Warehousing, materials handling, and packaging are interrelated functions that impact the entire supply chain. Modern warehousing requires strategic planning to efficiently meet customer needs. Materials handling involves selecting automated or semi-automated systems depending on the application. Packaging balances logistics needs for protection and efficiency with communication functions. Together these areas aim to lower costs and enhance customer service across transportation and storage operations.

1. Chapter Nine: Warehousing,
Materials Handling, and
Packaging
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2. Warehousing, Materials Handling, and Packaging
• Often thought of as independent areas, please consider them collectively, as part of an
integrated functional area that affects all areas of the supply chain
• Warehousing – Traditionally thought of as a place to hold or store inventory
• Materials Handling & Packaging – Traditionally viewed as a basic functions that collectively
support the handling of, identification, and protection of product
• However, in contemporary logistical systems, warehousing functionality has become strategic in
nature, taking into consideration significant complexities to efficiently meet customer
requirements
• Similarly Materials Handling, fueled by the advent of e-commerce has become a very large and
strategic investment for many firms
• Packaging has continued evolve, simultaneously incorporating both commercial marketing
related elements as well as traditional industrial handling considerations
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3. Strategic Warehousing – Why?
• Reasons for Warehousing
– Demand / supply / lead time uncertainty
– Manufacturing economies: production smoothing
– Transportation economies: volume discounts
– Customer service support
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4. Warehouse Requirements
• Warehouses exist to lower total cost or improve customer service
• Warehouses specialize in supply or demand facing services
• Facilities used for inbound materials are supply facing warehouses
• Facilities used for customer accommodation are demand facing warehouses
• Functionality and justification are different based on facilities support role
• Procurement
• Manufacturing
• Customer accommodation
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5. Warehousing Fundamentals: What are the Benefits?
• Service Benefits – operational strategy to add value within the
supply chain process
• Economic Benefits – operational strategy to save money by
using a storage point
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6. Warehousing - Service Benefits
• Stocking strategies
• Spot stock near customer (usually seasonal)
• Full-line stocking (inventory in anticipation of orders)
• Stocking to support production facility
• Value Added Services (greater value creation)
• Packaging / kitting
• Changing product form (e.g., paper cutting)
• Sequencing
• Drop-shipping (orders shipped directly to customer)
• Postponement (e.g., HP Printers)
Service benefits are meant to add value to the customer in the supply chain
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7. Warehousing - Service Benefits
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8. Economic Benefits
• Consolidation and break-bulk
• Sorting
• Cross Dock
• Seasonal storage
• Reverse logistics
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9. Plant A
Plant B
Plant C
Consolidation
Warehouse
Customers
A B C
Consolidation Example
Inventory from multiple locations is received and combined for shipments to customers
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10. Plant A
Break-Bulk Warehouse
Break-Bulk Example
Customer A
Customer B
Customer C
Large shipments are broken down for smaller deliveries to multiple customer destinations.
Purpose of consolidation and break-bulk is transportation savings.
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11. Cross-Dock
Product from multiple sources is mixed to form orders shipped to multiple customers.
Cross-Dock
Warehouse
Customer A
Customer B
Customer C
Plant A
Plant B
Plant C
•Consolidation with no “storage” – keeps product moving
•Maximizes TL volume opportunities
•Minimizes storage costs
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12. In-transit Mixing
One major difference with a mixing facility is the addition of product already sitting in the warehouse,
such as Product D.
Transit Mixing Point
Customer A
Customer B
Customer C
Plant A
Plant B
Plant C
Product D
Products: A, C
Products: B, C, D
Products: A, B, C, D
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13. Seasonal Storage
• Accommodate either seasonal production or seasonal demand
• Examples:
• Patio / Lawn Furniture – produced year round, sold in short window
• Agricultural Products – produced in season, sold year round
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14. Reverse Logistics Processing
• Returns Management
• Remanufacturing or Repair
• Remarketing
• Recycling
• Disposal
• Hazardous Materials & Government Regulation
• Product Recalls
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15. Warehouse Ownership Arrangements
• Private – typically operated by the firm owning the product
• Control
• Flexibility
• Cost
• Intangibles
• Public – outsource warehousing operations on a pay for service basis
• General Merchandise
• Refrigerated
• Special Commodity
• Bonded
• Household Goods & Furniture
• Contract – operated by “niche experts” providing customized service with long-term relationships
• Done correctly combines best of both public and private
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16. Warehousing - Cost / Volume Relationship
Cost $
Volume
Public
Private
Break even point
At low volumes, public warehouses (which can operate on a per unit basis) are generally more economical
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17. Warehouse Decisions
• Site Selection
• Design
• Product-Mix Analysis
• Expansion
• Handling
• Layout
• Sizing
To achieve the basic benefits of a warehouse a detailed analysis considering the size, type, and shape of the facility must
be determined. Proper planning can ensure desired warehouse efficiencies
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18. Warehousing - Impact of More Warehouses
• Improve service level due to reduction of average service time to customers
• Increase overhead and set-up costs
• Reduce transportation costs in a certain range
• Reduce outbound transportation costs
• Increase inbound transportation costs
• Increase inventory costs due to a larger safety stock
• Portfolio Effect/Square root law
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19. Warehousing - Layout
• Storage practice (slotting)
• First available
• Fixed area
• ABC
• Picking the product
• FIFO (First In First Out)
• LIFO (Last In First Out)
How should the product be stored within the warehouse?
What product characteristics might affect this choice?
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20. Warehouse Operations
• Primary Warehouse Functions
• Product Handling
• Receiving
• Product Putaway
• In-Storage Product Handling
• Order Picking
• Shipping
• Product Handling Considerations
• Basic Handling Considerations
• Mechanized Systems
• Semi-automated Systems
• Automated Systems
• Special Handling Considerations
• Storage
• Active Storage
• Extended Storage
Warehouses can be extremely complex operations. Primary functions include product handling and storage. Numerous
product handling considerations exist to support a given warehouse application. Secondary functions are also of significant
importance to the success of a given warehouse operation.
• Secondary Warehouse Operations
• Accuracy & Audits
• Security
• Safety & Maintenance
• Environmental Concerns and Regulatory
Environment
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21. Product Handling
• Product Handling:
• Receiving – the process of unloading product, responsible for ensuring SKU & quantity accuracy
• Product Putaway – Placement of product into active or secondary locations for storage
• In-Storage Product Handling – Active pick location replenishment, space consolidation
• Order Picking – Grouping of unique SKU’s and quantities to facilitate order assembly
• Shipping – loading and verification of outbound transportation equipment
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22. Warehouse Operations
• Product Handling Considerations:
• Basic Handling Considerations – initial
foundation for evaluating handling
alternatives
• Mechanized Systems
• Lift Trucks
• Towlines
• Tractor Trailers
• Conveyors
• Carousels
• Semi-automated Systems
• Automated Guided Vehicles (AGV)
• Sortation
• Robotics
• Flow Racks
• Automated Systems
• Order Selection
• Automated Storage / Retrieval
(AR/RS)
• Special Handling Considerations
• E-Fulfillment
• Returns Processing
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23. Warehousing - Materials Handling
• Semi-automated
• Storage and order picking equipment
• Racks, shelving and modular storage
• Automated systems
• Semi-automated – e.g., AGVs, robotics
• Automated storage and retrieval systems (AS/RS) – e.g., high rises
• Information-directed systems – e.g., RF wireless (Wi-Fi), Pick-to-light
• These may also be dependent on local regulations
• Singapore example: technology and land restriction
Many warehouses are moving away from manual to automated or semi-automated systems.
Which handling method is best?
On what does the decision depend?
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24. Warehouse Operations (1)
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25. Warehouse Operations (2)
• Storage
• Active Storage – Focused on quick
movement and flexibility, emphasis
on picking and putaway
productivity
• Extended Storage – Focused on
long term storage, emphasis on
maximum space utilization
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26. Warehouse Operations (3)
• Secondary Warehouse Operations
• Accuracy & Audits – of critical importance, maintaining an accurate account of product on hand within
the warehouse – (Physical Inventories, Cycle Count Programs)
• Security – Reducing pilferage and damage
• Safety & Maintenance – If it’s not done safely, it doesn’t matter, role preventative maintenance plays in
safety and asset protection
• Environmental Concerns and Regulatory Environment – Numerous factors at play within a warehouse
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27. Warehouse Operations (4)
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28. Warehouse Systems
• Warehouse Management Systems – system
running operations within four walls of the
warehouse, varying levels of functionality
• Yard Management Systems – system for
monitoring trailers in external facility “yard”
and managing delivery/pickup appointment
schedule
• Information Directed Systems –
complimentary to WMS systems include
directed supportive technology such as RF &
Light Directed
Modern warehouses use a variety of integrated systems to achieve efficient operations Key systems include:
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29. Packaging Perspectives
• Logistics primary concern: utility of
package, individual products or parts
grouped into cartons, bags, bins, or barrels
for damage protection and handling
efficiency
• Master Cartons: Benefit of standardization
• Containerization / Unitization: Driving
Handling Efficiency
Packaging is typically viewed as being either consumer, focused primarily on marketing, or industrial, focused on logistics
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30. Packaging for Handling Efficiency
• Package Design
• Cube & Weight Minimization
• Handling Efficiency
• Unitization
• Grouping of Master Cartons into one unit for
materials handling
• Rigid Devices
• Flexible Devices
Package decisions have a major impact on logistical productivity and efficiency
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31. Packaging for Handling Efficiency
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32. Packaging for Handling Efficiency
• Tie to information management systems
• human readable
• bar codes
• radio frequency identification
• For Package Handlers & Consumers
The final logistical packaging functionality is communication or information transfer
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33. Mode: Truck
• Bouncing
• Potholes
• Second most expensive mode
• LTL: protect from mishandling and
stacking
Mode: Rail
• Switching requires secure stowage
• Side-sway
• Longer shelf life
• Heat and cold
• Third most expensive mode
Packaging Protections by Mode
Mode: Air
• Water (loaded outdoors)
• Handling damage
• Also dynamics from truck
• The most expensive mode
Mode: Ocean
• Water (rain, seawater, condensation)
• Dynamics in all directions
• Handling damage
• Longer shelf-life
• Least expensive mode
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34. Packaging for Transportation
• Cube utilization (reduce load size)
• Weight limits
• Productivity while loading and unloading vehicle
• Intermodal containerization
Utility relates directly to transport cost:
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35. Warehousing, Materials Handling, and Packaging
• Collectively an integrated function area impacting all areas of the supply chain
• Strategic Warehousing in the 21st Century
• Finding the right materials handling strategy
• Packaging, industrial and communication capabilities
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