Unit four Warehousing.docx
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UnitfourWarehousing
UnitFourWarehousing
PartOneText
FunctionsandBenefitsofWarehousing
Warehousingisanintegralpartofeverylogisticssystem.Itplaysavitalroleinprovidingadesiredlevelofcustomerserviceatthelowestpossibletotalcost.Thewarehousingactivityisthelinkbetweentheproducerandthecustomer.Overtheyears,warehousinghasevolvedfromarelativelyminorfacetofafirm’slogisticssystemtooneofitsmostimportantfunctions.Wecandefinewarehousingasthatpartofafirm’slogisticssystemthatstoresproducts(rawmaterials,parts,goods-in-process,finishedgoods)atandbetweenpoints-of-originandpoint-of-consumption,andprovidesinformationtomanagementonthestatus,condition,anddispositionofitemsbeingstored.Warehousingcanbeprovidedbyeitherdistributioncentersorwarehouseswhicharetypicallyviewedasplacestoholdorstoreinventory.Thediscussionsinthischapterarerelevantforunderstandingwarehousingrangingfromfunctionsofwarehousing,itseconomicandservicebenefits,theownershiparrangement,tootherconsiderationsanddecisionsforwarehouses.
FunctionsofWarehousing
Warehousinghasthreebasicfunctions:
movement,storage,andinformationtransfer.Themovementfunctioncanbefurtherdividedintofourhandlingactivities:
receiving,transfer,orderselectionandshipping.Thereceivingactivityincludesthephysicalunloadingofproductsfromthetransportationcarrier.Italsoincludestheupdatingofwarehouseinventoryrecords,inspectionfordamage,andverificationofthemerchandisecountagainstordersandshippingrecords.Transferinvolvesthephysicalmovementoftheproductintothewarehouseforstorage,movementtoareasforspecializedservicessuchasconsolidation,andmovementtoout-boundshipment.Customerorderselectionisthemajormovementactivityandinvolvesregroupingproductsintotheassortmentcustomerdesires.Thelastmovementactivity,shipping,consistsofproductstagingandphysicallymovingtheassembledordersintocarrierequipment,adjustinginventoryrecords,andcheckingonorderstobeshipped.
Thesecondfunctionofwarehousing---storage---canbeperformedonatemporaryorsemi-permanentbasis.Temporarystorageemphasizesthemovementfunctionofthewarehouseandincludesonlythestorageofproductnecessaryforbasicinventoryreplenishment.Temporarystorageisrequiredregardlessoftheactualinventoryturnover.Theextentoftemporaryinventorystoragedependsonthedesignofthelogisticssystemandthevariabilityexperiencedinleadtimeanddemand.Semi-permanentstorageisthestorageofinventoryinexcessofthatrequiredfornormalreplenishment.Itcanalsobereferredtoasbufferorsafetystock.Themostcommonconditionsleadingtosemi-permanentstorageare
(1)seasonaldemand
(2)erraticdemand(3)conditioningofproductssuchasfruitsandmeat(4)speculation,and(5)specialdeals,suchasquantitydiscounts.
Informationtransfer,thethirdmajorfunctionofwarehousing,occurssimultaneouslywiththemovementandstoragefunctions.Managementalwaysneedstimelyandaccurateinformationasitattemptstoadministerthewarehousingactivity.Informationoninventorylevels,throughputlevels,stock-keepinglocations,inboundandoutboundshipments,customerdata,facilityspaceutilization,andpersonnelisvitaltothesuccessfuloperationofpublicorprivatewarehouses.
EconomicandServiceBenefitsofWarehousing
Traditionally,theintroductionofwarehousingintoasupplychainisregardedasanetincreaseinthetotalcostsofconductingbusiness,thenwhyiswarehousingstilldesirableandindispensable1?
Benefitsrealizedfromstrategicwarehousingareclassifiedaseconomicandservice.Nowarehousingshouldbeincludedinalogisticalsystemunlessitisfullyjustifiedonsomecombinationofcostandservice⒉Theeconomicbenefitsofconsolidationandbreak-bulkaretoreducetransportationcostbyusingwarehousecapabilitytogroupshipments.Inconsolidation,thewarehousereceivesmaterials,fromanumberofsources,whicharecombinedinexactquantitiesintoalargesingleshipmenttoaspecificdestination.Thebenefitsofconsolidationsaretherealizationofthelowestpossiblefreightrate,timelyandcontrolleddelivery,andreducedcongestionatacustomer’sreceivingdock⒊Abreak-bulkoperationreceivesasingleshipmentandarrangesfordeliverytomultipledestinations.Thebreak-bulkwarehouseorterminalsortsorsplitsoutindividualordersandarrangeslocaldelivery⒋Bothconsolidationandbreak-bulkarrangementsusewarehousecapacitytoimprovetransportationefficiency.Figure1illustrateseachactivity.
Consolidation
PlantA
PlantBConsolidationwarehousesABC
PlantC
Break-Bulk
CustomerA
PlantABreak-bulkwarehouseCustomerB
CustomerC
Figure1
Thedirecteconomicbenefitofstorageistoaccommodateseasonalproductionordemand.Forexample,lawnfurnitureandtoysaretypicallyproducedyear-roundbutaresoldonlyduringaveryshortmarketingperiod.Incontrast,agriculturalproductsareharvestedatspecifictimes,withsubsequentconsumptionoccurringthroughouttheyear.Bothsituationsrequireinventorystoragetosupportmarketingefforts⒌Storageprovidesabuffer,whichallowsproductionefficiencieswithintheconstraintsimposedbymaterialsourcesandconsumers⒍
Warehousecanprovideservicesthatenhancetop-linerevenuegrowth⒎Thedemandforhighlycustomizedservicehastransformedmoderndistributionwarehousesintofacilitiesthatspecializeinperformingvalue-addedservices⒏Avalue-addedserviceisanyworkthatcreatesagreatervalueforcustomers.Value-addedservicestypicallychangethephysicalfeaturesorconfigurationofproductssotheyarepresentedtocustomersinauniqueorcustomizedmanner.Warehousescanpostponefinalproductconfigurationbycompletingpackaging,labeling,andevenlightmanufacturing.Forexample,vegetablescanbeprocessedandcannedinbrightsattheprocessingplants.Brightsarecanswithoutlabels⒐Holdinginventoryasbrightsmeansthatproductisnotcommittedtospecificcustomersorcartonconfigurationduringprocessing.Onceaspecificcustomerorderisreceived,thewarehousecancompletelabelingandfinalizepackaging.Examplesofpostponementrangefrompackagingpharmaceuticalstocustomizingappliances.
WarehouseOwnershipArrangements
Warehousesaretypicallyclassifiedbasedonownership.Aprivatewarehouseisoperatedbytheenterprisethatownsthemerchandisehandledandstoredinthefacility.Apublicwarehouse,incontrast,isoperatedasanindependentbusinessofferingarangeofforhireservices,suchasstorage,handling,andtransportation⒑Publicwarehouseoperatorsgenerallyofferamenuofrelativelystandardizedservicestocustomers.Contractwarehousing,whichisacustomizedextensionofpublicwarehousing,combinesthebenefitsofprivateandforhirewarehousing.Contractwarehousingisalong-termbusinessarrangementthatprovidesauniqueortailoredlogisticsservicesforalimitednumberofcustomers.Theclientandthewarehouseoperatortypicallysharetherisksassociatedwiththeoperation.Theimportantdifferencesbetweencontractandpublicwarehouseoperatorsaretheanticipatedlengthoftherelationship,degreeofexclusiveorcustomizedservices,andsharedincorporationofbenefitsandrisks.
WarehouseManagementSystems
Thedevelopmentofworkproceduresgoeshardinhandwithtrainingwarehousepersonnel⒒MostfirmsdependuponaWarehouseManagementSystem(WMS)⒓tostandardizeworkproceduresandencouragebestpractice.Itismanagement’sresponsibilitytoseethatallpersonnelunderstandandusetheseprocedures.
WMSalsocoordinatesworkproceduresthatareimportantforreceivingandshipping.Establishedproceduresforreceivingandensuringproductentryintoinventoryrecordsarecritical.Ifpalletsareused,themerchandisemustbestackedinappropriatepatternstoensuremaximumloadstabilityandconsistentcasecounts⒔Personnelworkinginshippingmusthaveknowledgeoftrailerloadingpractice.Inspecifictypesofoperations,particularlywhenmerchandisechangesownership,itemsmustbecheckedduringloading.
Workproceduresarenotrestrictedtofloorpersonnel.Proceduresmustbeestablishedforadministrationandmaintenance.Replenishmentofwarehouseinventorycancauseoperationalproblemsifproperorderingproceduresarelacking.Normally,thereislimitedinteractionbetweenbuyersandwarehousepersonnel,althoughsuchcommunicationisimprovingwithinintegratedsupplychainmanagementorganizations.Buyerstendtopurchaseinquantitiesthataffordthebestprice,andlittleattentionisgiventopalletcompatiblequantitiesoravailablewarehousespace⒕Ideallybuyersshouldcoordinatewithwarehousepersonnelbeforecommissioninglargeordersorintroducingnewproducts.Theexperienceofsomecompanieshasforcedmanagementtorequirebuyerstopredeterminewarehousespaceassignmentpriortoordering.Anotherpotentialproblemisthequantityofcasesordered.Thegoalistopurchaseinpallet-multiplequantities⒖Forexample,ifaproductisideallystackedonpalletsina50-casepattern,thebuyershouldorderinmultiplesof50.Ifanorderisplacedfor120cases,uponarrivalthecaseswillfilltwopalletsplus20onathirdpallet.Theextra20caseswillrequirethewarehousecubicspacetypicallyusedforapalletof50andwillrequirethesameamountofmaterialshandlingcapacitytomove.
WarehouseDecisionsandConsiderations
Thebasicconceptthatwarehousesprovideasanenclosureformaterialstorageandhandlingrequiresdetaile