Certified

International Supply Chain Professional

(CISCP)
WAREHOUSE AND DISTRIBUTION
MANAGEMENT
Product Slotting
 Warehouse
 Warehouse include:
 (1) Private warehouses,
 (2) Public warehouses, and
 (3) Contract warehouses.

 A private warehouse facility is owned and managed by the same

enterprise that owns the merchandise handled and stored at the
facility.

 A public warehouse, in contrast, is operated as an independent

business offering a range of services -such as storage,
handling, and transportation- on the basis of a fixed or variable
fee.

 Public warehouse operators generally offer relatively

standardized services to all clients.
 Contract Warehouse

 Contract warehousing, which is evolving from the public

warehouse segment, provides benefits of both the
private and public alternatives.

 Contract warehousing is a long term, mutually beneficial

arrangement which provides unique and specially
tailored warehousing and logistics services exclusively
to one client, where the vendor and client share the risks
associated with the operation.
 Private Warehouses

 A private warehouse is operated by the firm owning

the product.

 The actual facility, however, may be owned or

leased.

 The decision as to which strategy best fits an

individual firm is essentially financial.

 Often it is not possible to find a warehouse for lease

that fits the exact requirements of a firm.
 Public Warehouses

 On the basis of the range of specialized operations

performed, public warehouses are classified as

 (1) general merchandise,

 (2) refrigerated,
 (3) special commodity,
 (4) bonded, and
 (5) household goods and furniture.

 Each warehouse type differs in its material handling

and storage technology as a result of the product and
environmental characteristics.
 Bonded Warehouse
 Bonded warehouses are licensed by the government to
store goods prior to payment of taxes or duties.

 They exert very tight control over all movements in and

out of the facility since government documents must be
filed with each move.

 For example, cigarettes are often stored in bonded

warehouses prior to having the tax stamp applied.

 This tactic saves the firm money by delaying tax

payments; it also reduces inventory value substantially.
 Benefits of Warehousing

Consolidation
 Shipment consolidation is an economic benefit of
warehousing.
 With this arrangement, the consolidating warehouse
receives and consolidated materials from a number of
manufacturing plants destined to a specific customer
on a single transportation shipment.
 The benefits are the realization of the lowest possible
transportation rate and reduced congestion at a
customer's receiving dock.
Consolidation Warehouses
 Break bulk warehouses

 Break bulk warehouse operations are similar to

consolidation except that no storage is performed.
 A break bulk operation receives combined customer
orders from manufacturers and ships them to individual
customers.
 The break bulk warehouse sorts or splits individual orders
and arranges for local delivery.
 Because the long-distance transportation movement is a
large shipment, transport costs are lower and there is
less difficulty in tracking.
Break bulk warehouses…
 Processing/Postponement

 Warehouses can also be used to postpone, or

delay, production by performing processing and
light manufacturing activities.

 A warehouse with packaging or labeling capability

allows postponement of final production until
actual demand is known.
 Stockpiling

 The economic benefit of stockpiling comes from the need of

seasonal storage.

 For example, lawn furniture and toys are produced year-round

and primarily sold during a very short marketing period.

 In contrast, agricultural products are harvested at specific times

with subsequent consumption occurring throughout the year.

 Both situations require warehouse stockpiling to support

marketing efforts.

 Stockpiling provides an inventory buffer, which allows production

efficiencies within the constraints imposed by material sources
and the customer.
 Service Benefits

 Five basic service benefits are achieved

through warehousing:
 spot stock,
 assortment,
 mixing,
 production support, and
 market presence.
 Spot Stock

 Under spot stocking, a selected amount of a firm's

product line is placed or "spot stocked" in a warehouse
to fill customer orders during a critical marketing
period.

 In particular, manufacturers with limited or highly

seasonal product lines are partial to this service.

 Rather than placing inventories in warehouse facilities

on a year-round basis or shipping directly from
manufacturing plants, delivery time can be
substantially reduced by advanced inventory
commitment to strategic markets.
 Assortment

 An assortment warehouse stocks product

combinations in anticipation of customer orders.

 The assortments may represent multiple products

from different manufacturers or special
assortments as specified by customers.

 In the second case, the wholesaler would create

a specific team uniform including shirt, pants, and
shoes.
 Mixing

 In a typical mixing situation, truckloads of products

are shipped from manufacturing plants to
warehouses.

 Upon arrival at the mixing warehouse, factory

shipments are unloaded and the desired
combination of each product for each customer or
market is selected.
 Production Support

 Production support warehousing provides a steady

supply of components and materials to assembly
plants.

 Safety stocks on items purchased from outside vendors

may be justified because of long lead times or
significant variations in usage.

 The operation of a production support warehouse is to

supply or "feed" processed materials, components, and
subassemblies into the assembly plant in an economic
and timely manner.
Warehouse Operating Principles

 Once it has been determined to use a

warehouse, the next step is designing it.
 Whether the warehouse is a small manual
operation or a large automated facility, the
following three principles are relevant:
 Design criteria,
 Handling technology, and
 Storage plan.
 Number of storey in the facility

 The ideal warehouse design is limited to a single storey

so that product does not have to be moved up and
down.

 The use of elevators to move product from one floor to

the next requires time and energy.

 The elevator is also often a bottleneck in product flow

since many material handlers are usually competing for
a limited number of elevators.

 While it is not always possible, particularly in central

business districts where land is restricted or expensive,
warehouses should be limited to a single story.
 Height utilization

 Regardless of facility size, the design should

maximize the usage of the available cubic space
by allowing for the greatest use of height on each
floor.
 Through the use of racking or other hardware, it
should be possible to store products up to the
building's ceiling.
 Maximum effective warehouse height is limited by
the safe lifting capabilities of material-handling
equipment, such as forklifts.
 Product flow

 Warehouse design should also allow for straight

product flow through the facility whether items are
stored or not.

 In general, this means that product should be

received at one end of the building, stored in the
middle, and then shipped from the other end.

 Straight-line product flow minimizes congestion

and confusion.
 Handling technology

 The second principle focuses on the

effectiveness and efficiency of material-
handling technology.

 The elements of this principle concern:

 movement continuity and
 movement scale economies.
A Sample Storage Area

29
 Site Selection…

 A warehouse need not be located in a major industrial

area.

 In many cities, one observes warehouses among

industrial plants and in areas zoned for light or heavy
industry.

 Interestingly, this is not a legal necessity because most

warehouses can operate under the restrictions placed
on commercial property.
 Warehouse Layout

 Layout of a warehouse depends on the proposed material

handling system and requires development of a floor plan to
facilitate product flow.

 It is difficult to generalize about warehouse layouts since they

must be refined to fit specific needs.

 If pallets are to be utilized, the first step is to determine the

pallet size.

 A pallet of nonstandard size may be desirable for specialized

products, but whenever possible, standardized pallets should
be used because of their lower cost.