Ch 7 warehousing


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Ch 7 warehousing

  1. 1. 07/07/11 <ul><li>Warehousing </li></ul><ul><li>What is a warehouse? </li></ul><ul><li>Traditional concept of warehouse </li></ul><ul><li>Store or godown </li></ul><ul><li>Place where unneeded items are stored </li></ul><ul><li>A place where things are dumped </li></ul><ul><li>Modern concept of warehouse </li></ul><ul><li>A facility – where value addition takes place </li></ul><ul><li>Storage is only one function </li></ul>
  2. 2. 07/07/11 <ul><li>Development of modern concept of </li></ul><ul><li>warehouse as facility </li></ul><ul><li>Consumer maintained store </li></ul><ul><li>Compulsion of infrastructure during monsoon and winter </li></ul><ul><li>Manufacturer’s store </li></ul><ul><li>Concept of factory as investment opportunity </li></ul><ul><li>Concept of productivity & growing volumes </li></ul><ul><li>Buffer between factory and market </li></ul>
  3. 3. 07/07/11 <ul><li>Marketing warehouse </li></ul><ul><li>Shrinking inventory & growing variety </li></ul><ul><li>Location to stock products and support marketing efforts </li></ul><ul><li>Production warehouse </li></ul><ul><li>Holding inventory of standard items for variety production </li></ul><ul><li>Production optimization [minimize cost] </li></ul>
  4. 4. 07/07/11 <ul><li>Modern warehouse </li></ul><ul><li>Engineering focus on material handling, storage & information in 1960 & 70 </li></ul><ul><li>Concept of JIT needs dependable delivery system of which warehouses are by now an integral part </li></ul><ul><li>TQM in warehouses - 1980 </li></ul>
  5. 5. 07/07/11 <ul><li>Warehousing Costs </li></ul><ul><li>Handling </li></ul><ul><li>Holding </li></ul><ul><li>Order Processing </li></ul><ul><li>Packaging </li></ul><ul><li>Admin </li></ul><ul><li>Maintenance </li></ul>
  6. 6. 07/07/11 <ul><li>Functions of warehouse [warehousing operations] </li></ul><ul><li>Receiving goods – receive and accept responsibility </li></ul><ul><li>Identifying goods – place, label, color code </li></ul><ul><li>Sorting goods- sort out the received goods for appropriate storage area </li></ul><ul><li>Dispatching goods to storage- for temporary storage with easy accessibility </li></ul><ul><li>Holding goods- security against pilferage and deterioration </li></ul>
  7. 7. 07/07/11 <ul><li>Selecting, retrieving, packing- items are retrieved and grouped according to customer order for dispatch </li></ul><ul><li>Marshaling goods- check the items of a single order for completeness and order records are updated </li></ul><ul><li>Dispatching goods- consolidated order is packaged and directed to right transport </li></ul><ul><li>Preparing records and advices- of stocks and replenishment requirements </li></ul>
  8. 8. 07/07/11 <ul><li>Economic and service benefits of </li></ul><ul><li>Warehouses </li></ul><ul><li>Economic benefits - Consolidation, Break bulk, Cross Dock, processing postponement, stock piling[seasonal storage] </li></ul><ul><li>Service benefits - spot stocking, Assortment, mixing, production support, market presence </li></ul>
  9. 9. 07/07/11 Economic benefits Consolidation warehouse Plant B [Product B for Customer X] Plant C [Product C for Customer X] Customer X [Product A+ Product B+ Product C] Plant A [Product A for Customer X]
  10. 10. 07/07/11 Plant A [Product A for Customers X+Y+Z] Break bulk warehouse Customer X Customer Y Customer Z
  11. 11. 07/07/11 Plant A [Product A] For W, X, Z Plant B [Product B] For W,X,Y,Z Cross Dock warehouse Customer W [A+B+C] Customer X [A+B] Customer Y [B+C] Customer Z A+ C Plant C [Product C] For W, Y, Z
  12. 12. 07/07/11 Service benefits In transit mixing Warehouse [transit mixing point, mix & make product C] Plant A [Product A] Plant B [Product B] Customer X Products A+ B+ C Customer Y Products A+B
  13. 13. 07/07/11 Manufacturing Warehouse Vendor A [part A] Vendor B [part B] Vendor C [part C] Assembly Line X Assembly Line Y Assembly Line Z
  14. 14. 07/07/11 <ul><li>Operating principles of Warehouse/warehouse design </li></ul><ul><li>1. Design criteria </li></ul><ul><li>product flow , ware house should be designed round material handling flow </li></ul>
  15. 15. 07/07/11 <ul><li>No of stories , one is ideal as against limitations of space, cost of land </li></ul><ul><li>Height utilization , principle of cubic space, principle of ‘go vertical’, limitation on height utilization due to fire safety and insurance regulations </li></ul><ul><li>2. Handling Technology </li></ul><ul><li>Movement continuity </li></ul><ul><li>Reducing runs </li></ul><ul><li>Reducing short runs with intermediate stops </li></ul><ul><li>Ensuring longer runs </li></ul>
  16. 16. <ul><li>Movement scale economies </li></ul><ul><li>Movement in large bulk </li></ul><ul><li>Moving material in cases strapped on pallets or Containers </li></ul><ul><li>Handling technology is addressing these issues </li></ul>07/07/11
  17. 17. 07/07/11 <ul><li>3. Storage Plan </li></ul><ul><li>Characteristics of product </li></ul><ul><li>Open air storage for bulky products </li></ul><ul><li>Heavy items closer to floor </li></ul><ul><li>Light items on higher rungs </li></ul><ul><li>Fast moving items in large bulk closer to aisles </li></ul><ul><li>Hazardous items </li></ul>
  18. 18. 07/07/11 <ul><li>Warehousing alternatives </li></ul><ul><li>1. Private Warehouses </li></ul><ul><li>Owned or leased by the product owner </li></ul><ul><li>Control is fully with the product owner </li></ul><ul><li>Changes can be made to integrate the warehouse with rest of the logistical system </li></ul><ul><li>Provides market presence to the product owner </li></ul><ul><li>There is no profit to be added to the cost </li></ul>
  19. 19. 07/07/11 <ul><li>2. Public Warehouses </li></ul><ul><li>Available to companies on hire </li></ul><ul><li>Overheads get distributed over a large customer base </li></ul><ul><li>As warehousing is their core business public warehouses offer expertise in management </li></ul><ul><li>Flexibility of location </li></ul><ul><li>Significant scale economies, several users and resultant volume, benefits in transportation costs </li></ul>
  20. 20. 07/07/11 <ul><li>3. Contract warehouses </li></ul><ul><li>Contract warehouse operators take over logistics responsibility from manufacturing company </li></ul><ul><li>Long term relationship and customized service </li></ul><ul><li>Expertise of management </li></ul><ul><li>Shared resources with several clients </li></ul><ul><li>General classification of Public </li></ul><ul><li>warehouses </li></ul><ul><li>1. General merchandise </li></ul><ul><li>2. Refrigerated </li></ul><ul><li>3. Special commodity </li></ul><ul><li>4. Bonded </li></ul>
  21. 21. Warehousing strategy 07/07/11 Where? How many? Of what type? Private Contract Public Market Presence Industry synergies Operating flexibility Location flexibility Scale economies
  22. 22. 07/07/11 <ul><li>Site selection </li></ul><ul><li>Location considerations </li></ul><ul><li>Cost of distribution to market area </li></ul><ul><li>Transport requirement and facilities & Transport cost </li></ul><ul><li>Competition, presence of others </li></ul><ul><li>Availability of utilities [power, water, gas, sewerage disposal and cost] </li></ul><ul><li>Labour supply and cost </li></ul><ul><li>I - R climate, labour productivity </li></ul><ul><li>Customer expectation of ‘D’ </li></ul><ul><li>Company specific commitments </li></ul><ul><li>Local taxation </li></ul>
  23. 23. 07/07/11 <ul><li>10. Community attitude </li></ul><ul><li>Restrictions associated with warehouses </li></ul><ul><li>Future expansion </li></ul><ul><li>Cost of land </li></ul><ul><li>Topography and soil condition </li></ul><ul><li>Possibility of title change to the land </li></ul>
  24. 24. 07/07/11 <ul><li>Ideal warehouse location </li></ul><ul><li>Protection of stock against moisture, insects, dust, fumes, pests, thieves, fire etc. </li></ul><ul><li>Provides facilities for ware housing activities </li></ul><ul><li>Economics of operation </li></ul><ul><li>Offers water for drinking and fire fighting </li></ul><ul><li>Away from sources of detrimental conditions </li></ul><ul><li>Easy access, proximity to ‘A’ customers </li></ul><ul><li>No geographic barriers </li></ul>
  25. 25. 07/07/11 <ul><li>Inventory at various locations, </li></ul><ul><li>the square root law </li></ul><ul><li>Inventory reduction and customer service </li></ul><ul><li>How much to hold and in how many locations to hold? </li></ul><ul><li>The square root law </li></ul><ul><li>X 2 =[X 1 ] [√n 2 /n 1 ]  </li></ul><ul><li>X 1 = total inventory in existing facilities  </li></ul><ul><li>X 2 = total inventory in future facilities </li></ul>
  26. 26. 07/07/11 n 1 = number of existing facilities [warehouses] n 2 = number of future facilities [warehouses] If a company distributes 40,000 units using 8 existing facilities and plans to reduce the inventory in their future facilities to 20,000 units, then what should be the number of facilities in their future network without compromising the customer service? If we use the square root formula, the answer is 2 facilities