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The Role of Facilities in Supply Chain Management

The Role of Facilities in Supply Chain Management. Making Basic Warehousing Decisions. A Basic Conceptual Rationale. Warehouse – a point in the logistics system where a firm stores or holds raw materials, semifinished goods, finished goods for varying periods of time.

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The Role of Facilities in Supply Chain Management

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  1. The Role of Facilities in Supply Chain Management Making Basic Warehousing Decisions

  2. A Basic Conceptual Rationale • Warehouse – a point in the logistics system where a firm stores or holds • raw materials, • semifinished goods, • finished goods for varying periods of time.

  3. Value –Adding Rules Consolidation Product mixing Service to customers Contingency protection Smooth operation Trade-Off Areas Transportation Order filling Lead times Stock outs Production Warehouse Value-Adding Rules

  4. Transportation Consolidation INBOUND LOGISTICS SYSTEM Supplier Volume Shipment Supplier Plant Warehouse Supplier Supplier OUTBOUND LOGISTICS SYSTEM Plant Market Warehouse Volume Shipment Plant Market Warehouse Plant

  5. Product Mixing • Stores various types of products • Product line mixture • Different colors • Different styles • Etc. • Stores various raw materials • Optimize transportation costs • JIT

  6. PRODUCT MIXING Plant 1 Products A & B Customer X A B C Plant 2 Products C & D A D F Customer Y Warehouse B C E Customer Z Plant 3 Products E & F SUPPLY MIXING Raw A Raw B A B C D Warehouse Plant Vender C Vender D

  7. Cross Docking • Facilitates product-mixing function • Products moved to waiting trucks instead of being stored • Travelers at an airport making connections 11 12 13 14 15 16 17 18 19 20 1 2 3 4 5 6 7 8 9 10

  8. Value-Adding Roles • Service – having product available close by when needed (shortens time) • Contingencies – having items on hand to protect against vendor stock outs, strikes, transportation delays, strikes, etc. • Smoothing – balancing strategy that allows a company to reduce its manufacturing capacity investment (seasonal operations)

  9. Cost Comparison Public & Private Warehousing Total Cost Private Warehousing Public Warehousing Fixed Cost Element Throughput Volume

  10. Characteristics Affecting Ownership Decision Firm Characteristics Private Public • Throughput volume High Low • Demand variability Stable Fluctuating • Market density High Low • Special physical control Yes No • Customer service required High Low • Security requirements High Low • Multiple use needed Yes No

  11. Logistics Costs Related to Number of Warehouses Total cost Inventory cost Total cost Warehousing costs Transportation costs Cost of Lost sales Number of warehouses

  12. Factors Affecting the Number of Warehouses FactorCentralizedDecentralized Substitutability Low High Product value High Low Purchase size Large Small Special warehousing Yes No Product line Diverse Limited Customer service Low High

  13. Basic Warehouse Operations RECEIVING Scheduled carrier Unload vehicle Inspect for damage Compare to P/O INPUT WAREHOUSE PROCESS Storage Equipment Stock location Popularity Unit size Cube Put-away Identify product Identify storage Location Move product Update records Order picking Information Walk & pick Batch picking AS/R Shipping prep Packaging Labeling Staging SHIPPING Schedule carrier Load vehicle Bill of lading Record update OUTPUT

  14. You pay for this space (used or unused) Space is Vertical… …not just horizontal Utilization of a Warehouse’s Cubic Capacity

  15. General Objectives of Materials Handling • Increase effective capacity of warehouse • Minimize aisle space • Reduce number of times product is handled • Develop effective working conditions • Reduce movements involving manual labor • Improve logistics service • Reduce cost

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