Supply chain management

SUPPLY CHAIN MANAGEMENT

Session 7 Warehousing

Barcelona, Fall 2018

Luis J. Díaz. Industrial Engineer. M.B.A.

Inventory storage is justified on the basis of cost and service. The focus on warehousing shifted from passive storage to strategic assortment. The term distribution center became widely used throughout industry to capture this dynamic aspect of traditional warehousing. Strategic warehousing serves to satisfy requirements related to local presence. A network of strategically located warehouses provide key customers the perception they will be logistically supported.

SUPPLY CHAIN MANAGEMENT

WAREHOUSING

Economic benefits of warehousing occur when overall logistics costs are reduced. Four basic economic benefits are:

• Consolidation and break bulk • Sorting • Seasonal storage • Reverse logistics

The economics benefits of CONSOLIDATION AND BREAK BULK are to reduce transportation costs by using warehouse capability to group shipments. In consolidation, the warehouse receives materials , from a number of sources , hat are combined in exact quantities int a large single shipments to a specific destination.

SUPPLY CHAIN MANAGEMENT

ECONOMIC BENEFITS (1)

The benefits of consolidations are the realization of the lowest possible freight rate , timely and controlled delivery, and reduced congestion at a customer´s receiving dock. A break bulk operation receives a single large shipment and arranges for delivery to multiple destinations.

The basic benefit of SORTING is to reconfigure freight as it flows from origin to destination. Three types of assortment are widely performed in logistical systems.

The objective of cross-docking is to combine inventory from multiple origins into a prespecified assortment for a specific customer. Cross docking requires precise on time delivert from each manufacturer. The high degree of precision required makes operation highly dependent on information technology.

SUPPLY CHAIN MANAGEMENT

ECONOMIC BENEFITS (2)

Mixing Is usually performed at an intermediate location between shipment origin and destination. Truckloads of products are shipped from origin to missing warehouse. Upon arrival at the mixing warehouse , shipments are unloaded and sorted into the combination desired by each customer. During the mixing process , inbound products cab be combined with others regularly stocked at a warehouse.

The objective of assembly is to support manufacturing operations. Products and components are assembled from a variety of second tier suppliers by a warehouse often referred as lead suppliers or tier one suppliers located in close proximity to the manufacturing plant

SUPPLY CHAIN MANAGEMENT

ECONOMIC BENEFITS (3)

REVERSE LOGISTIC includes following activities; 1. Returns management 2. Remanufacturing 3. Remarketing 4. Recycling 5. Disposal.

Returns Management is designed to facilitate the reverse flow of product that did not sell .

Remanufacturing facilitates the reverse flow of product following it s useful life. The product or components are updated for sale at a discounted price..

SUPPLY CHAIN MANAGEMENT ECONOMIC BENEFITS (4) REVERSE LOGISTIC

Remarketers use coordination and reverse flow to position and resell product when the orginal user no longer needs it.

Recycling returns product following its useful life with the objective to decomposing it to its component materials so that they can be effectively used.

When material cannot be reused it is required to dispose ii in the appropriate landfill

SUPPLY CHAIN MANAGEMENT ECONOMIC BENEFITS (5) REVERSE LOGISTIC

• Spot Stocking Manufacturers of highly seasonal products often spot stock. Instead of maintaining inventory in a warehouse year-round or shipping to customers direct from manufacturing plants , responsiveness in peak selling periods can be enhanced through temporary. inventory positioning in strategic markets.

• Full Line Stocking. The traditional use of warehouses by manufactures, wholesalrd ans retailers is to stock product inventory in anticipation of customer orders. The difference between spot stocking and full line stock is the degree and duration of warehouse utilization.

• Value-added Services The demand for highly customized service has transformed warehouses into facilities that specialize in performing value added services

SUPPLY CHAIN MANAGEMENT SERVICE BENEFITS

Warehouses are typically classified based on ownership. A private warehouse is operated by the enterprise that owns the merchandise handled and stored in the facility. A public warehouse , in contrast, is operated as an independent business offering a range of hire services as storage, handling and transportation. Contract warehousing ,which is a customized extension of public warehousing , combines the benfits of private and for hire warehousing

PRIVATE The major benefits of private warehousing are control, flexibility , cost and range of intangible. Usually offer more flexibility since operating policies, hours and procedures can be adjusted to meet specific customer requirements.

SUPPLY CHAIN MANAGEMENT WAREHOUSE OWNERSHIP ARRANGEMENTS (1)

Private warehouses are usually considered less costly than public warehousing because private facites are not operated for a profit. Private warehousing may offer intangible benefits. The firm´s sign on its sign may stimulate customer perceptions. The use of private warehousing is declining because if an increasing managerial interest in reducing capital invested in logistical assets.

PUBLIC Public warehouses offer a combination of services .Provide flexibility and shared services benefits. They have the potential to offer operating and management expertise since warehousing is their core business.

SUPPLY CHAIN MANAGEMENT WAREHOUSE OWNERSHIP ARRANGEMENTS (2)

From a financial perspective, warehousing may be able to achieve lower operation cost than private facilities. Also offer flexibility concerning size and number of warehouses , allowing users to respond to supplier, customer and seasonal demands. Public warehousing can also have the potential to share scale economies since the combined requirements of users can be leverage.

CONTRACT Contract warehousing combines characteristics of private and public operations. A long-term contractual relationship wil typically result in lower total cost than a public warehouse. At the same time, contract operations can provide benefits of expertise , flexibility, scalability and economies of scale by sharing management labor, equipment and information resources across multiple clients.

SUPPLY CHAIN MANAGEMENT WAREHOUSE OWNERSHIP ARRANGEMENTS (3)

Contract warehouses typically offer a range of logistical services such a transportation management, inventory control, order processing, customer service, and return merchandise processing. Contract logistic firms, called integrated service providers (ISP), are capable of performing the the total logistics responsibility for an enterprise.

SUPPLY CHAIN MANAGEMENT WAREHOUSE OWNERSHIP ARRANGEMENTS (4)

THANK YOU!