LOGISTICS AND TRANSPORTATION DESIGN

WAREHOUSE MANAGEMENT

Dr.Eng. Bonivasius Prasetya

Graduate School of Industrial Engineering
Mercu Buana University

The Nature and

Importance of Warehousing

In 1999, $75 billion, or 0.8 percent

of GDP was spent on warehousing.
The total supply of U.S. warehousing space in
1999 was 6.1 billion square feet, an increase
from 1990 of 700 million square feet of space.
Warehousing provides time and place utility for
raw materials, industrial goods, and finished
products, allowing firms to use customer
service as a dynamic value-adding competitive
tool.

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Management of Business Logistics, 7th Ed.

The Role of the Warehouse in the

Logistics System: A Basic Conceptual

Rationale

Functions of
The warehouse is
warehousing include:
where the supply
Transportation
chain holds or stores
consolidation
goods.
Product mixing
Cross-docking
Service
Protection against
contingencies
Smoothing

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Management of Business Logistics, 7th Ed.

Warehouse Value-Added Services

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Management of Business Logistics, 7th Ed.

Warehouse Value-Adding Roles

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Management of Business Logistics, 7th Ed.

Transportation Consolidation

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Management of Business Logistics, 7th Ed.

Supply and Product Mixing

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Management of Business Logistics, 7th Ed.

Basic Warehouse Decisions:

A Cost Trade-off Framework

Ownership
Public versus contract versus private
Centralized or Decentralized Warehousing
How many
Location
Size
Layout
What products where

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Management of Business Logistics, 7th Ed.

Basic Warehousing Decisions

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Management of Business Logistics, 7th Ed.

The Ownership Decision

Chapter 8

Public warehousing
costs mostly all
variable.
Private warehousing
costs have a higher
fixed cost component.
Thus private
warehousing virtually
requires a high and
constant volume.

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The Ownership Decision

Factors to consider
Throughput volume
Stability of demand
Density of market area to be served
Security and control needs
Customer service needs
Multiple use needs of the firm

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Firm Characteristics Affecting the

Ownership Decision

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Public Warehousing

Rationale for Public Warehousing

Limited capital investment
Flexibility
Public Warehousing Services
Bonded warehousing
Field warehouses

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Public Warehousing

Public warehousing
regulation:
Liability
Receipts

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Public warehousing rates

based upon:
Value
Fragility
Potential damage to
other goods
Volume and
regularity
Weight density
Services required

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Contract Warehousing

Up 23% per year in 2000 to $20.4 billion.

Compensation for seasonality in products.
Increased geographical coverage.
Ability to test new markets.
Managerial expertise and dedicated resources.
Less strain on the balance sheet.
Possible reduction of transportation costs.
Other issues discussed in Chapter 11.
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The Number of Warehouses

Chapter 8

Factors Affecting the

Number of Warehouses
Inventory costs
Warehousing costs
Transportation costs
Cost of lost sales
Maintenance of
customer service levels
Service small quantity
buyers

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Table 8-3: Factors Affecting the

Number of Warehouses
Factor

Centralized

Decentralized

Substitutability

Low

High

Product Value

High

Low

Purchase Size

Large

Small

Special Warehousing

Yes

No

Product Line

Diverse

Limited

Customer Service

Low

High

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Basic Warehouse Operations

Movement
Receiving
Put-away
Order picking
Shipping
Storage
Stock location
Warehouse Management System
(WMS)

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Figure 8-6

Basic Warehouse Operations

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Figure 8-7

The Computerized Warehouse

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Warehouse Layout and Design

Chapter 8

Develop a demand
forecast.
Determine each items
order quantity.
Convert units into cubic
footage requirements.
Allow for growth.
Allow for adequate aisle
space for materials
handling equipment.

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Warehouse Layout and Design

Provide for the

transportation interface.
Provide for orderpicking space.
Provide storage space.
Provide recouping,
office, and
miscellaneous spaces.
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Figure 8-8

Warehouse Space Requirements

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Principles of
Warehouse Layout Design
Figure 8-9

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Warehouse Layout and Design

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Basic needs:
Receiving
Basic storage
area
Order selection
and preparation
Shipping

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Storage Plan
Based on Product Movement

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Warehouse Layout and Design

Layout and Design Principles:

Use one story facilities
where possible.
Move goods in a straightline.
Use the most efficient
materials handling
equipment.
Minimize aisle space.
Use full building height.
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Warehouse Layout and Design:

Layout and Design Objectives

Cubic capacity
utilization
Protection
Efficiency
Mechanization
Productivity

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Table 8-4: Warehouse

Productivity Metrics

Pounds or units per day

Employees per pound moved
Pounds unloaded per hour
Pounds picked per hour
Pounds loaded per hour
Percentage of orders correctly filled
Productivity ratio = pounds handled/day divided by
labor hours/day
Throughput = amt of material moved through the
system in a given time period

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