Warehousing Functions

Warehouses

Material handling

Customer service

Information transfer

Storage function

Receive goods Identify goods Sort goods Despatch to storage Hold inventory Recall, select goods Marshal the shipment Despatch the shipment Prepare records and advices

Temporary

Permanent

Purpose of Warehousing

To provide desired level of customer service at the lowest possible total cost It is that part of the firms logistics system that stores products (RM, Packing Materials, WIP, FG) at and between point of origin and point of consumption and provides info to management on the status, condition and disposition of items being stored Distribution warehousing relates mainly to FG

Reasons for Warehousing

Service related
Maintain source of supply Support customer service policies Meet changing market conditions Overcome time and space differentials Support JIT programs of suppliers and customers Provide customers with the right mix of products at all times Temporary storage of materials to be disposed or re-cycled

Cost related
Achieve production economies Achieve transportation economies Take advantage of Quantity Purchase discounts and forward buys Least Logistics cost for a desired level of customer service

Warehouses
Support manufacturing Mix products from multiple facilities for shipment to a single customer Break-bulk Aggregate Used more as a flow-thru point than as a hoarding point

Distribution Warehousing

The objective is to set up a network of warehouses closest to the customer locations to service markets better and minimise cost Could be C&FA s, depots or distribution centers Macro location strategies:
Market positioned Production positioned Intermediately positioned

Distribution Center
Warehouse designed to speed the flow of goods and avoid unnecessary costs Speeds bulk-breaking to avoid inventory carrying costs Helps to centralise control and coordination of logistics activities Products can also be cross-docked (one vehicle to another)

Market positioned..

Market Positioned
Warehouses located nearest to the final customer Factors influencing are:

Order cycle time Transportation costs Sensitivity of the product Order size Levels of customer service offered
Production positioned.

In between

Production Positioned

Warehouses located close to the production facilities or supply sources Not the same level of customer service as the earlier one Serve as points of aggregation / collection for products made in a number of plants Factors influencing are:
Perishability of raw materials Number of products in the product mix Assortments ordered by customers Transport consolidation rates ex; FTL

Intermediate Positioned

Mid point locations between the final customer and the producer High customer service levels possible even if products made in number of units

Other macro approaches look at cost minimisation or cost and demand elements to maximise profitability
Transportation management.

Transportation

Very important in the Logistics function:

Movement across space or distance adds value to products Transportation provides time and place utility

Role of transportation includes:

Provides opportunity for growth under competitive conditions Deeper penetration into markets Wider distribution means greater demand Can influence product prices favourably
Principles.

Transportation Principles

Continuous flow Optimise unit of cargo - stackability Maximum vehicle unit capacity utilization Adaptation of vehicle unit to volume and nature of traffic Standardisation Compatibility of unit load equipment Minimum of dead weight to total weight Maximum utilization of capital, equipment and personnel
Process.

The Selection Criteria

Environmental analysis: shipper, carrier, government regulations, public influence Deciding objectives Selecting mode Select transport type within the mode Define functions of transport Evaluation and control customer perception / satisfaction, best practice benchmarking

Cost Factors

Can be product related or market related. Product related: density, stowability, ease or difficulty of handling and liability Market related: competition, location of markets, Government regulations, traffic in and out of the market, seasonality of movements and impact on customer service Five prominent modes:
Road, rail, air, water and pipeline. Sixth one is use of Ropeways

Customer Service Factors

Consistency, dependability Transit time Coverage door-to-door for example Flexibility in handling a range of products Loss and damage performance Additional services provided

Reverse logistics

Comparison of modes

Reverse Logistics

Movement of goods from the market or customer back to the company The need:

Increased awareness of the environment Stringent legislation For some it is part of the business Profitability of dealing with scrap, surplus

Surplus, obsolescence can result due to:

Over optimistic sales forecasts, change in product specs, errors in estimating material usage, losses in processing or overbuying based on incentives

Advantages of Rail
Economy more so for goods over long distances Efficiency of energy Reliability not affected by weather conditions

Disadvantages
Uneconomical for small shipments and short distances Not suitable for remote stations Costly terminal handling facilities Inflexible time schedules

Road transport..

Road Freight Advantages

Through movement direct from consignor to consignee, no transshipment Flexibility routes and loading routines can be easily altered, operate day and night Less capital costs for own fleet + immunity from industrial action Fast turn-around if articulated units like tractors and trailers are used Minimum delays

Disadvantages
Susceptibility to weather and road conditions in spite of the best protection Unsuitability for heavy loads rail transport more economical for bulk loads Unsuitability for long distances again the rail telescopic rates are more favourable

Air transport.

Air Transport Advantages

Faster mode Reduction in cost particularly inventory Broad service range Increasing capabilities Disadvantages:

High cost Weather affects flight conditions Limitations on heavy consignments

Water transport

Water Transport

Advantages:
Mass movement of bulk Lowest freight cost Preferred for long haul of low value commodities

Disadvantages:
Not for quick transit Suitable for certain types on commodities only

Pipeline.

Pipeline Movement

Advantages:
Reliable, continuous, all weather transport Low energy consumption hence low cost Low maintenance and operating costs Underground, no space problem Can traverse difficult terrain Minimal transit losses Operation round the clock, safe Economies of scale double the throughput for only 30% additional cost

Disadvantage is in the investment cost

Ropeways.

Ropeways

Advantages:
In hilly or inaccessible areas Long and circuitous routes with streams / deep valleys For commodities capable of movement in ropeway buckets Short haulages of less than 50 kms Areas where other carriers are uneconomical

Disadvantages:
Heavy investments Limitations on size and quantity of haul
How to decide on the right carrier?

Carrier Selection
Traffic Related
Length of haul Consignment weight Dimensions Value Urgency Regularity of shipment Fragility Toxicity Perishability Type of packing Special handling required

Shipper related
Size of firm Investment priorities Marketing strategy Network of production and distribution Availability of rail sidings Stockholding policy Management structure System of carrier evaluation

Service related
Speed (transit time) Reliability Cost Customer relationship Geographical coverage Accessibility Availability of special vehicles / equipment Monitoring of goods Unitisation Ancillary services bulk breaking, storage

Chart of Relative Merits

Parameter Speed Versatility Reliability Weight age 30 10 20 Rail 5 6 6 Road 6 8 8 Air 8 5 5 Water 4 6 5 Pipe line 3 3 7 Rope way 3 2 4

Availability
Continuity of service Distribution cost

10
10 20

7
6 4

8
7 5

5
5 6

6
5 6

3
8 7

2
3 8

Total score
Overall ranking

10
10

5.4
2

6.7
1

5.1
4

5.1
5

5.1
5

4.0
6

Key Learnings

Support to customer service has evolved from materials management to logistics and to supply chain management Production and marketing are the two internal customers of Logistics Logistics also has a direct impact on the financials of a company Three important functions of logistics are inventory management, warehousing and transportation

Key Learnings

Inventory directly supports customer service but also adds to the cost and has to be managed carefully Warehousing provides the place utility and works as a balance between production and meeting customer needs Transportation supports the place and time utility and uses different modes to reach the products to the consumer Modern day supply chains integrate the operations of a firm, its suppliers and customers