This document discusses networking and warehousing concepts for a course. It provides an overview of topics to be covered, including basic network concepts, supporting warehousing methods, order profiles, layouts, and case studies. Specific retailers like Sainsbury's and Tesco will be examined through case studies. Key issues in network planning and different network structures for grocery retailers are also summarized.

1. Networking and Warehousing

2. Aims
 New section – networks – 3 / 4 weeks, definite exam question
What you should know:
 Basic network concepts, centralisation, cross-docking,
consolidation
 Supporting warehousing methods – replenishment, order v batch
picking, unit loads
 Order profiles!!
 Important for subsequent sessions – eg can e-retailing and stores
be serviced from same sites? Will increase in smaller store formats
influence future network structures?
 Layouts, industrial engineering
 Case studies, videos
Subsequent weeks:
 Detailed Sainsbury’s case study
 Comparisons with Tesco and Co-operative Group – contrasting
trends
 Bring together in tutorial splitting into two groups?

3. Networks - Issues
 Changes in structure over recent years
 Factors to consider
 Moves towards time-based competition and different
service objectives.
 Trends in cost trade offs
 Consolidation - wider product ranges, tailor to
customer demands later in chain.
 Cross-docking
 Tesco case study
 Sainsbury’s v Co-operative Group –(Compare the
distribution network strategy of major retailers eg
Sainsbury’s with those with smaller store format
companies eg Co-op)
 Netto – automated DC – feedback on knowledge of
handling systems

4. Issues within network planning:
 number of levels of sites and number of sites within each
level.
 distribution of inventory between sites (e.g. centralisation
of particular product ranges).
 organisation of transport network (e.g. consolidation
points).
 roles and responsibilities around network.
 Rationalise supplier base on basis of reliability, improved
replenishment systems, cost and product quality.
customer information used to:
 Retain high value customers
 Move low value customers to low cost channels
 Prevent sales and service decline

5. Retail Distribution Networks
Warehouses & RDC’s
• Number
• Location
• Size
• Ownership
• Investment
• Shared ?
• Composite
• Service
• Automation - (handling, order processing etc)
• Transport network e.g. consolidation points
• Distribution of inventory
• Integration

6. Factors
 Product range
 Unit loads
 Supplier base
 Customer base
 Costs of resources
 Market positioning
 Gearing
 Current assets
 Throughputs
 Company strategy
 Financial support / incentives
 Competition

7. Grocery Network Structures
Traditional
• NDC - central inventory point serving RDC’s -
main slows, specialised, non foods
• RDC’s - key staging points between suppliers &
stores - composite, some slows & specialised
New Generation
• Consolidation Centres - close to regionally
concentrated small suppliers (typically chilled &
perishables) - combine loads
• Cross-docking
• Fulfilment factories
• Picking Centres - home shopping development

8. Centralised National Hub Operation
 Superstores catalysed
centralisation;
 Larger quantities and
own brands;
 New technologies.
 Improved
transparency,
backward integration,
third party distributors.
 Inventories
concentrated into
fewer sites whilst
improving
serviceability.
CENTRALISED RETAIL NETWORKS
Factory Supplier Warehouses Retailer RDC's
Strores Consumers
Information Flows
CENTRAL HUB
OPERATION

9. RDC
Consolidation
Centre
RDC
NDC International
Consolidation
Centre
Store
Home Shoppers
Picking
Centre Store
Store
Store
Home Shoppers
Suppliers
Suppliers
Suppliers
Suppliers
Suppliers
AN INTEGRATED RETAIL SUPPLY CHAIN NETWORK
Suppliers

10. Overview
Push v Pull Order Fulfillment
 Lean operations
 Complex DC’s
 Continuous processing
 Increased throughput
 Synchronisation
 Real time information
 Sortation systems – batch picking
 Consolidation

12. Designing a Superior Distribution
Network
Eg Sainsbury’s
Lidl?

13. Tactical - General
Review flows of goods, inventory plans and processes
within given configuration.
 Determine optimal network allocating inventory and
assembly activities between sites and products.
 Assign customers / suppliers to individual warehouses.
 Specify safety stocks, batch sizes and order frequencies
based on agreed service objectives.
Operational
•Formalise supporting procedures and schedules (eg assembly,
despatch, routeing, supplier selection).
•Supply schedules to support individual production plants
•Routings between all distribution centres and final customers.

14. Supply chain planning attempts
 Organise flows of products, services and
information.
 Model tangible outcomes around revenue
growth, asset utilisation and cost reduction.
 Assess how well activities are co-ordinated
across the chain.
 Reducing inventories.
 Increasing manufacturing and distribution
throughput.
 Improving the return on assets at all levels.
Corporate business focus
International perspective

15. Transport
 Delivery time, distance - labour, fuel etc
 Overtime & overnight stay
requirements
 Number, size & running cost of vehicles
 Direct delivery v economies of scale
through improved utilisation in trunking
 Supplier delivery of perishables to local
sites

16. Trends
Increases in Transport Costs - Decentralisation
 Fuel prices
 Congestion
 Environmental pressures
Shorter outbound journeys to customer, in smaller
trucks become more economic
Inbound journeys to centralised warehouse, full
loads in larger vehicles remain more economic
Key factor - utilisation v distance trade off
Local sourcing of goods may become more
appealing as freight costs increase - simulation

18. Consolidation Centre Benefits - Retailer
• More efficient use of RDC’s
• Greater potential for cross-docking
• Maximises full load deliveries into RDC’s
• Improves labour productivity
• Increased frequency of delivery
• Lower inventory levels
• Reduced time in stock - giving increased
shelf life to customer
• Greater product variety
• Improved product alignment to demand

19. Consolidation Centre Benefits -
Manufacturers & Transport Provider
Manufacturer
• Greater market
penetration
• Small firms to service
multiples
• Ability to service more
RDC’s
• Enlargement of
potential territory
• Focus on core
competencies - not
transport
Transport
• More cost efficient full
load deliveries
• Single point deliveries
- reduced transport
costs
• Standardised routes -
improved scheduling
• Reduced distance with
poor utilisation

20. Adoption of efficient consumer response: the issue of mutuality
Sherah Kurnia et al, Supply Chain Management: Vol 6 . No 5 . 2001 . 230

21. Corporate Strategy and Warehousing
• The role of the warehouse.
• Its relationship towards corporate strategy.
• The warehouse’s importance in different
customer service models.

22. Warehousing and Company
Strategy
JIT
Demand pull, minimal
economic quantity,
reduce WIP, supplier
reliability, preventative
maintenance,
eliminate buffers
TQM
Long-term
commitment, war on
waste, continuous
improvement, TQC,
continuous training,
ergonomics
Reduction in lead
time, inventory and
throughput time
IMPROVING
WAREHOUSING
OPERATIONS
On-time delivery,
improved effectiveness,
and improved quality

23. 23
Decision / Performance
Criteria
Responsiveness
Quality
Cost
Investment +
Operational
Space/Equipment/Labor
Product quality
Order accuracy
Order flow time
throughput
fill rate
volume flexibili ty/storage capacity
mix flexibility
=> Multi-cr iteria Optimization Problem!
Sainsbury’s Fulfilment
factories (eg Waltham
Point)
Sainsbury’s Central
Warehouses for Slow
Coop – centralisation and Movers (eg Stoke)
perishables from composite
site (eg Coventry)
Link to company strategy
and different site functions

24. Warehouse Operations
• Important storage and handling options.
• Picking equipment and supporting procedures.
• Warehouse returns operations.
• Warehouse layout models
• Legislation and health & safety issues
• Environmental factors.

25. Automation – Basic Movements and
Automation – ok???
Bar Code /
Scanning Carousels
WAREHOUSE
AUTOMATION
RDT
Radio Data
Terminals
Pick by Light
STORAGE
High Stackers,
VNA cranes and
ROBOTICS
Inventory
Control
Terminals
REPLENISHMENT
Conveyors
Automated Guided
Vehicles
WMS
Warehouse
Management
Systems
RETRIEVAL
Automated Storage
and Retrieval
Systems
Miniloads
25

26. Warehouse Procedures and
Layouts
Reserve Storage
and
Pallet Picking
Replenishment Replenishment
Case
Picking
Broken
Case
Picking
Accumulation, Sortation & Packing
Receiving Shipping
Cross-docking
Direct
putaway
to reserve
Direct
putaway
to primary

27. Warehouse System
Intake
 Bulk storage
 AS/RS
 Cross-docking
 AGV
Storage
 Bulk - first
 AS/RS
 High density miniload -
cartons
 Carousels -slows
Picking
 3 level flow rack with light
 Carousels - slow
 Bulk separate
Sorter
 Input & despatch lanes
Real - Time Information
 RF- Data
 PBL
 RF Data
 Scanners
 WMS

28. 28
www.mmh.com

29. 29

30. 30

31. 31

32. in-feed S/R Machine out-feed
Storage
Controller

33. 33
Pick by
Light,Carousels,
Live Storage

34. 34
Typical Sorter Layout - by Zones

35. 35
Batch Picking & Sortation
• Typically 50-100 orders
• Collect as batch, convey to high speed sorter, divide into order chutes & load
into cages
• High volumes required to be cost effective: typical industries grocery
• E-retailing longer slow tail (sortation quicker payback)

36. Design for Flexibility
 Materials & information
flow
 Efficient order taking,
picking and packing
 Minimal time from web
order to shipping
 Seasonal peaks
 Automation when justified
throughput
 Two functional areas;
processing orders and
returns
36

37. 37
Basic Warehouse Layout Models
• Throughflow - GI &Despatch at opposite sides direct flow of orders -
typically fast movers - large retailers
• Crossflow - GI & Despatch at same warehouse side - fast to slow movers
positioned in descending order & travel at right angle to bays
• Corner - as crossflow, except despatch at adjacent warehouse side :
products flow direct into despatch
• Inverted ‘T’ warehouse - GI & despatch at same warehouse side, bulk &
picking at opposite warehouse halves with central aisle for replenishment
General comment - simplistic (based on general warehouse square / rectangle,
too few segments, starting point)

38. 38

39. AC Moore - Crafts
Pressures
 SKU proliferation
 12 – 15% growth p.a
 Double handling – high labour costs
 Transportation – not all sku’s at every
site
 Order accuracy
 Categorisation of lines
39

40. AC Moore - Strategy
 3 shifts 1st – receiving, putaway, picking; 2nd –
replenishment and putaway, 3rd – replenishment
(skeleton staff)
 VNA – space utilisation
 Pick to light – fast movers, fed to sortation via
conveyors (250 picks / hr, 120 before)
 Second level – slow movers, pick instructions
from wireless terminals sent through WMS to
conveyor
 Third level – full case picks, paper pick
 3 layers merge via shoe sorter
 Postpone pallet binding, wrapping etc
 Double throughput capacity
40

41. AC Moore - Layout
41

42. Aeriel case:
 Congestion problems
 Space utilisation issues
 Radio frequency systems
 Pick to light
 Horizontal carousels
 Travel times and distances
 Zone and batch picking
 Inventory tracking
 Flowrack systems
 Quality control issues.
42

43. 43
Aeriel case:

44. Stop and Shop case:
 Cost reduction strategy
 Throughput capacity issues
 Service to store issues
 Voice picking
 Separation of perishable and non-perishables
 Integration with WMS
 Postponement of picking decisions
44

45. Stop and Shop case:
45

46. IKEA
 Varied inventory mix – more flexibility
 New catalogue web and direct to customer lines
 Extensive returns
 2/3 overseas lines
 Flat packed lines for dense storage and easy
handling
 Maximise flowthrough
 Semi automated high bay – manned s/r trucks
 Pallet conveyor
 Warehouse reflects store design
 Join products from high bay and cross-docking
area
 Different picking waves
46

47. IKEA
47

48. Simulation Modelling
Models may be used to:
Examine alternative layouts
Assess truck and other material handling equipment
needs
Calculate staffing levels and shift patterns
Review the effect of different stock levels
Determine correct product locations
Test without implementation ‘what if ? scenarios’
Compare & contrast different options