Contents:y Reasons for warehousing y Benefits y Warehouse operating principles y Types of Warehouse y Warehousing strategies y Warehouse location strategies

y Site selection y Transport

Warehousing:Storage or warehousing provides the place utility as part of logistics for any business and along with Transportation is a critical component of customer service standards.

Customer Analysis Order Fulfillment

Purchasing/ Supplier Partnering

Warehouse & Transportation

Integrated Supply Chain Management

Inventory Management & Control

Manufacturing/ Remanufacturing / Assembly

Materials Management

Demand & Lead Time Management

Reasons for warehousing:y To support the companys customer policy. y To maintain a source of supply without interruptions. y To achieve transportation economies. y To support changing market conditions and sudden changes in

demand.

y To support any JIT programs. y To provide customers with the right mix of products at all times and

all locations.

y To ensure least logistics cost for a desired level of customer service.

Benefits of warehousing:y Consolidation.

Consolidation Warehouses:Plant A

Customers
Consolidation Warehouses A B C

Plant B

Plant C

Benefits of warehousing:y Consolidation. y Break bulk warehouse.

Break bulk Warehouses:Customers

A

Plant A

Break bulk Warehouses

Benefits of warehousing:y Consolidation. y Break bulk warehouse. y Processing / Postponement. y Stockpiling. y Service benefits.

Warehouse Operating Principles:Three Principles are:

1) Design criteria:

a) Number of stories in the facility, b) Height utilization, c) Product flow

Warehouse Operating Principles:2) Handling technology

a) Movement continuity, b) Movement scale economies.

3) Storage plan

Types of warehouses:It includes: 1) Private warehouses, 2) Public warehouses, 3) Contract warehouses

Warehousing Strategy
y An integrated warehouse strategy focuses on two questions.

1) The 1st concerns how many warehouses should be employed. 2) The 2nd question concerns which warehouse types should be used to meet market requirements.

Warehousing Strategy:y Many firms utilize a combination of private, public, and contract facilities. y A private or contract facility may be used to cover basic year round requirements, while public facilities are used to handle peak seasons. y In other situations, central warehouses may be private, while market area or field warehouses are public facilities.

Warehousing Strategy
y Full warehouse utilization throughout a year is a remote possibility. y As a planning rule, a warehouse designed for full-capacity utilization will in fact be fully utilized between 75 to 85 % of the time. y Thus from 15 to 25 % of the time, the space needed to meet peak requirements is not utilized. y In such situations, it may be more efficient to build private facilities to cover the 75% requirement and use public facilities to accommodate peak demand.

Warehousing Strategy
y It may be more efficient to build private facilities to cover the 75 %

requirement and use public facilities to accommodate peak demand.

Warehousing Strategy
Other qualitative factors that should be considered include: 1) presence synergies: Inventory located nearby in a building that is clearly affiliated with the enterprise. 2) industry synergies: Refer to the operating benefits of collocating with other firms serving the same industry. 3) operating flexibility: Refers to the ability to adjust internal policies and procedures to meet product and customer needs.

Contd
4) location flexibility: Refers to the ability to quickly adjust warehouse location and number in accordance with seasonal or permanent demand changes. 5) scale economies: Refer to the ability to reduce material-handling and storage through application of advanced technologies.

Qualitative Decision Factors:Private Presence synergies Industry synergies Operating flexibility Location flexibility Scale economies Contract Public

The Warehouse location strategies:1) Market positioned: a) Order Cycle time b) Transportation cost c) Sensitivity of the product d) Order sizes 2) Product positioned: a) Perishability of the raw materials b) Number of products in the product mix c) Assortments ordered by the customers from the product mix d) Transportation consolidation rates 3) Intermediately positioned:

Site Selection:y Location of the major markets. y Nature of the products being distributed. y Quality & Variety of carriers serving the proposed site. y Quality & Quantity of labour available. y Cost of industrial land.

Contd
y Potential for expansion. y Local tax structures. y Cost of construction. y Cost & availability of utilities . y Any local govt. tax concessions or incentives.

Product-Mix Coiderations:y Each product should be analyzed in terms of annual sales, stability of

demand, weight, and packaging.

y It is also desirable to determine the total size and weight of the

average order processed through the warehouse.

Expansion:y Well-managed organizations often establish five- to ten-year

expansion plans.

y Such expansion considerations may require purchase or option of a

site three to five times the size of the initial structure.

Warehouse Layout:y Layout of a warehouse depends on the proposed material handling system and requires development of a floor plan to facilitate product flow. y If pallets are to be utilized, the first step is to determine the pallet size.

Pilferage Protection:y Protection against theft of merchandise has become a major factor in warehouse operation y As standard procedure, only authorized personnel should be permitted into the facility and surrounding grounds.

Product Deterioration:y The most obvious form of product deterioration is damage from careless transfer or storage. y Another major form of deterioration is non-compatibility of products stored in the same facility. y Product deterioration from careless handling within the warehouse is a form of loss that cannot be insured against and constitutes a 100 percent cost with no compensating revenue.

TRANSPORT

Transport Fundamentals:y Transport involves y Equipment y People y Decisions

When deciding the transport mode for a given product there are several things to consider: y Mode price y Transit time and variability (reliability) y Potential for loss or damage.

Single-mode Service Choices and Issues:Air

Rapidly growing segment of transportation industry Lightweight, small items Quick, reliable, expensive

Rail
Low cost, high-volume Improving flexibility intermodal service

Contd
y Road :

Company has flexibility of deciding the drop points . The operation can be 24 x 7 The risk of Industrial action is minimized. Insurance, Claims on truckers are quite streamlined. Ropeways:Only for solid. Can work in long and deep valleys in between. Suitable for ropeways buckets.

Contd Water
Low-cost, high-volume, slow Bulky, heavy and/or large items Combined with trucking & rail for complete systems International trade

Pipeline
Primarily for oil & refined oil products Slurry lines carry coal or kaolin High capital investment Low operating costs Low product losses

Transport Cost Characteristics:y Fixed costs:

y y y

Transport equipment Carrier administration Roadway acquisition and maintenance

y Variable costs:
y y y y

Fuel Labor Equipment maintenance Handling, pickup & delivery, taxes

Advantage of Transportation:y Greater economies in the scale of production. y Increases competition. y Better customer services.

Selection of Transportation mode:y Transport rate related variables. y Ability to track the consignment. y Customer service capabilities in terms of door-to-door transit time

and reliability.

y Consistency of pick up and delivery. y Right handling equipment. y Simplicity of the documentation. y Handling of complaints and the processing of claims.

References:y Sales Management Still & Cundiff and Giovonni y Sales and Distribution Management S.I.Gupta y www.scribd.com