Chapter 7: Warehouse and Material

Handling

1. Overview
2. Warehousing Activities
3. Inventory Record System
4. Warehouse Planning
5. Layout
6. Material Handling

1
 1. Overview
 Other names: distribution
center, logistics center.

Amazon warehouse
(Source: http://www.lakelandedc.com/)
Incoming trailers
Outbound trailers
 Aims of Warehousing
To support the broader logistics function by giving a
combination of high customer service and low costs.
Specific aims include:
 Providing and giving secure necessary storage.
 Keeping storage in good condition and with minimal damage.
 Efficient and low – cost operations with high productivity,
resources utilization: movements, sorting, picking, consolidating
deliveries.
 Giving safe working conditions, and compliance with regulations.
 Giving high customer service.
 Factors in Warehouse Design
 Warehouses are expensive to run and need careful
planning.
 Important factors in choosing the best size for a warehouse.
 Total throughput
 The number of products using the warehouse
 The type of demand for each product, how much it varies, average
order size, and so on
 Physical features of the products, particularly size and weight
 Special storage conditions, such as climate control, packaging etc.
 Target customer service level
 Lead times from suppliers and promised to customers
 Economies of scale
 Type of material handling equipment
 Layout of storage and related facilities.
 Ownership
 Private warehouses are owned or leased by an organization
as part of its own supply chains.
 Public warehouses: independent business, charging users a
fee.
 Types of public warehouses: bonded warehouses, cold
stores, bulk storage, tankers…
 Benefits of public warehouse: flexibility, avoiding large capital
investment, easy access to a wider geographical area, short-
term tests, use of economies of scale to reduce warehousing
costs, consolidating loads with other organizations to reduce
transport costs, high quality and efficient service
Meeting demand with a mixture of
private and public warehouses
Break-even analysis for public/private
warehouses

BACK TO MAIN
 OWNERSHIP
Many organizations own and run their own warehouses.
But for small organizations this would be both difficult and
expensive, so they use facilities provided by specialized
warehousing companies.
 Even large companies can benefit from this arrangement, so
they have a basic choice between private and public warehouses.
Private warehouses are owned or leased by an organization as
part of its own supply chains. The organization runs its own
warehouses to support its main operations. This gives greater
control over a central part of logistics, and allows integration of
warehousing with the broader activities of logistics.
 Ownership

A public warehouse is run as an independent

business, which makes money by charging users a
fee.
There are many types of public warehouse, including
bonded warehouses, cold stores, bulk storage, tankers
and various specialty stores. The facilities available
are generally so flexible that an organization can get,
within reason, any facilities that it needs. There are
also many arrangements for their use.
 Benefit of public warehouses
The main benefit of public warehouses is their flexibility. They can
be used to cover short-term changes in demand without buying or
disposing of facilities. Some other benefits include:

● flexibility to deal with changing demand, perhaps due to seasonality

● ability to supply skills and experience that the organization does not
have internally
● access to the latest equipment and practices
● avoiding large capital investment, giving higher return on investment
● easy access to a wider geographical area
 Benefit of public warehouses

● allowing short-term tests of working in new areas

● use of economies of scale to reduce warehousing
costs
● consolidating loads with other organizations to reduce
transport costs
● guaranteed high quality and efficient service
● flexibility to deal with changing conditions, removing
risks from dated practices and technology.
Common Warehouse Issues:
Ground Storage
Common Warehouse Issues:
Honeycombing
Common Warehouse Issues:
Stacking Items Above 3
Levels are Difficult Reached
Common Warehouse Issues:
Non-rigid Items
 Common Warehouse Issues:
Accessibility to items from both ends of
aisles is preferred to facilitate FIFO
 Common Warehouse Issues:
Partial Load Pallets Eliminate Vertical Space
Utilization
Common Warehouse Issues:
Safety Issues
Common Warehouse Issues:
Forklift Issues
 2. Warehousing Activities
Inbound
 Receiving
 Put Away
Outbound
 Order Processing and Picking
 Checking, Packing, and Shipping
Major operations in a DC or warehouse
Receiving Function

Unload/stage Inspect Put Away

Cross Storage
Dock Function

Shipping Function

Load Pack Order Pick

Avg Operation
Cost 55%
Receiving
 Tasks
 Check, inspect, unload, record,
 Facilities
 Docks, Lift trucks, forklift
 Computer terminals
 Decisions
 Dock design
 Schedule of arrivals
 Priorities
 Problem handling
 Cost ~ 10% of operation cost
 Putaway
 Tasks
 Move pallets or cases to storage
locations
 Facility
 Pallet truck
 Lift truck
 … more in following slides
 Decisions
 Where
 When
 Equipment 2-pallet pallet truck
 WMS systems
 Cost ~ 15%
Order Picking
Checking, Packing and Packaging
Shipping
Other Activities in Warehouses
 Key Warehouse Processes
 Receiving process: Receive Parts – Check quantity and quality (loop)
– System suggests put away locations (can be done manually also) -
Put away at respective locations – payment.
 Shipping process: Sales orders – Print picking tickets – Assign picker
– System specifies picking sequence – pick parts - packing and
checking - enter quantity and confirm - shipping
 Inventory control process: Reviewing – Planning (capacity, ordering)
– Ordering – Receiving – Checking – Updating.
 Other processes:
 Product Identity & Traceability
 Control of Inspection, Measuring and Testing process/equipment
 Control of Non-conforming Product
 Control Of Shipping Records
 Warehouse Management Systems
 A warehouse management system is basically just a software
to track and manage warehouse activities.
 Functions are
 Stock Locator Systems
 Shipping and Receiving
 Inventory Control 
 Order Selection
 Automated inventory replenishment
 Report Generation 
 Etc.
 3. Inventory Record System
 Technologies in use for automating data capture
 Linear or 1-D barcodes

 QR codes or 2-D barcodes

 RFID system:
 Bar-coding System
The bar code symbols: the AIM USD -2 standard
Elements of a bar code system: software
(generating/reading bar-codes), printer, operator,
scanner/decoder/reader, computer, database.
Wireless Systems
 RFID Technology (cont.)
 Active RFID:
 Battery powered: 3-5 years
 Higher storage capacities (512KB)
 Longer reading range (30-50m)
 Can be rewritten
 Devices in buildings: real-time location systems (RTLS)
 External devices: GPS systems
 Active RFID System:
 RFID Technology (cont.)
 Passive RFID:
 Do not require power
 Lower storage capacities (few bits to 1KB)
 Shorter reading range (3 – 10m)
 Usually Write-Once-Read Many/ Read Only tags
 Near Field Communication (NFC) tags: up to 10cm, Credit card  EPOS
system
 Passive RFID system:
 Costs and Benefits of RFID
 Costs = Tag cost + Reader cost + software cost + running costs
 Benefits in Supply Chain:
Shipping, Customs and Tariffs Tracing and Traceability Inbound and Outbound

• Take full advantage of free trade
agreements and zones
• Validate country of origin
• Create accurate export
documentation
• Increase 3rd party consolidation
efficiency
• Track defectives, recalls and returns
• Track product through processing
areas
• Track inventory throughout the
supply chain
• Track counterfeits
• Reduce manual receiving
• Reduce manual nature of audits
• Create electronic proof of delivery
• Improve outbound accuracy
• Eliminate claims
• Increase claims accuracy

Store Operations

• Improve PI accuracy
• Reduce shrink
Inventory Management DC Operations
• Cycle count
• Improve backroom-to-shelf
• Reduce carrying costs • Cycle count
replenishment
• Improved multichannel management • Increase pick/pack speed and
• Consolidate EAS technology
• Reduce dormant inventory accuracy
• Eliminate physical inventory counts
• Improve put away process
• Improve store to store transfer
• Reduce shrink
processes
RFID Application in Warehouse and DCs
 Addressing in Warehouse
1. Clearly mark items with an SKU identifier (internal code/number) and a
unit of measure (e.g., pack size: pair/dozen/barrel/pound/case):
2. Clearly mark location addresses on bins/slots/shelves/racks/floor
locations/drawers/and so on:
 Requirements: easy to understand, short, convey all needed
information
 Systems: numeric, alphabetic, alpha-numeric
 Location numbers need to be bar coded
3. Tie SKU numbers and location addresses together : Use a simple card
file system
4. Update product moves: manual tracking(stock movement reporting),
computerized approaches, or bar-coding coupled with radio frequency
scanners
Marking SKUs
Addressing Racks, Drawers, and Shelving
Addressing System
 Example
 Number of AISLES : 14

 Location Number : 9 characters

 Sample Location Number : 01-R-01-A

 01 : Aisle Number

 R : Rack Storage (‘R’ for rack and ‘G’ for ground storage)

 01 : Location Number (Odd if left of aisle entry, Even if right)

 A : Ground Level (A, B, C, D – 4 levels)

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 Example

02-R-01D 02-R-03D 02-R-05D 02-R-07D 02-R-08D 02-R-06D 02-R-04D 05-R-02D

AISLE - 02
02-R-01C 02-R-03C 02-R-05C 02-R-07C 02-R-08C 02-R-06C 02-R-04C 02-R-02C

Left Right
02-R-01B 02-R-03B 02-R-05B 02-R-07B 02-R-08B 02-R-06B 02-R-04B 02-R-02B

02-R-01A 02-R-03A 02-R-05A 02-R-07A 02-R-08A 02-R-06A 02-R-04A 02-R-02A

Aisle Entry

42
 AISLE - 12

12-G-001 12-G-004 12-G-005 12-G-008

AISLE - 13

13-G-001 13-G-004 13-G-005 13-G-008

Example

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 4. Warehouse Planning

Factors that need to be determined:

 Number of storage locations required
 Method of storing/retrieving products
 Assignment of items to locations
 Order picking
Cycle counting
 Storage Location Strategies
 The purpose of storage location strategies is to create procedures
that allow you to track product movement throughout the facility.
 Strategies:
 Memory: solely dependent on human recall. Storage
locations are limited in number, size, variety of items
stored
 Dedicated (Fixed) storage: Products are assigned to specific
locations
 Randomized storage: When a load arrives for storage it is placed
in the “closest” open feasible location
 Class-based dedicated storage: Dedicated storage is used for the
classes and randomized storage is used within a class.
Warehouse Capacity Planning
 Dedicated Storage
 The number of storage locations assigned to a product
must be capable of satisfying the maximum storage
requirement for the product.
 With multiproduct storage, the storage space required equals
the sum of the maximum storage requirements for each of the
products.
 Example
 Consider a simplified representation of a warehouse that
stores four products: 1,2,3,4. Daily demand and
replenishment quantities for the four products are given
below:

Product Daily Demand Replenishment

(pallet loads) Quantity (pallet loads)
1 2 8
2 5 40
3 2 12
4 1 12
 Solution
 The Cycle Time Tc = Least Common Multiple (LCM) of Time period Product 1 Product 2 Product 3 Product 4
intervals (4,8,6,12) = 24. 1 8 10 2 5
 The end-of-period storage requirements for 2 6 5 12 4
each product are
3 4 40 10 3
 Storage requirement for dedicated storage = 4 2 35 8 2
8+ 40 + 12 + 12 = 72 pallet loads
5 8 30 6 1
6 6 25 4 12
7 4 20 2 11
8 2 15 12 10
9 8 10 10 9
10 6 5 8 8
11 4 40 6 7
12 2 35 4 6
13 8 30 2 5
14 6 25 12 4
15 4 20 10 3
16 2 15 8 2
17 8 10 6 1
18 6 5 4 12
19 4 40 2 11
20 2 35 12 10
21 8 30 10 9
22 6 25 8 8
23 4 20 6 7
24 2 15 4 6
Maximum 8 40 12 12
 Randomized Storage

 Space Requirements: Equal to the maximum of the

aggregate storage requirements for the products.
 Example
Time period Product 1 Product 2 Product 3 Product 4 Aggregate
 Same example as in 1 8 10 2 5 25
2 6 5 12 4 27
dedicated storage. 3 4 40 10 3 57
4 2 35 8 2 47
Maximum aggregate 5 8 30 6 1 45
6 6 25 4 12 47
storage requirement 7 4 20 2 11 37
8 2 15 12 10 39
is 59 slots in time 9 8 10 10 9 37
10 6 5 8 8 27
period 20. Dedicated 11 4 40 6 7 57
12 2 35 4 6 47
storage required 72 13 8 30 2 5 45
14 6 25 12 4 47
slots. So an 15 4 20 10 3 37
16 2 15 8 2 27
improvement of 13 17 8 10 6 1 25
18 6 5 4 12 27
slots or 18%. 19 4 40 2 11 57
20 2 35 12 10 59
21 8 30 10 9 57
22 6 25 8 8 47
23 4 20 6 7 37
24 2 15 4 6 27
Maximum 8 40 12 12 59
 Comparison between dedicated
storage and randomized storage

Randomized storage typically requires less

space - but not always preferred
 Exercise
 Consider a simplified representation of a warehouse that
stores 2 products: A, B. Daily demand and replenishment
quantities for the four products are given below. Find number
of storage locations needed if the company follows dedicated
storage & randomized storage.

Product Daily demand Replenishment quantity

A 3 12

B 4 20
 Storage Assignment Strategies
A basic rule in assigning products to storage locations
is storing "better" products in the "better" locations in
the order picking system.
A "better location" is a location which provides faster
and more ergonomic access to the product stored. For
example, in a pallet flow rack, the pick-face that
corresponds to the direct front of the order-picker (also
called the golden-zone) is a better position than a pick-
face which the order-picker has to bend down to reach.
 Storage Assignment Strategies
 A measure of "goodness" of an item could have been the frequency
that it is requested. If an item is requested frequently, it is logical to
keep that item in an easily-accessible location. But if the item is too
heavy, it may be too much time consuming to replenish that item to
that favored location.
 Another measure of "goodness" for an item is occupying smaller
space. On the other hand if an item is requested very infrequently, it
is not necessary at all to assign it to a favored position, just because
it occupies little space.
 Another basic rule in assigning products to storage locations is taking
into consideration the dimensions. Cube matching of the items with
the storage locations is essential to eliminate space inefficiencies.
Shelf dimensions should be spacious enough to allow easy picking,
but tight enough to avoid unused space.
Cube Matching Concept
Assignment of Items to Locations
Assigning Products to Storage Locations: the
Simple Case
Storage Area

Dock Aisle

Storage Area
 Example
 The following information is given to different kind of goods
that is needed to store to the warehouse. Determine the
warehouse layouts that minimizes the load-distance scores
Department Trips to and from Area Needed
Dock (blocks)
1. Item1 280 1
2. Item 2 160 2
3. Item 3 360 1
4. Item 4 375 3
5. Item 5 800 4
6. Item 6 150 1
7. Item 7 100 2
 Solution
Because the departments have different area
requirements, we need to calculate the ratio of trips
to block spaces
Department Ratio Rank
1. Item1 280/1=280 2
2. Item 2 160/2 = 80 6
3. Item 3 360/1 = 360 1
4. Item 4 375/3 =125 5
5. Item 5 800/4=200 3
6. Item 6 150/1 = 150 4
7. Item 7 100/2 = 50 7
 Solution

The obtained layout is

Storage Area
3 5 5 6 4 2 7
Dock Aisle
1 5 5 4 4 2 7
Storage Area
 Assigning Products to Storage Locations
(cont): Equal demand
 Many costs of running a warehouse are fixed – such as
rent, local taxes, utilities, and depreciation.
 Some of these fixed costs are set by management policy,
such as the total investment in stock.
 The main variable cost comes from the details of the
layout, and depends on the time needed to locate items
and either add them to stock or remove them.
 When there are thousands of items in store, small
differences in the way they are arranged can give
markedly different service and costs.
 Example
A small store has a rack with nine colors of paint in five liter tins.
At one end of the rack is an issue area where the storekeeper works.
Weekly demand for the paint is as follows:

Colour Red Blue White Black Brown Green Yellow Grey Pink
Tins 150 210 1290 960 480 180 360 60 90

 If all paint is stored in bins that are 5 m wide, design a layout for the rack. Design a
layout if the size of bins varies with the weekly demand.
 Solution
 A reasonable aim: minimize the distance walked by the storekeeper, assuming that each tin of paint needs a
separate journey.
 The paint should be laid out so that colors with highest demand are nearest the issue area, so the layout
has paint in order white, black, brown, yellow, blue, green, red, pink and grey.

 Assuming that tins come from the middle of bins, the total distance moved by the storekeeper is:
= 2× (2.5×1290 + 7.5×960 + 12.5×480 + 17.5×360 + 22.5×210
+ 27.5×180 + 32.5×150 + 37.5×90 + 42.5×60) = 86,400 m (multiply by 2 since the picker has to come to take &
go out)

 If the size of bin is proportional to the weekly demand, and assuming that paint is taken from the middle of
the bins, the paint can be stored equally well in any order.
 Dedicated Storage :Assigning Products to
Storage Locations
Three factors:
 products
 represented by variable j
 total number of products = n
 storage locations
 represented by variable k
 total number of storage locations = s
 input-output (I/O) stations
 represented by variable i
 total number of i/o stations = m

If product j is assigned to storage location k, it is

represented by variable xj,k (xj,k = 1)
 Assigning Products to Storage Locations

 Time to travel from input point i to storage location k = ti,k

 Time to travel from storage location k to output point i = ti,k
 Total number of storage locations for product j = Sj
 Total number of S/R trips performed per time period for product
j = Tj
 pi,j = percent of total trips for product j performed from/to I/O
point i
 Expected time required to travel between storage location k
and I/O point i for product j = Tj/Sj * (pi,j * ti,k * xj,k)
 Assigning Products to Storage Locations
 The problem: Assigning products to slots such that function of the
distance traveled to store and retrieve the assigned products is
minimized.
n s
 The formulation: Minimize f ( x)   c j ,k x j ,k
j 1 k 1

Subject to:
n

x
j 1
j ,k  1; k  1, 2,..., s

x
k 1
j ,k  S j ; j  1, 2,..., n

x j ,k  (0,1) for all j and k

Tj Tj m
Where: c j ,k 
Sj
 j ,k 
Sj
p
i 1
t
i , j i ,k

 Solution: Formulate as a Transportation Problem

 Transportation Problem Solution:
Software Tools
Using “solver” functionality of Excel: for small
size problem only
Using commercial software such as LINGO,
CPLEX: Can solve for large size problems
 Example of Dedicated Storage
 Consider a simple situation involving 6 storage locations, two I/O points, and 3
products. Consider the storage rack face shown in the figure. A lift truck travels
along the aisle, stops and raises and lowers its forks to store and retrieve unit
loads of the products at the indicated (*) locations. The times require to travel
between the I/O points (*) and storage/retrieval locations (*) are as given in the
following table.
i k t i,k (sec) i k t i,k (sec)
4 5 6 1 1 5 2 1 45
* * * 1 2 15 2 2 25
1 2 3 * 1 3 25 2 3 5
* * * 1 4 20 2 4 60
I/O1 * I/O2
1 5 30 2 5 40
1 6 40 2 6 20
 In addition, the two I/O points are equally likely to be used for travel to/from the 6
S/R locations for all products and the number of storages and retrievals to be
performed per hour for three products are T1 = 4, T2 = 6 and T3 = 3; and the
required number of storage positions for each products are S 1 = 2 slots, S2 = 1
slot, and S3 = 3 slots.
 Solution
 From the given information, we have:
j,1 = 25 sec, j,2 = 20 sec, j,3 = 15 sec, j,4 = 40 sec, j,5 = 35
sec, j,6 = 30 sec, for j = 1, 2, 3.
 The result formulation of the transportation problem is:
Minimize f ( x)  50 x1,1  40 x1,2  30 x1,3  80 x1,4  70 x1,5  60 x1,6
 150 x2,1  120 x2,2  90 x2,3  240 x2,4  210 x2,5  180 x2,6
 25 x3,1  20 x3,2  15 x3,3  40 x3,4  35 x3,5  30 x3,6
Subject to:
3

x
j 1
j ,k  1; k  1, 2,..., 6

6 6 6

x
k 1
1, k  2;  x2,k  1;  x3,k  3;
k 1 k 1

x j , k  (0,1) for all j and k

 Solution
Using the transportation method, we have the
following solution:
1 2 3 4 5 6
1 50 40 30 80 70 60 2
Product 2 150 120 90 240 210 180 1 Number of slots per product
3 25 20 15 40 35 30 3
1 1 1 1 1 1 1
Maximum number of unit loads per slot
 Class-based Dedicated Storage Location

 Products are divided into three, four or five classes

based on their throughput (T)-to-storage (S) ratios.
 Example
 Consider a simplified storage problem involving the storage of
pallet loads of five canned vegetables: broccoli, beans,
cauliflower, corn and peas. The number of storage bays
required for each are 1, 3, 1, 2 and 3 respectively. The hourly
throughput requirements are 2, 15, 3, 20 and 60 respectively.
Ranking the products on the basis of throughput-to-storage
(T/S) ratio results in the following numerical assignments to
products: peas (1), corn (2), beans (3), cauliflower (4) and
broccoli (5). The layout of the storage region is shown, with the
average times required to store/retrieve loads assigned to the
various storage bays
Example
 Example
 Case 1: If dedicated storage is used -- similar to forming 5 classes
 One optimum assignment: assign peas to bays 4,5,6; corn to bays 9, 10; beans to bays 2,3,8;
cauliflower to bay 7; and broccoli to bay 1. The resulting travel time required to perform 100 S/R
operations would be (((30+15+15/3)*60) + ((30+30)/2)*20) + ((45+45+45)/3)*15) + (60*3) +(60*2) =
2775 seconds
 Case 2: 2 classes are used: 15 combinations are evaluated by T/S ranking method
 Option A : {(1),(2,3,4,5)} - total time for 100 S/R operations = 3000 seconds
 Option B : {(1,2),(3,4,5)} - total time = 2940 seconds (*)
 Option C : {(1,2,3),(4,5)} - total time = 3328.125 seconds
 Option D : {(1,2,3,4),(5)} - total time = 3550 seconds
 Case 3: 3 classes: 6 possibilities are evaluated by T/S ranking method:
 Option A: {(1),(2),(3,4,5)} - total time = 2820 seconds (*)
 Option B: {(1),(2,3),(4,5)} - total time = 2865 seconds
 Option C: {(1),(2,3,4),(5)} - total time = 2935 seconds
 Option D: {(1,2),(3),(4,5)} - total time = 2895 seconds
 Option E: {(1,2),(3,4),(5)} - total time = 2917.5 seconds
 Option F: {(1,2,3),(4),(5)} - total time = 3328.125 seconds
 Case 4: Four classes
 It is obvious that the best way to form four classes = {(1),(2),(3),(4,5)} - total time = 2775 seconds.
 Practice
 Consider the layout of 32 storage bays and one I/O point shown in the
figure below. Suppose that four products are to be stored using
dedicated storage. The storage bays are 15ft X 15 ft. The products
(oats, peas, beans and barley) have storage requirements of 16, 8, 5
and 3 bays respectively and throughput of 40, 30, 10 and 20
operations/day respectively.
 Determine the best way to form two classes for class-based storage
based on rectilinear travel.

I/
 Solution
 We have

 Expected distances to be traveled:

 Solution
 Possibilities:
{(Y),(P,O,B)}, {(Y,P),(O,B)},{(Y,P,O},(B)}
 {(Y),(P,O,B)}:
 Average distance for class I = [30+15+15]/3 = 20
 Average distance for class II = [2(105 + 90 + 75 + 60) + 2(90
+ 75 + 60 + 45) + 2(75 + 60 + 45) + 30 + 2(60 + 45 + 30)]/29
= 64.14
 Score = (64.14)(80) + (20)(20) = 5531.03
 {(Y,P),(O,B)}:
 Average distance for class I = [(5)(45)+(4)(30)+(2)(15)]/11 =
34.09
 Average distance for class II = [(1)(45)+(8)(60)+(6)(75)+(4)
(90)+(2)(105)]/21 = 73.57
 Score = (50)(34.09)+(50)(73.57) = 5383
 Solution
 {(Y,P,O},(B)}:
 Average distance for class I = [(6)(45)+(4)(30)+(2)(15)+(8)
(60)+(6)(75)+(1)(90)]/27 = 50
 Average distance for class II = [(3)(90)+(2)(105)]/5 = 96
 Score = (90)(50)+(10)(96) = 5460
 {(Y,P),(O,B)} provides the best score in two class classification.
So we select {Barley, Peas} in class I, and {Oats, Beans} in
class II.
 Turnaround time
 Apart from the layout of the storage areas, the efficiency of a warehouse
also depends on how quickly it deals with delivery vehicles.
 There are several measures of turnaround time, but the most common is
the time taken between a vehicle arriving (either delivering materials or
collecting them) and departing.
 Transport operators get paid for having their vehicles and drivers
moving, so they do not want them sitting idly in a warehouse during
loading or unloading.
 Everybody’s interest to minimize the turnaround time. Three
arrangements can help with this.
 First, orders can be assembled and waiting to move onto a vehicle –
when the vehicle arrives it is loaded quickly and moved on.
 Second, special loading and unloading equipment can be used to speed
operations. With, for example, rollers on vehicle floors a standard vehicle
can be loaded and unloaded in five minutes or less.
 Third, the bays can be laid out carefully to minimize congestion.
 Location of shipping and receiving
U shaped or cross docking configuration
 Receiving and shipping on the same side of the
warehouse
 Provides dock flexibility. If one experiences surge of
activity, can make use of additional doors from the other
function
Good
locations

I/
 Location of shipping and receiving
 Flow through configuration
 Receiving and shipping on opposite side of the warehouses
 Makes many storage locations of equal convenience
 More appropriate for extremely high volume
 Preferable when building is long and narrow

Good
locations I/O
 Order Picking
 Order Picking is the process of retrieving items
from storage in response to a specific customer
request.
Examples:
 a grocery warehouse: orders for retail stores are
selected once or twice a week.
 a drug store distribution center: the orders, consisting of
certain drugs are picked from the storage shelves by a
picker carrying a tote box.
 Retrieval Strategies
 Orders contain one or more items. It is important to know about the
structure of the orders (such as number of items per order, correlation
among items in an order), since it affects storage/retrieval strategies and
design of order picking systems. Simple plot of percentage of orders vs.
number of items in an order would give considerable insights.
 A very common strategy is batch-picking of small orders, that is picking
several orders in one travel. This can bring significant reductions in travel
time, which is the most significant part of total time spent in order picking.
Here is a simple example that illustrates the concept (red points are
locations of single-item orders, and blue ellipse represents the picker):
 Order Pickers Time Consumption
PICKERS TIME CONSUMPTION

Paperwork and Traveling

other activities
20% Searching

Extracting
Traveling
Extracting 55% Paperwork and other
10% activities
Searching
15%

Source: John J. Bartholdi, III, Steven T. Hackman, 1998

Goal - Contribute to efficient picker time utilization by suitable

Warehouse Design and WMS
 ‘Z’ Pick Pattern

A A A A A
IS IS IS IS IS
L L L L L
E E E E E

START Pickup Locations

 Order Picking Principles
• Task Interleaving & Task Management (combine processes of

picking and storing, etc.)

• Bulk store fast moving items (easy picking & replenishment)

• Combine pick tickets (Batch Processing)

• Item storage as per ABC Analysis

Picking Paths
 Travel time is a waste
 Reduce total travel time
 Sequence of the picks
 It matters!
 Identify the shortest route
 Help picker visualize
 The basic problem: Find the shortest path

A central depot and two possibilities for changing aisles,

at the front and at the rear of the warehouse
 The General Problem
 main aisle we refer to an aisle between the
front and rear end of the warehouse, going
through all blocks
 front aisle and the rear aisle do not contain
items, but can be used for changing aisles.
 cross aisle can be used to go from one
aisle to the next or from one block to the
next.
 Order pickers are assumed to be able to
traverse the aisles in both directions and to
change direction within the aisles
 Given that the order picker has to collect a
number of products in specified quantities
at known locations, in what sequence
should the order picker visit these
locations in order to minimize the distance
traveled?
 S-Shape Heuristic
 any aisle containing at least one item is traversed
through the entire length. Aisles where nothing
has to be picked are skipped.
 The order picking route starts at the depot. It goes
to the front of the main aisle closest to the depot,
that contains at least one item (1). This main aisle
is traversed up to and including the block farthest
from the depot, that contains at least one item (2).
 If the current block contains at least one item: Go
to the left most aisle containing items or go to the
right most aisle containing items, whichever is the
closest (3); go from one aisle to the next and
traverse any aisle containing items entirely; after
picking the last item, return to the front of the
block (4). If this block contains no items: Traverse
the aisle of this block, that is closest to the current
position. Repeat this procedure for all blocks until
the block closest to the depot has been
considered (5). Finally, return to the depot.
 Example
Find the shortest route of the following warehouse using
the S-shape heuristic
 Largest Gap Heuristic
 Similar to the S-shape heuristic, the order picking route starts at the depot; it goes to
the front of the main aisle closest to the depot, that contains at least one item;
traverses this main aisle up to and including the block farthest from the depot that
contains at least one item (1).
 On traversing the cross aisle (which is actually the rear aisle in this), each aisle is
entered as far as the ‘largest gap’ and left from the same side that it was entered (2). A
gap represents the distance between any two adjacent items, or between a cross aisle
and the nearest item. Thus, the largest gap is the part of the aisle that is not traversed.
 The last aisle of the block is traversed entirely, by which we arrive in the next cross
aisle (3). This cross aisle is traversed, while visiting the aisles of the blocks on both
sides of the cross aisle up to the largest gap. First the aisles on one side of the cross
aisle are visited (4) and thereafter the aisles on the other side (5). One aisle is again
traversed entirely to reach the next cross aisle (6). This may be either the left or the
right most aisle containing items, depending on which of the two gives the shortest
travel distance within the cross aisle.
 This process is repeated for all blocks containing items. If a block does not contain
items, then the aisle of this block, that is closest to the current position is traversed
entirely. After considering the last block, return to the depot (7).
Example
 Combined Heuristic
 This heuristic creates order picking
routes that visit every aisle, that
contains items, exactly once. The
aisles of each block are visited
sequentially, either from left to right or
from right to left.
 Similar to the S-shape and largest
gap heuristics, the order picking route
starts at the depot; it goes to the front
of the main aisle closest to the depot,
that contains at least one item;
traverses this main aisle up to and
including the block farthest from the
depot that contains at least one item.
 Combined Heuristic
 For each block we perform a small dynamic programming algorithm.
 Two states:
 the orderpicker is at the front of the block
 the orderpicker is at the rear of the block.
 6 transitions:
1. go from the current aisle to the next aisle along the front of the block and traverse
this aisle entirely, ending up at the rear of the block,
2. go from the current aisle to the next aisle along the rear of the block and traverse
this aisle entirely, ending up at the front of the block,
3. go from the current aisle to the next along the front of the block and do not enter
this aisle at all,
4. go from the current aisle to the next along the rear of the block and do not enter
this aisle at all,
5. go from the current aisle to the next aisle along the front of the block and traverse
this aisle up to the item farthest from the front and return to the front,
6. go from the current aisle to the next aisle along the rear of the block and traverse
this aisle up to the item farthest from the rear and return to the rear.
 Combined Heuristic
 Clearly, transitions (3) and (4) are only allowed if the aisle does not
contain any items. The cost of each transition is equal to the travel
time needed for the distance in the transition.
 The following figure depicts the 6 transitions. The current aisle is aisle
j, the next aisle is aisle j+1. The rear end of aisle j is denoted by aj
and the front end by bj.
 Example
Find the shortest route of the following warehouse using
the combined heuristic
 Aisle-by-Aisle Heuristic
 every main aisle is visited once. The
order pickers starts at the depot and goes
to the left most aisle containing items. All
items in this main aisle are picked and a
cross aisle is chosen to proceed to the
next main aisle. Again all items in this
main aisle are picked and the order
pickers proceeds to the next main aisle.
The aisle-by-aisle heuristic determines
which cross aisles to use to go from one
aisle to the next in such a way that the
distances traveled are minimized
 Optimal Algorithm

 This algorithm is described to

find shortest order picking
routes in a warehouse with
three possibilities for
changing aisles: at the front,
at the rear and somewhere in
between. This algorithm uses
dynamic programming to
solve the problem
 Reference

http://www.roodbergen.com/warehouse/
Cycle Counting/ Stock Taking

103
 Stock Taking

 To secure the accurate of inventory data is the

main duty of warehouse management.
 Stock information accuracy must be measured
and continuously improved.
 There are 2 main methods to measure the
stock information accuracy is Physical
counting & Cycle counting

104
 Stock Taking Process
Initiate Cycle Count/
Stock Take Request

Confirm
cycle count inv/
stock take
of all inv.

Prepare: plan, forms

Perform count
& verification

7. Stock adjustment fail Reconcile pass Update details

in ERP File doc
process Stock

105
 Inventory Record Accuracy - IRA

 Accuracy ≠ Absolute, includes acceptable error (

tolerance)
 An accurate inventory record ( Hit ) if
actual data = reported data ± tolerance
 IRA of the whole warehouse
IRA = (number of all accurate inventory records)
x 100%/(number of inspected records)

106
 How to Setup Tolerance?
 Based on the following factors:
 Amount quantity used/processed
 Inventory value
 Leadtime
 BOM levels/complexity
 Important degree
 ABC/Pareto Classification
 Important SKU will have low acceptance error level (small tolerance)

107
Practice: Determine IRA of ABC Company

AMG Company
Physical Inventory Tolerance
SKUs Class Count Record (%) Hit Miss
Toilet Menthol 700 B 94 100 ±2
Bath Menthol 5000 C 95 100 ±5
Bath Pro 5000 C 96 100 ±5
Floor Cleaner Spring 1L B 97 100 ±2
Floor Cleaner Menthol 1L B 98 100 ±2
Floor Cleaner Repel 1L B 99 100 ±2
Floor Cleaner Ylang 1L A 100 100 ±0
Floor Cleaner Lily 1L A 101 100 ±0
Floor Cleaner Menthol 5L C 102 100 ±5
Floor Cleaner Lily 5L B 103 100 ±2
Floor Cleaner Spring 5L C 104 100 ±5
Floor Cleaner Ylang 5L C 105 100 ±5
Glass Cleaner 800 A 106 100 ±0

A: ± 0%; B: ± 2%; C: ± 5%;

108
 Results
AMG Company
Physical Inventory Tolerance
SKUs Class Count Record (%) Hit Miss
Toilet Menthol 700 B 94 100 ±2 x
Bath Menthol 5000 C 95 100 ±5 x
Bath Pro 5000 C 96 100 ±5 x
Floor Cleaner Spring 1L B 97 100 ±2 x
Floor Cleaner Menthol 1L B 98 100 ±2 x
Floor Cleaner Repel 1L B 99 100 ±2 x
Floor Cleaner Ylang 1L A 100 100 ±0 x
Floor Cleaner Lily 1L A 101 100 ±0 x
Floor Cleaner Menthol 5L C 102 100 ±5 x
Floor Cleaner Lily 5L B 103 100 ±2 x
Floor Cleaner Spring 5L C 104 100 ±5 x
Floor Cleaner Ylang 5L C 105 100 ±5 x
Glass Cleaner 800 A 106 100 ±0 x

109
 Cycle Counting
Select sample from all SKUs
Determine counting frequency by day, week, month.
Calculate IRA of sample ~ IRA of warehouse
The maximum value is determined. From that, identify
the main reasons creating errors and analyze these
causes to improve IRA
 Cycle Counting is useful to improve IRA

110
Some Popular Cycle Counting
Methods

111
 Random Sample Cycle Counting
 Selects randomly samples to count: for example selecting randomly 50
SKUs in 1000 SKUs.

take a sample of 50 SKUs every day

Sampled "Hits" Accuracy
(%)
Monday 50 50 100
Tuesday 50 49 98
Wednesday 50 48 96
Thursday 50 48 96
Friday 50 49 98
Total 250 244 97.6

112
 ABC Cycle Counting
 Counting frequency is based on ABC classification, pay attention on
high value items.

Cycle Counting at Gizmo, Inc.

Cost Part Count Counts Counts
Class Numbers Frequency per Year per Day
A 2000 4/ Year 8000 32
B 3000 2/ Year 6000 24
C 5000 1/ Year 5000 20
Total 10000 19000 76

113
 5. Layout

Warehouse layout describes the physical

arrangement of storage racks, loading and unloading
areas, equipment, offices, rooms, and all other
facilities.
 Essential Elements in a Warehouse
● Arrival bay, or dock, where goods coming from suppliers are delivered,
checked and sorted
● Storage area, where the goods are kept as stock
● Departure bay, or dock, where customers’ orders are assembled and sent out
● Material handling system, for moving goods around
● Information system, which records the location of all goods, arrivals from
suppliers, departures to customers, and other relevant information.
A Common Warehouse Layout
 Layout of Racking
 Basic questions:
 What type of racking should be used?
 What is the best layout for the racking?
 Where should different items be stored on the racks?
 Recommended approach to design the layout:
 Forecast long-term materials demand  movements of materials into,
through and out of the warehouse.
 Compare available resources (equipment, space) for handling these
movements and storages.
 Design a general layout for the racking  assign materials to
appropriate locations (fast moving, chilled goods high value goods,
foods, chemicals.)
 Develop alternative layouts  choose the best Add details to give
final plans.
 Some Suggestions for Good Layouts
 Material Flow: Establish standard flow pattern that minimizes transit
time

STRAIGHT LINE FLOW ‘U’ FLOW ‘L’ FLOW ‘O’ FLOW SERPENTINE FLOW

 Smooth flow
 Simplify movements, eliminating or combining separate movements
where possible
 Have movements in straight lines on one floor
 Some Suggestions for Good Layouts
 Avoid Dead Ends In Aisles

 Give appropriate space for aisles – as narrow as possible to reduce non-

working space, but wide enough for equipment.
 Sufficient Aisle Width: Aisle width 12’ for easy forklift maneuvering
 Some Suggestions for Good Layouts
 Use high level storage where possible
 Consider using spare roof space for overhead movement of
materials.

‘Walk Thru Racks’ Vertical Space Left Unexploited

 Some Suggestions for Good Layouts
 Lighting: Maximum amount of natural lighting in the warehouse provides better
ergonomic work environment.

 Seek Many Alternatives: Best solutions are not obtained at initial design stage.
Develop possible alternatives and the best solution will result from iteration
within generated alternate solutions
 Offices must outside the main warehouse area
 Consider mezzanine floors for picking and administration
 6. Materials Handling
 MATERIALS HANDLING is concerned with the movement of
materials for short distances generally within a warehouse, or
between storage areas and transport.
 Objectives:
 Moving materials around a warehouse as required
 Moving materials quickly, reducing the number and
length of movements
 Increasing storage density, by reducing the amount of
wasted space
 Reducing costs, by using efficient operations
 Making few mistakes, with efficient material
management systems.
Pallet racks and bin shelving
Floor stacking
Bulk Storage
Roller Conveyor Belt Conveyor
Forklift Truck
Reach Truck
Carousels: parallel processing
 Vertical carousels

Small items
Valuable items
Trailer Order-picking machine
Tractor

Towline
Crane
Automated
Storage &
Retrieval
System
(AS/RS)

Automated 4 aisle miniload warehouse

with single mast stacker cranes.
 Choice of Equipment
 Higher volumes of throughput: Low throughput – manual WH,
medium throughput – mechanized WH, high throughput –
automated WH
 Physical characteristics of loads – size, weight, and so on
 Number of loads to be moved – from the throughput of the
warehouse, plus any internal movements for sorting, checking, and
so on
 Distance to be moved – from the size of the warehouse
 Speed of movement required – how quickly the warehouse has to
respond to demands, and so on.
Choice of Automation and Warehouse Size
 Packaging
 Standard packages:
 Collecting together materials into these standard
packages is called unitization to form unit loads.
 Standard packages can increase the density of storage.
 Purpose of packaging
 Identifies the product and gives basic information
 Protects items while they are being moved through
the supply chain
 Makes handling easier
 Assists in marketing, promoting the product,
advertising and giving information to customers.
 Types
Consumer (interior) packaging
 is designed for the customer and includes the marketing and
promotional materials.
 this is the one that is brightly colored and has cellophane and
advertisements.
Industrial (exterior) packaging
 is designed to protect and make handling easier.
 this is the plain box or pallet that gives information to
organizations in the supply chain.
 Five Main Materials for Packaging
 Glass is easy to clean, reuse and recycle, but is
fragile, relatively expensive and difficult to make
 Plastic is light, strong and easy to clean, but can be
expensive and difficult to make or reuse
 Cardboard is light, cheap and can be recycled, but
has little strength and poor durability
 Wood is strong, durable, easy to use and can be
reused, but it is heavy, bulky and difficult to clean
 Metal is strong and durable, but it is heavy and can
be expensive.
Glass Plastic
Cardboard
Wood
Metal
 Packaging Waste
Industrial packaging is more likely to be
reused and recycled than consumer
packaging, because it is ore robust, and can
be collected from a few locations.
Consumer packaging is more likely to be
discarded, but some companies have policies
of reducing this by reusable containers.
Replacing cardboard containers by wood:
contributing to a cleaner environment