Daily PlanDay 3

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Daily Plan-Day 3
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Module Overview

• How does warehousing support supply chain
  strategy?
• Warehouse operations design and control
• Building a SCOR card for the warehouse
• Integrated Logistics and Transportation

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How does warehousing support supply chain
strategy?
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Function of a Warehouse in a Supply Chain

• A warehouse is the point in the supply chain
  where raw materials, work-in-process (WIP), or
  finished goods are stored for varying lengths of
  time.
• Warehouses can be used to add value to a supply
  chain in two basic ways
• Storage. Allows product to be available where and
  when its needed.
• Transport Economies. Allows product to be
  collected, sorted, and distributed efficiently.

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Storage Function

• Storage provides value through
• Stockpiling. Accumulating material to lower
  per-unit cost of production and transportation by
  spreading fixed costs over more units.
• Buffering. Holding safety stock to hedge against
  uncertainty in demand, production output, and
  transportation times.
• Processing. Storage is sometimes a value-adding
  operation (e.g., wine).

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Transport Economies

• Consolidation of multiple small loads into a
  larger load gives access to economies of scale
  and density in transportation.
• Full truckload (TL) shipments are less costly
  than less-than-truckload (LTL) shipments.
• Waiting to accumulate a full load for TL shipment
  from origin to destination can cause excessive
  delay.
• Warehouses function as transshipment terminals
  for consolidation, cross-dock, and break-bulk
  activities.

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Types of Warehouses

• A public warehouse is a business that rents
  storage space to other firms on a month-to-month
  basis. They are often used by firms to supplement
  their own private warehouses.
• A warehouse can be used
• to store and transship raw materials at any point
  along the supply chain inbound to a production
  facility
• to hold work in process (WIP) at the facility,
  and
• to store and transship finished goods distributed
  from the facility.
• Raw material or finished goods warehouses can be
  used for consolidation, cross-docking, or
  breaking bulk purposes.

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Consolidation Warehouse

• A consolidation warehouse is used to combine
  multiple loads into a single load.
• Instead of costly LTL or infrequent TL shipments
  from each supplier directly to the customer, a
  consolidation warehouse provides less-costly and
  more frequent TL shipments to the customer.

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Cross-Dock Warehouse

• A cross-dock warehouse is used to mix freight so
  that TL shipments can be used for all transport
  between suppliers and customers.
• Receiving and shipping are usually coordinated so
  that no storage is required at the warehouse.

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Break-Bulk Warehouse

• At a multi-market warehouse, a large
  long-distance TL shipment from a supplier to
  broken down into smaller loads that are delivered
  a short-distance to each customer.
• Multi-market warehouses are usually located close
  to or in each major market served.

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Warehouse operations design and control
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Typical Warehousing Activities

• Receiving (unloading, verifying, inspecting)
• Putaway, cross-docking
• Order picking, replenishment
• Sortation, packing
• Shipping (verifying, loading)
• Within storage areas consolidation,
  rewarehousing, cycle counting

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Typical Warehousing Activities
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Receiving

• Receiving introduces inventory into the warehouse
  and prepares it for storage or customer order
  fulfillment.
• It is the process of unloading, verifying,
  inspecting, and staging of material transported
  to a warehouse in preparation for putaway or
  cross-docking, sometimes including sorting and
  repackaging of the material.

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Putaway

• Putaway is the process of moving material from
  the receiving area to a storage location or, in
  the case of cross-docking, directly to the
  shipping area.
• A putaway algorithm is used in the WMS to search
  for and validate locations where each movable
  unit in the putaway queue can be stored.
• The efficiency of all subsequent warehouse
  operations depend on performance of the putaway
  algorithm.
• Inventory and location attributes are used in the
  algorithm to make the selection.

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Replenishment

• Replenishment is the process of moving material
  from reserve storage to a forward picking area so
  that it is available to fill customer orders
  efficiently.
• Other types of in-plant moves include
• Consolidation the process of combining several
  partially filled storage locations containing the
  same type of item into a single location or
  several orders into a single shipment.
• Rewarehousing the process of moving items to
  different storage locations to improve handling
  efficiency.

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Order Picking

• Order picking is the process of removing material
  from storage in response to specific customer
  orders.
• Attributes not contained in the customer order
  are assigned using the preferences stored in the
  customer master file.

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Why is Order Picking Important?

• Order picking is the most critical activity in
  most warehouses because it is the point at which
  customer expectations are actually filled.
• Order picking represents 55 of all operating
  costs in a typical warehouse

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Sortation and Packing

• Sortation is the process of merging, identifying,
  inducting, and separating items to be conveyed to
  specific destinations.
• Packing is the process of unitizing orders for
  shipment.
• Sortation and packing is only required after
  piece and case batch order picking.

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Shipping

• The process of staging, verifying, and loading
  orders to be transported from a warehouse.
• The ASN for each order is generated during the
  picking process and is sent to the customer.
• Customer-specific shipping instructions for each
  order are retrieved from the preferences stored
  in the customer master file.
• Carrier selection is made using the rate
  schedules contained in the carrier master file.

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Building a SCOR card for the warehouse
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Key Performance Measures

• Financial (cost per unit) e.g.,
• Cost per Order (Total W/H Cost)/(Total Orders
  Shipped)
• Days on Hand (Avg. Inventory Value)/(Avg. Daily
  Sales)
• Productivity (units per man-hour) e.g.,
• Orders per Hour (Orders Picked Packed)/(Total
  W/H Labor Hours)
• Cycle Time (hours per unit) e.g.,
• Dock-to-Stock Time (Total Receiving Putaway
  Hours)/(Total Receipts)
• Order Cycle Time (Actual Ship Date) (Customer
  Order Date)

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Key Performance Measures (Cont)

• Utilization (avg. units/capacity) e.g.,
• Storage Utilization (Avg. Occupied
  Space)/(Available Storage Space)
• Quality () e.g.,
• Order Fill Rate (Orders Filled Complete)/(Total
  Orders Shipped)
• Order Accuracy (Error-Free Orders)/(Total Orders
  Shipped)
• On-Time Delivery (Orders On-Time)/(Total Orders
  Shipped)
• Loss (Total Damage Claims Loss)/(Total Sales)

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Integrated Logistics and Transportation
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Integrated Logistics Defined

• The process of anticipating customer needs and
  wants acquiring the capital, materials, people
  technology and information needed to meets those
  needs and wants optimizing the network to
  fulfill customer requests and utilizing the
  network to fulfill customer requests in a timely
  way.
• Council of Logistics Management

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Integrated Logistics Defined

• Managing the complexity of fulfillment in a
  heavily regulated industry, where millions of
  dollars in inventory could be jeopardized by
  careless product handling or compliance
  violations.

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Integrated Logistics Organization

• Centralized
• Decisions made in one central location
• Decentralized
• Decision made at different points in the supply
  chain
• Hybrid

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Logistics Systems Operating Objectives

• Operating Objectives
• Rapid response
• Information technology
• Inventory reduction
• Lack of tolerance to variance

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Logistics Systems Operating Objectives

• Operating Objectives
• Minimum variance
• Any unexpected event that disrupts the system.
• May result from any point in the supply chain.

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Logistics Systems Operating Objectives

• Operating Objectives
• Minimum inventory
• Achieve customer service goals with lowest TOTAL
  cost
• System wide view of inventory in the system

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The Role of Transportation in Integrated Logistics

• Operating Objectives
• Movement Consolidation
• Transportation costs affected by
• Type of product
• Size of shipment
• Distance traveled
• Mode of shipment used
• Consolidation is a way to reduce these costs

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Logistics Systems Operating Objectives

• Operating Objectives
• Quality
• TQM
• Logistics reversal and repeat
• Application to entire supply chain

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Logistics Systems Operating Objectives

• Operating Objectives
• Life cycle support
• Guarantee of product effectiveness
• Special considerations in pharmaceuticals
• Product Recall and Return Logistics

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Warehouse Management System

• The warehouse management system (WMS) is the
  software system that enables real-time, paperless
  control of warehouse operations.

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WMS Files

• The inventory master file acts as the repository
  for all inventory in the warehouse.
• The location master file provides the link
  between the WMSs logical representation of the
  warehouse and the physical layout of the
  warehouse.
• The item master file is used to identify valid
  items that are handled in the warehouse.

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WMS Files (cont)

• The carrier master file includes
  transportation-related information that is used
  for shipping completed orders.
• The customer master file is used to store
  customer preferences for how orders are to be
  shipped so that it does not need to be included
  in each order.

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Team Exercise1. Measure your SOP Maturity.
2. Build a two year plan to improve it and
estimate the benefits.