warehouse functions

7/28/2019 Warehouse Functions

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Warehousing Functions

Warehouses

Material

handling

Storage

function

Customer

service

Information

transfer

Temporary PermanentReceive goods

Identify goods

Sort goods

Despatch to storage

Hold inventory

Recall, select goods

Marshal the shipment

Despatch the shipment

Prepare records and

advices


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Purpose of Warehousing

To provide desired level of customer service

at the lowest possible total cost

It is that part of the firms logistics system that

stores products (RM, Packing Materials, WIP,FG) at and between point of origin and point of

consumption and provides info to management

on the status, condition and disposition of items

being stored

Distribution warehousing relates mainly to FG


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Reasons for WarehousingService related Cost related

Maintain source of supply

Support customer service

policies

Meet changing market

conditions

Overcome time and space

differentials

Support JIT programs of

suppliers and customers

Provide customers with the right

mix of products at all timesTemporary storage of materials

to be disposed or re-cycled

Achieve production economies

Achieve transportation

economies

Take advantage ofQuantity

Purchase discounts and forward

buys

Least Logistics cost for a desired

level of customer service


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Warehouses

Support manufacturing

Mix products from multiple facilities for

shipment to a single customer

Break-bulk

Aggregate

Used more as a flow-thru point than as ahoarding point


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Distribution Warehousing

The objective is to set up a network ofwarehouses closest to the customerlocations to service markets better andminimise cost

Could be C&FA s, depots or distribution centers

Macro location strategies: Market positioned

Production positioned Intermediately positioned


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Distribution Center

Warehouse designed to speed the flow ofgoods and avoid unnecessary costs

Speeds bulk-breaking to avoid inventory

carrying costs Helps to centralise control and co-

ordination of logistics activities

Products can also be cross-docked (onevehicle to another)

Market positioned..


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Market Positioned

Warehouses located nearest to the finalcustomer

Factors influencing are:

Ordercycle time

Transportation costs

Sensitivity of the product

Ordersize Levels ofcustomer service offered

Production positioned.


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Production Positioned

Warehouses located close to the productionfacilities or supply sources

Not the same level of customer service as theearlier one

Serve as points of aggregation / collection forproducts made in a number of plants

Factors influencing are:

Perishability of raw materials Number of products in the product mix

Assortments ordered by customers

Transport consolidation rates ex; FTL

In between


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Intermediate Positioned

Mid point locations between the final customer

and the producer

High customer service levels possible even if

products made in number of units

Other macro approaches look at cost

minimisation or cost and demand elements tomaximise profitability

Transportation management.


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Transportation

Very important in the Logistics function: Movement across space or distance adds value to

products

Transportation provides time and place utility Role of transportation includes:

Provides opportunity for growth under competitiveconditions

Deeperpenetration into markets Wider distribution means greater demand

Can influence product prices favourably

Principles.


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Transportation Principles

Continuous flow

Optimise unit of cargo - stackability

Maximum vehicle unit capacity utilization

Adaptation of vehicle unit to volume andnature of traffic

Standardisation

Compatibility of unit load equipment

Minimum ofdead weight to total weight

Maximum utilization of capital, equipment andpersonnel

Process.


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The Selection Criteria

Environmental analysis: shipper, carrier,

government regulations, public influence

Deciding objectives

Selecting mode

Select transport type within the mode

Define functions of transport

Evaluation and control customer perception /satisfaction, best practice benchmarking


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Cost Factors

Can be product related or market related.

Product related: density, stowability, ease ordifficulty of handling and liability

Market related: competition, location of markets,Government regulations, traffic in and out of themarket, seasonality of movements and impacton customer service

Five prominent modes: Road, rail, air, water and pipeline.

Sixth one is use of Ropeways


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Customer Service Factors

Consistency, dependability

Transit time

Coverage door-to-door for example Flexibility in handling a range of products

Loss and damage performance

Additional services provided

Reverse logistics


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Reverse Logistics

Movement of goods from the market or customerback to the company

The need: Increased awareness of the environment

Stringent legislation For some it is part of the business

Profitability of dealing with scrap, surplus

Surplus, obsolescence can result due to:

Over optimistic sales forecasts, change in productspecs, errors in estimating material usage, losses inprocessing or overbuying based on incentives

Comparison of modes


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Advantages of Rail

Economy more so for goods over long

distances

Efficiency of energy

Reliability not affected by weather

conditions


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Disadvantages

Uneconomical forsmall shipments and

short distances

Not suitable forremote stations

Costly terminal handling facilities

Inflexible time schedules

Road transport..


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Road Freight Advantages

Through movement direct from consignor toconsignee, no transshipment

Flexibility routes and loading routines can be

easily altered, operate day and night Less capital costs for own fleet + immunity

from industrial action

Fast turn-around if articulated units like

tractors and trailers are used Minimum delays


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Disadvantages

Susceptibility to weather and road conditions

in spite of the best protection

Unsuitability for heavy loads rail transport

more economical for bulk loads Unsuitability for long distances again the rail

telescopic rates are more favourable

Air transport.


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Air Transport Advantages

Fastermode

Reduction in cost particularly inventory

Broad service range

Increasing capabilities

Disadvantages:

High cost

Weather affects flight conditions

Limitations on heavy consignments

Water transport


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Water Transport

Advantages:

Mass movement ofbulk

Lowest freight cost

Preferred forlong haul of low value commodities Disadvantages:

Not for quick transit

Suitable forcertain types on commodities only

Pipeline.


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Pipeline Movement

Advantages: Reliable, continuous, all weathertransport

Low energy consumption hence low cost

Low maintenance and operating costs

Underground, no space problem Can traverse difficult terrain

Minimal transit losses

Operation round the clock, safe

Economies of scale double the throughput for only30% additional cost

Disadvantage is in the investment cost

Ropeways.


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Ropeways

Advantages: In hilly or inaccessible areas

Long and circuitous routes with streams / deepvalleys

Forcommodities capable of movement in ropewaybuckets

Short haulages of less than 50 kms

Areas where other carriers are uneconomical

Disadvantages: Heavy investments Limitations on size and quantity of haul

How to decide on the right carrier?

C i S l ti


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Carrier Selection

Traffic Related Shipper related Service related

Length of haul

Consignment weight

Dimensions

Value

Urgency

Regularity of

shipment

Fragility

Toxicity

Perishability

Type of packingSpecial handling

required

Size of firm

Investment priorities

Marketing strategy

Network of

production and

distribution

Availability of rail

sidings

Stockholding policy

Management

structureSystem of carrier

evaluation

Speed (transit time)

Reliability

Cost

Customer relationship

Geographical coverage

Accessibility

Availability of special

vehicles / equipment

Monitoring of goods

Unitisation

Ancillary services bulkbreaking, storage


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Chart of Relative Merits

Parameter Weight

age

Rail Road Air Water Pipe

line

Rope

way

Speed 30 5 6 8 4 3 3

Versatility 10 6 8 5 6 3 2

Reliability 20 6 8 5 5 7 4

Availability 10 7 8 5 6 3 2

Continuity of

service

10 6 7 5 5 8 3

Distribution cost 20 4 5 6 6 7 8

Total score 10 5.4 6.7 5.1 5.1 5.1 4.0

Overall ranking 10 2 1 4 5 5 6


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Key Learnings

Support to customer service has evolved frommaterials management to logistics and to supplychain management

Production and marketing are the two internalcustomers of Logistics

Logistics also has a direct impact on thefinancials of a company

Three important functions of logistics areinventory management, warehousing andtransportation


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Key Learnings

Inventory directly supports customer servicebut also adds to the cost and has to bemanaged carefully

Warehousing provides the place utility and

works as a balance between production andmeeting customer needs

Transportation supports the place and timeutility and uses different modes to reach the

products to the consumer Modern day supply chains integrate the

operations of a firm, its suppliers andcustomers

warehouse functions

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