distribution strategy the first consideration is the product (value,
durability, temperature sensibility, obsolescence, volume, etc).
• Another issue on the distribution strategy and network structure is the flow requirements of
the supply chain. Two options
• Direct shipments of goods from manufacturers to retailer or retailer to consumer:
direct shipping avoids the need to built and operate distribution facilities, reduce
inventory and compresses order cycle time. Downside: it is expensive to delivery small
quantities to buyers (reduced transportation efficiencies)
• Movements of goods through distributions facilities to customers: these facilities
including traditional warehouses, DCs, and cross-docking facilities.
o Warehouses and DCs can hold in anticipation of customer orders, provide a buffer of safety
stock and handle small quantity order efficiently
o Cross-docks provide a high-velocity alternative to direct shipping at lower cost

• Inventory, transportation and service tradeoffs must be analyzed before choosing direct
shipping or the use of distribution facilities. it is possible to employ a combination of the two
strategies
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Question
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Network Design Issues
Network design involves the determination of inventory positioning, the number and locations
of distribution facilities, and the ownership of facilities in the network

• Inventory positioning focus on inventory location within the supply chain. Two options:
• Centralized stock at a single locations (high-value and low-weight products)
- Greater control over the inventory and reduction in inventory carrying costs
o Benefits - Reduced demand variability due risk pooling, improved control over order-
filling process
- Long distance to customers
o Drawbacks - Longer lead times and Higher transportation costs

• De-centralized: Multiple inventory positions (high-volume, low-cost products)

- Stocking inventory regionally reduce delivery costs and order cycle time
o Benefits - Products is closer to demand points and can meet customer requirements

- Higher handling costs and additional expenses of running costs

o Drawbacks - More risk of product damage and the potential for product pilferage
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Network Design Issues
• Number and locations of distribution facilities: Determining the number of facilities needed
for a supply chain involves the evaluation of cost tradeoffs with other functional areas.
• As the number of warehouses increases, transportation costs and the cost of sale
decline, though inventory and warehouses costs increase (total cost will generally
decline). However total cost begin to rise as increasing inventory and warehousing cost
offset decreasing transportation costs and the cost of lost sales.
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Distribution Tradeoffs
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Question
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Question
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Network Design Issues
• Selecting Warehouse Locations . Transportation plays such a key role in today´s
decisions for locating warehouses, distribution centers, and cross – docking operations.
Warehouses play a critical role in reaching markets. Transportation, availability, quality,
and pricing influences the overall total operating cost for the client and operator, and
should be considered when locating warehouse facilities.

• Primary Factors. State and local tax laws (the level of inventory taxation), total
distribution cost, trade-off analysis of transportation and inventory carrying cost
must include tax ($ or €), zoning laws (transport size, labour regulations, time
restrictions, size and height of the buildings …), employees availability, materials or
supplier source.

• Facility Location Analysis.

Sophisticated location analysis. (Variables can vary by SKU and by clients).
Weighted average warehouse location analysis. Transportation analysis that minimizes
transportation costs spent on managing inbound and outbound shipments.
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Network Design Issues
• Ownership of facilities: there are 3 choices  private, public and contract warehousing.

− Private facilities: are internal facilities owned by the organization producing or owning the goods,
provide the organization great control over fulfilment processes and inventory, economies of scale if
volume is high enough and also provide source of income by renting or leasing excess space. The
organization must have distribution expertise and resources to built facilities
− Public warehousing: is the traditional external option. A public warehouse rent out space, and
additional service offerings by 3PL provider including: packaging, labeling, testing, inventory
maintenance, delivery, data processing etc. this kind of solution is often rented o a short term
operation
− Contract warehousing: is a customized version of public warehousing. Theses 3PL providers
dedicate space, labor, and equipment to a client`s specific product needs and providing integrated
and accurate distribution service.

− Outsourced distribution service should be considered for several reasons:

To avoid capital investment, flexibility due to short term commitments for 3PL capacity, it do no
have manage the personnel issues  essentially distribution becomes a variable cost activity
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• Network Design Issues

• Service factors and demand characteristics must be analyzed:

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• Network Design Issues

Cost Point of Indifference.- Considers only the assumed Fixed and Variable Cost.

FC a + VC a (U) = FC b + VC b (U)
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• Question
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Facility Considerations
• It is very important to determine the size of each facility (the layout and product location)
before it’s built. Once completed, it is expensive and operationally disruptive to modify
structures, layout and flows.
• First consideration is to determinate the size of each operation, this decision is driven by the
role, number and location of facilities.
• Traditional warehouse require storage space. It is important to use full volume of the cubic
storage space as efficiently as possible (means making use the vertical and horizontal
capacity).
• Receiving and shipping space: an area is needed to received and inspect goods. Outbound
goods may need to be sorted, staged, and consolidation prior to loading. The volume and
frequency of orders moving through facility are critical in determining the space needs.
• Order picking and assembly space: proper layout of the space used for these activities is
critical to efficient operations and customer service.
• Additional functions space: rework and returns, office, miscellaneous requirements
(break rooms, meeting rooms, locker rooms, equipment storage, utilities, etc.)
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Question
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Facility Considerations
• General principles for designing the interior of a facility:
SIZING PROCESS
1. Develop a demand forecast (estimate
in units for a relevant sales period by
product category)
2. Covert the units into cubic footage
requirements (include 10-15% for
growth)
3. Add space needs for receiving,
shipping, order picking, assembly, etc.
(one-third total space
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Facility Considerations
• Product protection: the layout must accommodate the physical characteristics of the
products being handle, such as hazardous materials, high-value good, temperature-sensitive
products
• Automation and materials-handling equipment: both offer great potential to improve
efficiency, but careful of the risk of investments in automation (technological change,
market fluctuation, and return on the large investment)
• Flexibility: the facility design should not be so permanent, the layout must be dynamic and
open to improvement.
• Continuous improvement: goals and standard for costs, order-handling efficiency, and
customer service must be set and monitored on a regular basis.
• Slotting: is defined as the placement of product in a facility for the purpose of optimizing
materials-handling and space efficiency. The objective minimize travel and amount time
operations within facilities. Travel an other nonproductive tasks can account to 60% of
distribution labor hours
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Distribution Execution
• Processes that take place within DCs, warehouses and cross-dock facilities
Product-Handling Functions
• 5 primary processes:
- Receiving
- Put-away
- Order picking
- replenishment
- shipping
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Product-Handling Functions
• Receiving: transferring goods into warehouse.
− unloading from the delivery vehicle onto reception dock. To check the goods in to ensure that they
match with the purchase order or dispatching advice.
− On the dock the goods are sorted by SKU, stacked on pallets to the correct ti-hi (ti: number carton
store on a layer; hi: number of layers on the pallet).
− The items are tagged with pallet labels that assign storage location
• Put-away: moving goods into storage location.
− Check the pallet configuration to validate quantities and product safety.
− Moving to proper location and placed in the rack. The pallets must be away quickly to ensure that
there is space to unload additional deliveries.
• Order-picking: selecting goods for customer orders.
− The pick is generated by warehouse system (on paper, label, computer display, voice –picking
system). Once picked, items may be labeled and put on a conveyor system or assembled on a pallet
for transfer to the shipping area.
− The items are secured to the pallet or carts by means of tape, stretch wrap, or strapping
− Picking is the most labor-intensive and expensive distribution activity (55-65% of DC operating
costs)
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• Product-Handling Functions
• Best Practices in Order-Picking
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Product-Handling Functions
• Replenishment: moving products from storage location to picking slots
− When the picking slot is empty the order will have to make a second trip to retrieve correct quantity.
(it may cause split deliveries or delays the dispatch)
− It is critical synchronize order picking and replenishment activities.
• Shipping: loading goods for delivery to the customer.
− Goods must moved from the staging area to the loading dock, counted and inspected and loaded
into truck

Support Functions
• The supports functions provide coordination between key processes and across the supply
chain, protect the organization’s inventory investment and improve working conditions within
facilities:
- Inventory control
- Safety, maintenance, and sanitation
- Security
- Performance analysis
- Information technology
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Distribution Metrics
• Customer can asses the quality of service provided by distribution operation, while
management can appraise operational costs and productivity.
• This evaluation are made through the measurement and analyze o distribution key
performance indicators (KPIs). KPIs can be used to evaluate current performance of internal
and 3PL operations versus historical results, internal goals and customer requirements
Customer-Facing Measures
• The customers goals are very sample: get de right product from vendor, in quantity ordered at
the expected time
- Order accuracy and order completeness KPI: this indicator measures ratios of correct
received to total ordered. Wrong quantities involve less accuracy inventory level , lost sales, costly
returns and dissatisfied customers
- Timeliness: is a critical component of customer service
- Perfect order index (POI): to be considerate perfect order, the rights item must be
delivered to the right place, at the right time, in defect-free conditions, and with the
correct documentation, pricing and invoicing
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• Internal Measures
• The customers goals are very simple: get de right product from vendor, in quantity ordered at
the expected time
- Distribution cost efficiency: item-level KPIs focus on the total distribution expense per unit of
measure (cost per pallet; per case or order).
- Asset utilization rate: space utilization is measured as % of capacity used to capacity available in cubic
feet or slots. A goal is to use 80-85% of a DC capacity (which provides space for peak volume). These KPIs
provide indication this equipment is used, sitting idle, or offline for repair
- Resources productivity: productivity improvements will have a great impact on the bottom line of P&L
statement. Productivity is measured as the ratio of number units processed per labor hour
- Resources efficiency: measures compare distribution activity completion versus expected time
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Distribution Technology
• Information must be shared regarding customers orders , inventory levels, condition, location within the
facility, inbound deliveries, labor performances, etc. software and information technology tools are
available to support distribution control and decision making.
• Warehouse Management Systems
• The core software used to manage fulfilments processes is called warehouse management systems
(WMS). The goal is to achieve a high level of control, inventory accuracy and productivity in the picking,
replenishment and put-away. WMS is an integrate package whose components often include radio-
frequency (RF), communication, dedicated localized computer hardware and the necessary applications
software. Improve labor productivity, keeping track of items, maximize the space whit optimal storage are
key WMS benefits.
• Advanced systems generate performant reports, support paperless processes, enable integration of
materials-handling equipment, picking and sorting systems, leverage wireless communication tolls and
support automatic identification equipment data collection.
• Other value-added capabilities:
• Labor management
• Task interleaving: involves mixing similar tasks
• Systems integration: with the enterprise resource planning (ERP)
• Activity-based costing/billing
• Multifunction Distribution
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• Automatic Identification Tools
• Automatic identification (Auto-ID) describes technologies to help machines identify objects,
such as barcodes, smart cards, voice recognition, radiofrequency identification (RDIF), etc.
• The WMS uses Auto-ID data captures technologies, such a barcodes scanners, mobile
captures, wireless local area networks (LANs) and RDFI to accurately gather information and
monitor the flow of products
• Barcodes and RFID are the tools of choice in distribution to help track, locate and move
product quickly
• Barcode is a series of parallel black and white bars, both of varying widths, whose represents
letters or numbers. This sequence is a code that scanners can translate into information such
as a shipment’s origin, product type, place of manufacture, product’s price.
• RFID tags consist of silicon chips an antenna that can transmit data to a wireless.
• WMS and Auto-ID tools facilitate accurate, low cost fulfillment of customer orders, help
distribution managers make better decisions, achieve maximum throughput an support
customer requirements
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Summary
• Distribution managers play a critical role in the supply chain:
− Fulfilling customer orders accurately and quickly while achieving the lowest cost
− Coordinate people, processes, capacity and technology to achieve customers
satisfaction, meet internal goals, and provide value-added services

• Distribution operations perform inventory handling, storage, and processes to create time
and place utility for SC.

• Balancing supply and demand, protected against uncertainly, promoting transportation

economies, can be addressed by distribution operations.

• 4 primary functions: accumulation, sortation, allocation, and assortment

• Tradeoffs must be made between space, equipment and people

• Distribution operations must protect product integrity, promote customer satisfaction, and
provide greater control of inventory.
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Summary (II)
• Distribution network design issues involve centralization/decentralization of inventory, the
number and location of facilities and facility ownership.

• Operational size, layout and product placement, positively impacts labor productivity and
response time.

• Distribution executions involves 5 primary processes: receiving, put-away, order, picking,

replenishment and shipping.

• Distribution KPIs include: labor productivity, and cost efficiency of the operations, as well as
customer service quality issues and the ultimate goal of perfect order fulfillment.

• Warehouse management system (WMS) improve products movements, flows and storage
operations

• Barcodes and RFDI are the automatic identification tools of choice in distribution to held
track, locate, and move product quickly.
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Materials Handling
• It’s the most important issue in terms of transferring goods in and out and in moving goods
to various locations in the building.

• The key factor is efficiency, whether the movement is mechanical, manual or both. Most
systems are a combination

• Materials handling has 4 dimensions:

− Movement: the goal is to achieve efficient movement of goods to, from and within the storage
facility
− Time: is concerned with readying goods for production or for customer order filling
− Quantity: it is the issue addresses the varying usage and delivery rate or raw materials and
finished goods, respectively
− Space: consumes space in warehouse, this space is fixed, the material handling systems must
utilize this space effectively
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• Objective of Materials Handling
• The general objectives:
− Increase effective capacity of warehouse: involve to use the building's
height as much as possible. Correct used of horizontal and vertical dimension
(focus on cubic)
− Minimize aisle space: to minimize aisle space while avoiding aisles narrow enough to impede
movement in the facility
− Reduce number of times product is handle: the company must avoid the additional
handling if the operations is to achieve efficiency. The designed of material-handling systems,
involves minimize the number of movements and allow product to flow rapidly
− Develop effective working conditions: including safety
− Reduce movements involving manual labor: systems usually combines automation and
manual labor (most efforts occur in the picking area) to eliminate short-distance movements and
automate operations as much as possible
− Improve logistics service: by making the distribution systems respond quickly and effectively to
plant and customer requirements.
− Reduce costs: effective material-handling contribute to a cost minimization by increasing
productivity, optimizing space used, and misplacing item less frequently
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• Guidelines and Principles for Materials Handling
• List of 20 the most commonly accepted principles of efficient materials handling
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• Materials Handling Equipment
Effective materials handing requires the use of different types of equipment.
Dock equipments: Materials handing begins at the loading dock when a truck containing the
goods arrives and needs to be unloaded. To load or unload the goods safely and quickly, the DC
should utilize important dock equipment.
• Forklifts. Warehouses usually use forklifts in conjunction with pallets. The forklifts truck
operates very efficiently. Its major disadvantage is that it requires an operator. Its biggest
advantage is its versatility in moving goods from one DC section to another or in transferring
goods in and out of the transportation equipment. In selecting forklifts trucks, a company
should consider normal equipment variations such as lifting capacity, lifting height, power
source (gasoline, battery, or propane gas).
• Dock Bumpers, are molded rubber pieces that protect the building from the impact of a
docking trailer backing into it and from a trailer shifting in weight during loading our
unloading.
• Dock levelers, level out the angle between the dock an de trailer by providing a ramp that
enables the forklift to drive into the trailer safely.
• Dock Seals, is a cushioned frame around the dock door opening that connects the trailer to
the dock.
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• Materials Handling Equipment
• Trailer Restraint Systems. Vehicle restraints prevent the trailer from drifting away from the
dock during loading or unloading. The best system is an automated one that uses a lighting or
sound system to communicate the trailer’s safety status between the dock worker and the
truck driver.
• Pallets. A pallet’s main function is to provide a base to hold individual items together. Once
the items are stacked on the pallet, materials-handling equipment can move the pallet to the
proper storage location.
• A variety of materials can be used to build pallets. Pressed wood fiber, a recyclable alternative to
wood pallets. Corrugated fiberboard pallets as recyclable paper scrap. The pharmaceutical, food-
processing and chemical industries use plastic and metal pallets because these pallets are easy to
clean and keep sanitary.
• Another method used extensively in the grocery industry is pallet rental. (ex. Chep USA).
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Other Materials-Handling Equipment
• Conveyors. These systems decrease handling costs, increase productivity of workers and
equipment, and provide an interface with WMS. There are two basic types of conveyors:

− roller conveyor, basically uses the gravity principle.

− wheel, belt towline conveyor, requires power equipment.

• Conveyors equipped with scanners and other automatic devices enable to move goods very
efficiently and quickly from one DC area another.
• If conditions change, changing the conveyor system may be necessary, often at a very high
cost.
• In analyzing the possibility of using conveyor systems, an organization must decide whether its
material-handling approach should be capital intensive or labor intensive.
• Conveyor systems have a very important fixed-cost segment, and a company must have
throughput volume sufficient to defray or spread the fixed costs.
• One disadvantage of conveyors is the possibility of equipment malfunction.
Other Materials-Handling Equipment
• Cranes. The two basic types are bridge cranes and stacker or wagon cranes.
• Bridge cranes are more common in physical supply warehouses or where companies have to
move, store, and load heavy industrial goods such as steel coils or generators.

• The advantage of bridge cranes is the ability to lift heavy items quickly and efficiently. The
advantages of stacker cranes are the effective use or space and the possibility for
automation.
• Automatic guided vehicles (AGVs): are machines that connect receiving,
storing, manufacturing and shipping. (do not require a driver)
Essentially, AGVs travel around the warehouse or plant carrying various
items to a particular programmed destination.
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Order-Picking and Storage Equipment
Cost of labor, equipment and space for order picking equals about 65% of total operating costs,
any improvement that reduce costs is important.
There are 2 main equipment types:
• Picker-to-part: the order picker must travel to the pick location within the aisle:

− Bin shelving: most basic storage system, the main advantages are
the low initial cost and the ability to divide units into various compartments.
− Modular storage drawers: are cabinets that are divided into drawers
and further subdivided into compartments. The main advantage is their ability
to hold a large number of SKUs.
− Flow racks: store items in cartons having a uniform size and shape.
The main advantage is that ensures FIFO inventory. They can also hold full pallets
− Mobile storage systems: need only one order picking aisle because a motorized
system can slide the racks, shelves, or modular drawers to the left or right
− Order picking vehicles: order picking trucks and person aboard storage
and retrieval vehicles increase productivity and maximized cubic space.
The order picker drives the vehicle horizontally or vertically to the pick location
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Order-Picking and Storage Equipment
• Part-to-picker: the pick location travels through an automatic machine to the picker. This
system have a higher initial cost, but utilizing automated storage and retrieval equipment
speed up order-picking operations, improves inventory control, and profits.
− Carrousels: are shelves or bins linked together trough a mechanical device that stores and rotates
items for order picking. 2 main types

− Horizontal: carrousels that rotate around vertical axis

− Vertical carrousel : the bins are enclosed for cleanliness and security,
and routes around a horizontal axis.

− Miniload automated storage retrieval systems (AS/RS): the machine

travels both horizontally and vertically to storage location, carrying item
on containers to and from order picking station at the end of the aisle.
It is very expensive

− Mezzanines: are double-layered systems that utilized a second level of

bin shelving, modular storage cabinets, flow racks or carrousels
above the first storage level. Mezzanine add a second level to utilized
cubic space more efficiently
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Question
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Types of Materials-Handling Equipment – A design Perspective
Companies divide materials-handling equipment into three design categories
• Flexible-path equipment: includes manual hand trucks, forklift trucks, etc. It design
advantages are versatility and flexibility. However, it is customarily more labor intensive.
• Continuous-flow fixed-path equipment: Includes conveyors an draglines. It is used for
companies with volume flow and uniform product size
• Intermittent-flow fixed-path equipment: including cranes, monorails, and stacker crane
equipment, they category combines the efficiency of continuous flow equipment with the
ability to stop unneeded equipment

Equipment Selection Factors

• Several factors affect the type of materials-handling equipment a company should uses. The
manager must approach this analysis in tradeoffs terms, measuring benefits against costs.
• A DC’s physycal characteristics also influence to use of equipment.
• Time is a logistics system factor in various ways, and it does affect materials handling.
− When the speed is critical, the equipment would be more sophisticated (conveyors systems,
automatic storage placers, etc).
− If time is not usually critical the equipment would be more basic
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Equipment Selection Factors
• These factors will provide the manager a basic framework for analyzing the company’s
particular needs and the materials-handling equipment options available to the company
• Sources of information: a number of sources provide help and insight:
− Software can be to estimate storage/retrieval needs and runs a senility analysis.
− Companies have staff engineers who can help distribution manager analyze the
situation.
− Another possibility is to use consultants to analyze need and select the best equipment

• Summary
• Material handling is very important to the efficient operation of distribution facilities.
• The equipment and tools facilitate the in-house flows of good from receiving to
shipping.
• The key to success is selecting the appropriate equipment for the type and volume of
product
• Effective selection will improve capacity utilization, employee productivity and
fulfillment speed
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Understanding Warehouse Cost and Risks
• The goal is to convey a costing system that can be used to compare costs of one warehouse
with another
Four Categories of Warehouse Costs
1. Handling: all expenses associated with moving product  Labor cost (wages, over time,
health insurance, vacations, holidays, uniforms, training…)
2. Storage: all expenses associated with moving “goods at rest”  facility costs (rent, or
depreciation, taxes, insurance, maintenance, lighting, guard service…)
3. Operations administration: all expenses associated to support the operation of DCs
supervisory and clerical salaries, office and data processing equipment, software,
communications, licenses,…)
4. General administrative expenses: expenses not incurred for specific DC are included here 
executive salaries, executive office expenses, selling and advertising expenses.

The Risk Factor

Cost per unit is escalates when  DC in not fully utilized, less rate of equipment utilization, errors
or damage in products
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Warehousing Tips
When Does Mechanization Make Sense?
Is that the investment is sound when payback is reasonably sure. Mechanization should save either space or
time, and in rare instances, it may save both; therefore the greatest opportunities are in the most labor
intensive warehouse jobs. Extremely long travel within warehouse or when land is very expensive, then the
mechanization make sense.

Relocation Your Distribution Center

4 of the most frequent reasons why warehouse must be moved:
− Facility is too small and can not expanded
− The location dose not adequately serve the market (customer base is changes)
− The supplier base has changed ant the current location is not ideal
− Because of Mergers and acquisitions your company has too many warehouses
Variables to take in account: Cost and availability of transportation, cost and availability of labor, price of land,
and taxes incentives .

Contain Hidden Costs with WMS

The functions can be enhanced and improved with WMS: physycal inventory accuracy, time spent for lost
items, time spent checking the work or order pickers or receivers, order picking accuracy. Correctly shipped
orders.
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Question
Level One:
Cornerstones of Supply Chain
Management