Practical Handbookof WarehousingF

Kenneth B. AckermanL8.Mfflmn,Co.Cohmbus, OH

KLUWER ACADEMIC PUBLISHERSBOSTON/DORDRECHT/LONDON

Contents

FOREWORD . vACKNOWLEDGMENTS vii

Background of the Warehouse Industry

1 THE EVOLVING ROLE OF WAREHOUSING 3History 3Warehousing in the Industrial Era 5Warehousing in the Age of Information 6The Changing Role of Human Resources Management . . . 7Warehousing as Part of a Logistics System 10Globalization of Warehousing 10A Profile of Tomorrow's Warehouse 12

2 THE FUNCTIONS OF WAREHOUSING 13Functions of Warehousing 13Warehousing Alternatives 15Cost Structure 16The Balance Between Risk and Costs 18The Changing Values of Warehousing 19Elements of Warehousing: Space Equipment, and People . . 20

3 THE PROS AND CONS OFCONTRACT WAREHOUSING 23The Historical Perspective 24Is the Contract Primarily for Lending Institutions? .,. . . . 25The "Evergreen" Contract 26The Pricing Challenge in Contracts 27Contracts and Stability 29

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4 WAREHOUSING AND CORPORATE STRATEGY . . .31A Mission Statement for Warehousing v 31The Make or Buy Decision 32Dealing with Growth 33What Business Are You in—Or, Should FormFollow Function? 34Motives for Contracting Out 35

The Elements of Warehouse Management

5 COMMUNICATIONS AND ELECTRONICDATA INTERCHANGE 39Warehousing Forms 40Damages 44Stock Status Information 44Communications and Order Picking 44Dealing with Complaints 45Developing a Standard Procedure 45EDI—How it Looks from the Warehouse 46Justification for EDI 46How Does It Work? 47How Widely Has EDI Been Accepted? 49The Future of EDI 49

6 PACKAGING AND IDENTIFICATION 51Functions of a Package 51How the Package Affects Warehousing 52Effect on Stacking 53Packaging for Unitization 55Identification 55Container Handling 56Package Design 56Choosing a Contract Packager 58A Series of Compromises 60

7 TRANSPORTATION .63Carrier Selection 63The Bill of Lading 65

CONTENTS

Shipper's Load and Count 65Released Valuation , 66Terms of Sale—F.O.B 66Dealing with Claims 67The Special Problem of Hazardous Materials 69Integrated Logistics 69

8 ACCOUNTABILITY 71Title ." 71Inventory Responsibility 74Product Liability 75Insurance 76Summary of Claims Procedures 77

9 STARTING-UP OR MOVING AWAREHOUSE OPERATION 79Reasons for Finding Another Warehouse 79Options for Your Next Warehouse 80Requirements Definition 81Finding the Best Location 81Architectural Features 83Estimating the Cost of Moving 84Cost of Transferring Each Load 85How Long Will It Take? ., 86Communications 87Other Communications 88Opening the Relocated Warehouse 88

10 AUDITING WAREHOUSE PERFORMANCE 91Quantifying Warehouse Space 92Quantifying Equipment Utilization 94Quantifying Productivity of People y. . . 94Qualitative Measures 95Tracking Accuracy 97Account Profitability 98

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Real Estate Aspects of Warehousing

11 FINDING THE RIGHT LOCATION 103Location Theory 103Outside Advisers 104Requirements Definition 106Location Models 107The Final Selection Process 112

12 BUILDING OR REHABILITATINGYOUR WAREHOUSE 113The Floor 114Structural System and Roof 115Docks and Drive Areas 116Illumination and Heating 117Foundations and Building Heights 118Wall Panels 118Interior and Exterior Finish 119The Rehabilitation Alternative 119Planning for Future Uses 120

13 THE 21ST CENTURY LOGISTICS FACILITY 121Some Definitions and Concepts 121Who Uses Logistics Facilities? 122Regional and National Differences 123The Changing Players in Logistics 124Seven Megatrends 125The Location Decision 127The Building Design 129Operational Changes 130Financial Considerations 131Conclusion and Recommendations 133

Planning Warehouse Operations

14 PLANNING FOR FUTURE USES 137Design Structure for Versatility 137Changes in Basic Function 138

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Internal and External Changes 139Managing Change 140

15 SPACE PLANNING 143Sizing the Warehouse 143Storage Requirements 144Interaction of Storage and Handling Systems 144Stock Location Systems—Fixed versus Floating Slots . . 144Family Groupings 146A Locator Address System 147Cube Utilization 148Lot Size 148Reducing Aisle Losses 149Reducing Number of Aisles 150Managing Your Space 150

16 PLANNING FOR PEOPLE AND EQUIPMENT 153The Process of Making Flow Charts 153The Best Sequence 156"What I f Questions 158The Critical Role of the Supervisor 159Planning for Equipment Use 162

17 CONTINGENCY PLANNING 165Strategies 166Trigger Points . 166Planning for the Impact of Strikes—Your Own Firm's asWell as Others' 167Strike Against Suppliers 168Strike Against Customers 168Trucking Strikes 168Charting the Planning Process 169Planning Steps . 169

18 POSTPONEMENT > 173Background of Postponement 173Types of Postponement 174Postponement of Commitment 174

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Postponement of Title Passage 175Postponement of Branding v 176Postponement of Consumer Packing 176Postponement of Final Assembly 177Postponement of Blending 177Increased Warehouse Efficiency 177Potential Challenges 179Postponement in the Warehouse 180

19 SELECTING A THIRD-PARTY OPERATOR 181A Four Step Process 182Evaluation Criteria 183The Contract 184Managing a Continuing Relationship 186

Protecting the Warehouse Operation

20 PREVENTING CASUALTY LOSSES 191Types of Casualty Losses 191Controlling Fire Risks 192Wind Storm Losses 195Flood and Leakage 195Mass Theft 196Vandalism 196Surviving an Insurance Inspection 196Plant Emergency Organizations 198

21 "MYSTERIOUS DISAPPEARANCE" 201Electronic Detectors and Alarms 201Door Protection Alarms 202Grounds Security 203Seals ,204Storage Rack 204Controlling Collusion Theft 204

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Physical Deterrent 205Restricted Access v 205Confirming Employee Honesty 206Giving and Checking References 208Other Collusion Theft Controls 209Marketability of Product 210Hiring Honest People 210Using Supervision for Security 211Procedures to Promote Security 211Customer Pick-Ups and Returns 212Security Audits 213

22 SAFETY, SANITATION, AND HOUSEKEEPING 215Accidents in the Warehouse 215Common Sense for Common Warehouse Operations . . 217Redesigning Lifting Tasks 218Training 219Safety Behavioral Factors 220Manual Handling and Safety 221Management's Role 221Sanitation 222Excellence in Housekeeping 223Benefits 225

23 VERIFICATION OF INVENTORIESAND CYCLE COUNTING 227Purpose of Inventories 227Inventory Carrying Cost 228Benefits of Improvement 228Problem Areas 228How Can a "Physical" Be Improved? 229Incentives 230Managing the Inventory-Taking Job 230Controlling the Count y. . 233Reconciliation . 233Eliminating Inventory Errors by Cycle Counting 234

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Cycle Counting, Another Approach 239What Does the Future Hold? 240

The Human Element

24 ORIENTATION AND TRAINING 243Some Training Examples 246Training Lift-Truck Operators 246Why Training Courses Fail 248Mentoring 249Mentoring in the Warehouse 252Goals of Training 254

25 LABOR RELATIONS 255Creating a Union-Free Environment in the Warehouse . . 255An Example 257Public Warehousing Alternative 257Public Warehouse Strikes 258Using Subcontractor Warehouse Services 258Transportation Strikes 259Inventory Hedging 259Turning from Union to Union-Free 259Preemployment Screening 260Employee Complaints 262The Role of the Supervisor . 263Arbitration Standards Pertaining to Discharge 263The Essence of Union-Free Management 265

26 MOTIVATION 267Barriers to Productivity 267Who Gets the Incentives? 268Union Attitudes 268Installing and Designing the System 269Pitfalls 271The Role of the Supervisor 271The Importance of Listening 272Feedback 274

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27 IMPROVING PEOPLE PERFORMANCE 277Maintaining Warehouse Discipline , 277Peer Review—A New Approach to Discipline 279The Interviewing Process 281Substance Abuse in the Warehouse 288Job Performance Appraisal 291Promotion from Within 292Pride in the Company 293

Productivity and Quality Control

28 MAKING WAREHOUSING MORE EFFICIENT 297Establish Targets for Improvement 297Forecasting 298Reduce Distances Traveled 298Increase Unit Load Size 300Seek Round-Trip Opportunities 300Improve Cube Utilization 301Free Labor Bottlenecks 302Reduce Item Handling 303Improve the Packaging 303Forces for Gain in Productivity 303

29 MONITORING PRODUCTIVITY 307Is Your Warehouse Economical? 309Monitoring Public Warehouses 315Implementation 322Guidelines for Measurement Systems 322

30 SCHEDULING WAREHOUSE OPERATIONS 325Scheduling for Peak Demand 326Why 40 Hours Is No Longer Enough 326A New Kind of Work Week 326

31 CUSTOMER SATISFACTION— 'THE ROLE OF THE WAREHOUSE 331Who Is YOUR Customer? 331

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Why Do Something Well That You Should Not BeDoing At All? 332The Importance of the Customer's Customer 332How Will You Use What You Learn? 334

32 IMPROVING ASSET UTILIZATION 337Space Utilization 337Energy Utilization 337Equipment Utilization 340The Equipment Utilization Ratio 340Improving Performance 341Lift-Truck Rebuild Program 342Key Points of the Rebuild Program 343The Value of the Program 344Inventory Performance 345The Management Factor 346Why Measure? 346Danger Signals 347Inventory Turnover and Distribution Analysis 349Case History 350An Action Plan—And Potential Benefits 354Summary 355

33 "JUST-IN-TIME" AND ITS VARIATIONS 357J IT in M a n u f a c t u r i n g 3 5 8J I T in Serv ice S u p p o r t . . . . 7 . 3 5 8Q u i c k R e s p o n s e 3 5 9Efficient C u s t o m e r R e s p o n s e and O t h e r V a r i a t i o n s . . . . 3 6 2

34 WAREHOUSING COSTS 365Costs Related to Function 365Developing a Cost for Warehouse Labor 366Justifying Purchase of Equipment 366Establishing a Value of Inventory 368Cost of Goods At Rest 370The Influence of Inventory Turns 371The Influence of Warehouse Layout 371Cost of Goods in Motion 372

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35 MANAGEMENT PRODUCTIVITY 377Defining Management 377Why Warehousing Is Different 378The Effective Manager 378Measurement Tools for the Manager 379The Critical Tasks of a Manager 381The Manager's Hardest Job 384The Buck Stops Here 385How Good Are Your Warehouse Supervisors? 385The Supervisor Promoted from Within 387The Importance of Clarifying Expectations 387

36 REDUCING ERRORS 389The Value of Order Checking 389Order-Picking Errors 390Order-Taking Errors 391A Good Item Location System 391Clear Item Identification 392Clear Description of Quantity Required 393Order Identification 394"Good" Order-Picking Document 394Other Factors to Consider 397Personnel Factors 398Identification with Work 399Posting Error Rates , 399Using Case Labels 399"Picking Rhythm" 400

The Handling of Materials37 RECEIVING AT THE WAREHOUSE 405

The Process: Eleven Steps 405Physical Flow 408Variations in the Receiving Process 408Equipment 410Locating the Receiving Function .411Scheduling of Warehouse Receiving 413Pitfalls of Receiving 414

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38 SHIPPING 417Unit Loads 417Doors Versus Time 418Dealing with Shipper's Load and Count (SL&C) 418Controlling Damage Claims 423Customer Pick-Ups 423

39 CROSS-DOCKING IN THE WAREHOUSE 425Success Factors 426Pricing 430Forms 431Achieving the Goal 432

40 SPECIALIZED WAREHOUSING 433Temperature-Controlled Warehousing:The Essential Differences 433Hazardous Materials Warehousing 438State and Local Building Inspectors 440Fulfillment Warehousing 442Household Goods Storage 444Modernization 444Diversification 445Summary 447

41 ORDER-PICKING 449Four Kinds of Order Picking 449Quality in Order-Picking 450Order-Picking Forms 450Systems for Order-Picking 451Fixed versus Floating Slots 452Order-Picking Methods 453Single-Order versus Batch Picking 453Zone System of Picking 455Designing Your Order-Picking System 455Summary 460

42 STORAGE EQUIPMENT 461Defining the Job 461Improving Storage with Racks 462

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Reducing Number of Aisles 463Other Types of Pallet Rack t 464Live Storage—Gravity Flow Rack 465When to Use Flow Racks 466What Flow Racks Will Not Do for You 467The Carousel—It's More Than a Merry-Go-Round . . . . 467Conveyor Systems 470Types of Conveyors 471The Automatic Guided Vehicle Systems(AGVS) Alternative 472Summary . 472

43 MOBILE EQUIPMENT 473Choosing Lift Trucks 473Operator Location 474Types of Lift Attachments 475Conventional or Narrow Aisle Trucks 476Brand Selection 476Automatic Guided Vehicle Systems 481What to Look for in Mobile Equipment 484

4 4 A P P R O A C H I N G W A R E H O U S E A U T O M A T I O N . . . 485The Relevance of Technology to Warehouse Operations . . 486The Benefits of Automation 489The Risks of Automation 490In Conclusion '. 493

45 PALLETS AND UNIT LOADS 495Standardization 495The Problem with Pallets 497New Kinds of Pallets 498Alternatives to Pallets 500Tradeoffs in Unit Handling 502New Ways to Use Pallets 504

46 DEALING WITH DAMAGE .' . . 507Causes of Damage in Physical Distribution 507Disposal of Carrier Damage 508

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Concealed Damage 509Warehouse Damage 509Reducing Warehouse Damage 510Recooperage and Repair 511Protecting Damaged Merchandise 512Storage of Damaged Products 513Loss and Damage Guidelines 513Damage Control Ratios 514Damaged Loads Ratio 514Preventing Warehouse Damage: A Questionnaire 515

47 REVERSE LOGISTICS IN THE WAREHOUSE 517Three Reasons for Returns 517The Role of the Warehouse Operator in Returns 519Reconfiguring the Warehouse for Returns 520Security Issues 520Reconditioning and Repackaging 521Running a Warehouse in Reverse 521Keeping it Simple 523

Handling of Information

48 CLERICAL PROCEDURES 527Customer Service Standards . 528Location of Clerical Center . 528Office Environment 529Organizing the Clerical Function 529Interaction with Marketing ; 530Manual and Electronic Data Processing 531Control of Automation 532Measuring Clerical Costs 532Management Information 532

4 9 COMPUTERS A N D WAREHOUSE MANAGEMENT . . 5 3 5Some Definitions 535Hardware versus Software—Then and Now 536So Which Comes First—Hardware or Software? 537

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Choosing Warehousing Software 538Barriers to Implementation 539Choosing a Warehouse Management System 539Selecting a New System 540How Do You Locate the Right SoftwareCompany or Package? 542How Long Does Implementation Take? 543Summary 545

50 ELECTRONIC IDENTIFICATION 547Bar Codes—What They Are and How They Work . . . . 547Scanners 548Contact and Noncontact Readers 551Printing Bar Codes 552A User's View of Bar Coding 552What Will Bar Coding Do for Me? 554The Pitfalls 555The Training Challenge 557Bar Coding and Luddites 558The Future of Electronic Identification 559

ENDNOTES 561ABOUT THE AUTHOR 565INDEX 567

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