Ch 12.1 warehouse management

warehouse

essential component of any supply chain

increasingly outsourced to logistic service providers

SKU (stock keeping unit) = a specific item at a particular geographical location

SKU

stock keeping unit

= a specific item at a particular geographical location

roles of a warehouse

• storing/ buffering products between points of origin and points of consumption

• consolidation and product mixing

• crossdocking

• value added services, including reverse logistics

meaning crossdocking

a logistics strategy where goods from suppliers are directly transferred to outbound trucks for delivery to customers, bypassing traditional warehouse storage to speed up delivery and cut costs

warehouse function : storing/ buffering

allows different parts of the supplu chain to operate independently

• increase operational flexibility (eg impact of seasonal demand, batch production, uncertainties)

• reduce customer lead times

warehouse function : consolidation

allows product mixing and reduces transport costs

• combines shipments from a number of sources in the same geographic area into larger, more economical shipping loads,

distribution center (warehouse function)

received large incoming shipments and splits them up into smaller outgoing shipments to demand points in a geographical area

warehouse function : crossdocking

allows to consolidate and transfer products directly without storage/ picking, customer is known

warehouse function : value added logistics

allow to meet specific customer demands, especially when a postponement strategy is adopted

warehouse benefits

• achieving transportation economies (eg combined shipments)

• achieving production economies (eg make-to stock polocy)

• taking advantage of quantity discounts and forwards buys

• meeting changing market conditions and uncertaunties (eg seasonality, demand fluctuations

• overcoming time and space differences between producers and customers

• providing temporary storage of material to be disposed or recycled (reverse logistics)

forward buys

you buy something now but only receive it later on

reverse logistics

the process of moving goods backward through the supply chain, from the customer back to the retailer, distributor, manufacturer, to recapture value through returns, repairs, recycling, refurbishment or disposal, effectively manageing the ‘after-sale’ life of a product

challenges related to warehouses

smaller orders, shorter response time, larger product variety

main warehousing activities

• receiving

• storage (transfer and put away)

• order picking

• accumulation/ sortation

• crossdocking

• shipping

warehouse management ≠ inventory management

warehouse activities : receiving

unloading products from transport carrier (typically truck)

updating inventory records

inspecting quantity / quality inconsistencies

warehouse activities : storage (transfer and put away)

transfer incoming products to storage

possibly repackaging (eg full pallets to cases or standardized bins)

warehouse activities : order picking

most labor-intensive activity in many warehouses

obtaining the right amount of the right products for a set of customer orders → many different strategies

customer orders consist of one or more order lines (= SKU in specific quantity)

warehouse activities : shipping

• accumulating picked orders into individual customer orders

• performing value-added services (pricing, labelling, kitting)

• packing and stacking customer orders on the right unit load

operations strategy

decisions related to operations, but not likely to be changed frequently

two aspects of operations strategy

• storage strategy ; where to store each SKU (stock keeping unit)

• order picking strategy : how to retrieve an SKU when ordered

obective : maximize service level subject to available resources (labor, machines, capital)

what are typical measures of service level

• order delivery time

• order integrity

• order accuracy

storage assignment : forward-reserve allocation

large reserve area (bulk stock) and small forward area (pick stock)

• advantage : picking efficiency through reduced distances

• disadvantage : frequent replenishment from reserve area

all SKU’s in forward area ?

how many units per SKU in forward area

storage assignment : storage location assignment policies

a set of rules which can be used to assign SKUs to storage locations

• random : assign SKUs randomly to eligible empty locations

• dedicated : assign SKUs to a fixed location

• full-turnover storage : assign SKUs generating the highest sales closest to the depot

• class-based storage : combination of turnover and random strategy

family grouping : related SKUs should be stored closed to each other

class-based storage assignment :

apply pareto’s law to devide SKU s in three classes (ABC)

dedicated storage areas for each class, but random assignment within classes

order picking systems : picker to parts :zoning

picking area divided into zones → each order picker assigned to a single zone

• order picker travel smaller distances and become familiar with locations

• but : different SKUs of the same order may be in different zones → split orders shoudl be consolidated before shipping

order picking systems : picker to parts zoning: consolidation strategies

• progressive zoning (pick and pass) → order is picked zone by zone : it goes to the next zone when completed in previous zone

• synchronized zoning → order is picked in parallel : it is merged after picking has been done in all zones

order picking systems : picker to parts : batching

in the case of small orders (few order linesà, single-order picking is ineffcient

→ order batching reduces travel distances by picking a set of orders in a single picking tour

sorting needs to be done either during or after picking tour

criteria to decide which orders are batched

• proximity of pick location (eg identical pick locations, distance between pick locations)

• time windows : order due time must be respected

order picking systems : picker to parts : routing

pick list : list of SKUs (and their quantities) to be picked in a single order picking tour

• assigned to a specific order picker

• results of zoning and batching decisions

routing decisions

sequencing the items on the pick list to ensure a short route through the warehouse for the order picker

order picking systems : picker to parts : routing (different types)

• s-shaped routing : works well in combination with within aisle storage

• return routing works well in combination with across aisle storage or diagonal storage

• mid-point routing and largest gap routing work well in combination with perimeter storage

picker-to-parts : technology

technology to support manual order picking

• capital investment vs accuracy and or productivity improvements

• eg scanning, voice picking, pick to light ext