bai giang quan tri kho hang sv

7/28/2019 Bai Giang Quan Tri Kho Hang Sv

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Ho Chi Minh city University of TransportDepartment of Transport Economics

Logistics Science SubDivision

***

Comp. by Nguyen Huynh Luu Phuong

(Internal Use only)

Warehouse Management

1

* Agenda:

Chapter 1: Inventory management

Chapter 2: Warehouse management

2

Chapter 1: Inventory management

1.1 Definition of Inventory:

Inventory is a stock or store of goods. It generally refers to material in stock. It is

also called the idle resource of an enterprise for current and future demand.

* Quiz: How many forms of inventorydo you think?

3


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1.1 Definition of Inventory:

Do you remember Dependent and Independent demand that you studied in the

subject Production management?

Yes, sir. No, Im sorry, sir.

Yeah, Go on the next lesson. Oops, Take up studies again to learn more.

4

1.2 Functions of inventory:

To meet anticipated demand

Inventory

To smooth production requirements

To decouple components of production distribution system

To protect against stockouts.

To take advantage of order cycle

To hedge against price increases or to take advantage of

quality discounts.

To permit operations

5

1.3 Objectives of inventory control:

1. What happens if under

and overstocking occur?

2. What concerns do I need

to focus on?

Level of

customer

service

Cost of

inventory

management

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1.3 Requirements for effective inventory

management:

To be effective, manager must have the following:

A system to keep track of inventory on hand and on order.

A reliable forecast of demand.

Knowledge of lead time and lead time variability.

Resonable estimates of inventory holding cost, ordering cost and shortage

cost.

A classification system for inventory items.

7

8 9 3 3 4 8 1 0 0 1 0 6 3

1.3.1 Inventory counting system:

Periodic system: Physical count of items in inventory made at periodic intervals.

Perpetual system: System that keeps track of removals from inventory

continuously, thus monitoring current levels of each i tem.

Trend in usage of Computerized check out systems nowadays. Some devices

facilitate the counting activities.

Portable data

collection terminal

Bar code readerEAN13 barcode

8

1.3.2 Demand forcast and lead time information:

1.3.3 Cost information:

Four basic costs are associated with inventory:

Holding cost (Carrying cost)

Purchasing cost

Ordering cost

Shortage cost

Forecasting Inventory Management

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1.3.4 Classification system:

A-B-C Approach: Classifying inventory according to some measure of importance,

and allocating control efforts accordingly.

A item

B item

C item

High

Low

Few Many

Annual dollar

volume of

items

Number of items

10

1.3.4 Classification system:

* Example 1: Classify the inventoryitems as A, B, or C based on annual dollar value,

given the following information:

ItemAnnual demand

(unit)

Unit cost

(USD)

1 1.000 4.300

2 5.000 720

3 1.900 500

4 1.000 710

5 2.500 250

6 2.500 192

7 400 200

8 500 100

9 200 210

10 1.000 35

11 3.000 10

12 9.000 311

1.4 Economic Order Quantity model (EOQ):

* EOQ: Identifying the order size that minimizes total cost.

1.4.1 Basic EOQ model:

* Assumptions of basic EOQ:

Only one product is involed.

Annual damand requirements are known.

Demand is spread throughout the year so that the demand rate is reasonbly

constant.

Lead time doesnt vary.

Each order is received in a single delivery.

There are no quantity discounts.

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The inventory cycle: Profile of inventory level over time13


The relation between average inventory and number of orders per year 14


Total annual cost = Annual carrying cost + Annual ordering cost

Where:

D: Demand, usually in units per year.

O: Order quantity, in units.

S: Ordering cost, in dollars USD (or other currency code)

H: Carrying cost, usually in dollars per unit per year.

SQ

DH

QTC

2

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16


By the profile above or by the calculus, we can obtain the optimal (economic) order

quantity. The result is the fomula:

The length of order cycle

17

H

DSQ

20

D

Q0


* Example 1: A local distributor for national tire company expects to sell

approximately 9,600 steelbelted radial tires of a certain tire and tread design next

year. Annual carrying costs are $16 per tire and ordering costs are $75. The

distributor operates 288 days per year.

a/ What is the EOQ?

b/ What is the length of an order cycle?

c/ How many times per year does the store reorder?

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* Example 2: Piddling Manufacturing assembles television set. It purchases 3,600

blackandwhite picture tube a year at $65 each. Ordering cost is $31, annual

carrying cost is 20 percent of the purchase price. Compute the optimal quantity

and the total annual cost of ordering and carrying the inventory.

19

1.4.2 EOQ with noninstantaneous replenishment:

20


Total annual cost = Carrying cost + Setup cost (Ordering cost)

Where:

Imax: Maximum Inventory.

p: Production or Delivery rate

u: Usage rate

21

SQ

DH

ITC

2

max

)(max upp

QI


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The economic run quantityis:

The length of order cycle is:

The run time is:

22

upp

HDSQ

20

u

Q0timeCycle

p

Q0Run time


* Example 3: A toy manufacturer uses 48,000 rubber wheels per year for its popular

dump truck series. The firm makes its own wheels, which it can produce at the rate

of 800 per day. The toy trucks are assembled uniformly over the entire year.

Carrying cost is $1 per wheel per year. Setup cost for a production run of wheels is

$45. The firm operates 240 days per year. Determine each of the following:

a/ Optimal run size.

b/ Minimum total annual cost.

c/ Cycle size forthe optimal run size.

d/ Run time.

23

1.4.3 EOQ with Quantity Discounts:

Quantity discounts are price reductions for large orders offered to customers to

induce them to buy in larger quantity.

24

The more you purchase,

the lower price you get

But, the more I purchase, the

more inventory I deal with


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Total cost = Carrying cost + Ordering cost + Purchasing cost

Where:

P: Unit price

25

DPSQDHQTC .

2


Adding PD doesnt change the EOQ 26


The total cost curve with quantity discounts is composed of a portion of the total

cost curve for each price. 27

Orderquantity Price per unit

1 to 44 $ 2

45 to 69 $ 1.7

70 or m or e $ 1 .4


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There are two general cases of the model:

Carrying costs are constant.

Carrying costs are stated as a percentage of purchase price.

When carrying costs are constant, all curves have the same EOQ.

28


When carrying costs are given as a percentage of unit price, price decreases reduce

carrying costs and that causes an increase in the EOQ.29


The procedure for determining the overall EOQ for carrying costs are constant:

1. Compute the common EOQ.

2. Only one of the unit prices will have the EOQ in its feasible range since the

ranges do not overlap. Identify that range:

a. If the feasible EOQ is on the lowest price range, that is the optimal

order quantity.

b. If the feasible EOQ is in any other range, compute the total cost for

the EOQ and for the price breaks of all lower unit costs. Compare the

total costs, the quantity that yields the lowest total cost is the optimal

order quantity.

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* Example 5: The maintenance department of a large hospital uses about 816 cases

of liquid cleanser annually. Ordering costs are $12, carrying costs are $4 per case a

year. And the new price schedule indicates that order of less than 50 ca ses will cost

$20 per case, 50 to 79 cases will cost 18 per case, 80 to 99 cases will cost $17 per

case, and larger orders will cost $16 per case. Determine the optimal order quantity

and the total cost.

31

Yeah, Its too

easy !!!


The procedure for determining the overall EOQ for carrying costs are stated as a

percentage of unit price:

1. Beginning with the lowest price, compute the EOQ for each price range

until a feasible EOQ is found.

2. If the EOQ for the lowest price is feasible, it is optimal order quantity. If the

EOQ is not the lowest price range, compare the total cost at the price

break for all lower prices with total cost of the largest feasible EOQ. The

quantity that yields the lowest total cost is the optimum.

32


* Example 6: Surge Electric uses 4,000 toggle switches a year. Switches are priced as

follow: 1 to 499, 90 cents each; 500 to 999, 85 cents each; and 1000 or more, 82

cents each. It costs $18 to prepare an order and receive it. And carrying costs are

18% of purchase price per unit on an annual basis. Determine the optimal order

quantity and the total annualcost.

33

Its not so easy as

above instance, I

must try more.


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1.4.4 When to reorderwith EOQ ordering:

REORDER POINT (ROP): When the quantity on hand of an item drops to this

amount, the item is reordered.

There are four determinants of the reorder point quantity:

1. The rate of demand.

2. The length of lead time.

3. The extent of demand and/or lead time variability.

4. The degree of stockout risk acceptable to management.

If demand and lead time are both constant, the reorder point is simly:

ROP = d x LT

Where:

d: Demand per dayor week.

LT: Lead time in days or weeks.

34


* Example 7: Tingly takes twoaday vitamins, which are delivered to his home by a

routeman seven days after an order is called in. At what point should Tingly

telephone his order in? (Note: No safety stock involed)

Service level: Probability that demand will not exceed supply during lead time.

Service level = 100% - Stockout risk

Safety stock: Stock that is held in excess of expected demand due to variable

demand rate and/orlead time.

The ROP then increases by the amount of the safety stock.

ROP = Expected demand dur ing lead time + safety stock

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* If an estimate of expected demand during lead time and its standard deviation

are available.

The ROP formula is:

ROP = expected demand during leadtime + z.dLTWhere:

z: Number of standard deviation(Looked up in next table).

dLT: Standard deviationof lead time demand.

Note: The smaller the risk, the greater the valueof z.

* If only demand is variable, then dLT = SQRT(LT).d and the ROP formula is:

Where:

d: Standard deviationof demand.

37

dLTzLTdROP ...


38


* If only leadtime is variable, then dLT = d.LT and the ROP formula is:

Where:

LT: Standard deviationof l ead time.

* If both demand and leadtime are variable, then:

And the ROP formula is:

39

LTdzLTdROP ...

222

.. LTddLT dLT

22

2 .... LTd dLTzLTdROP


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40z and E(z) look-up table.


* Example 8: Suppose that the manager of a construction supply house determined

from historical records that the lead time demand for sand averages 50 tons and a

standard deviation of 5 tons. Answer these questions, assuming that he is willing to

accept a stockout risk of no more than 3 percent.

a. What valueof z is appropriate?

b. How much safety stock should be held?

c. What reorder point should be used?

41


* Example 9: A restaurant uses an average of 50 jars of a special sauce each week.

Weekly usage of sauce has a standard deviation of 3 jars. The manager is willing to

accept no more than a 10 percent risk of a stockout during lead time, which is two

weeks. Assume the distribution of usage is normal.

a. Which of the above formulas isappropriate for this situation? Why?

b. Determine the value of z?

c. Determine the ROP?

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The expected number of units short in each order cycle is given by the formula:

Where:

E(n): Expected number of units short per order cycle.

E(z): Standardized number of units short obtained from above table.

dLT: Standard deviationof lead time demand

E(N): Expected number of units short per year.

* Example 10: Suppose the standard deviation of lead time demand is known to be

20 units.

a. For a lead time service level of 90 percent, determine the expected

number of units short for any order cycle.

b. What lead time service level would an expected shortage of 2 units imply?43

dLT

zEnE ).()( Q

D

nENE )()(


Relation between leadtime service level and annualservice level:

Or:

* Example 11: Given a lead time service level of 90%, D=1000, Q=250, dLT =16,

determine the annual service level and safety stock if annual service level of 98%.

44

D

NESLannual

)(1

Q

zESL dLTannual

).(1

1.4.5 FixedOrderInterval model:

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1.4.5 FixedOrderInterval model:

Pros:

Tight control needed for A items in ABC Classification.

Savings for ordering, packing and shipping costs.

The only practical approach if inventory withdrawals cant be closely monitored.

Cons:

Larger amount of safety stock.

Costs of periodic reviews.

46

ALTOIzLTOId d )(

Amount

to order=

Expected

demand during

protection

interval

+Safety

stock-

Amount on

hand at

reorder time

1.4.6 SinglePeriod model:

SinglePeriod model is a model for ordering of perishables and other items with

limited useful lives.

Costs in this model: Shortage and excess.

Cshortage = Cs = Revenueper unit Cost per unit

Cexcess = Ce = Cost per unit Salvage value per unit

* NOTE: Watch out for continuous stocking levels and discrete stocking levels. In

case of discrete stocking levels, choose the stocking level so that the desired

service level is equaled or exceeded.47

es

s

CC

C

LevelService


* Example 12: Sweet cider is delivered weekly to Pappys Produce Stand. Demand

varies uniformly between 300 liters and 500 liters per week. Pappy pays 20 cents

per liter for cider and charges 80 cents per liters for it. Unsold cider has no salvage

value and cannot be carried over into the next week due to spoilage. Find the

optimal stocking level and i ts stockout risk for that quantity.

* Example 13: Pappys Stand also sells a blend of cherry juice and apple cider.

Demand for the blend is approximately normal with a mean of 200 liters per week

and a standard deviation of 10 liters per week. C s = 60 cents per liter, and C e = 20

cents per liter. Find the optimal stocking level for the applecherry blend.

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* Example 14: Historical records on the use of spare parts for several large hydraulic

presses are to serve as an estimate of usage for spares of a newly installed press.

Stockout costs involve downtime expenses and special ordering costs. These

average $4200 per unit short. Spares cost $800 each. And unused parts have zero

salvage. Determine the optimal stocking level.

49

Number of spares used Relative frequency

0 0.20

1 0.40

2 0.30

3 0.10

4 or more 0

Chapter 2: Warehouse management

2.1 Introduction of warehouse:

50

What is warehouse???

StoringReceiving Picking


Most people just imagine warehouse as goods storage. Is it a full definition of

warehouse?

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Warehouse is a part of logistics system storing products and providing

information to management on the status, condition, and disposition of item

being stored.

52


Did you know?

Warehouse v.s Distribution Centre

53

2.2 Importance of warehouse:

54

Reduce lead time for purchasing Stock of raw materials and parts

Encourage for JustInTime system Support for customer service policy

Various products for transportation Repare for market changes

Temporary storage for returned or

reproduced items

Decrease of transport cost

Meet requirements of 7 Rs.

Reduce number of times of

purchasing or for discounting

Decrease of production cost


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55


56


Uses of warehouse:

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Uses of warehouse:

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2.3 Types of warehouse:

Public warehouse:

General Merchandise WH

Refrigerated or coldstorage WH

Bonded WH

Household goods and Furniture WH

Special commodity WH

Bulk storage WH

Private warehouse:

Warehouse for production

Warehouse for distribution

Warehouse for transportation

Material warehouse:

Contract warehouse:59

2.3 Types of warehouse:

60

P ub lic war eh ou se P ri va te war eho us e

Advantage

Con servat io n of cap ital Degree o f con trol

Adjustsfor seasonality Flexibility in service improvement

Red uced risk Less cost overlong term

E co no my of s ca le B et te r u se o f h um an r es ou rc e

Gr ea te r f le xi bi li ty In ta ng ib le b en ef it s

Tax advantages

Knowledge of exact warehousing cost

Insulation from labor desputes

Disadvantage

Communication proplem Lack of f lexibil ity

Lack of specializedservices Financial constrainst

Space may not be available Rateof return


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2.4 Main functions of warehouse:

2.4.1 Movement:

The movement function can be further divided into several activities, including: Receiving

Transfer or put away

Order picking/selection

Crossdocking

Shipping

Cross-docking system: Cross docking system is a distribution system where

items received at the warehouse are not received into stock, but are prepared

for shipment to another location or for retail stores.

61

2.4.1 Movement:

62

2.4.1 Movement:

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2.4.1 Movement:

* Types of cross-docking:

Manufacturing crossdocking.

Distribution crossdocking.

Transportation crossdocking.

Retail crossdocking.

* Products suitable for cross-docking:

Perishable items.

High qualityitems that do not require quality inspection during goods receipt.

Products that are pretagged and ready for sale at the customer.

Staple retail products with a constant demand and low demand variance.

64

2.4.1 Movement:

* Cross-docking Benefits:

Reduction in laborcosts, as the products no longerr equires picking and putaway

in the warehouse.

Reduction in the time from production to the customer, which helps improve

customer satisfaction.

Reduction in the need for warehouse space, as there is no requirement to

storage the products.

65

2.4.1 Movement:

* When should cross-docking be considered?

Inventorydestination is known when received.

Customer is ready to receive the inventory immediately.

Shipment to fewer than 200 locations daily.

Daily through put exceeds 2000 cartons.

More than 70% of inventory is conveyable.

Large quantity of individual items received by firm.

Inventoryarrives at firms docks prelabled.

Some inventory is timesensative.

Firms DC is nearcapacity.

Some of the inventoryis prepriced.

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2.4.2 Storage:

The second function of warehouse can be perfomed on a temporary or a semi

permanent basis.

Temporary storage

Semipermanent storage

67

2.4.3 Information transfer:

Organisations are relying increasingly on computerized information transfer

utilizing:

Electronic Data Interchange (EDI)

Bar coding

68

2.6 Storage and handling equipment:

69

2way wood pallet

4way plastic pallet


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70

Selective rack or single-deep rack


71

Double-deep rack


72

Push-back rack


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73

Pallet Flow rack


74

Drive-Through or Drive-In rack


75

AS/RS


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76

Counter balance lift truck


77

Reach lift truck


78Turret truck


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79Stacker crane for AS/RS


80Bin-Shelving or static rack


81Gravity-flow rack


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82Conveyor


83

More videos on storage

and handling equipment

Video 1: Fulfillment by Amazon

Video 2: Inside Better World Books warehouse

Video 3: Automatic picking system (Simulation)

2.7 Activities and Operations in warehouse:

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2.7.1 Arrival/checking:

85

Unloading Quantity/checking

A loaded forklift should

be driven backward asthe driver cannot see

things ahead.

Are names and

quantity of goodscorrect as on the

deliverystatement?

2.7.2 Receiving:

86

Loading on EV

Locating work on pallet rack

H34 H35

Where to store?

2.7.3 Storing:

87

Palletized goo ds

Stored on pallets


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2.7.3 Storing:

88

Stacking patterns on pallets

Block stacking is

likely to fall

Block

stacking

Pinhole

stacking

Alternate

stacking

Brick stacking

2.7.3 Storing:

89

2.7.3 Storing:

90

Numbers are assigned to each lane of the shelves and each shelf, and the

shelf number and stored goods are connected for management by computer,

etc.

A02 A03

Lane No. Shelf number and barcode


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2.7.3 Storing:

91

1. Fixed location: This is a management method to specify storing locations

(shelf numbers, etc.) by items, like at bookstores and l ibraries.

Merit: It is easyto find goods as they arealways in the same location Demerit: Other goods cannot be stored even if there is some vacancy. A

shortage in storing space may occur because of a sudden increase in the

quantity of goodsto store.

2. Free location: This is a management method which allows any item to be

stored at any vacant storing space. Names of goods and their location

number are connected to be managed.

Merit: Storing space efficiency improves

Demerit: It is possible that the same kind of goods are dispersed and

stored in different locations. It is difficult to find goods, unless managed

by computer, etc.

2.7.4 Picking:

92

Picking Picking check

Are the item number

and quantity correct?

2.7.5 Inventory clearance:

93

Count the number of stock on hand

1 case and 5

pieces of

NB1254


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2.7.6 Distribution processing:

94

$50

Assortment work Assembling work Price-tagging

$45

Price Tag

2.7.7 Packing:

95

Usually, shipping labels are

affixed, indicating deliveryaddressees and delivery

addresses, etc.

2.7.8 Vehicle arrangement work:

96

To arrange vehicles deciding which trucks are used to deliver

goods to which a rrival goods owners in what order.

Considering the amount,

delivery dates, addresses,

etc.


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2.7.9 Overview:

97

Example of a flow from order fulfill ment to shipment

Invoice (Mail)

Customer

Order input by FAX operators

Orderingform

FAX

Order input by telephone

operators

Sales agent/sales

clerical work

Core System

ERP

Headquarters

Picking

Request

Order-receiving form automatic FAXDelivery

Inventory

allocation

CTI Double-checkby other operators

Ordering

form

Issuance ofdelivery

slip/invoice

NEC

Mail/FAX

FAX

Items directlyshipped from

supplier

Supplier

Logistic Center

WMS

Order

registration

Picking

informationTEL

FAX

Coresystem

Sales

cooperation

Web

Order-receiving Center

FAX :

:NEC

FAX

[ F A X ]

:

[ ]

:

-

:

2 /2 /20 0 5

: :

FAX

:

:

NEC

F AX :

[ FAX ]

:

[ ]

:

-

:

2/ 2/2005

: :

Delivery

2.8 Warehouse activity cost:

Receiving cost

Storage cost

Picking cost

Shipping cost

* Warehouse affects the following cost:

Warehousing cost

Cost of loss sale

Inventorycost

Transport cost

98

2.9 Considered issues in warehousing:

2.9.1 Inefficient warehouse management system:

Receiving

Incorrect product, uncompleted information

Putaway

Unidentified product, unknown storage location

Storage

Different size of items, inappropriate location of storage

Order picking

Costly picking method, uncompleted picking

Shipping Prep

Unsuitable packaging, no lebeling

Shipping

No scheduling, out of date records, inefficient loading 99


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Unknown storage location

100

God helps me findwhere my goods is.



Order Picking

101

Quantity

ofitems

A A 5

BC 3

NX 1

A A 5

BC 3

NX 1

A A 5

BC 3

NX 1

JF 1

BC 2

PI 1

ET 5

WE 1

Picking is done as many times as thenumber of orders

Quantity

ofitems

A A 5

BC 3

NX 1

Quantity

ofitems

A A 5

BC 3

NX 1

Quantity

ofitems

A A 5

BC 3

NX 1

Quantity

ofitems

A A 5

BC 3

NX 1

Quantity

ofitems

A A 5

BC 3

NX 1

Quantity

ofitems

A A 5

BC 3

NX 1

Quantity

ofitems

A A 5

BC 3

NX 1

Quantity

ofitems

A A 5

BC 3

NX 1

Quantity

ofitems

A A 5

BC 3

NX 1

Quantity

ofitems

A A 5

BC 3

NX 1

FG 2

Shipping slip

Picking of 4 items



Different size of items to be stored.

102


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2.9.2 Unproductive space utilization in warehousing:

Inappropriate position of equipment or goods in warehouse can directly or

indirectly affect to the efficiency of warehousing process.

Items characteristics

Warehouses characteristics

103


2.9.3 Inappropriate facilities and equipment

utilization:

104

2.10 Approaches for warehouse management

improvements:

2.10.1 Better plan and design for warehouse and

facility:

Factors of warehouse investment

Markets demands

Existing warehouses Characteristics of goods

Economic situation

Resources

Area, Equipment, Staff, Capital, Specialist

Regulation

Others105


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facility:

Factors of warehouse locationselection

Source of raw material or items

Transportation network, facility aroud the site

Source of labor, cost of labor

Communitys attitude, government regulations

Public facility

Environment

Future Opportunity

Land cost

Construction cost, tax, insurance

Distance between factory, supplier, customer, market106

Which place is the most

appropriate one for our

warehouse?


facility:

Factors of warehouse design

Develop a demand forecast.

Allow for growth

Allow for adequate aisle space:

Main aisle

Cross aisle

Aisle in retail bin area

Personal aisle

Service aisle

Fire aisle

107


facility:

Factors of warehouse design

Provide for order picking space

Provide for storage space

Provide for office, miscellanous space

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facility:

Layout and Design Principles:

Use one story buildingas possible

109

One-story warehouse Multi-story warehouse

Ramp

way

No need to have an

elevator and work is

done quickly


facility:


Move goods in a straight line

110


facility:


Minimize aisle space

Use full building height

111


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facility:


Utilize warehouses cubic capacity

112


facility:


To park lengthwise, its necessary to have a space approximately twice as

long as the length of vehicle.

113


facility:


Reduce inhouse transport by considering these receiving and shipping

docks location.

114


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facility:


Consider following warehouse layouts:

Randomized storage

Dedicated storage

Products can be grouped by:

Compatibility

Complementarity

Popularity

115


facility:


Other considerations: Floor load capacity, pillar interval in warehouse,

lighting ...

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2.10.2 Improvement of warehouse management:

Receiving process:

Carrier scheduling

Have your suppliers to correctly label material before they arrive at your

warehouse.

Affix tag on the SKUs to be easily located and managed

Use RFID if possible.

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Putaway/Storage:

Separate types of goods and storages.

Partition warehouse into smaller unit of storage and put clear section

indicator.

Color section, rack, shelve for easy recognition.

Standardize carrying unit.

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Order processing:

Customer order handlingmethods:

Discrete picking

Batch picking

Zone picking

Wave picking

Basic orderpicking method:

Pickers walk to pick item

Pickers uses the equipment or vehicle to pick items

Items are transported to picker

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Order processing:

Orderpicker routing pattern:

SShape method

Return method

Midpoint method

Largest gap method

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