TLMT4-2

TLMT 201 – Retail Transportation Week 4

Transcript of “Warehousing & Inventory Management” Video

This week we will discuss Warehousing & Inventory Management. Warehousing is a great way to manage a multitude of functions. A company can use a warehouse to handle an overflow of products and store this overflow for future use. A warehouse can be used to consolidate a variety of products to distribute to various retail locations. Lastly, a warehouse can be used to provide timely and accurate delivery of products to local retail markets contributing to customer service and satisfaction. Therefore, a warehouse can be utilized for various reasons and are an integral part in providing retail customers and end users with goods and products they want and need. Likewise, it can create a competitive advantage within the retail industry as it often times reduces lead times and time to markets which assist in keeping regular inventory levels as well as seasonal and safety inventory at the appropriate levels. This brings us to site selection. A company must consider several things when determining the proper location for a distribution center or warehouse facility. Such as,

• How much land will we need? • Can we expand, if needed? • How much does the land cost? • What are the zoning requirements? • Does the location have access to the interstate, rail, or waterways? • How does this access affect transit times? • How does this access contribute to delivery costs of our raw materials? And, how does

this access affect detention charges or other additional costs due to the design and layout of the warehouse?

• What utilities are available in this area? • What telecommunications are available? • What kind of workforce is available? • Are they local or state tax incentives?

These are only a few questions that are important to ask when identifying a site for a warehouse or distribution center. All of these things and more affect the overall operations of a warehouse. So, that brings us to the design and layout of the warehouse. Next, it is necessary to review the layout of the warehouse as one of the major functions is storage and distribution. A warehouse should be designed based on the types of products stored as well as the type of equipment needs to pick the products for transport and distribution. The layout needs to be such that picking each product is a linear process which is the shortest distance from point A to point B. For example, a forklift operator picks a pallet of widgets off a shelf. The widgets are your fastest and most requested product. Therefore, this product needs to be placed as close to the loading area as possible for quick access to loading.

Considerations for a warehouse layout are: • Types of shelves or storage areas. You must consider the size and height as well as if the

product needs to be kept cool or dry • Number of aisles • Width of the aisles. You must consider the types of equipment you will need to pick the

product for loading or unloading the product. • Placement of the products. This refers to how the product will be stored on the shelf the

height of the product, and the proximity to the loading and unloading areas. As you can see, the next topic of discussion is how do you move the product in the most efficient manner? Remember the example used earlier with the forklift and widgets? Well, that’s what we call material handling equipment. A warehouse must use the proper equipment to move products and goods in the most timely and cost efficient manner possible. As with any business, warehouse managers must consider safety, security, and damage. In moving products and goods damage is inevitable; however, in a warehouse proper storage as well as packaging can alleviate some damage. That is why the layout of the warehouse is vital to reducing costs and damage claims. If the product is not handled and managed properly it is a waste of time and money all the way from production to transportation to the warehouse. Additional costs within a warehouse or distribution center are: storage costs, handling costs, and clerical costs. So, these costs are the costs of operating the warehouse or DC. These become contributing factors in the layout because storage costs are calculated based on space, value, and storage equipment. Whereas, handling costs are the costs associated with labor costs and the equipment needed to move the product. In other words, how much does it cost to pay Frank the forklifter to move a pallet of widgets? Labor costs, fuel costs, and pallet loads per pounds moved per hour, etc. Lastly, there are clerical costs in operating a warehouse or DC. These are costs determined by the time in preparing documentation as well as the volume of paperwork. Also, taking into consideration the technology and automation needed to complete these tasks. Now that we have reviewed the warehousing side of things, let’s look at inventory. There are three types of inventory:

• Raw Materials: Manufacturers use raw materials to make something else. For example, a furniture manufacturer needs raw materials such as wood to produce their product.

• Work in Progress: This refers to products in the manufacturing process but not yet finished.

• Finished Goods: This is a completed product.

All inventory will fall within one of these categories. Remember in the earlier example when we discussed widgets? The widgets were the most requested product so they were in close proximity to the loading and unloading areas. This is a good example of First In-First Out or FIFO which is one method for determining inventory value. Other methods are Last in-Last Out or LIFO, average cost, actual cost, and standard cost. As I mentioned, LIFO is Last in-Last Out which means that this value assessment assumes that a product that is the last in the door will be the first items to be sold or used. Average cost on the other hand, calculates the average unit cost for all items used within a specific timeframe. Actual cost is a method used to determine the specific cost of an item as it moves in, thru, and out of the facility. Lastly, is standard cost. This is a value that is assessed throughout a given period to include current, historical, and anticipated costs. Next, we need to briefly discuss inventory control. Inventory control includes 3 primary approaches: cyclical ordering system, order point or fixed order quantity system, and material requirements planning or MRP. A cyclical ordering system is time based which means that a retailer can receive orders at predetermined times. Have you ever ordered something via the telephone or online and it is a product that you will need say every 30 days? This is a good example of cyclical ordering systems. The supplier anticipates your need for the product and automatically ships the product by the time you need it. Next is order point or fixed order quantity system. This means that a retailer will receive their order to keep their inventory at a minimum or maximum level. Remember last week when we discussed safety inventory or safety stock. This is exactly what order point/fixed order is referring to as the supplier will ensure your inventory is kept at a fixed point or level. Last is the material requirements planning or MRP. This is a computerized method of managing inventory to include a master production schedule and bill of materials. In conclusion, we have discussed warehousing and inventory management to include site selection, design, layout, inventory control and value.

TLMT 201 – Retail Transportation Week 4

Transcript of “Warehousing & Inventory Management” Video

This week we will discuss Warehousing & Inventory Management. Warehousing is a great way to manage a multitude of functions. A company can use a warehouse to handle an overflow of products and store this overflow for future use. A warehouse can be used to consolidate a variety of products to distribute to various retail locations. Lastly, a warehouse can be used to provide timely and accurate delivery of products to local retail markets contributing to customer service and satisfaction. Therefore, a warehouse can be utilized for various reasons and are an integral part in providing retail customers and end users with goods and products they want and need. Likewise, it can create a competitive advantage within the retail industry as it often times reduces lead times and time to markets which assist in keeping regular inventory levels as well as seasonal and safety inventory at the appropriate levels. This brings us to site selection. A company must consider several things when determining the proper location for a distribution center or warehouse facility. Such as,

• How much land will we need? • Can we expand, if needed? • How much does the land cost? • What are the zoning requirements? • Does the location have access to the interstate, rail, or waterways? • How does this access affect transit times? • How does this access contribute to delivery costs of our raw materials? And, how does

this access affect detention charges or other additional costs due to the design and layout of the warehouse?

• What utilities are available in this area? • What telecommunications are available? • What kind of workforce is available? • Are they local or state tax incentives?

These are only a few questions that are important to ask when identifying a site for a warehouse or distribution center. All of these things and more affect the overall operations of a warehouse. So, that brings us to the design and layout of the warehouse. Next, it is necessary to review the layout of the warehouse as one of the major functions is storage and distribution. A warehouse should be designed based on the types of products stored as well as the type of equipment needs to pick the products for transport and distribution. The layout needs to be such that picking each product is a linear process which is the shortest distance from point A to point B. For example, a forklift operator picks a pallet of widgets off a shelf. The widgets are your fastest and most requested product. Therefore, this product needs to be placed as close to the loading area as possible for quick access to loading.

Considerations for a warehouse layout are: • Types of shelves or storage areas. You must consider the size and height as well as if the

product needs to be kept cool or dry • Number of aisles • Width of the aisles. You must consider the types of equipment you will need to pick the

product for loading or unloading the product. • Placement of the products. This refers to how the product will be stored on the shelf the

height of the product, and the proximity to the loading and unloading areas. As you can see, the next topic of discussion is how do you move the product in the most efficient manner? Remember the example used earlier with the forklift and widgets? Well, that’s what we call material handling equipment. A warehouse must use the proper equipment to move products and goods in the most timely and cost efficient manner possible. As with any business, warehouse managers must consider safety, security, and damage. In moving products and goods damage is inevitable; however, in a warehouse proper storage as well as packaging can alleviate some damage. That is why the layout of the warehouse is vital to reducing costs and damage claims. If the product is not handled and managed properly it is a waste of time and money all the way from production to transportation to the warehouse. Additional costs within a warehouse or distribution center are: storage costs, handling costs, and clerical costs. So, these costs are the costs of operating the warehouse or DC. These become contributing factors in the layout because storage costs are calculated based on space, value, and storage equipment. Whereas, handling costs are the costs associated with labor costs and the equipment needed to move the product. In other words, how much does it cost to pay Frank the forklifter to move a pallet of widgets? Labor costs, fuel costs, and pallet loads per pounds moved per hour, etc. Lastly, there are clerical costs in operating a warehouse or DC. These are costs determined by the time in preparing documentation as well as the volume of paperwork. Also, taking into consideration the technology and automation needed to complete these tasks. Now that we have reviewed the warehousing side of things, let’s look at inventory. There are three types of inventory:

• Raw Materials: Manufacturers use raw materials to make something else. For example, a furniture manufacturer needs raw materials such as wood to produce their product.

• Work in Progress: This refers to products in the manufacturing process but not yet finished.

• Finished Goods: This is a completed product.

All inventory will fall within one of these categories. Remember in the earlier example when we discussed widgets? The widgets were the most requested product so they were in close proximity to the loading and unloading areas. This is a good example of First In-First Out or FIFO which is one method for determining inventory value. Other methods are Last in-Last Out or LIFO, average cost, actual cost, and standard cost. As I mentioned, LIFO is Last in-Last Out which means that this value assessment assumes that a product that is the last in the door will be the first items to be sold or used. Average cost on the other hand, calculates the average unit cost for all items used within a specific timeframe. Actual cost is a method used to determine the specific cost of an item as it moves in, thru, and out of the facility. Lastly, is standard cost. This is a value that is assessed throughout a given period to include current, historical, and anticipated costs. Next, we need to briefly discuss inventory control. Inventory control includes 3 primary approaches: cyclical ordering system, order point or fixed order quantity system, and material requirements planning or MRP. A cyclical ordering system is time based which means that a retailer can receive orders at predetermined times. Have you ever ordered something via the telephone or online and it is a product that you will need say every 30 days? This is a good example of cyclical ordering systems. The supplier anticipates your need for the product and automatically ships the product by the time you need it. Next is order point or fixed order quantity system. This means that a retailer will receive their order to keep their inventory at a minimum or maximum level. Remember last week when we discussed safety inventory or safety stock. This is exactly what order point/fixed order is referring to as the supplier will ensure your inventory is kept at a fixed point or level. Last is the material requirements planning or MRP. This is a computerized method of managing inventory to include a master production schedule and bill of materials. In conclusion, we have discussed warehousing and inventory management to include site selection, design, layout, inventory control and value.