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Introduction. Progression of Warehousing Decisions Why Use Warehouses? Types of Warehousing Warehouse Operations Warehousing Innovations Warehouse Layout Packaging. Progression of Warehousing Decisions . Should Warehouses Be Used?

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Introduction

Progression of Warehousing Decisions

Why Use Warehouses?

Types of Warehousing

Warehouse Operations

Warehousing Innovations

Warehouse Layout

Packaging


Progression of Warehousing Decisions.

Should Warehouses Be Used?

If Warehouses are Used, Should they be Public or Private?

Where Should they be Located?

What Should be their Capacities?

How Many Should You Have?

What Should be their Layout and Design?


Why Use Warehouses?

Cope with Variable Market Conditions

Cope with Variable Sources of Supply

Production Economies

Purchasing Economies

Transportation Economies

Customer Service


Warehouse Operations

Planning, Organizing, Staffing, Equipping, and Controlling

Human Resource Management

Billing and Inventory Control

Order Filling

Local Delivery

Material Handling

Packaging

Safety, Security, Maintenance

Measuring Warehouse Efficiency


Warehouse Safety

J.N. Devin, "Cowboy After OSHA,“ 1972.


Warehousing Innovations

WERC – Established 1978

Housekeeping

Storage Heights

Automated Retrieval Systems

Bar Codes, Scanners, EDI, RFID, etc.

Narrow Aisle Equipment, Conveyors, etc.

The Distribution Center Concept

Assembly, Product Maintenance, Repair, etc.

Management Controls

Cross Docking


Costs of Increasing Storage Heights

Total Cost

$

Labor &

Insurance

C1

Construction

& Finance

Storage Height

H1


Costs of Increasing Storage Heights

Effects of New Technology

Total Cost

$

Labor &

Insurance

C1

Construction

& Finance

Storage Height

H1


Costs of Increasing Storage Heights

Effects of New Technology

$

Total Cost

Labor &

Insurance

C1

C2

Construction

& Finance

Storage Height

H1

H2


Warehousing Innovations

WERC – Established 1978

Housekeeping

Storage Heights

Automated Retrieval Systems

Bar Codes, Scanners, EDI, RFID, etc.

Narrow Aisle Equipment, Conveyors, etc.

The Distribution Center Concept

Assembly, Product Maintenance, Repair, etc.

Management Controls

Cross Docking


8

4

Types of Warehousing

Private Warehousing

Public Warehousing

Contract Warehousing

Cross-Docking


Private vs Public Warehousing

(Without Cost of Capital)

Public

$

(All Variable Cost)

Private

(Fixed + Variable Cost)

Prefer Public

Volume

Prefer Private

Indifferent


Indifference Point Between Public and Private

(Without Cost of Capital)

Private = Fixed Costs + Variable Costs

Public = Variable Costs

Example:

Private Fixed Costs = $500,000/year

Private Variable Costs = $0.15/pound

Public Variable Costs = $0.25/pound

Indifference point is where both costs are equal

500,000 + .15X = .25X

500,000 = .10X

X = 5,000,000 pounds

ROI = 0


Private vs Public Warehousing

(With Cost of Capital)

$

Public

Savings

(All Variable Cost)

Private

(Fixed + Variable Cost)

Prefer Public

Volume

Prefer Private

Indifferent


Indifference Point Between Public and Private

(With Cost of Capital)

Private = Fixed Costs + Variable Costs

Public = Variable Costs

Example:

Private Fixed Costs = $500,000/year

Private Variable Costs = $0.15/pound

Public Variable Costs = $0.25/pound

Indifference point is where savings = desired ROI

Savings

Average Investment

= ROI


Indifference Point Between Public and Private

(With Cost of Capital)

Desired ROI = Hurdle Rate

Savings = Public – Private

Average Investment = Initial Investment /2

Example:

Hurdle Rate = 10%

Investment = $8,000,000

Private Fixed Costs = $500,000/year

Private Variable Costs = $0.15/pound

Public Variable Costs = $0.25/pound


Indifference Point Between Public and Private

(With Cost of Capital)

Hurdle Rate = 10%

Investment = $8,000,000

Private Fixed Costs = $500,000/year

Private Variable Costs = $0.15/pound

Public Variable Costs = $0.25/pound

Savings = Public - Private

.25X - (500,000 + .15X)

4,000,000

= .10


Indifference Point Between Public and Private

(With Cost of Capital)

Savings = Public – Private

.25X - (500,000 + .15X)

4,000,000

= .10

.25X - (500,000 + .15X)

= .10 * 4,000,000

.25X - 500,000 - .15X

= 400,000

.25X - .15X

= 400,000 + 500,000

.10X

= 900,000

X

= 9,000,000


Advantages of Private Warehousing

Greater Control

Flexibility (CS Needs, Space Use, etc.)

Tax Benefits (Depreciation)

Image to Customers

Potentially Lower Cost


Disadvantages of Private Warehousing

Lack of Flexibility (Fixed Size/Location)

Capital Requirements

Equipment Maintenance/Training

Potential Labor Problems


Advantages of Public Warehousing

Capital Conservation

Ability to Meet Peak Demand

Reduced Risk

Flexibility WRT Volume

Avoidance of Property Taxes

Avoidance of Labor Problems

Potentially Lower Cost

Knowledge of Exact Costs


Disadvantages of Public Warehouses

Lack of Control

Difficult Communications

Not Always Available

Potentially Higher Cost


Cross-Docking

An operations procedure that allows product to be delivered and received on one side of a facility, undergoes internal handling procedures at the receiving dock, distributing unit loads and moving the product to shipping docks on the other side of the facility where trucks or rail cars are waiting to be loaded for customer delivery.




Warehouse Layout 

Angling vs On-the-Square

Fixed vs Variable Slots

Space Loading Techniques

Item Popularity

Item Size

Cube per Order Index

Family Groupings

Linear Programming

Simulation


Cost of Fixed vs Variable Storage Slots

Total Cost

$

Labor

C1

Space Utilization

Percent Variable

V1


Cost of Fixed vs Variable Storage Slots

Effects of New Technology

Total Cost

$

Labor

C1

Space Utilization

Percent Variable

V1


Cost of Fixed vs Variable Storage Slots

Effects of New Technology

$

Total Cost

Labor

C1

C2

Space Utilization

Percent Variable

V1

V2


Warehouse Layout 

Angling vs On-the-Square

Fixed vs Variable Slots

Space Loading Techniques

Item Popularity

Item Size

Cube per Order Index

Family Groupings

Linear Programming

Simulation


Functions of Packaging

  • Marketing

    • Information

    • Promotion

      Logistics

    • Containment

    • Protection

    • Apportionment

    • Unitization

    • Convenience

    • Communication


Postponement

What is it?

Why do we do it?

Examples


Postponement

What is it?

A delayed differentiation strategy to reduce uncertainty and cost while satisfying customer needs.

Activities in the supply chain are delayed until a demand is realized.

Bucklin (1965) Model of Postponement /Speculation


Postponement

Why do we do it?

It has the potential to improve responsiveness while reducing inventory, transportation, storage, and obsolescence.

Insufficient inventory early in the product cycle can cost market share.

Products at the end of life cycle lose value quickly and risk obsolescence, which can lead to large inventory write-offs.


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