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DIPLOMA IN SUPPLY CHAIN MANAGEMENT

WAREHOUSING & STORAGE MANAGEMENT

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Key components of distribution and logistics

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Component of customer expectation

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Warehousing overview

Strategic warehousing
Warehouse operations
Warehouse ownership
arrangements
Warehouse decisions

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NATURE OF WAREHOUSE

By the stage in the supply chain: materials, work-in-progress


or finished goods;
By geographic area: for example, a parts warehouse may
serve the whole world, a regional warehouse may serve a
number of countries, a national warehouse may serve
just one country, or a local warehouse may serve a specific
region of a country;
By product type: for example, small parts, large assemblies
(eg car bodies), frozen food, cold chain, bonded, docking,
quarantine, etc. perishables, security items and hazardous
goods;
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NATURE OF WAREHOUSE
By function: for example, inventory holding or sortation (eg as a hub of a
parcel carrier);
By ownership: owned by the user (e.g. the manufacturer or retailer) or by
a third-party logistics company;
by company usage: for example, a dedicated warehouse for one
company, or a shared user
warehouse handling the supply chains for a number of companies;
By area: ranging from 100 square metres or less to well over 100,000
square meters;
by height: ranging from warehouses about 3 metres high through to
high-bay warehouses
that may be over 45 metres in height;
by equipment: from a largely manual operation to a highly
automated warehouse.
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Warehousing contributes value in the
logistics process
Traditionally viewed as a
place to hold or store
inventory
Contemporary view is the
warehouse functions to
mix inventory
arrangements to meet
customer requirements
Storage of products is held
to a minimum

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Role of Warehousing in value chain is it
necessary to have a warehouse
Demand for the product is
continual (make to stocks,
make to order, engineer to
order
Bridge the supply and
demand lead time.
Some of the role of
warehousing can not be
rule out and these are

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Role of Warehousing in value chain is it
necessary to have a warehouse
Inventory holding point
(coupling /decoupling points)
Consolidation/docking
center points
Cross Docking points
Sortation points
Assembly points
Transshipment
Return Good center
Quarantine

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Value added by warehouse

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Costs

Warehousing cost Building services (like


approximately 20-30% lights, heat, maintenance
of the logistics costs. and HVAC 15%
45-50% cost of this Equipment 10-15%
comes from the staff Information technology
cost 5-10%
Rent and depreciation Insurance 10%
cost around 25% Security 10%

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Evolution of strategic warehousing
Warehouses were once viewed
as a necessary evil, used to
coordinate product supply with
customer demand
The explosion of the consumer
economy after WWII saw the
rise of distribution networks for
consumer goods
Warehousing shifted from
passive storage to strategic
assortment

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Evolution of strategic warehousing
Market /Industry trend
Business model
Corporate Objectives
Business plan
Supply Chain Strategy
International and domestics
warehousing.
Customer services level eg.
Diabetes, hepatitis c
Cold chain
External factors etcs

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Warehousing types evolved to accommodate
the dynamic aspects
Distribution centers
Consolidation terminals
Break-Bulk facilities
Cross-docks

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Strategic warehousing offers manufacturers a way
to reduce dwell time of parts and materials
Warehousing is integral to just-
in-time (JIT) and stockless
production strategies
Requires strategically located
warehouses across the globe
An important goal in
warehousing is to maximize
flexibility
Respond to ever-changing
customer demand

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Strategic warehousing can provide both
economic and service benefits
Economic benefits of warehousing occur
when overall logistics costs are reduced
Consolidation and break-bulk
Sorting
Seasonal storage
Reverse logistics
Service benefits are justified by sales
improvements that more than offset added
cost
Spot-stocking
Full line stocking
Value-added services

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Illustration of consolidation and break-bulk
arrangements

Figure 10.1 Consolidation and Break-Bulk Arrangements 10-17


Sorting involves reconfiguring freight as it flows
from origin to destination

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Cross-docking is used extensively by retailers to
replenish store inventories
Cross-docking combines inventory from multiple origins
into a prespecified assortment for a specific customer

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Successful cross-docking is highly dependent on
information technology

Products are
received, selected,
repackaged, and
loaded for shipment
w/o storage
WalMart Distribution
Center

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Mixing is usually performed at an intermediate
location between origin and destination
Mixing combines inventory from multiple origins (like
cross-docking) but also adds items that are regularly
stocked at the mixing warehouse

Stock
Inventory

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Assembly supports manufacturing operations

Assembly occurs when


products or components
from second-tier suppliers
are assembled by a
warehouse located near
manufacturing plant
Common assembly
processes are packaging
and color customizing

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Seasonal storage provides direct benefit by
accommodating production or demand
Seasonal production
include agricultural
products
Seasonal demand includes
lawn furniture and toys
Seasonal storage allows
production efficiencies
within the constraints of
seasonality

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Reverse logistics processing

Reverse logistics include


activities supporting
Returns management
Recalls or product that did not sell
Remanufacturing and repair
Repairing/refurbishing equipment
Remarketing
Selling used equipment
Recycling
Disposal

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Service benefits of warehousing
Spot-stocking is the
positioning of inventory for
seasonal or promotional
demand
Full line stocking provides
one-stop shopping capability
for goods from multiple
suppliers Full Line Stocking at
Value-added services include United Electrics
any work that creates a greater Distribution Center
value for customers
See Table 10.1 for examples

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Typical list of value-added services

Table 10.1 Value-Added Services

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Warehouse operations involve two major
activities handling and storage

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Warehouse operations involve two major
activities handling and storage
Objective is to
Efficiently receive inventory
Store it as required
Assemble it into complete
orders
Make a customer shipment
Operations will therefore
emphasize product flow

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Handling

Handling must optimize


movement continuity and
efficiency
ReceivingUnloading the
arriving vehicles
In-Storagemoving goods
for storage (transfer) or order
selection (picking)
Shippingverifying the
order and loading the
departing vehicles

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Storage plans should make product velocity
a major factor
Slotting determines
specific locations for the
product based on
Velocityhow fast the
goods move
Weighthow heavy is the
product
Special Characteristics
how large or small, does it
require rack or bin storage

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Warehouses must manage two classes of storage

Active Storagestorage for


basic inventory replenishment
Focuses on quick movement
Includes flow-through or cross-
dock distribution
Extended Storagestorage
for inventory held in excess of
period for normal
replenishment
E.g. seasonal, speculative, or
even commodities

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Warehouse ownership arrangements
Privatewarehouse operated
by the firm owning the product
Building may be owned or leased
Publicservice company owns
warehouse and hires out space
and services
Usually classed as
General merchandise
Refrigerated
Special commodity
Household goods and furniture

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Contract warehousing combines elements of
private and public operations
Usually a long-term relationship
or contract between a firm and
the warehousing owner/operator
Long-term cost savings compared
with public warehouse
Often a firms employees will work
alongside the contract warehouses
Example is Kraft Foods who has
contracted with AmeriCold Logistics
since the late 1990s

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Network deployment is the combination of private,
public and contract facilities used by a firm
Network deployment strategy
requires answering two questions
How many warehouses should be
established?
Which warehouse ownership types
should be used in specific markets?
For example, when warehouse
utilization is not full throughout
the year
Use private or contract warehouse
to cover 75 percent requirement
Public facilities used to
accommodate peak demand

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Warehouse decisions that determine
handling and storage efficiency
Site Selection
Design
Product-Mix Analysis
Expansion
Materials Handling
Layout
Sizing
Warehouse management system
Accuracy and audit
Security
Safety and maintenance

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Site selection is driven by service availability
and cost factors
Identify broad geography where an active warehouse meets service,
economic and strategic requirements
Selection and number of retail outlets drives location of support
warehouses
Final selection should be preceded by extensive analysis

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Warehouse management systems encourage
best practices
Warehouse management systems (WMS) integrate
procedures and software support to standardize storage
and handling work procedures
One main use of WMS is to coordinate order selection
Discrete selection is when a specific customers order is
selected and prepared for shipment as a single work assignment
Wave or batch selection is when orders are processed through
zones of the warehouse assigned to specific employees

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Other warehouse planning issues
Inventory accuracy is typically
maintained by annual physical
counts or counting portions of
inventory on a planned basis
Cycle counting is the audit of selected
inventory on a cyclic schedule
Audits are common to maintain
safety, assure compliance to
regulations and help improve
procedures
Security issues involve protection
from pilferage and damage

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Safety and maintenance issues must also be
considered when planning warehouse designs
Accident prevention
Comprehensive safety programs
and training, accident
investigation and follow up
Environmental protection
Spill ( leak ) kits and spill plans
Maintenance
Scheduled maintenance of
building, material handling
equipment, and collision damage
prevention

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