CH 10 Warehousing PDF

CHAPTER 10
Warehousing Management
Copyright © 2015 Pearson Education, Inc.

The Role of Warehousing in a
Logistics System
• Warehousing
– refers to “that part of the firm’s logistics system
that stores products (raw materials, part, good-in-
process, finished goods) at and between points of
origin and point of consumption.”
Source: Douglas M. Lambert, James R. Stock, and Lisa M. Ellram, Fundamentals of

Logistics Management (New York: Irwin McGraw-Hill, 1998), Chapter 8.
Copyright © 2015 Pearson Education, Inc. 10-2

Warehousing Management
• Warehousing and transportation are substitutes for
each other, with warehousing having been referred
to as “transportation at zero miles per hour.”

Logistics System
Figure presents an example of trade-off between warehousing and transportation. Indicates that placing a warehousing facility
between procedure and consumers adds a new layer of cost in to the system (which is associated with warehousing). Moreover
warehousing facility generates shorter-haul transportation routes (from producer to facility, from the facility to warehouse); as a
general rule, short-haul transportation (a relatively short distance in terms of travel or the transport of goods) tends to be more costly
per mile than long-haul transportation routes.

Logistics System
• Key reason for warehousing
– because patterns of production and consumption do not
occurs at the same time
• Warehousing
– serves to match different rates or volumes of flow when
patterns of production and consumption do not occurs at the
same time
• Store finished goods - Canned fruit and vegetable production occurs
relatively short period of time, but sales are spread throughout the
year
• Store raw material -sometimes, larger quantities of goods are
purchased than can be consumed in a short period of time, and
warehousing space is needed to store the surplus product (e.g.,
automobile manufacturer might purchase extra amount of steel in
response to anticipated steel shortages)

Logistics System
• Warehousing helps/facilitates the regrouping function
in a supply chain – can take place in four forms
(accumulating, allocating, assorting, shorting out)
– Accumulating (bulk making)
• involves bringing together similar stocks from different sources
• E.g., department store buys large quantities of men’s suits from
several different producers.
– Allocating (bulk breaking)
• involves breaking larger quantities into smaller quantities
• E.g., department store might buy 5000 suits in size 42, an individual
store might only carry 15 suits in this size

Logistics System
• Warehousing facilitates the regrouping function in a supply
chain; can take place in four forms
– Assorting
• refers to building up a variety of different products for resale to particular
customers; putting together a variety of products to give a target market what it
wants.
• E.g., retailers or wholesalers who try to supply a wide variety of products for the
convenience of their customers.
• E.g., department store might want to supply individual stores number of different
suit size (36, 38, 49), and styles (2-botton, 3-botton)
– Sorting out
• separating products into grades and qualities desired by different target markets
• E.g., department store chain may sell $1000 men’s suit in high-end shopping mall,
$300 outlet.
• E.g., a wholesaler that specializes in serving convenience stores may focus on
smaller packages of frequently used products.

Logistics System
• Warehousing can be provided by
Warehouses,
Distribution centers,
– Warehouses Cross-docking facilities
• Emphasize the storage of products

• Primary purpose is to maximize the usage of available storage
space
• Tend to be more for extended stay purposes or pure storage.
– Distribution centers
• Emphasize rapid movement of products through the facility
• Stores products for relatively lesser periods compared to a
warehouse. Attempt to maximize throughput (amount of product
entering and leaving a facility in a given time period)
– e.g., store goods for short periods of time as orders are fulfilled

Logistics System
Examples of Warehouses Examples of Distribution Centers
Source: https://www.quora.com/

Logistics System
– Cross-docking facilities
• Defined as “the process of receiving product and shipping it
out the same day or overnight without putting it into
storage”
• Has grown due to the increased emphasis on time reduction
in supply chains
• Key benefits include improved service by allowing products
to reach their destinations more quickly as well as reduced
inventory carrying costs from less stock because of faster
product delivery

Logistics System
– Cross-docking facilities
• Is differentiated from distribution centers by the length
of time a product is in a facility (24 hours or less for
cross-docking facility)
• Design of the facility is an important consideration to
facilitate quick movement of product
– Should be designed with a minimal amount of storage
space and truck doors on two or more sides1
– Some designs include “H”, “I”, “T”, “U” and “E”
configurations
1DelBoro, “Cross-Docking Rediscovered.”

The Role of Warehousing in a Logistics System
Figure 10.2 shows I-shaped

cross-docking design –
rectangular, long, and narrow as
possible.

The Role of Warehousing in a Logistics System
Other possible cross-docs

include H, L, T, U, and E, and
their applicability depends on
the spatial configuration of the
land used to build the cross-
dock as well as the number of
docks to be used.

Public, Private, Contract, and
Multiclient Warehousing
• Organizations must also decide the
proper mix in terms of warehouse
ownership
– Owning
• Private warehousing
– Renting
• Public warehousing
• Contract warehousing
• Multiclient warehousing
• Private warehousing
– Owned by the firm storing goods in the facility
– Generates high fixed costs
– Should only be considered by companies dealing with
large volumes of inventory
– Largest uses of private warehousing are retail chain
stores
– Offers control to owner (e.g. can be constructed to
user specifications – storing steel beams, gasoline, 24
hours access, etc.)
– Assumes both sufficient demand volume and stability
so that warehouse remains full

• Private warehousing potential drawbacks
– High fixed cost of private storage
– Necessity of having high and steady demand
volumes
– Less attractive when interest rates are high
– May reduce an organization’s flexibility in respond
to changes in the external environment (e.g.,
changing demand patterns, mergers and
acquisitions)

• Public warehousing
– Serve all legitimate users
– Require no capital investment on the user’s part
– Allows users to rent space as needed
– Can be rented on a month-to-month basis
– Warehousing companies have responsibility for personnel decisions
and regulatory issues
– Offers more locational flexibility (e.g., can be important when
company is entering new markets)
– May provide specialized services (e.g., repacking larger shipments into
retail size quantities, product assembly, etc.)
– Warehousing labor safety practices monitored by Occupational Safety
and Health Administration (OSHA), from managerial perspective,
because OSHA standards are complex and lengthy, it can be quite
costly and challenging to comply with OSHA regulations

• Potential drawback of public warehouses

– Lack of control by the user, e.g., lack of space
availability when needed, may not open 24 hours
a day, no control where the goods are stored
within the facility

• Contract warehousing
– Another option of renting warehousing space, since
1990
– Also referred to as third-party (3PL) warehousing or
dedicated warehousing
– “a long term, mutually beneficial arrangement which
provides unique and specially tailored warehousing
and logistics services exclusively to one client, where
the vendor and client share the risks associated with
the operation.”1
1Warehousing Education and Research Council, Contract Warehousing: How It Works and How to Make It Work
Effectively (Oak Brook, IL: Author, 1993).

• Contract warehousing has evolved to include value-adding
services to a greater degree than public warehousing1
– Customization
– Reverse logistics
– Repair and refurbishment
• Contract warehousing simultaneously mitigates the negative

aspects and highlights the positive aspects of public and private
warehousing.
– Contract warehousing allows a company to focus on its core competencies, with
contract warehousing management provided by experts
– Contract warehousing also tends to be more cost effective than private
warehousing, with potentially the same degree of control because key
specifications can be included in the relevant contract (e.g., certain product should
not be stored on floor)
1William Hoffman, “Contract Warehousing Evolves,” Traffic World, January 31, 2005, 16.

• Multiclient warehousing
– Become popular in the first part of 21 century
– Mixes attributes of contract and public warehouses
– Limited number of customers (more than one, no more than
dozen)
– Services are more differentiated than those in a public facility
– Services are less customized than those in a contract facility
– Services are purchased through minimum 1 year contracts
– Are attractive to smaller organizations that don’t have sufficient
volumes to:
– Build their own storage facilities
– Use traditional one client contract warehousing services

Design Considerations in Warehousing
• General considerations
– Quantity and character of goods to be handled must be
known—product profiling
• Weight and dimensions, packaging, shelf life, temperature and lot
control requirements, and hazardous material requirements
– Know the purpose to be served
• Facility with low rates of product turnover should be laid out in a
manner that maximizes utilization of the cubic capacity of the
storage facility
• Facility that emphasizes rapid product movement with limited
time in storage should be configured to facilitate the flow of
product into and out of it

• Trade-offs
– Must be made among space, labor, and
mechanization with respect to warehouse design
– Spaciousness may not always be advantageous because
the distances that an individual or machine must travel
in the storing and retrieving functions are increased
– Lack of space conditions can lead to such inefficiencies
as the product damage that can be caused by forklift
puncture and movement bottlenecks caused by
insufficient aisle width

• Trade-offs
– Fixed versus variable slot locations for merchandise
• In fixed slot locations each SKU has one or more permanent
slots assigned to it
• Provide stability in order picking in the sense that company
should always know where specific SKU is located, however, this
may result in low space utilization
• Variable slot location involves empty storage slots being
assigned to incoming products based on space availability
• Generally results in more efficient space utilization, fro order
picking perspective it requires a near-perfect information system
because there must be flatness knowledge of each product’s
location

• Trade-offs
– Build out (horizontal) versus build up (vertical)
• General rule of thumb is that it is cheaper to build up
than build out
– Building out requires more land, which can be quite expensive
in certain geographic locations
– Building up may require special equipment, which can be
quite expensive – lift pallet
• Illustrates the importance of understanding inter-
functional trade-offs when thinking about warehousing
design

• Trade-offs
– Order-picking versus restocking (stock-replenishing)
functions
• Organizations must decide whether workers who pick
outgoing orders and those who are restocking storage
facilities should work at the same time or in the same area
• When order pickers and stock-replenishers are allowed to
work in the same area, fewer managerial personnel may be
needed but it may also lead to congestion due to the
number of workers in a relatively limited space. One
suggestion is for the two sets of workers to use different
aisles for their activities, but this requires a superior
information system

• Trade-offs
– Two-dock versus single-dock layout
• In two-dock system generally has receiving docks
on one side of a facility and shipping docks on the
other side, with goods moving between them
• In single-dock system, each and every dock can be
used for both shipping and receiving, typically
receiving product at one time of a day and
shipping it at another time

• Trade-offs
– Conventional, narrow, or very
narrow aisles
• Conventional (more than 12
feet wide), narrow (between
9.5-12 feet wide), very narrow
(less than 8 feet wide)
• As aisle space increases,
storage space decreases
• Easier to operate mechanical
equipment in wider aisles
• Reduce the chances of
accidents and product damage
with wider aisles
• Narrower aisles require
specialized storage and
handling equipment (more
expensive)

• Trade-offs
– Degree of warehousing automation
• Refers to utilizing mechanical or electronic devices to
substitute for human labor
• Examples include narrow aisle forklifts, automated
guided vehicles, automated storage and retrieval
systems, and radio frequency identification, and others
• Offers the potential to reduce labor costs and to
improve warehouse productivity
• Managers must ensure that automation results in
noticeable improvement in warehousing effectiveness
and efficiency

Example of Automated Storage and Retrieval
Example of Automated Guided Vehicles

• Trade-offs
– Other space needs
• Only approximately 10 percent of a facility’s cubic capacity is
actually occupied by product1
• Warehousing facilities set aside space for nonstorage
activities such as employee washrooms, lunchrooms, office
space, specialized storage for hazardous items, warehousing
supplies, pallet storage/repair facility, and many more
• When designing warehousing facility, it’s also important to
keep in mind external space-related needs – vehicles waiting
area, space for vehicle maneuvering (e.g., turning, backing
up), employee parking

Warehousing Operations
• Efficient and effective warehousing
management can be a difficult task
• Workforce motivation can be difficult because
the work can be:
– Repetitive in nature of the work
– Strenuous and physically demanding
– On occasion dangerous

• Some prominent operational issues include:
– Warehousing productivity analysis
– Safety considerations
– Hazardous materials
– Warehousing security
– Cleanliness and sanitation issues

• Warehousing productivity analysis
– Productivity is a measure of output/input
– Numerous productivity metrics can be used to assess warehouse
productivity, but not all are relevant to all facilities
– Examples of representative measures include:
§ Cases shipped per person
§ Product lines shipped per person
§ Pallets shipped per person
§ Average warehouse capacity used
§ Forklift capacity used
– Comparing current performance with previous period is good
enough? How about benchmarking with the industry standards?
– Automation, is it the only way to increase productivity? How
about improving work process?
• Safety considerations
– Warehouses,
distribution centers, and
cross-docking facilities
can be dangerous
workplaces
– Fatality rate in
warehousing is higher
than the average rate for
all industries

– Warehouse safety can be influenced by
governmental regulations
• In the U.S. safety standards have been set for
warehousing equipment and operations and are
enforced by OSHA
• Only trained and certified warehousing employees are
permitted to operate forklift, and forklift operators
must be recertified every three years
• OSHA also provides suggestions for improving
warehousing safety, such as prohibiting employees
from jumping from dock plate to dock plate

– Warehouse safety categories include:
• Employee
• Property
• Motor vehicles

• Employee
– “it’s cost more to recruit, train and replace worker than to
provide a safe environment”, warehouse professional’s advice
– Injured due to the improper lifting, trying to carry too heavy a
load
– Back and shoulder injuries are common among warehousing
personnel
– Back support belts and braces are becoming more widely used

• Property
– Warehousing facilities generate large volumes of waste
materials – empty cartons, steel strapping, and broken pallets
– Some materials used for packing highly flammable – plastic
pallets
– Waste materials, fire prevention must be properly handled

• Motor vehicles
– Forklift operations and equipment have been particularly
focus on government safety regulation
– ~ 100 employees are killed and 95000 injured while operating
forklifts in warehousing facilities
– Training and safety measure can reduce these incidents

• Hazardous materials “hazmat”
– Examples include:
• Explosives
• Flammable liquids
• Flammable solids
– Government regulations often require shipping
documents indicating the hazardous materials
– Government regulations require the use of safety
data sheets (SDS) for each hazardous product to
store in a facility

• Warehousing security
– Example potential threats include:
• Theft
• Pilferage
• Heat and humidity
• Vandalism
• Fire
• Loss of electricity
– Focuses on protecting products and preventing
their theft


• Cleanliness and sanitation issues
– Particularly important in many industries, such the
food service industry
– Can have a positive impact on employee safety,
morale, and productivity while also reducing
employee turnover1
– Requires common sense and due diligence
1Ned Bauhof, “Keeping It Clean,” Beverage World, July 2007, 77.

Copyright Notice
All rights reserved. No part of this publication may be reproduced, stored in a

retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written
permission of the publisher. Printed in the United States of America.

CH 10 Warehousing PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

CH 10 Warehousing PDF

Uploaded by

Copyright:

Available Formats

CHAPTER 10

Copyright © 2015 Pearson Education, Inc.

Source: Douglas M. Lambert, James R. Stock, and Lisa M. Ellram, Fundamentals of

Copyright © 2015 Pearson Education, Inc. 10-2

Copyright © 2015 Pearson Education, Inc. 10-3

Copyright © 2015 Pearson Education, Inc. 10-4

Copyright © 2015 Pearson Education, Inc. 10-5

Copyright © 2015 Pearson Education, Inc. 10-6

Copyright © 2015 Pearson Education, Inc. 10-7

• Emphasize the storage of products

Copyright © 2015 Pearson Education, Inc. 10-8

Copyright © 2015 Pearson Education, Inc. 10-9

Copyright © 2015 Pearson Education, Inc. 10-10

Copyright © 2015 Pearson Education, Inc. 10-11

Figure 10.2 shows I-shaped

Copyright © 2015 Pearson Education, Inc. 10-12

Other possible cross-docs

Copyright © 2015 Pearson Education, Inc. 10-13

Copyright © 2015 Pearson Education, Inc. 10-15

Copyright © 2015 Pearson Education, Inc. 10-16

Copyright © 2015 Pearson Education, Inc. 10-17

• Potential drawback of public warehouses

Copyright © 2015 Pearson Education, Inc. 10-18

Copyright © 2015 Pearson Education, Inc. 10-19

• Contract warehousing simultaneously mitigates the negative

Copyright © 2015 Pearson Education, Inc. 10-20

Copyright © 2015 Pearson Education, Inc. 10-21

Copyright © 2015 Pearson Education, Inc. 10-22

Copyright © 2015 Pearson Education, Inc. 10-23

Copyright © 2015 Pearson Education, Inc. 10-24

Copyright © 2015 Pearson Education, Inc. 10-25

Copyright © 2015 Pearson Education, Inc. 10-26

Copyright © 2015 Pearson Education, Inc. 10-27

Copyright © 2015 Pearson Education, Inc. 10-28

Copyright © 2015 Pearson Education, Inc. 10-29

Example of Automated Storage and Retrieval

Example of Automated Guided Vehicles

Copyright © 2015 Pearson Education, Inc. 10-30

Copyright © 2015 Pearson Education, Inc. 10-31

Copyright © 2015 Pearson Education, Inc. 10-32

Copyright © 2015 Pearson Education, Inc. 10-33

Copyright © 2015 Pearson Education, Inc. 10-35

Copyright © 2015 Pearson Education, Inc. 10-36

Copyright © 2015 Pearson Education, Inc. 10-37

Copyright © 2015 Pearson Education, Inc. 10-38

Copyright © 2015 Pearson Education, Inc. 10-39

Copyright © 2015 Pearson Education, Inc. 10-40

Copyright © 2015 Pearson Education, Inc. 10-41

Copyright © 2015 Pearson Education, Inc. 10-42

Copyright © 2015 Pearson Education, Inc. 10-43

1Ned Bauhof, “Keeping It Clean,” Beverage World, July 2007, 77.

Copyright © 2015 Pearson Education, Inc. 10-44

All rights reserved. No part of this publication may be reproduced, stored in a

Copyright © 2015 Pearson Education, Inc. 10-45

You might also like