MDP408a

Production & Operations

Management (Facilities Planning)
Lecture #16
Design of Warehouses
 Definition
• A warehouse can be defined as that part of a firm’s
materials management system that stores raw
materials, parts, goods-in-process and finished goods
at and between point of origin and point of
consumption, and provides information to
management on the status, condition, and
disposition of items being stored.

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 The Role of the Warehouse in the Logistics
System
• The warehouse is where
the supply chain holds • Functions of
or stores goods. warehousing include:
– High service level
– Protection against
contingencies
– Transportation
consolidation
– Product mixing
– Cross-docking

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Transportation Consolidation

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Supply and Product Mixing

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 Cross-Docking
Cross docking is a
logistics procedure
where products
from a supplier or
manufacturing plant
are distributed
directly to a
customer or retail
chain with marginal
to no handling or
storage time.
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 Importance of warehousing
• Why do companies hold inventories in storage?
1. Achieve transportation economies
2. Achieve production economies
3. Take advantage of quantity purchase discounts and forward buys
4. Maintain a source of supply
5. Support the firm’s customer service policies
6. Meet changing market conditions (seasonality, demand
fluctuations, competition…etc)
7. Overcome the time and space differentials that exist between
producers and consumers
8. Support the just-in-time programs of customers
9. Provide customers with mix of products instead of a single product
on each order
10. Provide temporary storage of materials to be disposed or recycled
(reverse logistics)
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Basic Warehousing Decisions

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PKT Group (Malaysia)

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The Ownership Decision

• Public warehousing costs

mostly all variable.
• Private warehousing costs
have a higher fixed cost
component.
• Thus private warehousing
virtually requires a high
and constant volume.

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 The Ownership Decision

• Other factors to consider

– Stability of demand
– Security and control needs
– Customer service needs

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Basic Warehouse Operations

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 Responsibilities of warehouse
management

1. Receiving material from suppliers, which includes the actual

unloading from the transportation carrier, the updating of
warehouse inventory records, inspection for damage and quality
specifications and verification of the merchandise count against
orders and shipping records.
2. Appropriate physical storage of all production materials, some in-
process inventory, and finished goods storage.
3. Developing a system for classifying, marking and locating all
materials so they are readily accessible and, at the same time,
protect them against pilferage, unauthorized usage, and
unnecessary damage or deterioration.

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 Identification of materials
• In order to be able to control the flow of material in and
out the warehouse, materials are identified by special
coding system.
• There are two types of identification systems in
industrial firms:
1. External systems: are standard systems commonly known and
used in materials transactions between different firms. They
are designed to make sure that firms use the same language
when communicating with each other.
2. Internal systems: There are hundreds of specially designed
coding systems tailored for each firm’s specific needs.

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 Identification of materials (example)

10-digit identification system

2 1 3 7 0 1 9 5 0 8

General class Generic class Subclass Specific item number

1 → raw materials
2 → purchased parts 137 → fastener 019 → manufactured
3 → manufactured parts
part
4 → work in process
5 → finished goods

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 Bar Coding
• Standard markings that can be read by automatic or
handheld scanners that allow for labor saving logistical
activities for all supply chain members.
• Bar Codes contain information regarding:
– Vendor
– Product type
– Place of manufacture
– Product price

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 RFID
• Radio Frequency Identification
• Identification system that consists of chip-
based tags and readers
• Data is stored and retrieved remotely using
radio waves

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Components of an RFID system

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 Warehouse design
• The design of warehouses is concerned with defining the
storage space, selecting the appropriate storage method
and selecting suitable material handling equipment for
adding and extracting material.
• The main objective of warehouse design are:
1. Achieve ready accessibility of major materials and permitting
efficient service to users.
2. Efficient space utilization and flexibility of arrangement
3. A reduced need of materials handling equipment
4. Minimization of material deterioration and spoilage
5. Ease of physical counting.

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 Warehouse design
• The first step in designing the warehouse is to answer
the following questions:
1. How much space (and what configuration) is required to
store the items properly?
2. How many units are normally withdrawn at once? Should an
item be stored singly, in pairs, or in dozens?
3. What is the maximum number of units to be stored at one
time?
4. What type of storage facility best suits the item (considering
the weight, shape and handling)?
5. What handling equipment is necessary to transport the
item?
6. How often is the item withdrawn from stores?
7. Where is the item most frequently used in the production
operation?
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Warehouse space considerations

• Develop a demand forecast.

• Determine each item’s order
quantity.
• Convert units into cubic
footage requirements.
• Allow for growth.
• Allow for adequate aisle
space for materials handling
equipment.

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 Warehouse space considerations

• Provide for the

transportation
interface.
• Provide for order-
picking space.
• Provide storage space.
• Provide office and
miscellaneous spaces.

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Warehouse Space Requirements

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 Aisle space
• Aisles are necessary in a warehouse for
allowing material-handling equipment to
reach different parts of the storage area.
• However, aisles constitute wasted space, a
space that is not used for the main purpose of
a warehouse, which is storage.

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 Aisle space
• Warehouses generally have two types of aisles:
– Main or working aisles
– Utility or secondary aisles
• The main aisles are wide (10-12 feet) to allow the
material handling unit such as a forklift truck to
operate.
• The utility aisles are used to gain access to racks,
offices, elevators, and utility rooms, and they are much
narrower (2 to 9 feet).
• The main aisles connect the receiving and shipping
areas, and their placement dictates the material flow.
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Aisle configurations

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 Warehouse space (example)
• A plant produces 75 units per hour of an item
with dimensions of 0.5x0.5x0.1 foot.
Management wishes to store a one-week supply
in containers measuring 7x7x4 feet.
• A minimum of 3 inches of space is required
between adjacent units in each direction for
packaging and handling.
• Determine the number of containers needed. If
these containers may be stacked two high,
determine the floor space required.
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 Warehouse space (example)
If there are n items in a
row (or column), then n+1
packing spaces must be
provided (see figure).
Thus the number of units
that can be stored in each
direction (n1, n2, n3) must
satisfy the equation:
ni wi + (ni + 1) si = di

Where wi is the dimension of the unit

si is the packaging space required
di is the dimension of the package in the i direction
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 Warehouse space (example)
The length of the box is 7 feet, and therefore,
0.5(n1) + 0.25(n1+1) = 7
Hence the maximum n1 is 9.1  9
The width of the box is 7 feet, therefore,
0.5(n2) + 0.25(n2+1) = 7
Hence n2 = 9 as well
The height of the box is 4 feet, thus
0.1(n3) + 0.25(n3+1) = 4
Hence n3 = 3
Accordingly, the total number of units that can be stored
in a box is n1 x n2 x n3 = 243
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 Warehouse space (example)
Now let us calculate the number of units to be stored in a week
and the associated container requirements:
75 units/hour x 40 hours/week = 3000 units/week
3000 / 243 = 12.34 or 13 containers/week
13 / 2 (containers per stack) = 6.5 or 7 stacks

The floor space needed for each stack is 7 x 7 = 49 square feet

49 x 7 stacks = 343 square feet of floor space required.

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 Warehouse location
• The selection of storage and warehouse sites is very
important.
• Some obvious rules:
– If the warehouse is to contain mainly finished products, it
should be close to the customers.
– If the material stored is to be used in manufacturing, the storage
facility should be near the production plant.
– The storage must have sufficient land and good transportation
available.
– The site should not be cut off from suppliers and markets by
geographical barriers such as rivers, mountains and lakes.
– The site must have good fire and police protection.
– The company must be able to bring necessary utilities and labor
to operate the store.

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 Warehouse Layout

• Layout Principles:
– Use one story facilities where
possible.
– Move goods in a straight-line.
– Use the most efficient materials
handling equipment.
– Use an effective storage plan
– Minimize aisle space.
– Use full building height.

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 Warehouse design
• There are eight general types of equipment
commonly used in storing materials:
1. Pallets and skids
2. Open and closed shelving
3. Cabinets (with or without counters)
4. Bins
5. Stacking boxes
6. Special storage racks
7. Gravity feed racks
8. Outdoor platforms and racks
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Warehouse design

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Warehouse design

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Materials-Handling Equipment
 Dock Equipment

• Forklifts
• Dock bumpers
• Dock levelers
• Dock seals
• Trailer restraint
systems
• Pallets
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Pallets and Pallet Movers

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Forklift Truck

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Pallet Types

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 Other Materials Handling Equipment:
Conveyors
• Types • Disadvantages
– Roller or gravity style – Very expensive
– Belt style – Relatively inflexible
• Advantages
– Assist in keeping
inventory records an
location
– Ability to move goods
quickly and efficiently

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 Other Materials Handling Equipment:
Other
• Types • Advantages
– Cranes (overhead – Ability to handle
and wheeled) special movements
– Packers (COFC and quickly and
TOFC) efficiently
– Automatic guided • Disadvantages
vehicles – Very expensive and
limited use

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Cranes

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