The Storage and Handling System

The day soldiers (subordinates) stop bringing you their problems is the day you have stopped leading them. Colin Powell

Storage Fundamentals in Inventory Strategy

Inventory Strategy Forecasting Inventory decisions Purchasing and supply scheduling decisions Storage fundamentals Storage decisions Transport Strategy Transport fundamentals Transport decisions

Location Strategy Location decisions The network planning process

PLANNING

Customer service goals The product Logistics service Ord. proc. & info. sys.

CONTROLLING

ORGANIZING

The Storage System

Except where customer service is a concern: Storage is an economic convenience, not a necessity Reasons for storage y Transportation and production costs can be reduced y Better coordination of supply and demand y Storage can be an integral part of the production process y Storage may enhance sales Storage Functions y Holding y Consolidation y Break-bulk y Mixing (merge-in-transit)

The Storage System (Contd)

Note Storage functions are performed in an attempt to reduce transportation, production, and purchasing costs, which justify their added expense. Storage Space Alternatives y Ownership y Leasing y Rental y In-transit

Balancing the Load on a Public Warehouse

Percentage of usable warehouse capacity
120 100 80 60 Manufacturer A & B 40 20 0 J F M A M J Manufacturer A J A S O N D Manufacturer A, B, C & D Manufacturer A, B & C

Time, months

Consolidation Warehouse
10,000 lb. A Manufacturer A 8,000 lb. B Manufacturer B 15,000 lb. C Manufacturer C 7,000 lb. D Manufacturer D 40,000 lb. ABCD Consolidation warehouse Customer

Similar to a mergein-transit facility

Distribution, Break Bulk, or Pool Point Warehouse

Customer A

LTL Manufacturer Low rate TL shipment Distribution warehouse Customer B

Warehouse may or may not hold inventories

Customer C

Storage Cost Savings

Direct shipments to customers SHIPPING WEIGHT (lb.) 10,000 8,000 15,000 7,000 Total LTL RATE TO CUSTOMER $2.00/cwt. 1.80 3.40 1.60

MANUFACTURER A B C D

COST $200 133 510 112 $966

Storage Cost Savings (Contd)

Shipments through a distribution center
MANUFACTURER A B C D Total DISTRIBUTION WAREHOUSE CHARGE $10 8 15 7 SHIPPING WEIGHT (lb.) 10,000 8,000 15,000 7,000 40,000 TL RATE FROM DISTRIBUTION WAREHOUSE TO CUSTOMER $1.00/cwt. 1.00 1.00 1.00 LTL RATE TO DISTRIBUTION CENTER $0.75 0.60 1.20 0.50 TOTAL LTL

$75 48 180 35

TOTAL TL $100 80 150 70

COST $185 136 345 112 $778

Space Comparison
Ownership alternative Less expensive under high utilization High degree of control over operations Benefits of real estate ownership Space may be converted to uses other than storage Rental alternative No fixed investment Lower cost under seasonal or low utilization of an owned facility Location flexibility

The Materials Handling System

Materials Handling Functions y Loading and unloading
y Movement to and from storage y Order filling

Materials-Handling Considerations y Load unitization

y Space layout y Storage equipment y Movement equipment

A Low Throughput, Holding Warehouse

Semi permanent storage bay Product

Inbound and outbound

A High Throughput, Distribution Warehouse

Product C B Inbound A C D Order picking and product mixing bays Order-picking route Outbound Semi-permanent storage bay A Replenishment

Storage/Handling Systems

y Manual handling system y Forklift truck-pallet system y Conveyorized system y Automated storage and retrieval
system

Order PickingArea System

Semipermanent storage bay A Product

B C Order-picking route

Inbound and outbound

Order PickingModified Area System

Semipermanent storage bay A Replenishment B Inbound A C D Order picking and product mixing bays Order-picking route Outbound

Product C

11-16

An Automated Warehouse
Shipping and Receiving
Outgoing loads Incoming loads Audit spur for load checking

To auxiliary storage areas

Automated crane storage and order picking

Economics of Storage/Handling Alternatives

Public warehousing Cost to company, $ Private warehousing, automated handling Leased warehousing

Private warehousing, pallet-forklift truck handling

a 0
a

Annual system throughput, cwt.

Economical range for public warehousing. b Economical range for leased warehousing, manual handling. c Economical range for private warehousing, pallet-forklift truck handling. d Economical range for private warehousing, automated handling.

Virtual Warehousing

Dont hold all inventories needed

for sale in companys warehouse Ship selected items directly from suppliers Reduces investment in inventories Requires a first-rate order management system May require sharing critical information with vendors