Storage and Warehousing

Chapter 8
Warehouse Functions
◼ Provide temporary storage of
goods
◼ Put together customer orders
◼ Serve as a customer service
facility
◼ Protect goods
◼ Segregate hazardous or
contaminated materials
◼ Perform value-added
services
◼ Inventory
Elements of a Warehouse
◼ Storage Media
◼ Material Handling System
◼ Building
Storage Media
◼ Block Stacking
◼ Stacking frames
◼ Stool like frames
◼ Portable (collapsible) frames
◼ Cantilever Racks
Storage Media (Continued)
◼ Selective Racks
◼ Single-deep
◼ Double-deep
◼ Multiple-depth
◼ Combination
◼ Drive-in Racks
◼ Drive-through Racks
Storage Media (Continued)
◼ Mobile Racks
◼ Flow Racks
◼ Push-Back Rack
Storage Media (Continued)
◼ Racks for AS/RS
◼ Combination Racks
◼ Modular drawers (high
density storage)
◼ Racks for storage and
building support
Storage and Retrieval Systems
◼ Person-to-item
◼ Item-to-person
◼ Manual S/RS
◼ Semi-automated S/RS
◼ Automated S/RS
◼ Aisle-captive AS/RS
◼ Aisle-to-aisle AS/RS
Storage and Retrieval Systems
(cont)
◼ Storage Carousels
◼ Vertical
◼ Horizontal

◼ Miniload AS/RS
◼ Robotic AS/RS
◼ High-rise AS/RS
(two motors)
Phoenix Pharmaceuticals
◼ German company
founded in 1994
◼ Receives supplies from
19 plants across
Germany and
distributes to drugstores
◼ $400 million annual
turnover
Phoenix Pharmaceuticals
◼ 30% market share
◼ Fill orders in < 30
minutes
◼ 87,000 items
◼ 61% pharmaceutical,
39% cosmetic
Phoenix Pharmaceuticals (cont.)
◼ 150-10,000 picks per month
◼ Three levels of automation
◼ Manual picking via flow-racks
◼ Semi-automated using dispensers
◼ Full automation via robotic AS/RS
AVS/RS
RFID
Warehouse Problems
◼ Design
◼ Operational or Planning
Warehouse Design
◼ Location
◼ How many?
◼ Where? R

◼ Capacity

◼ Overall Layout

C C C C C C

EXIT
Warehouse Design
 Warehouse Design
Enclosure

◼ Layout and Location of

Outside
building
wall

Docks Truck
Truck

◼ Pickup by retail Dock Flush dock

Face
customers? Dock berths
Totally enclosed
Dock berths
Straight in, Straight out
Canopy

◼ Combine or separate Truc

k

shipping and receiving? Dock

Face

Dock Open dock

◼ Layout of road/rail Face

Sawthoot dock

network
◼ Room available for
maneuvering trucks?
◼ Similar trucks or a
variety of them?
Warehouse Design (cont)
◼ Number of Docks ◼ Seasonal highs and
◼ Shipping and receiving lows
combined or ◼ Types of load
separated? handled? Sizes?
◼ Average and peak Shapes? Cartons?
number of trucks or rail Cases? Pallets?
cars? ◼ Protection from
◼ Average and peak weather elements
number of items per
order?
Model for Rack Design
x(a + 1) + y(b + 1)
Minimize
2
Subject to xyz  n
x, y int eger
◼ x, y are # of columns, rows of rack spaces
◼ a, b are aisle space multipliers in x, y
directions
Model for Rack Design (Cont)
◼ In the relaxed problem,
xyz=n
x=n/yz
◼ The unconstrained objective is

n(a + 1) / yz + y(b + 1)
2
Model for Rack Design (Cont)
◼ Taking derivative with respect to y, setting
equation to zero and solving, we get

−n(a + 1) b + 1
2
+ =0
2y z 2
n(b + 1) n(a + 1)
x= and y=
z(a + 1) z(b + 1)
Rack Design Example
◼ Consider warehouse
shown in figure 10.29
◼ Assume travel
originates at lower left
corner
◼ Assume reasonable
values for the aisle
space multipliers a, b
Rack Design Example (Cont)
◼ Example 1: Determine length and width of
the warehouse so as to accommodate 2000
square storage spaces of equal area in:
◼ 3 levels
◼ 4 levels
◼ 5 levels
Rack Design Example Solution
◼ Reasonable values for a, b are 0.5, 0.2
◼ For the 3-level case,

2000(0.2 + 1)
x=  24
3(0.5 + 1)
2000(0.5 + 1)
y=  29
3(0.2 + 1)
Rack Design Example Solution
(Cont)
◼ Previous solution gives a total storage of
24x29x3=2088
◼ Due to rounding, we get 88 more spaces
◼ If inadequate to cover the area required for
lounge, customer entrance/exit and other
areas, the aisle space multipliers a, b must be
increased appropriately and the x, y values
recalculated
Rack Design Example Solution
(Cont)
◼ For the 4 level and 5 level case, the building
dimensions are 25x20 units and 18x23 units,
respectively
◼ Easy to calculate the average distance
traveled - simply substitute a, b, x and y
values in the objective function
◼ For 3-level case, average one-way distance =
35.4 units
Warehouse Design Model
 Model Assumptions
◼ 1. The available total storage space is known.
◼ 2. The expected time a product spends on the
shelves is known. This is referred to as the dwell
time throughout this paper.
◼ 3. The cost of handling each product in each flow
is known.
◼ 4. The dwell time and cost have a linear
relationship.
◼ 5. The annual product demand rates are known.
◼ 6. The storage policies and material handling
equipment are known and these affect the unit
handling and storage costs.
 Model Notation

Parameters
i: Number of products i = 1, 2, …, n.
j: Type of material flow; j=1,2,3,4
i : Annual demand rate of product i in unit loads
Ai : Order cost for product i
Pi : Price per unit load of product i
pi : Average percentage of time a unit load of product i spends in reserve area
if product is assigned to material flow 3
qij : 1 when product i is assigned to material flow j=1, 2 or 4 ;
di  + 1 when product i is assigned to flow j=3, where di is the ratio of the
size of the unit load in reserve area to that in forward area and di  is the
largest integer greater than or equal to di


 Model Notation

a,b,c : Levels of space available in the vertical dimension in each functional area,
a - cross-docking, b - reserve, c – forward
r: Inventory carrying cost rate
H ij : Cost of handling a unit load of product i in material flow j
C ij : Cost of storing a unit load of product i in material flow j per year
Si : Space required for storing a unit load of product i
TS : Total available storage space
Qi : Order quantity for product i (in unit loads)
Ti : Dwell time (in years) per unit load of product i
LLCD ,ULCD : Lower and upper storage space limit for cross-docking area
LLF ,ULF : Lower and upper storage space limit for forward area
LLR ,ULR : Lower and upper storage space limit for reserve area
 Model Notation
a,b,c : Levels of space available in the vertical dimension in each functional area,
a - cross-docking, b - reserve, c – forward
r: Inventory carrying cost rate
H ij : Cost of handling a unit load of product i in material flow j
C ij : Cost of storing a unit load of product i in material flow j per year
Si : Space required for storing a unit load of product i
TS : Total available storage space
Qi : Order quantity for product i (in unit loads)
Ti : Dwell time (in years) per unit load of product i
LLCD ,ULCD : Lower and upper storage space limit for cross-docking area
LLF ,ULF : Lower and upper storage space limit for forward area
LLR ,ULR : Lower and upper storage space limit for reserve area
Decision Variables
X ij = 1 if product i is assigned to flow type j ; 0 otherwise
 ,  , : Proportion of available space assigned to each functional area,  - cross-
docking,  - reserve,  - forward
 Model

Model
n 4 n 4
Minimize 2  qij H ij i X ij +   (q C Q X /2)
ij ij i ij (1)
i=1 j =1 i=1 j=1
4

X
j =1
ij =1 i (2)
n
 
 (QiSi X i1 /2)  aTS (3)
i=1
n n

 (Q S X
i i i2 /2) +  ( piQi S i X i3 )  b TS (4)
i=1 i=1
n n

 ((1− p )Q S X
i i i i3 /2) +  (Qi Si X i4 /2)  c TS (5)
i=1 i=1


 Model
 +  + =1 (6)
LLCD  a TS  ULCD (7)
LLR  b TS  ULR (8)
LLF  c TS  ULF (9)
, ,  0 (10)
X ij = 0or1 i, j (11)


Spreadsheet Based AS/RS Design
Tool
Spreadsheet Based AS/RS Design
Tool
Block Stacking
◼ Simple formula to determine a near-optimal
lane depth assuming
◼ goods are allocated to storage spaces using
the random storage operating policy
◼ instantaneous replenishment in pre-
determined lot sizes
◼ replenishment done only when inventory
excluding safety stock has been fully depleted
◼ lots are rotated on a FIFO basis
Block Stacking (Cont)
◼ withdrawal of lots takes place at a constant
rate
◼ empty lot is available for use immediately
◼ Let Q, w and z denote lot size in pallet loads,
width of aisle (in pallet stacks) and stack
height in pallet loads, respectively
Block Stacking (Cont)
◼ Kind’s (1975) formula for near-optimal lane
depth, d

Qw w
d= −
z 2
Block Stacking (Cont)
◼ E.g., if lot size is 60 pallets, pallets are stacked 3
pallets high and aisle width is 1.7 pallet stacks, then

60(1.7) 1.7
d= −  5 pallets
3 2
◼ Verify optimality by checking the utilization for all
possible lane depths (a finite number)
Block Stacking (Cont)
◼ Several issues omitted in Kind’s formula.
Some examples
◼ What if pallets withdrawn not at a constant
rate but in batches of varying sizes?
◼ What if lots are relocated to consolidate pallets
containing similar items?
Storage Policies
◼ Random
◼ In practice, not purely random
◼ Dedicated
◼ Requires more storage space than random,
but throughput rate is higher because no time
is lost in searching for items
◼ Cube-per-order index (COI) policy
◼ Class-based storage policy
Storage Policies (Cont)
◼ Shared storage policy
◼ Class based and shared storage policies are
between the two “extreme” policies - random
and dedicated
◼ Class based policy variations
◼ if each item is a class, we have dedicated
policy
◼ if all items in one class, we have random
policy
Design Model for Dedicated Policy
◼ Warehouse has p I/O points
◼ m items are stored in one of n storage spaces
or locations
◼ Each location requires the same storage
space
◼ Item i requires Si storage spaces
Design Model for Dedicated Policy
(Cont)
◼ Ideally, we would like

◼ However, if LHS < RHS, add a dummy

product (m+1) to take up remaining spaces
Design Model for Dedicated Policy
(Cont)
◼ So, assume that the above equality holds
◼ But, if RHS < LHS, no feasible solution
◼ Model Parameters
◼ fik trips of item i through I/O point k
◼ cost of moving a unit load of item i to/from I/O
point k is cik
◼ distance of storage space j from I/O point k is
dkj
Design Model for Dedicated Policy
(Cont)
◼ Model Variable
◼ binary decision variable xij specifying whether
or not item i is assigned to storage space j
Design Model for Dedicated Policy
(Cont)
Design Model for Dedicated Policy
(Cont)
Design Model for Dedicated Policy
(Cont)
Design Model for Dedicated Policy
(Cont)
◼ Model is generalized QAP
◼ Can be solved via transportation algorithm
◼ No need for binary restrictions in the model
Design Model for Dedicated Policy
- Example WH Layout

1 2 3 4

5 6 7 8

9 10 11 12

13 14 15 16
 Design Model for Dedicated Policy
- Example (Cont)
◼ 3 I/O points located in middle of south, west
and north walls
◼ 4 items
Design Model for Dedicated Policy
Example [fik(cik)]
1 2 3 Si

1 150(5) 25(5) 88(5) 3

2 60(7) 200(3) 150(6) 5

3 96(4) 15(7) 85(9) 2

4 175(15) 135(8) 90(12) 6

Design Model for Dedicated Policy
Example Solution (dkj)

1 2 3 4 5 6 7 8 9 1 1 1 1 1 1 1
0 1 2 3 4 5 6

1 5 4 4 5 4 3 3 4 3 2 2 3 2 1 1 2

2 2 3 4 5 1 2 3 4 1 2 3 4 2 3 4 5

3 2 1 1 2 3 2 2 3 4 3 3 4 5 4 4 5
Design Model for Dedicated Policy
Example Solution (wij)

1 2 3 … 15 16

1 1627 1272 1313 ... 1003 1442

2 1020 876 996 ... 1284 1668

3 1830 1308 1361 ... 1932 2559

4 2908 2470 2650 ... 1878 2675

Design Model for Dedicated Policy
- Example Solution (Cont)

2 3 3 2

2 2 1 2

4 4 4 1

4 4 4 1
Design Model for COI Policy
◼ Consider special case of dedicated storage
policy model
◼ All items use I/O points in same proportion
◼ Cost of moving a unit load of item i is
independent of I/O point
◼ Define Pk as % trips through I/O point k
◼ No need for the first subscript in fik as well as
cik
Design Model for COI Policy
(Cont)
Design Model for COI Policy
(Cont)
Design Model for COI Policy
(Cont)
Design Model for COI Policy -
Solution
◼ COI model easier than Dedicated Model
◼ Rearrange “cost”, “distance” terms (cifi/Si), wj
in non-increasing and non-decreasing order
◼ Match
◼ Item corresponding to 1st element in ordered
“cost” list with storage spaces corresponding
to 1st Si elements in ordered “distance” list
Design Model for COI Policy -
Solution
◼ Second item with storage spaces
corresponding to next Sl elements, and so on
…
◼ COI policy calculates inverse of the “cost”
term and orders elements in non-decreasing
order, of their COI values, thereby producing
the same result as above
Design Model for COI Policy -
Solution
◼ Arranging cost and distance vectors in non-
increasing and non-decreasing order and
taking their product provides a lower bound
on cost function
◼ Above algorithm is optimal
Design Model for COI Policy -
Example
◼ Consider dedicated policy example
◼ Ignore cik and fik data
◼ Assume
◼ all 4 items use 3 I/O points in same proportion
◼ pallets moved/time period are 100, 80, 120 and
90
◼ cost to move unit load through unit distance is
$1.00
◼ Determine optimal assignment of items to
storage spaces
Design Model for COI Policy
Example Solution
 Design Model for COI Policy -
Example Solution
◼ Sort [cifi/Si] values in non-increasing order
◼ [60, 33.33, 16, 15], corresponding to items 3,
1, 2 and 4
◼ Optimal storage space assignment
◼ Item 1 to Storage Spaces 2, 5, 7
◼ Item 2 to Storage Spaces 1, 3, 9, 11, 14
◼ Item 3 to Storage Spaces 6, 10
◼ Item 4 to Storage Spaces 4, 8, 12, 13, 15, 16
Design Model for COI Policy
Example Solution

2 1 2 4

1 3 1 4

2 3 2 4

4 2 4 4
Design Model for Random Policy
◼ Items stored randomly in empty and available
storage spaces
◼ Each empty space has an equal probability of
being selected
◼ Storage or retrieval may not be purely
random, but we assume so for model
Design Model for Random Policy
(Cont)
◼ Problem Definition
◼ Determine storage space layout so total
expected travel distance between each of n
storage spaces and p I/O points is minimized
◼ Sum of distances of each storage space from
each I/O point is
Design Model for Random Policy-
Solution
◼ Arrange spaces in non-decreasing order of
the sum of above distances
◼ Pick the n closest storage spaces
◼ n depends upon inventory levels of all items
◼ n is less than that required under dedicated
policy
Design Model for Random Policy -
Example
◼ Determine storage space layout for 56
storage spaces in a 140x70 feet warehouse
◼ Random storage policy
◼ Minimize total distance traveled
◼ Each storage space is a 10x10 feet square
◼ I/O point located in middle of south wall
Design Model for Random Policy -
Example (Cont)
Design Model for Random Policy -
Example Solution
◼ Calculate distance of all potential storage
spaces to the I/O point
◼ Arrange them in non-decreasing order
Design Model for Random Policy -
Example Solution (Cont)
◼ Largest distance traveled is 70 feet
◼ Sum total distance traveled (2800) by number
of storage spaces (56) to get average
distance traveled = 50 feet
Design Model for Random Policy -
Example Solution (Cont)

70 70

70 60 60 70

70 60 50 50 60 70

70 60 50 40 40 50 60 70

70 60 50 40 30 30 40 50 60 70

70 60 50 40 30 20 20 30 40 50 60 70
Travel Time Models
◼ For random policy, average distance traveled

◼ When number of storage spaces are large,

calculating average distance can be tedious
Travel Time Models (Cont)
◼ If storage spaces are small relative to total
area, approximate average distance traveled
◼ assume spaces are continuous points on a
plane
◼ use the integral
Travel Time Models (Cont)
◼ We assume in previous integral that
◼ warehouse is in 1st quadrant
◼ only one I/O point (at origin and SW corner)
◼ distance metric of interest is rectilinear
◼ Previous integral can be easily modified if
◼ two or more I/O points
◼ distance metric is not rectilinear
◼ no restrictions on location of warehouse
Travel Time Models (Cont)
◼ Suppose designer interested in shape that
minimizes travel time
◼ Then, depending upon number and location
of I/O points, distance metric, warehouse
shape can range from diamond to circle to
trapezium !!!
Travel Time Models (Cont)
◼ Models minimizing construction costs and
travel distance
◼ Consider following assumptions
◼ Warehouse shape is fixed - rectangle
◼ Warehouse area = A
◼ Construction cost is function of warehouse
perimeter - r[2(a+b)]
◼ r is unit (perimeter) distance construction cost
◼ a and b are warehouse dimensions
Travel Time Models (Cont)
◼ One I/O point at origin and SW corner
◼ coordinates are (p, q)
◼ cost for each unit distance traveled = c
◼ Model
Travel Time Models (Cont)
◼ Optimal value of a and b, given that
◼ I/O point must be on or outside exterior
walls, i.e., p $ 0
◼ warehouse area must be A square units
Travel Time Models (Cont)
◼ Single command cycle
◼ Dual or multiple command cycles
Warehouse Operations
◼ Warehouse operational problems
◼ Sequence in which orders to be picked
◼ How frequently orders picked from high-rise
storage area?
◼ Batch picking or pick when order comes in?
◼ Limit on number of items picked?
◼ If so, what is the limit?
◼ Operator assignment to stacker cranes
Warehouse Operations (Cont)
◼ How to balance picking operator’s workload?
◼ Release items from stacker crane into
sorting stations in batches or as soon as
items are picked?
◼ Order picking consumes over 50% of the
activities in warehouse
Warehouse Operations (Cont)
◼ Not surprising that order picking is the single
largest expense in warehouse operations
◼ Since construction and operation of AS/RS
are very high,managers interested in
maximizing throughput capacity
Order Picking Sequence
◼ Two basic picking methods
◼ Order picking
◼ Zone picking
◼ Consider this:
◼ An AS/R machine has two independent
motors
◼ Movement in horizontal and vertical
directions simultaneously
Order Picking Sequence (Cont)
◼ Time to travel from (xi, yi) to (xj, yj)
Order Picking Sequence Model
Order Picking Sequence
Algorithms
◼ Construction
◼ Improvement
◼ Hybrid
Order Picking Sequence
Algorithms (Cont)
◼ 2-opt
◼ 3-opt
◼ Branch-and-bound
◼ Simulated Annealing
◼ Convex Hull
Convex Hull Algorithm - Phase 1

◼ Find xmax and ymax

◼ Delete points inside polygon formed by
xmax, ymax and origin
◼ For each region, construct convex path
between extreme points
◼ Sort points in regions 1 and 2 in
ascending order of x-coordinate
Convex Hull Algorithm - Phase 1
(Cont)
◼ Sort region 3 points in descending order
◼ Starting with 1st extreme point, compute V
for three consecutive points i, i+1, i+2
▪ V= (yi+1-yi)(xi+2-xi+1)+(xi-xi+1)(yi+2-yi+1).
◼ Repeat until other extreme point is reached
◼ If V # 0, no convex hull with i, i+1, i+2
◼ Otherwise, convex hull possible
Convex Hull Algorithm - Phase 1
(Cont)
ymax

Region 1 Region 2

xmax

Region 3

0
Convex Hull Algorithm - Phase 1
(Cont)
◼ Using some or all of the sorted points in
regions 1, 2, and 3, three at a time,
generate convex hull (sub-tour)
◼ Points not in sub-tour are considered in
phases 2 and 3.
◼ If xmax = ymax following explanation still good
Convex Hull Algorithm - Phase 2

◼ Insert points that maybe included in sub-tour

without increasing cost
◼ Such free insertion points lie on a
parallelogram with two adjacent points in the
sub-tour as its corner
Convex Hull Algorithm - Phase 3

◼ Insert points not included in the sub-tour in

phases 1 and 2 using minimal insertion cost
criteria
◼ greedy hull
◼ steepest descent hull
◼ If no points left for insertion in phase 2 or 3,
phase 1 sub-tour is optimal
Simulated Annealing Algorithm
◼ Set S, z, r, Tin, T= Tin; Tfin= 0.1Tin
◼ Randomly select points i and j in S and
exchange their positions
◼ If new solution S' has z’< z, set S = S', and z
= z’
◼ Otherwise, set S= S' with probability e-d/T
Simulated Annealing Algorithm
(Cont)
◼ Repeat Step 1 until number of new solutions
= 16 times the number of neighbors
◼ Set T= rT. If T > Tfin, go to Step 1
◼ Otherwise return S, and STOP
TSP Software
Routing Problem
Multimedia CD for Distribution
Center Design