12/10/2024

Contemporary Logistics
Twelfth Edition, Global Edition Learning Objectives
10.1 To discuss the role of warehousing in a logistics system
10.2 To learn about public, private, contract, and multiclient warehousing
Chapter 10 10.3 To analyze select considerations when designing warehousing
facilities
Warehousing Management
10.4 To examine some prominent operational issues in warehousing

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The Role of Warehousing in a Logistics System (1 of 8)

The Role of Warehousing in a Logistics System (2 of 8)

• Warehousing • Warehousing and transportation are substitutes for each

 Refers to “that part of the firm’s logistics system that other, with warehousing having been referred to as
stores products (raw materials, parts, goods-in-process, “transportation at zero miles per hour”
finished goods) at and between points of origin and point
of consumption”1

1Douglas
M. Lambert, James R. Stock, and Lisa M. Ellram, Fundamentals of Logistics Management (New York: Irwin
McGraw-Hill, 1998), Chapter 8.

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Figure 10.1: Adding a Warehousing Facility: The Role of Warehousing in a Logistics System (3 of 8)
Shorter-Haul Transportation
• Warehousing
 Serves to match different rates or volumes of flow when
patterns of production and consumption do not coincide
 Facilitates the regrouping function in a supply chain
o Involves rearranging the quantities and assortment of
products as they move through the supply chain

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The Role of Warehousing in a Logistics System (4 of 8) The Role of Warehousing in a Logistics System (5 of 8)
• Regrouping can take place in four forms:
 Accumulating (bulk making) • Warehousing can be provided by:
o Involves bringing together similar stocks from different sources  Warehouses
 Allocating (bulk breaking)  Distribution centers
o Involves breaking larger quantities into smaller quantities  Fulfillment centers
 Assorting  Cross-docking facilities
o Refers to building up a variety of different products for resale to
particular customers
 Sorting out
o “Separating products into grades and qualities desired by different
target markets”2

2William D. Perreault, Jr., Joseph P. Cannon, and E. Jerome McCarthy, Basic Marketing, 16th ed. (New York: McGraw-Hill Irwin,

2008), Chapter 11.

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The Role of Warehousing in a Logistics System (6 of 8) The Role of Warehousing in a Logistics System (7 of 8)

• Fulfillment centers
• Warehouses
 Focused on e-commerce orders
 Emphasize the storage of products
• Cross-docking
 Primary purpose is to maximize the usage of available
 Defined as “the process of receiving product and shipping it
storage space
out the same day or overnight without putting it into storage”3
• Distribution centers  Key benefits include improved service by allowing products to
 Emphasize rapid movement of products through the reach their destinations more quickly as well as reduced
facility inventory carrying costs from less stock because of faster
product delivery4
 Attempt to maximize throughput
 Has grown due to the increased emphasis on time reduction
o Throughput is defined as the amount of product in supply chains
entering and leaving a facility in a given time period
3No author, “2008 Cross-Docking Trends Report,” Saddle Creek Corporation, 2008.
4Mike DelBoro, “Cross-Docking Rediscovered,” Material Handling & Logistics, May 2011, 34–37.

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Figure 10.2: Ideal Facility for Pure Supplier

The Role of Warehousing in a Logistics System (8 of 8) Consolidation (Full Pallet Movement)
• Cross-docking facilities
 Is differentiated from distribution centers by the length of
time a product is in a facility (24 hours or less for cross-
docking facility)
 Design of the facility is an important consideration to
facilitate quick movement of product
o Should be designed with a minimal amount of storage
space and truck doors on two or more sides5
o Some designs include “H,” “L,” “T,” “U,” and “E”
configurations
5DelBoro, “Cross-Docking Rediscovered.”
Source: Reprinted by permission of the Warehousing Education and Research Council.

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Public, Private, Contract, and Multiclient Public, Private, Contract, and Multiclient
Warehousing (1 of 9) Warehousing (2 of 9)
• Organizations must also decide the proper mix in terms of • Public warehouses
warehouse ownership  Serve all legitimate users
 Owning  Require no capital investment on the user’s part
o Private warehousing  Allow users to rent space as needed
 Renting  Can be rented on a month-to-month basis
o Public warehousing  Warehousing companies have responsibility for personnel
decisions and regulatory issues
o Contract warehousing
o Warehousing labor safety practices monitored by
o Multiclient warehousing Occupational Safety and Health Administration (OSHA)
 Offer more locational flexibility
 May provide specialized services

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Public, Private, Contract, and Multiclient Public, Private, Contract, and Multiclient
Warehousing (3 of 9) Warehousing (4 of 9)
• Private warehousing
• Public warehouses  Owned by the firm storing goods in the facility
 Potential drawback is lack of control by the user  Generates high fixed costs
 Should only be considered by companies dealing with
large volumes of inventory
 Largest uses of private warehousing are retail chain
stores
 Offers control to owner
 Assumes both sufficient demand volume and stability so
that warehouse remains full

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Public, Private, Contract, and Multiclient Public, Private, Contract, and Multiclient
Warehousing (5 of 9) Warehousing (6 of 9)
• Private warehousing • Contract warehousing
 Potential drawbacks include:  Also referred to as third-party (3PL) warehousing or
o High fixed cost of private storage dedicated warehousing
o Necessity of having high and steady demand  Refers to “a long term, mutually beneficial arrangement
volumes which provides unique and specially tailored
warehousing and logistics services exclusively to one
o Less attractive when interest rates are high
client, where the vendor and client share the risks
o May reduce an organization’s flexibility associated with the operation”6
 Internally
 Externally 6Warehousing Education and Research Council, Contract Warehousing: How It Works and How to Make It Work

Effectively (Oak Brook, IL:

Author, 1993).

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Public, Private, Contract, and Multiclient Public, Private, Contract, and Multiclient
Warehousing (7 of 9) Warehousing (8 of 9)
• Contract warehousing • Multiclient warehousing
 Less costly than private warehousing and more costly  Mixes attributes of contract and public warehouses
than public warehousing  Services are more differentiated than those in a public
 Allows a company to focus on its core competencies facility
 Potentially offers the same degree of control as private  Services are less customized than those in contract
warehousing due to contract specifications warehousing
 Services are purchased through minimum one-year
contracts

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Public, Private, Contract, and Multiclient

Warehousing (9 of 9) Design Considerations in Warehousing (1 of 8)
• Multiclient warehousing • General considerations
 Are attractive to smaller organizations  Quantity and character of goods to be handled must be
o That don’t have sufficient volumes to build their own known
storage facilities  Know the purpose to be served by a particular facility
o That don’t have sufficient volume to justify using o Facility with low rates of product turnover should be
contract warehousing laid out in a manner that maximizes utilization of the
o Have regular, but not continuous, need for cubic capacity of the storage facility
specialized equipment or services o Facility that emphasizes rapid product movement with
o Can benefit from working with other companies that limited time in storage should be configured to
have similar needs or requirements facilitate the flow of product into and out of it

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Design Considerations in Warehousing (2 of 8) Design Considerations in Warehousing (3 of 8)

• Fixed versus variable slot locations for merchandise
• Trade-offs
 In fixed slot locations each SKU has one or more
 Must be made among space, labor, and mechanization
permanent slots assigned to it
with respect to warehouse design
 Variable slot location involves empty storage slots being
assigned to incoming products based on space availability

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Design Considerations in Warehousing (4 of 8) Design Considerations in Warehousing (5 of 8)

• Build out (horizontal) versus build up (vertical) • Order-picking versus stock-replenishing functions
 General rule of thumb is that it is cheaper to build up  Organizations must decide whether workers who pick
than build out outgoing orders and those who are restocking storage
facilities should work at the same time or in the same area
 Warehousing equipment costs tend to increase
• Two-dock versus single-dock layout
 Generally has receiving docks on one side of a facility and
shipping docks on the other side, with goods moving between
them
 In a one-dock system, each and every dock can be used for
both shipping and receiving

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Design Considerations in Warehousing (6 of 8) Design Considerations in Warehousing (7 of 8)

• Conventional, narrow, or very narrow aisles • Degree of warehouse automation
 As aisle space increases, storage capacity decreases  Refers to utilizing mechanical or electronic devices to
substitute for human labor
 Easier to operate mechanical equipment in wider aisles
 Examples include narrow aisle forklifts, automated guided
 Reduce the chances of accidents and product damage vehicles, automated storage and retrieval systems, radio
with wider aisles frequency identification, and others
 Narrower aisles require specialized storage and  Offers the potential to reduce labor costs and improve
handling equipment (more expensive) warehouse productivity
 Managers must ensure that automation results in noticeable
improvement in warehousing effectiveness and efficiency

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Warehousing Operations (1 of 9)
Design Considerations in Warehousing (8 of 8)
• Efficient and effective warehousing management can be an
• Other space needs
exacting task
 Not uncommon for only approximately 20 percent of a
facility’s cubic capacity to be occupied by product7 • Workforce motivation can be difficult because the work can
be:
 Warehousing facilities set aside space for nonstorage
activities such as employee washrooms, lunchrooms,  Repetitive in nature
office space, specialized storage for hazardous items,  Strenuous and physically demanding
warehousing supplies, and many more  Occasionally dangerous

7http://www.ioptimizerealty.com/2012/12/21/measuring-utilization-warehouse/

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Warehousing Operations (2 of 9) Warehousing Operations (3 of 9)

• Some prominent operational issues include: • Warehousing productivity analysis
 Warehousing productivity analysis  Productivity is a measure of output divided by input
 Safety considerations  Numerous productivity metrics can be used to assess
warehouse productivity, but not all are relevant to all facilities
 Hazardous materials
 Examples of representative measures include:
 Warehousing security
o Cases shipped per person
 Cleanliness and sanitation
o Product lines shipped per person
o Pallets shipped per person
o Average warehouse capacity used
o Forklift capacity used

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Warehousing Operations (4 of 9) Warehousing Operations (5 of 9)

• Safety considerations • Safety considerations
 Warehousing facilities can be dangerous workplaces  Warehouse safety categories include:
o Forklifts account for one out of every six workplace o Employee
deaths8
o Property
 Warehouse safety can by influenced by governmental
regulations o Motor vehicles
o In the U.S. safety standards have been set for
warehousing equipment, and operations are enforced by
OSHA

8Eric Scharski, “Want a Safer Warehouse? Start with Forklift Users,” Food Logistics, January/February 2015, 36–41.

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Figure 10.3: Workplace Safety Issues

Warehousing Operations (6 of 9)
• Hazardous materials (hazmat)
 Examples include:
o Explosives
o Flammable liquids
o Flammable solids
 Government regulations often require shipping
documents indicating the hazardous materials
 Many countries also require the use of safety data
sheets (SDS)

Source: Reprinted with permission of Liberty Research Institute for Safety,

August 30, 2012.

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Warehousing Operations (7 of 9) Warehousing Operations (8 of 9)

• Warehousing security • Warehousing security
 Example potential threats include:  Focuses on protecting products and preventing their
o Theft theft
o Pilferage  Can be enhanced by focusing on people, facilities, and
o Heat and humidity processes
o Vandalism
o Fire
o Loss of electricity

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Table 10.1: Possible Shortcomings in

Warehousing Security
Warehousing Operations (9 of 9)
• Cleanliness and sanitation issues
 Particularly important in many industries, such as the
foodservice industry
 Can have a positive impact on employee safety, morale,
and productivity while also reducing employee turnover9
 Require common sense and due diligence

Source: Julia Kuzeljevich, “The Seven Deadly Sins in Warehouse Security,” Canadian Transportation & Logistics,
April 2006, 44.

9Ned Bauhof, “Keeping It Clean,” Beverage World, July 2007, 77.

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Key Terms (1 of 2) Key Terms (2 of 2)

• Accumulating (bulk-making) • Fixed slot location • Private warehousing • Variable slot location
• Allocating (bulk-breaking) • Fulfillment centers • Public warehousing • Velocity slotting

• Assorting • Hazardous material(s) • Regrouping function • Warehouse automation

• Contract warehousing • Multiclient warehousing • Sorting out • Warehouses

• Throughput • Warehousing
• Cross-docking • Occupational Safety and
Health Administration
• Distribution center
(OSHA)
• Dunnage

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