Global Supply Chain

Management
Chapter #8
Materials Handling and
Packaging
The Logistics System
Customer
Transportation
Service

Information Warehouse
LOGISTICS
Systems Management

Inventory Materials
Management Management

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Overview
 We will quickly review basic warehouse design
considerations
 As a part of planning for the utilization of
warehouse space
 We will examine in some depth the trade-offs
between manual and automated warehousing
and material handling
 We will look at the functions of packaging and
examine how packaging influences material
handling considerations
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Introduction
 Space design and utilization within a warehouse is
crucial and has implications for a number of logistics
activities
 Poor design slows movement of goods, raises
costs and impacts customer service
 Handling of goods and placement of goods are both
affected by warehouse design and the design is
affected by our decisions on placement and handling

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Introduction
 Packaging serves a number of functions including
compensating for material handling issues
 Total cost impact of packaging decisions are often
difficult to quantify
 Numerous stakeholders

 Marketing – in capturing and retaining customers

 Logistics – in protecting products and ease of

handling
 Manufacturing – getting the products into their

packages
 Legal, etc. – product safety issues and legal

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requirements 7
Warehouse Design Guidelines
 Several general principles guide the layout of
any warehouse
 One-story if possible
 Straight line flows, receiving to storage to shipping
(Chapter 7)
 Efficient material handling resources/operations
 Effective storage plan and use of space
 Minimize aisle space, maximize use of building
height
 Guidelines only …obviously we are often
constrained by other factors
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Manual Materials Handling
 Manual systems obviously require labor to
implement
 Manual systems impose several constraints on
warehouse design and operations
 Generally must rely on simple systems of racks and
bins for storage
 Require wider aisles
 Limit the use of conveyors and other automated
handling and sorting equipment
 Limit the usable storage height (up to 5 levels)
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Manual Materials Handling
 Rely on labor extensively to pick and place
inventory units using:
 Pallet jacks
 Carts
 Man-on fork lifts
 Short conveyor runs, etc.

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Manual Materials Handling
 Tend to work best for either very high or very
low demand goods
 Disadvantages include:
 Cost of labor
 Damage rates
 Incorrect placement of goods, frustrating storage
and/or picking to order

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Automated Material Handling
 Automated systems replace direct labor with
mechanization wherever feasible
 Automation has a number of advantages:
 Automation improves productivity by mechanizing labor
intensive handling activities
 Generally lower operating costs
 Greater efficiency of space utilization
 Less damage
 Fewer errors in put-up or pick
 Better integration with IS insures good stock rotation
 Can work 24/7 regardless of location

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Automated Material Handling
 Automation is not without disadvantages:
 Initial cost is much greater
 Equipment
 Computer systems
 Design considerations, e.g. flat-floors
 Personnel training, etc.
 Reliability and maintainability
 Integration with the organization’s existing
information system
 Retention of the people displaced by automation is a
big concern in some countries
 Fixed nature of the solution reduces flexibility and
increases time/cost to change

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Manual vs. Automated Handling
 Generally, benefits of automation outweigh the
costs
 In countries where labor is plentiful, this may not be
the case
 In some markets, maintenance and reliability
issues may outweigh the potential cost savings
and efficiency gains as a function of distance
from equipment providers and lack of skilled
service personnel
 When the system is down…nothing moves!
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 Short video on automated warehousing
system
 https://www.bing.com/videos/search?
q=amazon+automated+warehousie+systems&
docid=603494247153888595&mid=7673365
4040B0CDD940E76733654040B0CDD940E
&view=detail&FORM=VIRE

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Future Trends in Material
Handling
 While you can buy automation off-the-shelf
today, most integrated systems are essentially
one of a kind
 In the future, such systems will not provide
the cost effective solutions required by
industry
 They will still exist
 Special applications
 Special situations…Nike

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Future Trends in Material
Handling
 Reliability will require the right mix of robust
equipment, fault tolerance and redundancy
 Move from buying based on lowest bidder to
buying the best equipment for the job/environment
 Integration with existing systems will become
more important as we move toward total
supply chain integration
 Our systems and those of our vendors and
customers!

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Future Trends in Material
Handling
 Upgradeability will be required in new
automation design and implementation to
handle changes in mission and technology
 Automated ID systems based on radio
frequency identification (RFID) systems will
replace barcode and OCR (optical character
recognition) identification systems
 Wal-Mart required their top 150 suppliers to use
RFID in 2006
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Future Trends in Material
Handling
 Automated ID systems based on radio
frequency identification (RFID) systems will
replace barcode and OCR identification
systems (continued)
 The DoD has announced the requirement for RFID
tagging beginning with contracts written in 2005
 RFID tags/chips provide increased visibility of
inventory items and improve
 Tracking, condition monitoring, etc.

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Future Trends in Material
Handling
 Ease of use will increase as automated
systems become part of the broader systems
 Self monitoring
 Voice recognition, etc.
 Maintainability needs will increase because
of:
 Cost considerations
 24/7 operation

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Future Trends in Material
Handling
 Manual systems will still exist, but
management will have to closely analyze the
costs and benefits of alternatives to
implement the system that best meets
customer and logistics needs

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Product Packaging
 Packaging is receiving increasing attention as we
expand into global markets
 Packaging decisions have numerous impacts on
our costs and are a concern to a number of
internal stakeholders:
 Logistics
 Marketing
 Legal
 Production
 Finance

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Types of Packaging
 Two basic kinds of packaging
 Consumer package is the product packaging that
the consumer sees
 Also called interior or marketing package
 Industrial package is the packaging that protects
the goods and facilitates their handling through
the logistics system
 Also called exterior package

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Types of Packaging
 Obviously, different parts of the organization
are focused on consumer and industrial
packaging
 Considered independently, we can end up
with a very costly system to implement

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Packaging Considerations
 Marketing is interested in the package’s role
in capturing and retaining customers
 Sufficient information
 Attractive
 Etc.

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Packaging Considerations
 Legal is concerned about product safety and
legal information requirements
 How to properly dispose of the product when
done
 Point of origin
 Materials/ingredients
 Etc.

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Packaging Considerations
 Production is primarily concerned with how
packaging impacts production
 How to make/source the packaging
 How to get the individual units packaged
 How to package for storage and shipping
 Etc.

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Role of packaging
 Logistics is concerned with how the packaging
affects customer service, quality, shipping and
handling
 How the product packaging will affect the product’s
journey through the supply chain
 We like to work with cubes
 Getting marketing packages into exterior packs (a
concern shared equally with production)
 Protection from damage, weather, contamination,
tampering, etc.
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Role of packaging
 Logistics is concerned with how the
packaging affects customer service, quality,
shipping and handling (continued)
 Security issues
 Ease of handling
 Storage and space utilization
 Cost of shipping
 Environmental issues
 Import/export and other legal issues, etc.
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Packaging Materials
 Traditionally, we have used lots of wood and
metal in packaging
 Excellent physical protection
 Both weigh a lot
 Can be expensive to produce/procure
 Disposal remains an issue in many markets
 Today cardboard is still the primary material
for exterior packaging
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Packaging Materials
 Interior packaging is increasingly plastics and
other synthetics
 Lots of environmental issues with synthetics
 New laws in many countries with respect to disposal
of packaging
 But packages are light, easy and inexpensive to
produce in a customized format, etc.
 For exterior packaging, reusable systems are on
the rise.
 Automated ID technologies can play a big role
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Packaging for Global Markets
 Certainly some unique problems
 Packaging might have to be designed to endure
the worst possible conditions
 Over packaged for handling protection
 Packaging for one region might not be
sufficient for another

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Packaging for Global Markets
 Legal requirements vary by product and
market
 Environmental requirements vary by product
and market
 Identification, language, marking,
instructions, etc. all vary by region/country
and often by product

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Bar Coding
 Bar codes have been the standard of
identification for the past two decades
 New multi-dimensional barcodes contain and
convey more than simple product information
 Bar codes have enabled much of our material
handling automation
 Barcode technology took >20 years to become
ubiquitous in the marketplace

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Bar Coding
 RFID is on the verge of replacing bar coding as
the standard method of identification
 Capable of carrying huge amounts of information
 Much less expensive to use…after the cost of the
tags themselves ($.25 today headed to $.05)
 Capable of integrating with quality monitoring
systems
 Likely to become the standard in <10 years
 But ...few have yet been able to make a
compelling business case for adoption
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Trade-offs with packaging
Management must do the analysis to evaluate the
trade-offs between packaging costs and
 Transportation (less expensive modes of
transportation require better packaging)
 Handling
 Storage
 Etc.
 Once again, we are looking for the best
overall system of costs vs. benefits with
customer service always at the top of our list
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