Transcript Ozment-5-Warehousing
Transportation/Logistic Strategy
Warehousing
Introduction
Progression of Warehousing Decisions Why Use Warehouses?
Types of Warehousing Warehouse Operations Warehousing Innovations Warehouse Layout Packaging
Transportation/Logistic Strategy
Warehousing
Progression of Warehousing Decisions
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Should Warehouses Be Used?
If Warehouses are Used, Should they be Public or Private?
Where Should they be Located?
What Should be their Capacities?
How Many Should You Have?
What Should be their Layout and Design?
Transportation/Logistic Strategy
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Why Use Warehouses?
Cope with Variable Market Conditions Cope with Variable Sources of Supply Production Economies Purchasing Economies Transportation Economies Customer Service
Transportation/Logistic Strategy
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Warehouse Operations
Planning, Organizing, Staffing, Equipping, and Controlling Human Resource Management Billing and Inventory Control Order Filling Local Delivery Material Handling Packaging Safety, Security, Maintenance Measuring Warehouse Efficiency
Transportation/Logistic Strategy
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Warehouse Safety
J.N. Devin, "Cowboy After OSHA,“ 1972.
Transportation/Logistic Strategy
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Warehousing Innovations
WERC – Established 1978 Housekeeping Storage Heights Automated Retrieval Systems Bar Codes, Scanners, EDI, RFID, etc.
Narrow Aisle Equipment, Conveyors, etc.
The Distribution Center Concept Assembly, Product Maintenance, Repair, etc.
Management Controls Cross Docking
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Costs of Increasing Storage Heights Total Cost Labor & Insurance C1 H1 Construction & Finance Storage Height
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Costs of Increasing Storage Heights Effects of New Technology Total Cost C1 Labor & Insurance H1 Construction & Finance Storage Height
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C1 C2 Transportation/Logistic Strategy
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Costs of Increasing Storage Heights Effects of New Technology Total Cost Labor & Insurance H1 Construction & Finance H2 Storage Height
Transportation/Logistic Strategy
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Warehousing Innovations
WERC – Established 1978 Housekeeping Storage Heights Automated Retrieval Systems Bar Codes, Scanners, EDI, RFID, etc.
Narrow Aisle Equipment, Conveyors, etc.
The Distribution Center Concept Assembly, Product Maintenance, Repair, etc.
Management Controls Cross Docking
8 4 Transportation/Logistic Strategy
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Types of Warehousing
Private Warehousing Public Warehousing Contract Warehousing Cross-Docking
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Private vs Public Warehousing
(Without Cost of Capital) Public (All Variable Cost) Private (Fixed + Variable Cost)
Prefer Public
Indifferent
Prefer Private Volume
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Indifference Point Between Public and Private
(Without Cost of Capital) Private = Fixed Costs + Variable Costs Public = Variable Costs Example: Private Fixed Costs = $500,000/year Private Variable Costs = $0.15/pound Public Variable Costs = $0.25/pound Indifference point is where both costs are equal 500,000 + .15X = .25X
500,000 = .10X
X = 5,000,000 pounds
ROI = 0
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Private vs Public Warehousing
(With Cost of Capital) Savings Public (All Variable Cost) Private (Fixed + Variable Cost) Prefer Public Indifferent Prefer Private
Volume
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Indifference Point Between Public and Private (With Cost of Capital)
Private = Fixed Costs + Variable Costs Public = Variable Costs Example: Private Fixed Costs = $500,000/year Private Variable Costs = $0.15/pound Public Variable Costs = $0.25/pound Indifference point is where savings = desired ROI Savings Average Investment = ROI
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Indifference Point Between Public and Private (With Cost of Capital)
Desired ROI = Hurdle Rate Savings = Public – Private Average Investment = Initial Investment /2 Example: Hurdle Rate = 10% Investment = $8,000,000 Private Fixed Costs = $500,000/year Private Variable Costs = $0.15/pound Public Variable Costs = $0.25/pound
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Indifference Point Between Public and Private (With Cost of Capital)
Hurdle Rate = 10% Investment = $8,000,000 Private Fixed Costs = $500,000/year Private Variable Costs = $0.15/pound Public Variable Costs = $0.25/pound Savings = Public - Private .25X - (500,000 + .15X) 4,000,000 = .10
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Indifference Point Between Public and Private (With Cost of Capital)
Savings = Public – Private .25X - (500,000 + .15X) 4,000,000 = .10
.25X - (500,000 + .15X) = .10 * 4,000,000 .25X - 500,000 - .15X = 400,000 .25X - .15X
= 400,000 + 500,000 .10X = 900,000 X = 9,000,000
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Advantages of Private Warehousing
Greater Control Flexibility (CS Needs, Space Use, etc.) Tax Benefits (Depreciation) Image to Customers Potentially Lower Cost
Transportation/Logistic Strategy
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Disadvantages of Private Warehousing
Lack of Flexibility (Fixed Size/Location) Capital Requirements Equipment Maintenance/Training Potential Labor Problems
Transportation/Logistic Strategy
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Advantages of Public Warehousing
Capital Conservation Ability to Meet Peak Demand Reduced Risk Flexibility WRT Volume Avoidance of Property Taxes Avoidance of Labor Problems Potentially Lower Cost Knowledge of Exact Costs
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Disadvantages of Public Warehouses
Lack of Control Difficult Communications Not Always Available Potentially Higher Cost
Transportation/Logistic Strategy
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Cross-Docking
An operations procedure that allows product to be delivered and received on one side of a facility, undergoes internal handling procedures at the receiving dock, distributing unit loads and moving the product to shipping docks on the other side of the facility where trucks or rail cars are waiting to be loaded for customer delivery.
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Cross-Docking
Transportation/Logistic Strategy
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Cross-Docking
Transportation/Logistic Strategy
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Warehouse Layout
Angling vs On-the-Square Fixed vs Variable Slots Space Loading Techniques Item Popularity Item Size Cube per Order Index Family Groupings Linear Programming Simulation
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Transportation/Logistic Strategy
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Cost of Fixed vs Variable Storage Slots Total Cost Labor C1 V1 Space Utilization Percent Variable
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Transportation/Logistic Strategy
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Cost of Fixed vs Variable Storage Slots Effects of New Technology Total Cost Labor C1 V1 Space Utilization Percent Variable
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Transportation/Logistic Strategy
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Cost of Fixed vs Variable Storage Slots Effects of New Technology Total Cost Labor C1 C2 Space Utilization V1 V2 Percent Variable
Transportation/Logistic Strategy
Warehousing
Warehouse Layout
Angling vs On-the-Square Fixed vs Variable Slots Space Loading Techniques Item Popularity Item Size Cube per Order Index Family Groupings Linear Programming Simulation
Transportation/Logistic Strategy
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Functions of Packaging Marketing
Information Promotion
Logistics
Containment Protection Apportionment Unitization Convenience Communication
What is it?
Transportation/Logistic Strategy
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Postponement Why do we do it?
Examples
What is it?
Transportation/Logistic Strategy
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Postponement
A delayed differentiation strategy to reduce uncertainty and cost while satisfying customer needs. Activities in the supply chain are delayed until a demand is realized. Bucklin (1965) Model of Postponement /Speculation
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Postponement Why do we do it?
It has the potential to improve responsiveness while reducing inventory, transportation, storage, and obsolescence. Insufficient inventory early in the product cycle can cost market share. Products at the end of life cycle lose value quickly and risk obsolescence, which can lead to large inventory write-offs.