Practical Handbook

of Warehousing
F

Kenneth B. Ackerman
L8.Mfflmn,Co.
Cohmbus, OH

KLUWER ACADEMIC PUBLISHERS

BOSTON/DORDRECHT/LONDON
 Contents

FOREWORD . v
ACKNOWLEDGMENTS vii

Background of the Warehouse Industry

1 THE EVOLVING ROLE OF WAREHOUSING 3
History 3
Warehousing in the Industrial Era 5
Warehousing in the Age of Information 6
The Changing Role of Human Resources Management . . . 7
Warehousing as Part of a Logistics System 10
Globalization of Warehousing 10
A Profile of Tomorrow's Warehouse 12
2 THE FUNCTIONS OF WAREHOUSING 13
Functions of Warehousing 13
Warehousing Alternatives 15
Cost Structure 16
The Balance Between Risk and Costs 18
The Changing Values of Warehousing 19
Elements of Warehousing: Space Equipment, and People . . 20
3 THE PROS AND CONS OF
CONTRACT WAREHOUSING 23
The Historical Perspective 24
Is the Contract Primarily for Lending Institutions? .,. . . . 25
The "Evergreen" Contract 26
The Pricing Challenge in Contracts 27
Contracts and Stability 29

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4 WAREHOUSING AND CORPORATE STRATEGY . . .31

A Mission Statement for Warehousing v 31
The Make or Buy Decision 32
Dealing with Growth 33
What Business Are You in—Or, Should Form
Follow Function? 34
Motives for Contracting Out 35

The Elements of Warehouse Management

5 COMMUNICATIONS AND ELECTRONIC
DATA INTERCHANGE 39
Warehousing Forms 40
Damages 44
Stock Status Information 44
Communications and Order Picking 44
Dealing with Complaints 45
Developing a Standard Procedure 45
EDI—How it Looks from the Warehouse 46
Justification for EDI 46
How Does It Work? 47
How Widely Has EDI Been Accepted? 49
The Future of EDI 49
6 PACKAGING AND IDENTIFICATION 51
Functions of a Package 51
How the Package Affects Warehousing 52
Effect on Stacking 53
Packaging for Unitization 55
Identification 55
Container Handling 56
Package Design 56
Choosing a Contract Packager 58
A Series of Compromises 60
7 TRANSPORTATION .63
Carrier Selection 63
The Bill of Lading 65
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Shipper's Load and Count 65

Released Valuation , 66
Terms of Sale—F.O.B 66
Dealing with Claims 67
The Special Problem of Hazardous Materials 69
Integrated Logistics 69

8 ACCOUNTABILITY 71
Title ." 71
Inventory Responsibility 74
Product Liability 75
Insurance 76
Summary of Claims Procedures 77

9 STARTING-UP OR MOVING A
WAREHOUSE OPERATION 79
Reasons for Finding Another Warehouse 79
Options for Your Next Warehouse 80
Requirements Definition 81
Finding the Best Location 81
Architectural Features 83
Estimating the Cost of Moving 84
Cost of Transferring Each Load 85
How Long Will It Take? ., 86
Communications 87
Other Communications 88
Opening the Relocated Warehouse 88

1 0 AUDITING WAREHOUSE PERFORMANCE 91

Quantifying Warehouse Space 92
Quantifying Equipment Utilization 94
Quantifying Productivity of People y. . . 94
Qualitative Measures 95
Tracking Accuracy 97
Account Profitability 98

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Real Estate Aspects of Warehousing

11 FINDING THE RIGHT LOCATION 103
Location Theory 103
Outside Advisers 104
Requirements Definition 106
Location Models 107
The Final Selection Process 112
12 BUILDING OR REHABILITATING
YOUR WAREHOUSE 113
The Floor 114
Structural System and Roof 115
Docks and Drive Areas 116
Illumination and Heating 117
Foundations and Building Heights 118
Wall Panels 118
Interior and Exterior Finish 119
The Rehabilitation Alternative 119
Planning for Future Uses 120
13 THE 21ST CENTURY LOGISTICS FACILITY 121
Some Definitions and Concepts 121
Who Uses Logistics Facilities? 122
Regional and National Differences 123
The Changing Players in Logistics 124
Seven Megatrends 125
The Location Decision 127
The Building Design 129
Operational Changes 130
Financial Considerations 131
Conclusion and Recommendations 133

Planning Warehouse Operations

14 PLANNING FOR FUTURE USES 137
Design Structure for Versatility 137
Changes in Basic Function 138

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Internal and External Changes 139

Managing Change 140
15 SPACE PLANNING 143
Sizing the Warehouse 143
Storage Requirements 144
Interaction of Storage and Handling Systems 144
Stock Location Systems—Fixed versus Floating Slots . . 144
Family Groupings 146
A Locator Address System 147
Cube Utilization 148
Lot Size 148
Reducing Aisle Losses 149
Reducing Number of Aisles 150
Managing Your Space 150
1 6 PLANNING FOR PEOPLE AND EQUIPMENT 153
The Process of Making Flow Charts 153
The Best Sequence 156
"What I f Questions 158
The Critical Role of the Supervisor 159
Planning for Equipment Use 162
1 7 CONTINGENCY PLANNING 165
Strategies 166
Trigger Points . 166
Planning for the Impact of Strikes—Your Own Firm's as
Well as Others' 167
Strike Against Suppliers 168
Strike Against Customers 168
Trucking Strikes 168
Charting the Planning Process 169
Planning Steps . 169
1 8 POSTPONEMENT > 173
Background of Postponement 173
Types of Postponement 174
Postponement of Commitment 174

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Postponement of Title Passage 175

Postponement of Branding v 176
Postponement of Consumer Packing 176
Postponement of Final Assembly 177
Postponement of Blending 177
Increased Warehouse Efficiency 177
Potential Challenges 179
Postponement in the Warehouse 180

19 SELECTING A THIRD-PARTY OPERATOR 181

A Four Step Process 182
Evaluation Criteria 183
The Contract 184
Managing a Continuing Relationship 186

Protecting the Warehouse Operation

2 0 PREVENTING CASUALTY LOSSES 191
Types of Casualty Losses 191
Controlling Fire Risks 192
Wind Storm Losses 195
Flood and Leakage 195
Mass Theft 196
Vandalism 196
Surviving an Insurance Inspection 196
Plant Emergency Organizations 198

21 "MYSTERIOUS DISAPPEARANCE" 201

Electronic Detectors and Alarms 201
Door Protection Alarms 202
Grounds Security 203
Seals ,204
Storage Rack 204
Controlling Collusion Theft 204

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Physical Deterrent 205

Restricted Access v 205
Confirming Employee Honesty 206
Giving and Checking References 208
Other Collusion Theft Controls 209
Marketability of Product 210
Hiring Honest People 210
Using Supervision for Security 211
Procedures to Promote Security 211
Customer Pick-Ups and Returns 212
Security Audits 213
2 2 SAFETY, SANITATION, AND HOUSEKEEPING 215
Accidents in the Warehouse 215
Common Sense for Common Warehouse Operations . . 217
Redesigning Lifting Tasks 218
Training 219
Safety Behavioral Factors 220
Manual Handling and Safety 221
Management's Role 221
Sanitation 222
Excellence in Housekeeping 223
Benefits 225
2 3 VERIFICATION OF INVENTORIES
AND CYCLE COUNTING 227
Purpose of Inventories 227
Inventory Carrying Cost 228
Benefits of Improvement 228
Problem Areas 228
How Can a "Physical" Be Improved? 229
Incentives 230
Managing the Inventory-Taking Job 230
Controlling the Count y. . 233
Reconciliation . 233
Eliminating Inventory Errors by Cycle Counting 234

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Cycle Counting, Another Approach 239

What Does the Future Hold? 240

The Human Element

24 ORIENTATION AND TRAINING 243
Some Training Examples 246
Training Lift-Truck Operators 246
Why Training Courses Fail 248
Mentoring 249
Mentoring in the Warehouse 252
Goals of Training 254
25 LABOR RELATIONS 255
Creating a Union-Free Environment in the Warehouse . . 255
An Example 257
Public Warehousing Alternative 257
Public Warehouse Strikes 258
Using Subcontractor Warehouse Services 258
Transportation Strikes 259
Inventory Hedging 259
Turning from Union to Union-Free 259
Preemployment Screening 260
Employee Complaints 262
The Role of the Supervisor . 263
Arbitration Standards Pertaining to Discharge 263
The Essence of Union-Free Management 265
26 MOTIVATION 267
Barriers to Productivity 267
Who Gets the Incentives? 268
Union Attitudes 268
Installing and Designing the System 269
Pitfalls 271
The Role of the Supervisor 271
The Importance of Listening 272
Feedback 274

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2 7 IMPROVING PEOPLE PERFORMANCE 277

Maintaining Warehouse Discipline , 277
Peer Review—A New Approach to Discipline 279
The Interviewing Process 281
Substance Abuse in the Warehouse 288
Job Performance Appraisal 291
Promotion from Within 292
Pride in the Company 293

Productivity and Quality Control

2 8 MAKING WAREHOUSING MORE EFFICIENT 297
Establish Targets for Improvement 297
Forecasting 298
Reduce Distances Traveled 298
Increase Unit Load Size 300
Seek Round-Trip Opportunities 300
Improve Cube Utilization 301
Free Labor Bottlenecks 302
Reduce Item Handling 303
Improve the Packaging 303
Forces for Gain in Productivity 303

29 MONITORING PRODUCTIVITY 307

Is Your Warehouse Economical? 309
Monitoring Public Warehouses 315
Implementation 322
Guidelines for Measurement Systems 322
3 0 SCHEDULING WAREHOUSE OPERATIONS 325
Scheduling for Peak Demand 326
Why 40 Hours Is No Longer Enough 326
A New Kind of Work Week 326
31 CUSTOMER SATISFACTION— '
THE ROLE OF THE WAREHOUSE 331
Who Is YOUR Customer? 331

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Why Do Something Well That You Should Not Be

Doing At All? 332
The Importance of the Customer's Customer 332
How Will You Use What You Learn? 334
32 IMPROVING ASSET UTILIZATION 337
Space Utilization 337
Energy Utilization 337
Equipment Utilization 340
The Equipment Utilization Ratio 340
Improving Performance 341
Lift-Truck Rebuild Program 342
Key Points of the Rebuild Program 343
The Value of the Program 344
Inventory Performance 345
The Management Factor 346
Why Measure? 346
Danger Signals 347
Inventory Turnover and Distribution Analysis 349
Case History 350
An Action Plan—And Potential Benefits 354
Summary 355
33 "JUST-IN-TIME" AND ITS VARIATIONS 357
JIT in Manufacturing 358
JIT in Service Support . . . . 7 . 358
Quick R e s p o n s e 359
Efficient C u s t o m e r R e s p o n s e and Other Variations . . . . 3 6 2
34 WAREHOUSING COSTS 365
Costs Related to Function 365
Developing a Cost for Warehouse Labor 366
Justifying Purchase of Equipment 366
Establishing a Value of Inventory 368
Cost of Goods At Rest 370
The Influence of Inventory Turns 371
The Influence of Warehouse Layout 371
Cost of Goods in Motion 372

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35 MANAGEMENT PRODUCTIVITY 377

Defining Management 377
Why Warehousing Is Different 378
The Effective Manager 378
Measurement Tools for the Manager 379
The Critical Tasks of a Manager 381
The Manager's Hardest Job 384
The Buck Stops Here 385
How Good Are Your Warehouse Supervisors? 385
The Supervisor Promoted from Within 387
The Importance of Clarifying Expectations 387
3 6 REDUCING ERRORS 389
The Value of Order Checking 389
Order-Picking Errors 390
Order-Taking Errors 391
A Good Item Location System 391
Clear Item Identification 392
Clear Description of Quantity Required 393
Order Identification 394
"Good" Order-Picking Document 394
Other Factors to Consider 397
Personnel Factors 398
Identification with Work 399
Posting Error Rates , 399
Using Case Labels 399
"Picking Rhythm" 400
The Handling of Materials
37 RECEIVING AT THE WAREHOUSE 405
The Process: Eleven Steps 405
Physical Flow 408
Variations in the Receiving Process 408
Equipment 410
Locating the Receiving Function .411
Scheduling of Warehouse Receiving 413
Pitfalls of Receiving 414

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38 SHIPPING 417
Unit Loads 417
Doors Versus Time 418
Dealing with Shipper's Load and Count (SL&C) 418
Controlling Damage Claims 423
Customer Pick-Ups 423
39 CROSS-DOCKING IN THE WAREHOUSE 425
Success Factors 426
Pricing 430
Forms 431
Achieving the Goal 432
4 0 SPECIALIZED WAREHOUSING 433
Temperature-Controlled Warehousing:
The Essential Differences 433
Hazardous Materials Warehousing 438
State and Local Building Inspectors 440
Fulfillment Warehousing 442
Household Goods Storage 444
Modernization 444
Diversification 445
Summary 447
41 ORDER-PICKING 449
Four Kinds of Order Picking 449
Quality in Order-Picking 450
Order-Picking Forms 450
Systems for Order-Picking 451
Fixed versus Floating Slots 452
Order-Picking Methods 453
Single-Order versus Batch Picking 453
Zone System of Picking 455
Designing Your Order-Picking System 455
Summary 460
42 STORAGE EQUIPMENT 461
Defining the Job 461
Improving Storage with Racks 462

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Reducing Number of Aisles 463

Other Types of Pallet Rack t 464
Live Storage—Gravity Flow Rack 465
When to Use Flow Racks 466
What Flow Racks Will Not Do for You 467
The Carousel—It's More Than a Merry-Go-Round . . . . 467
Conveyor Systems 470
Types of Conveyors 471
The Automatic Guided Vehicle Systems
(AGVS) Alternative 472
Summary . 472
43 MOBILE EQUIPMENT 473
Choosing Lift Trucks 473
Operator Location 474
Types of Lift Attachments 475
Conventional or Narrow Aisle Trucks 476
Brand Selection 476
Automatic Guided Vehicle Systems 481
What to Look for in Mobile Equipment 484
4 4 APPROACHING WAREHOUSE A U T O M A T I O N . . . 485
The Relevance of Technology to Warehouse Operations . . 486
The Benefits of Automation 489
The Risks of Automation 490
In Conclusion '. 493
45 PALLETS AND UNIT LOADS 495
Standardization 495
The Problem with Pallets 497
New Kinds of Pallets 498
Alternatives to Pallets 500
Tradeoffs in Unit Handling 502
New Ways to Use Pallets 504
4 6 DEALING WITH DAMAGE .' . . 507
Causes of Damage in Physical Distribution 507
Disposal of Carrier Damage 508

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Concealed Damage 509

Warehouse Damage 509
Reducing Warehouse Damage 510
Recooperage and Repair 511
Protecting Damaged Merchandise 512
Storage of Damaged Products 513
Loss and Damage Guidelines 513
Damage Control Ratios 514
Damaged Loads Ratio 514
Preventing Warehouse Damage: A Questionnaire 515
4 7 REVERSE LOGISTICS IN THE WAREHOUSE 517
Three Reasons for Returns 517
The Role of the Warehouse Operator in Returns 519
Reconfiguring the Warehouse for Returns 520
Security Issues 520
Reconditioning and Repackaging 521
Running a Warehouse in Reverse 521
Keeping it Simple 523

Handling of Information
4 8 CLERICAL PROCEDURES 527
Customer Service Standards . 528
Location of Clerical Center . 528
Office Environment 529
Organizing the Clerical Function 529
Interaction with Marketing ; 530
Manual and Electronic Data Processing 531
Control of Automation 532
Measuring Clerical Costs 532
Management Information 532
4 9 COMPUTERS A N D WAREHOUSE MANAGEMENT . . 5 3 5
Some Definitions 535
Hardware versus Software—Then and Now 536
So Which Comes First—Hardware or Software? 537

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Choosing Warehousing Software 538

Barriers to Implementation 539
Choosing a Warehouse Management System 539
Selecting a New System 540
How Do You Locate the Right Software
Company or Package? 542
How Long Does Implementation Take? 543
Summary 545
5 0 ELECTRONIC IDENTIFICATION 547
Bar Codes—What They Are and How They Work . . . . 547
Scanners 548
Contact and Noncontact Readers 551
Printing Bar Codes 552
A User's View of Bar Coding 552
What Will Bar Coding Do for Me? 554
The Pitfalls 555
The Training Challenge 557
Bar Coding and Luddites 558
The Future of Electronic Identification 559

ENDNOTES 561
ABOUT THE AUTHOR 565
INDEX 567

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