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Why have a Warehouse
y To better match supply with customer demand
x Allows us to respond quickly to customer demand x Allows for buffering against surges in demand or supply
y To consolidate product to reduce transportation costs and to improve customer service y To provide value added processing
x Assembly may occur ± Dell
Basic Warehouse Decisions:
A Cost Trade-off Framework
± Public versus contract versus private
Centralized or Decentralized Warehousing
± How many ± Location ± Size ± Layout ± What products where
Basic Warehousing Decisions .
Thus private warehousing virtually requires a high and constant volume. Private warehousing costs have a higher fixed cost component. .The Ownership Decision Public warehousing costs mostly all variable.
The Ownership Decision Factors to consider ± Throughput volume ± Stability of demand ± Density of market area to be served ± Security and control needs ± Customer service needs ± Multiple use needs of the firm .
Public Warehousing Rationale for Public Warehousing ± Limited capital investment ± Flexibility Public Warehousing Services ± Bonded warehousing ± Field warehouses .
Public Warehousing Public warehousing regulation: ± Liability ± Receipts Public warehousing rates based upon: Value Fragility Potential damage to other goods Volume and regularity Weight density Services required .
Managerial expertise and dedicated resources. Less strain on the balance sheet.Contract Warehousing Compensation for seasonality in products. . Possible reduction of transportation costs. Increased geographical coverage. Ability to test new markets.
Warehouses in the Supply Chain .
etc. CVS merchandise) cyclical / batched production due to large set-up costs ± Typical sources of random variation variations in transportation times due to weather.. or to exploit significant economies of scale. unreliable suppliers ± Typical economies of scale involved Price breaks in bulk purchasing . traffic congestion. variations in production times due to unreliable operations. ± Typical sources/examples of systematic variation product seasonality's (e.g.The role of warehousing in contemporary distribution networks Buffer: It holds inventory for downstream stages of the supply chain. in order to allow the entire production / distribution network to deal efficiently with the systematic and random variation in the network operations. bureaucracy. Toys R Us.
or several firms.) Consolidation center: It accumulates and consolidates products from various points of manufacture within a single firm. Consolidation allows to control the overheads of transportation operations by: ± allowing the operation of the carriers to their capacity. for combined shipment to common customers.The role of warehousing in contemporary distribution networks (cont. the more effective amortizing of the fixed transportation costs ± reducing the number of shipping and receiving operations Cross-docking: Consolidation without staging . and therefore.
The role of consolidation in contemporary distribution networks Manufacturers Retailers Manufacturers Consolidator Retailers .
repackaging items to form a new item.g.) Value-Added-Processing (VAP): Increasingly.e. while maintaining a small number of generic product components. warehouses are required to undertake some value-added-processing tasks like: ± pricing and labeling ± kitting (i. which allows for customized product configuration.. this development is aligned to and suggested by the idea/policy of postponement of product differentiation.g.The role of warehousing in contemporary distribution networks (cont. assembly of a computer unit from its constituent components.. e. . delivered by different suppliers) ± invoicing In general. ³beauty´ products) ± light final assembly (e..
response in 30 min) . sometimes.Warehouse classification by ³customer type´ Factory warehouse: Interfaces production with wholesalers ± small number of large orders daily ± advance info about order composition Retail Distribution warehouse: Serves a number of captive retail units ± advance info about order composition ± carton and item picking from a forward area ± more orders per shift than consolidation/shipping lanes Catalog Retailer: A warehouse filling orders from catalog sales ± ± ± ± a large number of small (frequently single-line) orders item and.g. carton picking daily composition of orders usually unknown only statistical information available Support of Manufacturing operations: A stock room providing raw material and/or work-in-process to manufacturing operations ± many small orders ± only statistical information available about order composition ± stringent time requirements (e..
the larger the handling costs .y Stock Keeping Unit (SKU) ± The smallest physical unit of a product tracked by an organization y In general. the smaller the handling unit.
g.Product concepts related to the characterization of material flow in a contemporary warehouse Item (otherwise piece or each): The smallest unit of product sold by a distribution center. ± a 1-liter bottle of a soft drink ± a box of 100 paper clips Carton: a paperboard container holding identical product. usually similar in size to a carton. Tote: a container usually made of plastic and often used for storing and handling different products. example dimensions: 14x10x20in or 30x20x40cm.. e. usually of a size and weight allowing manual handling. but re-usable. .
Mixed unit load: a set of cartons or totes of different products arranged to a cubical pattern similar to a pallet.Product concepts related to the characterization of material flow in a contemporary warehouse (cont. often wrapped or strapped for stability. . so that manual handling may be difficult. Pallet: a set of cartons or totes of identical product arranged in a cubical pattern and usually supported by a base that may be of wood or plastic. Over pack: a large carton or tote containing different products.) Inner pack: several units of a product secured together and sold by the distribution center as a unit. example dimensions are 40x48x54in and 80x120x100cm. a carton contains several inner packs. and purchase quantities per item are large. smaller than a pallet but larger than a carton. if many items are contained in a carton.
requesting specific SKU¶s in specific quantities. packed 24 in a carton.Product concepts related to the characterization of material flow in a contemporary warehouse (cont. packaged in a pre-specified manner. Order: a document from a customer. e. that it is identified as a distinct entity for distribution purposes. Line item: a ³line´ in an order document designating a specific SKU and quantity ..g.) Stock Keeping Unit (SKU): a set of product(s). ± a 2-liter bottle of Coca-Cola Classic ± 6 2-liter bottles of Coca-Cola Classic packed in a carton ± 12-ounce cans of Coca-Cola Classic.
Sortation & Packing Direct putaway to reserve Receiving Cross-docking Direct putaway to primary Shipping .A schematic representation of the warehouse material flow Replenishment Replenishment Broken Case Picking Case Picking Reserve Storage and Pallet Picking Accumulation.
providing the assurance that the quantity and quality of such materials are as ordered. ± Put-away (~15% of warehouse operating costs): the act of placing merchandise to storage. disbursing materials to storage or to other organizational functions requiring them.The major warehouse operations Inbound processes ± Receiving (~10% of warehouse operating costs): the collection of activities involved in the orderly receipt of all materials coming into the warehouse. it includes determining and registering the actual storage location(s) transportation placement .
± Order-picking (~55% of warehouse operating costs): the set of physical activities involved in collecting from the storage area the materials necessary for the fulfillment of the various customer orders. coordinating order fulfillment with other facilities of the distribution network.The major warehouse operations (cont. scheduling the order picking and the shipping activity.) Outbound processes ± Processing customer orders (typically done by the computerized warehouse management system of the facility): This set of activities includes checking that the requested material is available to ship. typically identified as: traveling (~55% of the order picking time) searching (~15% of the order picking time) extracting (~10% of the order picking time) documentation and other activities (~20 % of the order picking time) . if necessary. producing the ³pick´ lists to guide the order picking and the necessary shipping documentation.
± Shipping: The activities of preparing the shipping documents (packing list. and performing the additional valueadded-processing supported by contemporary warehouses. in many instances. accumulating orders to outbound carrier. bill of lading). address label.) Outbound processes (cont. as discussed in a previous slide. this may be the carrier¶s responsibility). loading trucks (although.The major warehouse operations (cont. . and attaching the necessary documentation / labels. ± Others: Handling returns.) ± Checking: Checking orders for completeness (and quality of product) ± Packing: Packaging the merchandise in appropriate shipping containers.
«or in Yoon and Sharp¶s representation... RECEIVING pallets pallets pallets cases overpacks mul (items totes) cases PALLET RESERVE pallets (items cases) pallets CASE PICK cases cases cases totes (cases) Breakdown function ITEM PICK items (items cases) totes (items cases) totes SORTING A totes totes SORTING B totes cases overpacks UNITIZING totes mul cases pallets overpacks Consolidation Function SHIPPING .
Operational Cost Breakdown 20% 10% 15% Receiving Putaway Order Picking Others 55% .
especially those due to traveling. and maintain a high level of responsiveness to customer orders. while preserving the order integrity.The major concerns underlying the organization of order-picking Establish an efficient operation by controlling the orderpicking labor costs. Responsiveness Costs Quality .
.How? By organizing the associated work-flow so that it presents ± high pick density.. . the amount of time elapsed between the arrival of an order into the warehouse management system and the time it is loaded on the shipping carrier.e. while providing procedures´ to the appropriate ³mechanisms / ± maintain the order integrity. average number of picks per foot of travel ± short (order) flow time. i.e. i.
Maintaining a ³forward´ pick area.Major mechanisms for increasing the pick density Establishing a high SKU density. the implementation of this idea might involve the frequent reconfiguration of the facility. containing a certain quantity from each of the most popular SKU¶s in the facility. ± In case of a dynamically varying demand. in a way that it balances the incurred space and labor (replenishment) costs. ± In general.e. . ± The implementation of this approach necessitates a systematic procedure for determining the items to be stored in the forward pick area and the associated amounts. the number of SKU¶s encountered per foot of travel.. i. the effectiveness of this approach will depend on the characteristics of the stored product and the equipment involved in its storage and retrieval.
± Requires an additional sortation process: sort-while-pick: the picker carries a compartmentalized container that allows the separate accumulation of each order on its picking list downstream sorting: sorting of the orders takes place at a dedicated station of the facility. ± Sortation implies additional space.e. i. possibly involving some sophisticated equipment (sorting conveyors).. labor and equipment costs ± Batching is another complex economic decision.Major mechanisms for increasing the pick density Batching the orders. have the workers retrieve more than one order at each trip in the storage area. especially for ³medium size´ orders .
Appropriately parallelizing the order processing. i. then orders are repeatedly assigned to the next available worker.. ± Parallelization typically involves a zoning scheme. they must be parallelized. then. have each order being processed by more than one worker.e. typically quantified as follows: order work content = (number of picks in the order) x (average person-hours per pick) ± If the total work of picking and loading an order is small enough. ± If the orders are large and/or span distant regions. .Major mechanisms for reducing the order flow time Maintaining a high pick density (which translates to a high level of worker productivity). ± A critical aspect for selecting the order parallelization scheme is the order work content.
a carousel.g. a 40-aisle system divided into zones of 10 aisles each..g. e.. a zone can be also defined by one unit of this equipment.Warehouse zoning Zone: A part of the warehouse to which an order picker is restricted. In case of warehouse systems involving automated storage and retrieval equipment. e. Zoning patterns: Progressive Zoning To packing and shipping Z1 Z2 Z3 Z4 Z5 Parallel/Simultaneous Zoning To sorting and consolidation Z1 Z2 Z3 Z4 Z5 Order Order .
progressive or parallel: an order is split into sub-orders by zone and a picker in each zone fills the corresponding sub-order .Combining Batching with Zoning: the resulting order-flow patterns Single-order pick: one picker works on one order at a time until the order is filled sort-while-pick. often applied with conveyor transport of items to the sorting area single-order-pick with zoning. no zoning: several orders are picked by one person completely. no zoning: one picker works on several orders at a time with a container/vehicle that has compartments for maintaining the order integrity batch-picking with downstream sorting.
Combining Batching with Zoning: the resulting order-flow patterns sort-while-pick with zoning: an order is split into suborders by zone and a picker in each zone fills the corresponding sub-orders using a set of containers or a vehicle that has compartments for maintaining order integrity batch picking with downstream sorting and zoning. usually simultaneous: several orders are split into sub-orders and the sub-orders for each zone are filled by the picker(s) operating in that zone .
± a forward pick area with a storage capacity insufficient to satisfy the entire daily demand.g. must be replenished. e. e. safety or efficiency reasons. Necessitated by. and therefore..g.g.g. but they also lead to smaller equipment and/or space costs and smaller order completion times. Pick wave: The set of orders processed during a time window. Small time windows tend to cause workload imbalances and longer travel times.. . four 2-hour time windows in an 8-hour shift.Pick Wave Planning Time window: a portion of the day/shift during which a set of orders is released and fully processed... e. ± a downstream sorting system that limits the number of orders that may be in process at any time (e. the number of streams/output chutes in a conveyor-based sortation system). but replenishment cannot occur simultaneously with picking activity for.
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