Supply Chain Logistics Management

Chapter 13: Warehouse Management

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

ECONOMIC BENEFITS OF WAREHOUSING

• Consolidation

• Break-bulk or cross dock

• Processing/Postponement

• Stockpiling

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

WAREHOUSE BENEFITSCONSOLIDATION

Plant A

Plant B

Plant C

Consolidation Warehouses

Customers

A B C

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

WAREHOUSE BENEFITDISTRIBUTION ASSORTMENT

Plant A

Plant B

Plant C

Distribution Center

Customer A

Customer B

Customer C

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

WAREHOUSE BENEFITBREAK BULK OPERATION

Plant A Break Bulk Warehouse

Customer A

Customer B

Customer C

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

SERVICE BENEFITS OF WAREHOUSING

• Spot stock

• Assortment

• Mixing

• Production support

• Market presence

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

WAREHOUSING BENEFITSIN-TRANSIT MIXING

Plant A

Plant B

Plant C

Warehouse Transit

Mixing Point

Product D

Customer W

A-B-C-D

Customer X

A-B-C-D

Customer Y

A-B-C

Customer Z

A-B

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

WAREHOUSING BENEFITSMANUFACTURING SUPPORT

Vendor A

Vendor B

Vendor C

Manufacturing Warehouse

Assembly Plant

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

WAREHOUSING ALTERNATIVES

• Options– Private– Public– Contract– Other

• Select warehousing option with best strategic fit

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

SHARE OF WAREHOUSE BUSINESS

53%

14%

33%

Private

Contract

Public

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

DECISION FACTORS

• Strategy

• Type of need

• Information system

• Control

• Product characteristics

• Culture

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

STRATEGY

• Full line

• Centralized postponement

• Utilization of current capacity and resources

• Market presence

• Segment focused

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

USE OF ALTERNATIVES(Percent of Facilities)

Type of Firm Private Public Contract Grocery 28 58 14 Drug/HC 65 30 5 Chemical 49 42 9 Automotive 84 9 7 Electronics 84 7 9 Consumer Goods

57 38 5

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

WHO USES THE MOST FACILITIES?

Type of Company Number of Facilities Grocery 14 Drugs/Healthcare 8 Chemical 25 Automotive 6 Electronics 8 Consumer Goods 5

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

TYPE OF NEED

• Turn inventory

• Promotional inventory

• Speculative inventory

• Custom services and activities

• Seasonal

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

INFORMATION SYSTEM

• Communication capabilities

• System compatibility

• Handling technologies

• Activity based costing

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

CONTROL

• Customs and bonding

• Temperature

• Secrecy

• Lot control and recall

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

PRODUCT CHARACTERISTICS

• Handling characteristics

• Storage characteristics

• Speed of movement

• Flexibility

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

NEW WAREHOUSES WILL BE:

50%

28%

22%

Larger

Same

Smaller

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

CULTURE

• Unionization

• Expertise

• Industry experience and economies

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

VALUE-ADDED WAREHOUSING

• Packaging

• Refined unitization– Adjust pallets or shrink-wrap– Change containers

• Production specialization

• Product climatization

• Recall capability

• Market confidentiality

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

TRADITIONAL HANDLING

• Palletizing, put away, storage, replenishment, selection and loading for shipment

• Food industry products handled up to 17 times in SC and in DC 4.3 times

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

CROSS-DOCKING

• Products received, selected, repackaged, loaded for shipment w/o storage

• Enabled by conveyors & sortation equipment

• Used with general merchandise & food

• Fast moving products replenished using POS/planagram systems

• Used in large (800K to 1,200K sq.ft..) DCs

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

FOOD INDUSTRYLess Impediments to C-D

• Scanning data-<OC

• Better category mgt. & tracking systems

• Expansion forward w/mfg. pre-assembly multi-SKU pallets

• Bar-code scanning at case & pallet levels

• Advanced ship

• EDI transactions

• Automated replenishment programs

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

CROSS-DOCKING RESULTS

• MFG. added costs +$.10 /case

• Average distributor cost savings $.35 /case

• Break down store sorted cases saves $.50 to $.55/case

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

ECR PILOT C-D TESTSRETAIL & WHOLESALE

• <Inventory carrying costs

• <Storage & processing space

• <Product handling(damage, shrinkage, out of date products, returns, DC labor costs

• Improved sales through displays

• >Logistics savings to product sales support

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

STUDY OF C-D IN INDUSTRY

• Only 76% space of traditional

• Only 57% of direct labor

• Case/hour increases Up to 75%

• Excellent payback periods

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

CONTRACT WAREHOUSING

• Storage space, software systems, labor & management dedicated to a specific shipper’s logistics system

• Resources customized to a specific client’s requirements

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

DIFFERENTIATIONCONTRACT VS. PUBLIC

• Productivity sharing

• Business relationships

• Real estate arrangements

• Pricing agreements

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

INTEGRATED LOGISTICS SERVICES

• Mission-Provide services to meet all or significant part of a shipper’s total logistical requirements

• Titles-Third party logistics, contract logistics, logistics utilities, and integrated logistics service providers

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

CONSIDERATION OF QUALITATIVE DECISION FACTORS

Private Contract PublicPresence synergyIndustry synergyOperating synergyLocation flexibilityScale economies

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

TECHNOLOGY

• Remote Computing• Automatic TrailerUL• EDI• Radio Frequency• Sortation Systems• HiDensity Unit Load

Automatic Storage• Scanning • Pick-to-Light • M’tl Handling Auto.

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

WAREHOUSING IN FUTURETOPIC OF WORKSHOP

• Evolutionary cycles– Become paperless

– Become shelfless

– Become seamless

• External factors– Global networks

– People

– Third party

– Technology

• Reverse logistics

• Company examples

Logistics in Supply Chain Management, First Edition , Bowersox, Closs, and CooperCopyright© 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

CONCLUSION

• Warehouse strategy is evolving to more focused and flexible

• Technology and expertise are key warehouse alternative determinants

• Operating and industry synergies are more important factors