Supply Chain Management

CLO 1: Describe the purposes and roles warehouses and distribution centres (DCs) have in
the supply chain

Fall 2021
SUP 2083
Maurice Sarabi

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 Agenda
1.1 Describe from both product and information flow perspectives the
receiving function
1.2 Describe from both product and information flow perspectives the
storage function
1.3 Describe from both product and information flow perspectives the
picking function
1.4 Describe from both product and information flow perspectives the
packing function
1.5 Compare and contrast different picking processes including wave
picking and batch picking
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 Introduction
• Warehousing:
– The activities related to receiving, storing, and shipping materials to and
from production or distribution locations.
• Warehouse Management System
– A computer application system designed to manage and optimize
workflows and the storage of goods within a warehouse. Often interfaces
with automated data capture and enterprise resources planning systems.
– Goal of a WMS is to improve the quality of all aspects of
warehousing beyond what would be possible without a
software.
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 Warehouse Operations in 21st Century
• Warehousing has evolved :
– Integrated with logistics strategy
– Efficient use of space
• Space utilization
• Better forecasting
– Attention to optimal numbers and locations
– Increased activity aided by new equipment, automation, and training

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 Warehousing Objectives (i)

Rapid Minimize Minimize

Response Variance Inventory

Movement Life Cycle

High Quality
Consolidation Support

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 Warehousing Objectives (ii)

Rapid Response
• Organizations use forecasts and market analysis to anticipate changes in
the market or customer needs so there will be time to make changes.
• Changes include:
• Number of warehouses
• Placement of warehouses
• Management of inventory levels
• Efficient product movement through facility
• Transportation and warehousing interface is critical

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 Warehousing Objectives (iii)

Minimize variance
• Efficient tracking and handling of inventory in a warehouse is
critical to achieving predictable service.
• Loading, unloading, packaging, and order picking each have a role
in minimizing variability in service.

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 Warehouse Objectives (iv)

Minimize inventory
• Efficiently managed warehouse lead to less inventory
build up in the pipeline.

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 Warehousing Objectives (v)
Movement consolidation
• Consolidating small shipments into large shipments for a
more cost – effective transportation.
• Expediting unloading, tracking, repackaging, and reloading
are all crucial to effective consolidation of movement.

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 Warehousing Objectives (vi)

High quality
• The idea is to eliminate errors in a warehousing operations
and participate in continuous improvement.

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 Warehousing Objectives (vii)

Life cycle support

• The number, placement, and efficiency of warehouses must take
into account the all the phases of the life cycle:
• Introduction
• Growth
• Maturity
• Decline
• Reverse logistics (repair, replace, or recycle)

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 Pros of adding a warehouse
• Customer service improves
• Transportation costs decline with shorter distances to travel
• Rapid delivery may improve competitive position
• Decentralized system allows better service to small customers

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 Cons of adding a warehouse
• Inventory costs rise with redundant functions (safety stock)
• Increase in setup and overhead costs.

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 Types of warehouses (i)
• Private warehouses owned by a firm
• Public warehouses available for lease
• Contract warehouses

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 Types of warehouses (ii)

• Private warehouses owned by a firm

– Owned by an organization
– Benefits:
• Control: Can be built to suit the organizations needs and
requirements
• No Markup: Avoid paying a markup by owning the warehouse
• Market presence: Proximity to the customer can facilitate
faster and a personalized service.

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 Types of warehouses (iii)
• Public warehouses available for lease
– Available in a variety of configuration:
• Refrigerated
• Bonded
• General merchandise
• Household goods
– Benefits:
• Flexibility: able to increase or decrease its warehousing costs
• Potential cost reduction: in spite of the markup the organization may save
money by economies of scale and lower labor costs.
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 Types of warehouses (iv)

• Contract warehouses
– Hybrid of public and private warehouse
– Benefits:
• Potential cost reductions
• Tailored services
• Flexibility
• Expanded geographic market

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 Flow of goods in a warehouse

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 Warehouse activities (i)
• Receiving
• Packaging
• Put-away
• Sorting
• Shipping
• Cycle counting
• Order picking

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 Warehouse activities (ii)
• Receiving:
– Encompasses the physical receipt of the material, the inspection of
incoming shipment of conformance with the purchase order (quantity and
damage), the identification and delivery to destination, and the preparation
of receiving reports.
• Packaging
– Goods are packaged after receipt of a customer order.
• Put-away
– Moving the material from the dock or another location, transporting the
material to a storage area, placing that material in a staging area and then
moving it to a specific location, and recording the movement and
20 identification of the location where the material has been placed.
 Warehouse activities (iii)
• Sorting
– The function of physically separating a homogeneous subgroup
from a heterogeneous population of items
• Example: apples to apples and oranges to oranges
• Shipping
– Functions that perform tasks for outgoing shipment of parts,
components, and products. It includes packaging, marking,
weighing, and loading for shipment.

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 Warehouse activities (iv)
• Cycle counting
– It an inventory accuracy technique where inventory is counted on
a cyclic schedule instead of once a year.
• More frequently for high moving items and less frequently for slow
moving items
– The most effective way is counting a certain number of items
every workday with each item counted at a prescribed frequency.
– Key point: identify inventory discrepancies which lead to a root
cause analysis.

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 Warehouse activities (v)
• Order picking
– The required quantity of specific products for movement to a
packaging area and documenting that the material was moved
from one location to another.
• Batch Picking is a way of grouping multiple orders into small batches ,
operators fill all orders in the batch at the same time, working from a
consolidated pick list.
• Zone Picking is a way of grouping stock-keeping units (SKU’s) into a set of
different zones where warehouse employees teams are assigned to pick
and sort from inside each designated zone.

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 Warehouse functions (i)
• Consolidation
• Break – bulk and cross dock
• Postponement and processing
• Stockpiling seasonal inventory
• Mixing

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 Warehouse functions (ii)
• Consolidation:
– Combining inbound or outbound shipments for economies of scale to
reduce logistics costs
– Reduced congestion at receiving dock
• Break – bulk and Cross – dock
– Combining inbound or outbound shipments for economies of scale to
reduce logistics costs
– Reduced handling costs (no storage)

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 Warehouse functions (iii)
• Postponement and processing
– More efficient storage
– More accurate forecasting
– Less safety stock required
– Mass customization
– Increased costs for hiring, training, and completing the finished goods

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 Warehouse functions (iv)
• Stockpiling seasonal inventory
– Efficient use of production by eliminating seasonal increase and decrease
in capacity
– Reduced chance of seasonal stock-outs
– More warehouse capacity than required for JIT delivery

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 Warehouse functions (v)
• Mixing
– Serves customers by reducing their costs for handling, storage, etc.
– Increases efficient use of warehouse space.

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 Video
• https://www.youtube.com/watch?v=dAXdeqcHBp4
• How Amazon Receives Your Inventory

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 Video
• https://www.youtube.com/watch?v=Cd0b29LztcY&t=1s
• UPS Worldport: Superhub Kentucky | Giant Hubs | Episode 4 |
Free Documentary

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 References
• APICS. (2014). Warehousing. In APICS CSCP.

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