Puc l400 Lecture 1

8/2/2019 Puc l400 Lecture 1

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PRINCE CHARLES AFUN


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LOSC403: Warehousing and

Materials Mgt


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08/09/11 Prince Charles Afun 3

Learning Objectives by the end of thecourse, students should be able to:

Discuss the strategic value-adding rolewarehousing plays in the logistics system.

Explain the basic rationale for warehousing in

light of transportation consolidation, productmixing, service, contingency protection, andsmoothing.

Develop an analytical framework for basicwarehousing decisions.


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08/09/11 PRINCE CHARLES AFUN 4

Learning Objectives

Distinguish between the different warehouseactivities requiring space in the warehousedesign.

Discuss the major principles of warehouselayout design.

Compare the use of private versus publicwarehousing.

Explain public warehousing services,regulations, and pricing.


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Learning Objectives

Describe the decision-making approach usedto determine the number of warehouses inthe logistics system.

Discuss the effect of materials handling andpackaging on logistics.

Describe the four dimensions and theobjectives of materials handling.


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Learning Objectives

Describe the various types of packagingmaterials available and their relativeadvantages and disadvantages.


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What is a warehouse andwarehousing?


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A warehouse is a location with adequate facilitieswhere volume shipment are received from aproduction centre, broken down, reassembledinto combinations representing a particular orderor orders, and shipped to the customers location

or locations


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Warehousing Refers to the activities involving storage of

goods on a large-scale in a systematic andorderly manner and making them available

conveniently when needed.

In other words, warehousing means holding orpreserving goods in huge quantities from thetime of their purchase or production till theiractual use or sale

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businessdictionary.com

Performance of administrative and physical

functions associated with storage of goodsand materials

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Robert Hughes defines

Warehousing as a set of activities that are involved inreceiving and storing of goods and preparing them

for reshipment

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From the definitions;

A warehouse is typically viewed as a place to store

inventory.

The warehouse is where the supply chain holds or

stores goods.


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The need for warehousing arises due to:

Seasonal production of goods

Seasonal Demand

Large-scale Production

Quick Supply

Continuous Production.

Price Stabilization

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Advantages of warehousing

Protection and Preservation of

goodsRegular flow of goods

Continuity in production

Convenient location

Easy handling

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Useful for small businessmen

Creation of employmentFacilitates sale of goods

Availability of finance

Reduces risk of loss

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Is it only a storage facility?


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CLASS DISCUSSION

Warehousing creates time utility.

True or false and why

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A WAREHOUSE

..In the past, warehouse management could focus

solely on controlling the movement and storage of

materials within an warehouse operation

and processing the associated transactions of

picking, packing, shipping and receiving.

However, todays systems must integrate

warehouse operations, so that visibility extends

beyond the four walls of the warehouse and to the

rest of the value chain

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Benefits of Warehousing

Consolidation

Shipment consolidation is an economic benefit ofwarehousing.

With this arrangement, the consolidating warehousereceives and consolidates materials from a number ofmanufacturing plants destined to a specific customeron a single transportation shipment.

The benefits are the realization of the lowest possibletransportation rate and reduced congestion at acustomer's receiving dock.


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Warehousing can provide both

economic and service benefits Economic benefits of

warehousing occur when overalllogistics costs are reduced Consolidation and break-bulk

Sorting Seasonal storage

Reverse logistics

Service benefits are justified bysales improvements that more than

offset added cost Spot-stocking

Full line stocking

Value-added services


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Consolidation Warehouses


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Consolidation Warehouses

The primary benefit of consolidation is that itcombines the logistical flow of several smallshipments to a specific market area.

Consolidation warehousing may be used by a singlefirm, or a number of firms may join together and usea for-hire consolidation service.

Through the use of such a program, each individua1manufacturer or shipper can enjoy lower totaldistribution cost than could be realized on a directshipment basis individually.


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Break bulk warehouses

Break bulk warehouse operations are similar toconsolidation except that no storage is performed.

A break bulk operation receives combined customerorders from manufacturers and ships them toindividual customers.

The break bulk warehouse sorts or splits individualorders and arranges for local delivery.

Because the long-distance transportation movementis a large shipment, transport costs are lower andthere is less difficulty in tracking.


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Break bulk warehouses


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Processing/Postponement

Warehouses can also be used to postpone, or delay,production by performing processing and lightmanufacturing activities.

A warehouse with packaging or labeling capabilityallows postponement of final production until actualdemand is known.

For example, vegetables can be processed andcanned in "brights" at the manufacturer.

Brights are cans with no pre-attached labels.


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The use of brights for a private label productmeans that the item does not have to becommitted to a specific customer or package

configuration at the manufacturer's plant.

Once a specific customer order is received,the warehouse can complete final processingby adding the label and finalizing thepackaging.


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Processing and postponement provide two economicbenefits:

First, risk is minimized because final packaging is notcompleted until an order for a specific label andpackage has been received.

Second, the required level of total inventory can bereduced by using the basic product (brights) for avariety of labeling and packaging configurations.


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Stockpiling

The economic benefit of stockpiling comes from theneed of seasonal storage.

For example, lawn furniture and toys are producedyear-round and primarily sold during a very shortmarketing period.

In contrast, agricultural products are harvested atspecific times with subsequent consumptionoccurring throughout the year.

Both situations require warehouse stockpiling tosupport marketing efforts.

Stockpiling provides an inventory buffer, which allowsproduction efficiencies within the constraints imposedby material sources and the customer.


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Service Benefits

Five basic service benefits are achievedthrough warehousing:

spot stock,

assortment, mixing,

production support, and

market presence.


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Spot Stock

Under spot stocking, a selected amount of a firm'sproduct line is placed or "spot stocked" in awarehouse to fill customer orders during a criticalmarketing period.

In particular, manufacturers with limited or highlyseasonal product lines are partial to this service.

Rather than placing inventories in warehousefacilities on a year-round basis or shipping directlyfrommanufacturing plants, delivery time can besubstantially reduced by advanced inventorycommitment to strategic markets.


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Spot Stock

Utilizing warehouse facilities forstock spotting allowsinventories to be placed in a variety of marketsadjacent to key customers just prior to a maximumperiod of seasonal sales.

Suppliers of agricultural products to farmers often usespot stocking to position their products closer to aservice-sensitive market during the growing season.

Following the sales season, the remaining inventoryis withdrawn to a central warehouse.


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Assortment

An assortment warehouse stocks productcombinations in anticipation of customer orders.

The assortments may represent multiple productsfromdifferent manufacturers or special assortments

as specified by customers. In the first case, forexample, an athletic wholesaler

would stock products froma number of clothingsuppliers so that customers can be offeredassortments.

In the second case, the wholesaler would create aspecific team uniform including shirt, pants, andshoes.


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Assortment vs. Spot Stock

The differential between stock spotting and completeline assortment is the degree and duration ofwarehouse utilization.

A firm following a stock spotting would typicallywarehouse a narrow product assortment and place

stocks in a large number of small warehousesdedicated to specific markets fora limited timeperiod.

Distribution assortment warehouse usually has abroad product line, is limited to a fewstrategic

locations, and is functional year-round. The combined assortments also allow larger

shipment quantities, which in turn reducetransportation cost.


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Mixing

In a typical mixing situation, truckloads of productsare shipped from manufacturing plants towarehouses.

Each large shipment enjoys the lowest possible

transportation rate. Upon arrival at the mixing warehouse, factory

shipments are unloaded and the desiredcombination of each product for each customer ormarket is selected.

When plants are geographically separated, overalltransportation charges and warehouse requirementscan be reduced by mixing.


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Production Support

Production support warehousing provides a steadysupply of components and materials to assemblyplants.

Safety stocks on items purchased from outsidevendors may be justified because of long lead timesor significant variations in usage.

The operation of a production support warehouse isto supply or "feed" processed materials, components,and subassemblies into the assembly plant in aneconomic and timely manner.


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Market Presence

While a market presence benefit may not be soobvious, it is often cited by marketing managers as amajor advantage of local warehouses.

The market presence factor is based on theperception or belief that local warehouses can bemore responsive to customer needs and offer quickerdelivery than more distant warehouses.

As a result, it is also thought that a local warehousewill enhance market share and potentially increaseprofitability.


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Warehouse Operating Principles

Once it has been determined to use awarehouse, the next step is designing it.

Whether the warehouse is a small manual

operation or a large automated facility, thefollowing three principles are relevant:

Design criteria,

Handling technology, and

Storage plan.


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Design Criteria

Warehouse design criteria address physicalfacility characteristics and product movement.

Three factors to be considered in the design

process are: the number of stories in the facility,

height utilization, and

product flow.


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Number of stories in the facility

The ideal warehouse design is limited to a singlestory so that product does not have to be moved upand down.

The use of elevators to move product from one floor

to the next requires time and energy. The elevator is also often a bottleneck in product flow

since many material handlers are usually competingfor a limited number of elevators.

While it is not always possible, particularly in centralbusiness districts where land is restricted orexpensive, warehouses should be limited to a singlestory.


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Height utilization

Regardless of facility size, the design shouldmaximize the usage of the available cubic space byallowing for the greatest use of height on each floor.

Most warehouses have 20- to 30-foot ceilings(1 foot = 12 inch; 1 inch = 2.54 cm), although modern

automated and high-rise facilities can effectively useceiling heights up to 100 feet.

Through the use of racking or other hardware, itshould be possible to store products up to thebuilding's ceiling.

Maximum effective warehouse height is limited by thesafe lifting capabilities of material-handlingequipment, such as forklifts.


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Product flow

Warehouse design should also allow for straightproduct flow through the facility whether items arestored or not.

In general, this means that product should bereceived at one end of the building, stored in themiddle, and then shipped from the other end.

Straight-line product flow minimizes congestion andconfusion.


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Handling technology

The second principle focuses on theeffectiveness and efficiency of material-

handling technology.

The elements of this principle concern:

movement continuity and movement scale economies.


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Movement continuity

Movement continuity means that it is better for amaterial handler or piece of handling equipment tomake a longer move than to have a number ofhandlers make numerous, individual, short segmentsof the same move.

Exchanging the product between handlers or movingit from one piece of equipment to another wastestime and increases the potential for damage.

Thus, as a general rule, fewer longer movements inthe warehouse are preferred.


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Movement scale economies

Movement scale economies imply that all warehouseactivities should handle or move the largest quantitiespossible.

Instead of moving individual cases, warehouseactivities should be designed to move groups of

cases such as pallets or containers. This grouping or batching might mean that multiple

products or orders must be moved or selected at thesame time.

While this might increase the complexity of an

individual's activities since multiple products or ordersmust be considered, the principle reduces thenumber of activities and the resulting cost.


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Storage Plan

According to the third principle, a warehouse designshould consider product characteristics, particularlythose pertaining to volume, weight, and storage.

Product volume is the major concern when defining awarehouse storage plan.

High-volume sales or throughput product should bestored in a location that minimizes the distance it ismoved, such as near primary aisles and in lowstorage racks.

Such a location minimizes travel distance and the

need for extended lifting. Conversely, low-volume product can be assigned

locations that are distant from primary aisles orhigher up in storage racks.


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A Sample Storage Area


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Storage Plan

Similarly, the plan should include a specific strategyfor products dependent on weight and storagecharacteristics.

Relatively heavy items should be assigned tolocations low to the ground to minimize the effort and

risk of heavy lifting. Bulky or low-density products require extensive

storage volume, so open floor space or high-levelracks can be used for them.

On the other hand, smaller items may require storage

shelves or drawers. The integrated storage plan must consider and

address the specific characteristics of each product.


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Types of warehouses

Basic Warehouses generally include: (1) Private warehouses, (2) Public warehouses, and (3) Contract warehouses.

A private warehouse facility is owned and managedby the same enterprise that owns the merchandisehandled and stored at the facility.

A public warehouse, in contrast, is operated as anindependent business offering a range of services-such as storage, handling, and transportation- on thebasis of a fixed or variable fee.

Public warehouse operators generally offer relativelystandardized services to all clients.


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Types cont.....

Contract warehousing, which is evolving from the publicwarehouse segment, provides benefits of both the privateand public alternatives.

Contract warehousing is a long term, mutually beneficialarrangement which provides unique and specially tailoredwarehousing and logistics services exclusively to oneclient, where the vendor and client share the risksassociated with the operation.

Important dimensions that differentiate contractwarehousing operators from public warehouse operatorsare the extended time frame of the service relationship,tailored services, exclusivity, and shared risk.


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Private Warehouses

A private warehouse is operated by the firm owningthe product.

The actual facility, however, may be owned or

leased.

The decision as to which strategy best fits anindividual firm is essentially financial.

Often it is not possible to find a warehouse for leasethat fits the exact requirements of a firm.


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Private Warehouses

The major benefits of private warehousing includecontrol, flexibility, cost, and other intangible benefits.

Private warehouses provide more control since theenterprise has absolute decision-making authorityover all activities and priorities in the facility.

This control facilitates the ability to integratewarehouse operations with the rest of the firm'sinternal logistics process.


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Private Warehouses

Private warehousing is usually considered less costlythan public warehousing because private facilitycosts do not have a profit markup.

This perceived benefit, however, may be misleadingsince public warehouses often are more efficient or

may operate at lower wage scales. Private warehousing has also some intangible

benefits, particularly with respect to market presence. A private warehouse with a firm's name on it may

produce customer perceptions of responsiveness and

stability. This perception sometimes provides a firm with a

marketing advantage over other enterprises.


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Public Warehouses

On the basis of the range of specialized operationsperformed, public warehouses are classified as

(1) general merchandise,

(2) refrigerated, (3) special commodity,

(4) bonded, and

(5) household goods and furniture.

Each warehouse type differs in its material handlingand storage technology as a result of the product andenvironmental characteristics.


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Public Warehouses

General merchandise warehouses are designed tohandIe general package commodities such as paper,small appliances, and household supplies.

Refrigerated warehouses (either frozen or chilled)handle and maintain food, medical items, andchemical products with special temperaturerequirements.

Commodity warehouses are designed to handlebulk material or items with special handlingconsiderations, such as tires or clothing.


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Public Warehouses

Bonded warehouses are licensed by thegovernment to store goods prior to payment of taxesor duties.

They exert very tight control over all movements in

and out of the facility since government documentsmust be filed with each move.

For example, cigarettes are often stored in bondedwarehouses prior to having the tax stamp applied.

This tactic saves the firm money by delaying taxpayments; it also reduces inventory valuesubstantially.


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Public Warehouses

Finally, a household goods or furniturewarehouse is designed to handle and store

large, bulky items such as appliances andfurniture.

Of course, many public warehouses offercombinations of these operations.


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Public Warehouses

From a financial perspective, public warehousingmay have a lower variable cost than comparableprivately operated facilities.

The lower variable cost may be the result of lower

pay scales, better productivity, or economy of scale.

Public warehouses certainly result in lower capitalcosts.

When management performance is judged according

to return on investment (ROI), the use of publicwarehousing can substantially increase enterprisereturn.


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Public Warehouses

Public warehousing offers flexibility in that it is easyto change the location, size, and number of facilities,allowing a firm to quickly respond to supplier,customer, and seasonal demands.

Private warehouses are relatively fixed and difficult to

change because buildings have to be constructed orsold.

Public warehousing can also offer significant scaleeconomies since the volume for each customer isleveraged with that of other users.

This results in high-volume operations that canspread fixed costs and justify more efficient handlingequipment.


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Public Warehouses

A public warehouse can also leveragetransportation by providing delivery of loadsthat represent many public warehousecustomers.

For example, rather than have vendor A andvendor B each deliver to a retail store fromtheir own warehouse, a public warehouseserving both vendors could deliver a singlecombined load more efficiently.


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Public Warehouses

A public warehouse charges clients a basic fee forhandling and storage.

In the case of handling, the charge is based on thenumber of cases or pounds handled.

For storage, the charge is assessed on the numberof cases or weight in storage during the month.

Such charges normally exceed the cost of privatewarehousing if adequate private facility volumeexists.

However, when economies of scale are not possiblein a private facility, public warehousing may be a low-cost alternative.


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Contract Warehouses

Contract warehousing combines the bestcharacteristics of both private and public operations.

The long-term relationship and shared risk result in

lower cost than typical public warehousearrangements.

Contract warehouse operations can provide benefitsof expertise, flexibility, and economies of scale bysharing management, labor, equipment, andinformation resources across a number of clients.


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Contract Warehouses

Although it is common for contract warehouseoperators to share resources across clients in thesame industry such as grocery products, it is notcommon that direct competitors will want to share

resources.

Contract warehouse operators are also expandingthe scope of their services to include other logistics

activities such as transportation, inventory control,order processing, customer service, and returnsprocessing.


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Contract Warehouses

For example, Rich Products, a frozen foodmanufacturer in Buffalo, New York, has increasinglyutilized contract warehousing.

Since 1992, Rich has had a long term commitmentwith a refrigerated warehousing and distributioncompany, Christian Salvesen, for storage, handling,and distribution services at its facilities in New York.

The nature of the arrangement benefits both partiesand allows Rich to expand its distribution networkwithout incurring any fixed facility cost.


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Contract Warehouses

Rich is assured that there will always be storagespace for its products.

Christian Salvesen doesn't have to be concerned

with filling space in its warehouses and can focus onproviding service.

Moreover, the longer Rich Products utilizes Christian

Salvesen's services, the better the contractwarehousing firm will be able to understand Rich'sbusiness needs and provide customized services.


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Classification of warehouses

NB. It must therefore be noted that, irrespective of thetype of warehouse, they (warehouses) may beclassified on the following criterion:

Utility Criteriaa. Productb. Specialised nature of service provided

Ownership

Conditionality of Release


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Utility Criteria

a. Product

Explosive store house and magazines

Depots with storage tankers

Secured warehouse. Eg, coin/notes treasurepapers are stored

Yard.

b. Speciality of Service. Eg cold store, dry agricproducts, medical store

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Ownership

Government: warehouses owned bygovernments or states to hold materials fortheir own use

Public warehouses

Private

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Conditionality of Release

Contract warehouse

Bonded warehouse

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Warehousing Strategy

Many firms utilize a combination of private, public,and contract facilities.

A private or contract facility may be used to coverbasic year round requirements, while public facilities

are used to handle peak seasons. In other situations, central warehouses may be

private, while market area or field warehouses arepublic facilities.

Each use of warehouse combinations will bediscussed now.


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Full warehouse utilization throughout a year is aremote possibility.

As a planning rule, a warehouse designed for full-capacity utilization will in fact be fully utilized between

75 and 85 percent of the time. Thus from 15 to 25 percent of the time, the space

needed to meet peak requirements is not utilized.

In such situations, it may be more efficient to build

private facilities to cover the 75 percent requirementand use public facilities to accommodate peakdemand.


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It may be more efficient to build private facilities to cover the 75percent requirement and use public facilities to accommodatepeak demand.


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The second form of combined public warehousingmay result from market requirements.

A firm may find that private warehousing is justified atspecific locations on the basis of distribution volume.

In other markets, public facilities may be the least-cost option.

In logistical system design the objective is todetermine whatever combination of warehousestrategies most economically meets customer serviceobjectives.


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An integrated warehouse strategy focuses on twoquestions.

The first concerns how many warehouses should beemployed.

The second question concerns which warehousetypes should be used to meet market requirements.

For many firms, the answer is a combination that canbe differentiated by customer and product.

Specifically, some customer groups may be servedbest from a private warehouse, while a publicwarehouse may be appropriate for others.


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Other qualitative factors that should be consideredinclude:

(1) presence synergies,

(2) industry synergies,

(3) operating flexibility,

(4) location flexibility, and

(5) scale economies.

Each consideration and its rationale will be discussed.


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Presence synergies

Presence synergies refer to the marketing benefitsof having inventory located nearby in a building thatis clearly affiliated with the enterprise (e.g., thebuilding has the firm's name on the door).

It is widely thought that customers are morecomfortable when suppliers maintain inventory innearby locations.

Products and customers that benefit from localpresence should be served from private or contractfacilities.


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Industry synergies

Industry synergies refer to the operating benefits ofcollocating with other firms serving the same industry.

For example, firms in the grocery business oftenreceive substantial benefits when they share public

warehouse facilities with other suppliers serving thesame industry.

Reduced transportation cost is the major benefitsince joint use of the same public warehouse allowsfrequent delivery of consolidated loads from multiple

suppliers. Public and contract warehousing increase the

potential for industry synergy.


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Operating flexibility

Operating flexibility refers to the ability to adjustinternal policies and procedures to meet product andcustomer needs.

Since private warehouses operate under the

complete control of the enterprise, they are usuallyperceived to demonstrate more operating flexibility.

On the other hand, a public warehouse often employspolicies and procedures that are consistent across itsclients to minimize operating confusion.

There are many public and contract warehouseoperations that have demonstrated substantialflexibility and responsiveness.


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Location flexibility

Location flexibility refers to the ability to quicklyadjust warehouse location and number in accordancewith seasonal or permanent demand changes.

For example, in-season demand for agricultural

chemicals requires that warehouses be located nearmarkets that allow customer pickup.

Outside the growing season, however, these localwarehouses are unnecessary.

Thus, the desirable strategy is to be able to open and

close local facilities seasonally. Public and contract warehouses offer the location

flexibility to accomplish such requirements.


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Scale economies

Scale economies refer to the ability to reducematerial-handling and storage through application ofadvanced technologies.

High-volume warehouses generally have greateropportunity to achieve these benefits because they canspread technology's fixed cost over larger volumes.

In addition, capital investment in automated equipmentcan reduce direct variable cost.

Public and contract warehouses are generallyperceived to offer better scale economies since theyare able to design operations and facilities to meethigher volumes of multiple clients.


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Qualitative Decision Factors

Presence synergy and Operating flexibility is higher in PrivateWarehouses.

Other factors are higher in Public Warehouses.


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Planning the Distribution Warehouse

The initial decisions of warehousing are related toplanning.

A master plan of the layout, space requirements, and

material-handling design should be developed firstand a specific site for the warehouse selected.

These decisions establish the character of the

warehouse, which, in turn determines the degree ofattainable handling efficiency.

Si S l i


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Site Selection

Location analysis techniques are available to assist inselecting a general area for warehouse location.

Once location analysis is completed, a specificbuilding site must be selected.

Three areas in a community may be considered forlocation:

1) commercial zones, 2) outlying areas served bymotor truck only, and 3) central or downtown areas.

The primary factors in site selection are the

availability of services and cost. The cost of procurement is the most important factor

governing site selection.

Si S l i


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Site Selection

A warehouse need not be located in a majorindustrial area.

In many cities, one observes warehouses among

industrial plants and in areas zoned for light or heavyindustry.

Interestingly, this is not a legal necessity because

most warehouses can operate under the restrictionsplaced on commercial property.

Si S l i


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Site Selection

Beyond procurement cost, setup and operatingexpenses such as rail sidings, utility expenses, taxes,insurance rates, and highway access requireevaluation.

These expenses vary between sites.

For example, a food distribution firm recently rejectedwhat otherwise appeared to be a totally satisfactory

site because of insurance rates.

The site was located near the end of a water main.

Si S l i


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Site Selection

During most of the day, adequate water supplieswere available to handle operational and emergencyrequirements.

The only possible water problem occurred during twoshort periods each day.

From 6:30 to 8:30 in the morning and from 5 to 7 inthe evening, the demand for water along the line wasso great that a sufficient supply was not available tohandle emergencies.

Because of this deficiency, abnormally highinsurance rates were required and the site wasrejected.

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Site Selection

Several other requirements must be satisfiedbefore a site is purchased.

The location must offer adequate room for

expansion. Necessary utilities must be available.

The soil must be capable of supporting thestructure, and the site must be sufficiently

high to afford proper drainage (su akna izinverme).

P d t Mi C id ti


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Product-Mix Considerations

The design and operation of a warehouse are relateddirectly to the character of the product mix.

Each product should be analyzed in terms of annual sales,stability of demand, weight, and packaging.

It is also desirable to determine the total size and weightof the average order processed through the warehouse.

These data provide necessary information for determiningrequirements in warehouse space, design and layout,material-handling equipment operating procedures, andcontrols.

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Expansion

Future expansion is often neglected when anenterprise consider initial establishment of itswarehouse facilities.

Inclusion of a warehouse into the logistical system

should be based partially on estimated requirementsfor future operations.

Well-managed organizations often establish five- toten-year expansion plans.

Such expansion considerations may requirepurchase or option of a site three to five times thesize of the initial structure.

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Expansion

Special construction is often considered toease expansion without seriously affectingnormal operations.

Some walls may be constructed of semi-permanent materials to allow easy removal.

Floor areas, designed to support heavymovements, are extended to these walls in amanner that facilitates expansion.

S l ti f M t i l H dli S t


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Selection of Material-Handling System

A material-handling system is one of the initialconsiderations of warehouse planning.

Movement is the main function within a warehouse.

Consequently, the warehouse is viewed as astructure designed to facilitate maximum productflow.

It is important to stress that the material-handlingsystem should be selected early in the warehousedesign stage.

W h L t


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Warehouse Layout

Layout of a warehouse depends on the proposedmaterial handling system and requires developmentof a floor plan to facilitate product flow.

It is difficult to generalize about warehouse layouts

since they must be refined to fit specific needs.

If pallets are to be utilized, the first step is todetermine the pallet size.

A pallet of nonstandard size may be desirable forspecialized products, but whenever possible,standardized pallets should be used because of theirlower cost.

W h L t


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Warehouse Layout

The most common sizes are 40 by 48 inches and 32by 40 inches.

In general, the larger the pallet load, the lower the

cost of movement per package over a given distance.

The packages to be placed on the pallet and therelated patterns will determine, to a certain extent,the size of pallet best suited to the operation.

Regardless of the size finally selected, managementshould adopt one size for the total operation.

W h L t


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Warehouse Layout

The second step in planning a layout involves thepallet positioning.

The basic method of positioning pallets in a

mechanized warehouse is a ninety-degree, orsquare, placement.

Square placement means that the pallet is positionedperpendicular to the aisle.

The square method is widely used because of layoutease.

Pilf P t ti


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Pilferage Protection

Protection against theft of merchandise has becomea major factor in warehouse operations. Such protection is required as a result of the

increased vulnerability of firms to riots and civildisturbances.

All normal precautions employed throughout theenterprise should be strictly enforced at eachwarehouse.

Security begins at the fence.

As standard procedure, only authorized personnelshould be permitted into the facility and surroundinggrounds and entry to the warehouse yard should becontrolled through a single gate.



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Without exception, no private automobile-regardlessof management rank or customer status-should beallowed to penetrate the yard adjacent to thewarehouse.

To illustrate the importance of the stated guidelines,the following actual experience may be helpful.

A particular firm enforced the rule that no private

vehicles should be permitted in the warehouse yard. Exceptions weremade fortwo handicapped office

employees.



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One night afterwork, one of these employeesaccidentally discovered a bundle taped under onefender of his car.

Subsequent checking revealed that the car was

literally a delivery truck. The matter was promptly reported to security, which

informed the employee not to alter any packagestaped to the car and to continue parking inside theyard.

Over the next several days, the situation was fullyuncovered, with the ultimate arrest and conviction ofseveral warehouse employees who confessed tostealing over $100,000of company merchandise.



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The firm would have been better off purchasing asmall vehicle to provide transportation forthehandicapped employees from the regular parking lotsto the office.

Shortages are always a major consideration inwarehouse operations. Many are honest mistakes in order selection and

shipment, but the purpose of security is to restricttheft from all angles.

The majority of thefts occur during normal workinghours.



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Computerized inventory control and order processingsystems help protect merchandise from being carriedout of the warehouse doors.

No items should be released from the warehouseunless accompanied by a computer releasedocument.

If samples are authorized foruse by salespersons,the merchandise should be separate from otherinventory.



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Not all pilferage occurs on an individual basis.

Numerous instances have been discovered whereorganized efforts between warehouse personnel and

truck drivers resulted in deliberate over-picking orhigh-for-low-value product substitution in order tomove unauthorized merchandise out of thewarehouse.

Employee rotation, total case counts, and occasionalcomplete line-item checks can reduce vulnerability tosuch collaboration.

Product Deterioration


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Within the warehouse, a number of factors canreduce a product or material to a non-usable or non-marketable state.

The most obvious form of product deterioration isdamage from careless transfer or storage.

Another major form of deterioration is non-

compatibility of products stored in the same facility.



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The primary concern is deterioration that results fromimproper warehouse work procedures.

A constant concern is the carelessness of warehouse

employees.

In this respect, the forklift truck may well bemanagement's worst enemy.

Regardless of how often operators are warnedagainst carrying overloads, some still attempt suchshortcuts when not properly supervised.



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In one situation, a stack of four pallets was droppedoff a forklift truck at the receiving dock of a foodwarehouse.

Standard procedure was to move two pallets perload.

The value of the damaged merchandise exceededthe average daily profit of two supermarkets.

Product deterioration from careless handling within

the warehouse is a form of loss that cannot beinsured against and constitutes a 100 percent costwith no compensating revenue.

Documents

Puc l400 Lecture 1