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Introduction. Progression of Warehousing Decisions Why Use Warehouses? Types of Warehousing Warehouse Operations Warehousing Innovations Warehouse Layout Packaging. Progression of Warehousing Decisions . Should Warehouses Be Used? - PowerPoint PPT Presentation
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Warehousing
Transportation/Logistic Strategy
Progression of Warehousing DecisionsWhy Use Warehouses?Types of WarehousingWarehouse OperationsWarehousing InnovationsWarehouse LayoutPackaging
Introduction
Warehousing
Transportation/Logistic Strategy
Progression of Warehousing Decisions.
Should Warehouses Be Used?If Warehouses are Used, Should they be Public or Private?Where Should they be Located?What Should be their Capacities?How Many Should You Have?What Should be their Layout and Design?
Warehousing
Transportation/Logistic Strategy
Why Use Warehouses?
Cope with Variable Market ConditionsCope with Variable Sources of SupplyProduction EconomiesPurchasing EconomiesTransportation EconomiesCustomer Service
Warehousing
Transportation/Logistic Strategy
Warehouse Operations
Planning, Organizing, Staffing, Equipping, and ControllingHuman Resource ManagementBilling and Inventory Control Order FillingLocal DeliveryMaterial HandlingPackagingSafety, Security, MaintenanceMeasuring Warehouse Efficiency
Warehousing
Transportation/Logistic Strategy
J.N. Devin, "Cowboy After OSHA,“ 1972.
Warehouse Safety
Warehousing
Transportation/Logistic Strategy
WERC – Established 1978HousekeepingStorage HeightsAutomated Retrieval SystemsBar Codes, Scanners, EDI, RFID, etc.Narrow Aisle Equipment, Conveyors, etc.The Distribution Center ConceptAssembly, Product Maintenance, Repair, etc.Management ControlsCross Docking
Warehousing Innovations
Warehousing
Transportation/Logistic Strategy
Costs of Increasing Storage Heights
$
H1 Storage Height
Construction& Finance
Total Cost
Labor & Insurance
C1
Warehousing
Transportation/Logistic Strategy
$
Storage Height
Total Cost
Labor & Insurance
Effects of New Technology
Construction& Finance
C1
H1
Costs of Increasing Storage Heights
Warehousing
Transportation/Logistic Strategy
$
Storage Height
Construction& Finance
C1
C2
H1 H2
Costs of Increasing Storage Heights
Total CostLabor & Insurance
Effects of New Technology
Warehousing
Transportation/Logistic Strategy
WERC – Established 1978HousekeepingStorage HeightsAutomated Retrieval SystemsBar Codes, Scanners, EDI, RFID, etc.Narrow Aisle Equipment, Conveyors, etc.The Distribution Center ConceptAssembly, Product Maintenance, Repair, etc.Management ControlsCross Docking
Warehousing Innovations
Warehousing
Transportation/Logistic Strategy8 4
Types of Warehousing
Private WarehousingPublic WarehousingContract WarehousingCross-Docking
Warehousing
Transportation/Logistic Strategy
Private vs Public Warehousing(Without Cost of Capital)
$ Public(All Variable Cost)
Private(Fixed + Variable Cost)
VolumeIndifferent Prefer PrivatePrefer Public
Warehousing
Transportation/Logistic Strategy
Indifference Point Between Public and Private(Without Cost of Capital)
ROI = 0
Private = Fixed Costs + Variable CostsPublic = Variable Costs
Example:Private Fixed Costs = $500,000/yearPrivate Variable Costs = $0.15/poundPublic Variable Costs = $0.25/pound
Indifference point is where both costs are equal
500,000 + .15X = .25X500,000 = .10XX = 5,000,000 pounds
Warehousing
Transportation/Logistic Strategy
Private vs Public Warehousing(With Cost of Capital)
$ Public(All Variable Cost)
Private(Fixed + Variable Cost)
VolumeIndifferent Prefer PrivatePrefer Public
Savings
Warehousing
Transportation/Logistic Strategy
Private = Fixed Costs + Variable CostsPublic = Variable Costs
Example:Private Fixed Costs = $500,000/yearPrivate Variable Costs = $0.15/poundPublic Variable Costs = $0.25/pound
Indifference point is where savings = desired ROI
Indifference Point Between Public and Private(With Cost of Capital)
SavingsAverage Investment = ROI
Warehousing
Transportation/Logistic Strategy
Desired ROI = Hurdle RateSavings = Public – PrivateAverage Investment = Initial Investment /2
Example:Hurdle Rate = 10%Investment = $8,000,000 Private Fixed Costs = $500,000/yearPrivate Variable Costs = $0.15/poundPublic Variable Costs = $0.25/pound
Indifference Point Between Public and Private(With Cost of Capital)
Warehousing
Transportation/Logistic Strategy
Hurdle Rate = 10%Investment = $8,000,000 Private Fixed Costs = $500,000/yearPrivate Variable Costs = $0.15/poundPublic Variable Costs = $0.25/pound
Savings = Public - Private
Indifference Point Between Public and Private(With Cost of Capital)
.25X - (500,000 + .15X) 4,000,000 = .10
Warehousing
Transportation/Logistic Strategy
Savings = Public – Private
.25X - (500,000 + .15X) 4,000,000 = .10
Indifference Point Between Public and Private(With Cost of Capital)
.25X - (500,000 + .15X) = .10 * 4,000,000
.25X - 500,000 - .15X = 400,000
.25X - .15X = 400,000 + 500,000
.10X = 900,000
X = 9,000,000
Warehousing
Transportation/Logistic Strategy
Greater ControlFlexibility (CS Needs, Space Use, etc.)Tax Benefits (Depreciation)Image to CustomersPotentially Lower Cost
Advantages of Private Warehousing
Warehousing
Transportation/Logistic Strategy
Lack of Flexibility (Fixed Size/Location)Capital RequirementsEquipment Maintenance/TrainingPotential Labor Problems
Disadvantages of Private Warehousing
Warehousing
Transportation/Logistic Strategy
Capital ConservationAbility to Meet Peak DemandReduced RiskFlexibility WRT VolumeAvoidance of Property TaxesAvoidance of Labor ProblemsPotentially Lower CostKnowledge of Exact Costs
Advantages of Public Warehousing
Warehousing
Transportation/Logistic Strategy
Lack of ControlDifficult CommunicationsNot Always AvailablePotentially Higher Cost
Disadvantages of Public Warehouses
Warehousing
Transportation/Logistic Strategy
Cross-DockingAn operations procedure that allows product to be delivered and received on one side of a facility, undergoes internal handling procedures at the receiving dock, distributing unit loads and moving the product to shipping docks on the other side of the facility where trucks or rail cars are waiting to be loaded for customer delivery.
Warehousing
Transportation/Logistic Strategy
Cross-Docking
Warehousing
Transportation/Logistic Strategy
Cross-Docking
Warehousing
Transportation/Logistic Strategy
Warehouse Layout
Angling vs On-the-SquareFixed vs Variable SlotsSpace Loading Techniques
Item PopularityItem SizeCube per Order IndexFamily GroupingsLinear ProgrammingSimulation
Warehousing
Transportation/Logistic Strategy
Cost of Fixed vs Variable Storage Slots
$
V1
Total Cost
Labor
Percent Variable
Space Utilization
C1
Warehousing
Transportation/Logistic Strategy
$ Total Cost
Space Utilization
Percent Variable
Cost of Fixed vs Variable Storage Slots
V1
C1 Labor
Effects of New Technology
Warehousing
Transportation/Logistic Strategy
$Total Cost
Cost of Fixed vs Variable Storage Slots
V2V1
C1
C2
Percent Variable
Space Utilization
Labor
Effects of New Technology
Warehousing
Transportation/Logistic Strategy
Angling vs On-the-SquareFixed vs Variable SlotsSpace Loading Techniques
Item PopularityItem SizeCube per Order IndexFamily GroupingsLinear ProgrammingSimulation
Warehouse Layout
Warehousing
Transportation/Logistic Strategy
Functions of Packaging
MarketingInformationPromotion
LogisticsContainmentProtectionApportionmentUnitizationConvenienceCommunication
Warehousing
Transportation/Logistic Strategy
Postponement
What is it?
Why do we do it?
Examples
Warehousing
Transportation/Logistic Strategy
Postponement
What is it?
A delayed differentiation strategy to reduce uncertainty and cost while satisfying customer needs.
Activities in the supply chain are delayed until a demand is realized.
Bucklin (1965) Model of Postponement /Speculation
Warehousing
Transportation/Logistic Strategy
Postponement
Why do we do it?
It has the potential to improve responsiveness while reducing inventory, transportation, storage, and obsolescence.
Insufficient inventory early in the product cycle can cost market share.
Products at the end of life cycle lose value quickly and risk obsolescence, which can lead to large inventory write-offs.