Business Log Ch 9

Cross Docking

(Type of sorting) -the logistics practice of unloading materials from an incoming truck and loading these materials directly onto the outbound trucks with little or no storage in between to reduce inventory investment and storage space requirements -Main reasons to do this are: To provide a central site for products to be sorted and combined for delivery to multiple destinations. To consolidate and combine smaller product loads into one method of transport -Advantages: 1. Operational Efficiency- warehouse operations are more efficient as the material does not have to be stored at the warehouse, moving directly from receiving to shipping. And 2. Inventory Efficiency: as there is no storage at the warehouses, total inventory in the supply chain can be reduced.

Assembly

(in sorting) supports manufacturing operations. Occurs when products or components from 2nd tier suppliers are assembled by a warehouse located near the manufacturing plant. Common assembly processes are packaging and color customizing

Mixing

(type of sorting) combines inventory form multiple origins like cross docking

Seasonal Storage

(under sorting) provides direct benefit by accommodating seasonal demand such as lawn furniture and toys. Accommodates seasonal production such as agricultural products. Storage provides an inventory buffer, which allows production efficiency within the constraints imposed by material sources and consumers

Advantages of private warehouse ownership

-Control: offers greater flexability in designing warehouse and in operations -Visibility: inventory, material flow, handling, supervision and associated costs -Cost: operating cost can be 15%-25% lower if the company uses 75% utilization

Other functions of a warehouse

-Quality Inspections: incoming and outgoing -Repackaging: for specific customer orders -Assembly Operation: warehouse operation that puts products together with other items before shipping them out to the final customer ex:) literature, spare parts, advertising materals

Advantages of Contract warehouse ownership

-can have special services like temperature to fit needs -can be a cost from the contract or negotiated for a lower price -offers a degree of control at a decent price

Disadvantages of private warehouse ownership

-high start up cost: captial to build or buy warehouse. long risky investment. cost of hiring and training employees. purchase of material handling equiptment -Fixed location: not easy to move to another location if market changes -Fixed size and costs: when volume is low, the company still needs to pay fixed costs

Disadvantages of Public warehouse ownership

-potential of incompatible computer systems -specialized services may not be what is needed -space may not be available where/when needed

Reverse Logistics Processing

-returns management: recalls or product that did not sell -remanufacturing and repair -remarketing: selling used equipment -recycling: returning product following its useful life with the goal of decomposing it to be reused -disposal: for materials which cannot effectively be reused

Decisions driving warehouse management include

-site selection -number of warehouse facilities in the network -layout of the warehouses -methods of receiving, storing, retrieving and distributing products and materials

Break Bulk (in economic benefits)

-warehouse operation that divides full truckloads of items from a single source or manufacturer into smaller, more appropriate quantities for use or further distribution. (exact opposite of consolidation, look at diagram on slides)

Consolidation (in economic benefits)

-warehouse operation that receives products from different plants or suppliers, sorts them, and then combines them with similar shipments from other plants or suppliers for further distribution.

Warehouse Operations

-warehouse operations involve two major activities: handling & Storage -objective is to: efficiently receive inventory, store is as required, assemble it into complete orders, make a customer shipment -operations will therefore emphasize product flow

Evolution of strategic warehousing

-warehouses were once viewed as a necessary evil, use to coordinate product supply with customer demand -the explosion of the consumer economy after WWII saw the rise of distribution networks for consumer goods -warehousing shifted form passive storage to strategic assortment

Warehousing provides benefits in 2 major categories

1. Economic benefits: occur when overall logistics costs are reduced. ex:) Consolidation and break bulk, sorting, seasonal storage, reverse logistics 2. Service benefits: justified by sales improvements that more than offset added cost. ex:) Spot stocking, full line stocking, value added services

Warehouse Network Strategy

1. Market Positioned Strategy: Close to customers to maximize distribution services and improve delivery. Few suppliers; many customers 2. Product Positioned Strategy: Close to supply source to collect goods and consolidate before shipping products out to customers. Many suppliers; few customers 3. Immedietly Positioned Strategy: Midway between supply source and customers, when distribution requirements are high and product comes from various locations Relatively equal number of suppliers and customers

Primary functions of a warehouse

1. Receiving: physical receipt of material, identification, inspection for conformance with the purchase order (quantity and damage) 2. Storage: secure retention of parts or products for future use or shipment 3. Picking: withdrawing components from stock to make assemblies or finished goods or to ship to a customer 4. Packing: placing items of an order into an appropriate container for safe shipping, and marking and labeling the container with customer shipping destination data 5. Shipping: outgoing shipment of parts, components and products

MEMORIZE ~~~ Service Benefits of Warehousing:

1. Spot stocking: the positioning of inventory for seasonal or promotional demand 2. Full line stocking: provides one stop shopping capability for goods from multiple suppliers 3. Value-added services: include any work that creates a greater value for customers

Warehouse Ownership Arrangements

1. public warehouses 2. contract warehouses 3. private warehouses

Public warehouse ownership

A business that provides storage and related warehouse functions to companies on a short or long term basis - from month to month. -they own their own equipment and hire own staff to manage facility -Fees = combo of monthly storage fees plus a pallet in/out fee -Fees are based on: size, weight, if it can be stacked, value, if fragile -may have some document and account management fee

Advantages of Public warehouse ownership

Advantages: -no capital investment or property taxes -Has flexibility: can be short or long term, for seasonal products, add storage capacity on short notice -Lower costs and reduced risks -Access to special services: temperature control, customer service etc

Warehouse Network: Hybrid Approach

Companies may choose to do some type of a hybrid approach to balance costs and inventory against customer service. -One hybrid network is a "hub-and-spoke" where there is a centralized warehouse (i.e., the "hub") which holds most of the inventory linked to a series of smaller geographically dispersed warehouses (i.e., the "spokes") which hold only a small amount of inventory to support their local area in the immediate time frame -The hub warehouse feeds the spoke warehouses with inventory as necessary on a regular basis. -Operating costs are lower because the spoke warehouses are smaller than in a decentralized model. -Inventory is also lower as all of the safety stock is held centrally, which generally means that less total safety stock is required because all of the risk and uncertainty is managed centrally. -Customer service is generally better than in a purely centralized model since some of the inventory is maintained closer to the customer.

Handling & Storage

Handling - optimize movement continuity and efficiency Storage - essential that products be assigned specific locations in the warehouse called Slots. -Slotting determines specific locations for the product based on velocity (how fast the goods move), weight, special storage requirements.

Warehouse Network: Single Warehouse

Positives: -less complicated -operating costs and inventory are lower -no duplication of equiptment, staff and managers -network will be centralized and company will have its best people, equiptment and inventory systems in one concentrated place -warehouse can more activiely focus on needs of customers Negatives: -may take longer to deliver product to customers not near the centralized location

Warehouse Network: Multiple Warehouses

Positives: -potentially faster delivery to customers from decentralized network (assuming good inventory in each warehouse) Negatives: -more complicated -operating costs and inventory will be higher since each warehouse costs $$$ to operate and hire staff -network will be decentralized and the company will have to spread its best people and equiptment across a larger network

Warehouse Designs

Safety and maintenance issues must also be considered when planning warehouse designs -Accident Prevention: Comprehensive safety programs and training, accident investigation and follow up -Environmental Protection: Spill kits and spill plans -Maintenance: Scheduled maintenance of building, material handling equipment, and collision damage prevention

Sorting

The basic benefits of sorting is to reconfigure freight as it is being transported from origin to destination

Contract Warehouse ownership

Variation of public warehousing that handles the shipping, receiving and storage of goods on a contract basis. -contract can be for entire building or certain portion -usually needs client to commit for years not months -fee structure may be fixed cost, cost plus or both -The company providing the space handles the equiptment, employees and maintenance

Handling and Storage Efficiency

Warehouse decisions that determine handling and storage efficiency -Site Selection -Design -Product Mix -Expansion -Material Handling -Layout -Sizing -Warehouse Management System -Accuracy and Audit -Security -Safety and Maintenance

Storage Alternatives

Warehouses must manage two classes of storage Active storage: storage for basic inventory replenishemtn, focuses on quick movement Extended storage: storage for inventory held in excess of period for normal replneishemnt ex:) seasonal, speculative

Audits

common to maintain safety, assure compliance to regulations and help improve procedures

Warehouse Management System

integrate procedures and software support to standardize storage and handling work procedures -One main use of WMS is to coordinate order selection -Discrete selection: when a specific customer's order is prepared for shipment as a single work assignment -Wave or batch selection: when orders are processed through zones of the warehouse assigned to specific employees

Security Issues

involve protection from pilferage and damage

Strategic Warehousing

offers manufacturers a way to reduce DWELL TIME of parts and materials -warehousing is integral to just in time (JIT) and stockless production strategies - requires strategically located warehouses across the globe -an important goal in warehousing is to maximize flexibility - respond to ever changing customer demand: product assortment, value added services, shipment sequencing

Private Warehouse ownership

storage facility owned by the company that owns the goods being stored -usually established by companies that have a lot of inventory or high value goods or need specialized handling -can be operated as a separate division within a company -can be co located with manufacturing on site or off site

Disadvantage of contract warehouse ownership

the client company is expected to enter contract for years not months

Warehouse Network

the number of, and the relationship between, the warehouses that a company has in their structure. -Questions needed to be answered establishing a warehouse network: 1. How many warehouses does the company need? 2. Where should they be located *trade offs that will determine how many warehouses and where they should be located are (1) level of customer service company wants to provide (2) amount of inventory company wants to invest in

Inventory Accuracy

typically maintained by annual physical counts or counting portions of inventory on a planned basis -Cycle counting is the audit of selected inventory on a cyclic schedule

The changing role of the warehouse

used to be just storage operations and basic things → turned more into distribution centers where a goal was to get the product in then out as quickly as possible and do value added servcies → fullfillment centers that have dynamic cross docking, green operations, etc more complicated

warehousing contributes _____ in the logistics process

value

Warehousing types

warehousing types evolved to accommodate dynamic aspects of logistics 1. Distribution centers 2. Consolidation terminals 3. Break-bulk facilities 4. Cross-docks