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7/29/2019 WH Science Slides
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C H A P T E R S 1 – 3
W A R E H O U S E O P E R A T I O N S
Warehouse and Distribution
Science
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Definition of a Warehouse
Warehouses are points in the supply chain whereproduct pauses and is touched.
Consumes both space and time (person-hours).
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Why have a warehouse?
To better match supply with customer demand
To consolidate product, reduce shipping cost
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Types of Warehouses
Retail Distribution Center (DC)
Service Parts DC
Catalog fulfillment or E-commerce DC
3PL Warehouse Perishables Warehouse
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Warehouse Systems Determined by
Inventory characteristics
Number of products, size, and turn rates
Throughput and service requirements
Number of lines picked and orders shipped per day Footprint of building & cost of equipment
Cost of labor
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Material Flow
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Fluid Flow Model of Product Flow
Insights from Fluid Dynamics: fluid flows faster innarrower segments of pipe than wider segments
Implies on average, an item will move more slowly throughthe region with large inventory than it will through a region
with little inventory.
Figure 2.1
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General Warehouse Guidelines from Fluid Model
Keep the product moving
Avoid starts and stops which require extra handling andadditional space
Avoid layouts that impeded smooth flow
Identify and resolve bottlenecks to flow
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A product is generally handled in smaller units
as it moves down thesupply chain.
A stock keeping unit, orsku, is the smallestphysical unit of productthat is tracked by the
organization.
Upstream in the SC, flow is in larger units, likepallets.
Product is successively
broken down intosmaller units as it movesdownstream.
Figure 2.2
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Popularity vs
Volume (flow)
Popularity (number of times requested orpicks) is NOT highly correlated with physical
volume (flow) of a sku.Makes warehousedesign difficult becauseit is hard to designprocessed that work well with skus that me
be any combination of popular/unpopular nadlow-volume/high- volume.
Figure 2.3
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The mostpopular 20%
of SKUs
This plot is the sameskus ranked from mostpopular to least.
This is a typical plot
that shows that a smallfraction of the skusaccount for most of theactivity. (80%/20%rule)
It is easy to designprocesses for popularskus because they arefairly predictable. Figure 2.4
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The remaining80% of the
SKUs
Conisder the skus in the“long-tail” of the curve,the 80% that arerequested infrequently.
Impossible to know which of those skus will be requested tomorrow.
They occupy most of thespace of the warehouse.
Have high safety stock.
Figure 2.4
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“Two Warehouses” in One
Essentially you have 2 warehouses:
The first “warehouse” Organized around a small set of predictably popular skus
Easy to plan for
Challenge is to manage flow efficiently
Labor intensive
The second “warehouse” Predictable in “aggregate” only
Harder to plan for Space intensive
Challenge to hedge space and labor tradeoff
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Dedicated Storage
Each location is reserved for an assigned product
Simple to implement
Store more popular items in more convenient
locations Workers “learn” the layout making picking more
efficient
Does not use space efficiently – on average half full
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Inventory
Level
Idealizedrepresentation of how inventory level at alocation changes over
time Average inventory levelover time 50%
Figure 2.5
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Shared Storage
Assign a product to more than 1 location, when a locationis empty it is available for reassignment
More locations, less product in each location, so space isrecycled sooner
Better utilization of space than dedicated storage Need Warehouse Management System (WMS) to direct
workers More time consuming to put away Requires worker discipline to pick where directed not
where most convenient May have more discrepancies between book and physical
inventory
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Theorem 2.1
When a sku is stored in k locations of equal size theaverage space utilization is k/(k + 1).
Moving from 1 location to 2 locations, improves
utilization from 50% to 66% Increasing the number of locations increases
utilization, but the improvement diminishes as k increases.
Increasing the number of locations also increases themanagement required.
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Storage In Practice
Typically the actual space utilization for sharedstorage is slightly less than the value from Theorem2.1
Shared storage is more often used for bulk storageareas (i.e. pallets)
Dedicated storage for the most active pick area, where the area is smaller and labor benefits matter
most.
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Illustration of Shared & Dedicated Storage
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Example of a Hybrid System
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Warehouse as a Queuing System
A queuing system is where customers arriveand join a queue to awaitservice by any of several
servers. After receivingservice, the customersdepart the system.
Fundamental result of
queuing theory is Little’sLaw.
Theorem 2.2 (Little’s Law) For a queuing system insteady state that averagelength L of the queue
equals the average arrivalrate λ times the average
waiting time W.
=
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Little’s Law Example
Warehouse with 10,000pallets that turn an averageof about 4 times per year.
L = 10,000 W = ¼ year
10,000 pallets = 14 year
≈ 40,000
What labor rate isnecessary to support this?
Assuming one 8-hour shiftper day and about 250
working days per year,there are about 2,000
working hours/year.
λ ≈,
2,
≈20 pallets/hour
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Super Club Music
Super Club distributes recorded musicto retail stores. Such physicaldistribution of music is, of course, adying enterprise, as it is being replaced by distribution via the web.
Super Club stores are divided in toroutes and each route is visited by a
delivery truck once a week on a regularday.
Each day they pick for about 8 routes, which total about 100 stores.
On average each store orders about 50sku's and about 3 of each sku, for a
total of about 15,000 pieces per day. The warehouse knows these orders a
day in advance of picking and so canplan its work in advance.
Unique challenges A very, very few sku's will be very, very
popular and most sku's will scarcely sellat all. In fact, it is not unusual for 20percent of the sku's to sell one or fewercopies over a year.
Popularity is very fleeting; what is apopular product now may be dead in
two weeks. A large number of returns in the music
business
More information http://www.warehouse-science.com/?b6a9d0d0
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Pallet rack Static shelving withoverstock on top
Super Club Music
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Typical shelf 48 bays of flow rack
Super Club Music
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Packing orders intocartons
Pick face of flow rack
Super Club Music
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Warehouse
Operations
Most of the expense in atypical warehouse isLABOR.
Most of the labor cost is
ORDER-PICKING.
Most of the time inorder-picking is inTRAVEL.
Receive• 10 % of operating cost
Put-away • 15% of operating cost
Store • Non-value added
Pick • 55% of operating cost
Pack, Ship• 20% of operating cost