IE 6202 Warehousing Systems Instructor Spyros Reveliotis Office

IE 6202: Warehousing Systems Instructor: Spyros Reveliotis Office: Room 316, ISy. E Bldng tel #: (404) 894 -6608 e-mail: spyros@isye. gatech. edu homepage: www. isye. gatech. edu/~spyros

“Course Logistics” • Office Hours: 1: 30 -2: 30 pm Tu. Th (also an open-door policy will be generally adopted, but an appointment arranged by e-mail is preferred) • Grading policy: – – – Homework & Projects: 30% Midterm: 30% (Tent. Date: Thursday, Oct. 17) Final: 40% (Date: Monday, Dec. 9) Exams closed-book, with 3 pages of notes per exam Make-up exams and Incompletes: Only for very serious reasons, which are officially documented.

“Course Logistics” (cont. ) • Course Reading Materials – J. Bartholdi and S. Hackman, “Warehouse and Distribution Science”, Release 0. 1. 2, unpublished manuscript, 2000, URL: http: //www. isye. gatech. edu/~spyros – Lectures posted on the course Web-site accessed by my homepage – Material posted on the Georgia Tech Library electronic reserves – Books on reserve: • Tompkins et al. , “Facilities Planning”, John Wiley & Sons, 1996. • Heragu, S. , “Facilites Design” PWS Publishing Co. , 1997. • Francis et al. “Facility Layout and Location: An analytical approach”, 2 nd ed. Prentice Hall, 1992. • Askin and Standridge, “Modeling and Analysis of Manufacturing Systems”, John Wiley & Sons, 1993.

Course Objectives (What is this course all about? ) – An introduction to the fundamental concepts and issues and algorithms involved in the design and operation of contemporary warehouses and distribution centers – In particular, a balanced development of the following issues: • A systematic exposition of the organization and operation of contemporary warehouses, and their role in the overall supply chain • A systematic presentation of the equipment involved, its basic attributes and functionality, and its connection to the sought efficiencies • A decomposition of the overall warehouse deisgn, operations planning and control problem to a series of sub-problems, and the development of analytical/quantitative methodologies for addressing these subproblems • Implementation of (some of) these methodologies on some basic computational tools used in practice (mainly through the project assignments)

Next. . . • Understanding the role of warehouses in contemporary distribution networks • A description of the warehouse operations and equipment • A (conceptual) description of the major design, planning and control problems arising in contemporary warehousing • Key References – J. Bartholdi and S. Hackman, “Warehouse and Distribution Science”, Release 0. 1. 2, unpublished manuscript, 2000, URL: http: //www. isye. gatech. edu/~spyros/: Chpts 1 -4 – G. Sharp, “Warehouse Management”, Chpt 81 in Handbook of Industrial Engineering, by G. Salvendy (ed. ), John Wiley & Sons, NY, 2000. – Tompkins et al. , “Facilities Planning”, John Wiley & Sons, 1996: Chpt. 9 – B. Rouwenhorst et. al. , “Warehouse design and control: Framework and literature review”, European Journal of OR, Vol. 122, pgs 515 -533, 2000. – Yoon, C. S. and Sharp, G. , “A structured procedure for analysis and design of order pick systems”, IIE Trans. , Vol. 28, pgs 379389, 1996

The role of warehousing in contemporary distribution networks • Buffer: It holds inventory for downstream stages of the supply chain, in order to allow the entire production / distribution network to deal efficiently with the systematic and random variation in the network operations, or to exploit significant economies of scale. – Typical sources/examples of systematic variation • product seasonalities (e. g. , Toys R Us, CVS merchandise) • cyclical / batched production due to large set-up costs – Typical sources of random variation • variations in transportation times due to weather, traffic congestion, bereaucracy, etc. • variations in production times due to unreliable operations, unreliable suppliers – Typical economies of scale involved • Price breaks in bulk purchasing

The role of warehousing in contemporary distribution networks (cont. ) • Consolidation center: It accumulates and consolidates products from various points of manufacture within a single firm, or several firms, for combined shipment to common customers. • Consolidation allows to control the overheads of transportation operations by: – allowing the operation of the carriers to their capacity, and therefore, the more effective amortizing of the fixed transportation costs – reducing the number of shipping and receiving operations • Cross-docking: Consolidation without staging

The role of consolidation in contemporary distribution networks Retailers Manufacturers Consolidator Retailers

The role of warehousing in contemporary distribution networks (cont. ) • Value-Added-Processing (VAP): Increasingly, warehouses are required to undertake some value-added-processing tasks like: – pricing and labeling – kitting (i. e. , repackaging items to form a new item; e. g. , “beauty” products) – light final assembly (e. g. , assembly of a computer unit from its constituent components, delivered by different suppliers) – invoicing • In general, this development is aligned to and suggested by the idea/policy of postponement of product differentiation, which allows for customized product configuration, while maintaining a small number of generic product components.

Warehouse classification by “customer type” • Factory warehouse: Interfaces production with wholesalers – small number of large orders daily – advance info about order composition • Retail Distribution warehouse: Serves a number of captive retail units – advance info about order composition – carton and item picking from a forward area – more orders per shift than consolidation/shipping lanes • Catalog Retailer: A warehouse filling orders from catalog sales – – a large number of small (frequently single-line) orders item and, sometimes, carton picking daily composition of orders usually unknown only statistical information available • Support of Manufacturing operations: A stock room providing raw material and/or work-in-process to manufacturing operations – many small orders – only statistical information available about order composition – stringent time requirements (e. g. , response in 30 min)

Product concepts related to the characterization of material flow in a contemporary warehouse • Item (otherwise piece or each): The smallest unit of product sold by a distribution center, e. g. , – a 1 -liter bottle of a soft drink – a box of 100 paper clips • Carton: a paperboard container holding identical product, usually of a size and weight allowing manual handling; example dimensions: 14 x 10 x 20 in or 30 x 20 x 40 cm. • Tote: a container usually made of plastic and often used for storing and handling different products; usually similar in size to a carton, but re-usable.

Product concepts related to the characterization of material flow in a contemporary warehouse (cont. ) • Inner pack: several units of a product secured together and sold by the distribution center as a unit, if many items are contained in a carton, and purchase quantities per item are large; a carton contains several inner packs. • Pallet: a set of cartons or totes of identical product arranged in a cubical pattern and usually supported by a base that may be of wood or plastic; example dimensions are 40 x 48 x 54 in and 80 x 120 x 100 cm. • Mixed unit load: a set of cartons or totes of different products arranged to a cubical pattern similar to a pallet, often wrapped or strapped for stability. • Overpack: a large carton or tote containing different products; smaller than a pallet but larger than a carton, so that manual handling may be difficult.

Product concepts related to the characterization of material flow in a contemporary warehouse (cont. ) • Stock Keeping Unit (SKU): a set of product(s), packaged in a pre-specified manner, that it is identified as a distinct entity for distribution purposes; e. g. , – a 2 -liter bottle of Coca-Cola Classic – 6 2 -liter bottles of Coca-Cola Classic packed in a carton – 12 -ounce cans of Coca-Cola Classic, packed 24 in a carton. • Order: a document from a customer, requesting specific SKU’s in specific quantities. • Line item: a “line” in an order document designating a specific SKU and quantity

A schematic representation of the warehouse material flow Replenishment Case Picking Reserve Storage and Pallet Picking Replenishment Broken Case Picking Accumulation, Sortation & Packing Direct putaway to reserve Direct putaway to primary Receiving Shipping Cross-docking

The major warehouse operations • Inbound processes – Receiving (~10% of warehouse operating costs): the collection of activities involved in • the orderly receipt of all materials coming into the warehouse; • providing the assurance that the quantity and quality of such materials are as ordered; • disbursing materials to storage or to other organizational functions requiring them. – Put-away (~15% of warehouse operating costs): the act of placing merchandise to storage; it includes • determining and registering the actual storage location(s) • transportation • placement

The major warehouse operations (cont. ) • Outbound processes – Processing customer orders (typically done by the computerized warehouse management system of the facility): This set of activities includes • checking that the requested material is available to ship; • if necessary, coordinating order fulfillment with other facilities of the distribution network; • producing the “pick” lists to guide the order picking and the necessary shipping documentation; • scheduling the order picking and the shipping activity. – Order-picking (~55% of warehouse operating costs): the set of physical activities involved in collecting from the storage area the materials necessary for the fulfillment of the various customer orders, typically identified as: • • traveling (~55% of the order picking time) searching (~15% of the order picking time) extracting (~10% of the order picking time) documentation and other activities (~20 % of the order picking time)

The major warehouse operations (cont. ) • Outbound processes (cont. ) – Checking: Checking orders for completeness (and quality of product) – Packing: Packaging the merchandise in appropriate shipping containers, and attaching the necessary documentation / labels. – Shipping: The activities of • preparing the shipping documents (packing list, address label, bill of lading); • accumulating orders to outbound carrier; • loading trucks (although, in many instances, this may be the carrier’s responsibility). – Others: Handling returns, and performing the additional valueadded-processing supported by contemporary warehouses, as discussed in a previous slide.

…or in Yoon and Sharp’s representation. . . RECEIVING pallets PALLET RESERVE Breakdown function pallets (items cases) pallets (items totes) cases overpacks mul pallets CASE PICK cases ITEM PICK totes (cases) items SORTING A totes SORTING B totes cases overpacks UNITIZING totes mul cases pallets overpacks SHIPPING (items cases) totes Consolidation Function

Operational Cost Breakdown 20% 15% 55%

The major concerns underlying the organization of order-picking • Establish an efficient operation by controlling the orderpicking labor costs, especially those due to traveling, and • maintain a high level of responsiveness to customer orders, while • preserving the order integrity. Responsiveness Costs Quality

How? • By organizing the associated work-flow so that it presents – high pick density, i. e. , average number of picks per foot of travel – short (order) flow time, i. e. , the amount of time elapsed between the arrival of an order into the warehouse management system and the time it is loaded on the shipping carrier, • while providing the appropriate “mechanisms / procedures” to – maintain the order integrity.

Major mechanisms for increasing the pick density • Establishing a high SKU density, i. e. , the number of SKU’s encountered per foot of travel. – In general, the effectiveness of this approach will depend on the characteristics of the stored product and the equipment involved in its storage and retrieval. • Maintaining a “forward” pick area, containing a certain quantity from each of the most popular SKU’s in the facility. – The implementation of this approach necessitates a systematic procedure for determining the items to be stored in the forward pick area and the associated amounts, in a way that it balances the incurred space and labor (replenishment) costs. – In case of a dynamically varying demand, the implementation of this idea might involve the frequent reconfiguration of the facility.

Major mechanisms for increasing the pick density • Batching the orders, i. e. , have the workers retrieve more than one order at each trip in the storage area. – Requires an additional sortation process: • sort-while-pick: the picker carries a compartmentalized container that allows the separate accumulation of each order on its picking list • downstream sorting: sorting of the orders takes place at a dedicated station of the facility, possibly involving some sophisticated equipment (sorting conveyors). – Sortation implies additional space, labor and equipment costs – Batching is another complex economic decision, especially for “medium size” orders

Major mechanisms for reducing the order flow time • Maintaining a high pick density (which translates to a high level of worker productivity). • Appropriately parallelizing the order processing, i. e. , have each order being processed by more than one worker. – A critical aspect for selecting the order parallelization scheme is the order work content, typically quantified as follows: • order work content = (number of picks in the order) x (average person -hours per pick) – If the total work of picking and loading an order is small enough, then orders are repeatedly assigned to the next available worker. – If the orders are large and/or span distant regions, then, they must be parallelized. – Parallelization typically involves a zoning scheme.

Warehouse zoning Zone: A part of the warehouse to which an order picker is restricted, e. g. , a 40 -aisle system divided into zones of 10 aisles each. In case of warehouse systems involving automated storage and retrieval equipment, a zone can be also defined by one unit of this equipment, e. g. , a carousel. Zoning patterns: Progressive Zoning Parallel/Simultaneous Zoning To packing and shipping Z 1 Order Z 2 Z 3 Z 4 Z 5 To sorting and consolidation Z 1 Z 2 Z 3 Order Z 4 Z 5

Combining Batching with Zoning: the resulting order-flow patterns • Single-order pick: one picker works on one order at a time until the order is filled • sort-while-pick, no zoning: one picker works on several orders at a time with a container/vehicle that has compartments for maintaining the order integrity • batch-picking with downstream sorting, no zoning: several orders are picked by one person completely, often applied with conveyor transport of items to the sorting area • single-order-pick with zoning, progressive or parallel: an order is split into sub-orders by zone and a picker in each zone fills the corresponding sub-order

Combining Batching with Zoning: the resulting order-flow patterns • sort-while-pick with zoning: an order is split into suborders by zone and a picker in each zone fills the corresponding sub-orders using a set of containers or a vehicle that has compartments for maintaining order integrity • batch picking with downstream sorting and zoning, usually simultaneous: several orders are split into sub-orders and the sub-orders for each zone are filled by the picker(s) operating in that zone

Pick Wave Planning • Time window: a portion of the day/shift during which a set of orders is released and fully processed, e. g. , four 2 -hour time windows in an 8 -hour shift. • Pick wave: The set of orders processed during a time window. • Necessitated by, e. g. , – a downstream sorting system that limits the number of orders that may be in process at any time (e. g. , the number of streams/output chutes in a conveyor-based sortation system). – a forward pick area with a storage capacity insufficient to satisfy the entire daily demand, and therefore, must be replenished, but replenishment cannot occur simultaneously with picking activity for, e. g. , safety or efficiency reasons. • Small time windows tend to cause workload imbalances and longer travel times, but they also lead to smaller equipment and/or space costs and smaller order completion times.