Warehousing Management Objectives of Efficient Warehouse Operations Provide

Warehousing Management • Objectives of Efficient Warehouse Operations – Provide timely customer service – Keep track of items so they can be found readily & correctly – Minimize the total physical effort & thus the cost of moving goods into & out of storage – Provide communication links w/ customers DSCI 4743 1

Warehousing Management • Benefits of Warehouse Management – Provide a place to store & protect inventory – Reduce transportation costs – Improve customer service levels • • Complexity of warehouse operation depends on the # of SKUs handled & the # of orders received & filled Most activity in a warehouse is material handling DSCI 4743 2

Warehousing Management • Costs of Operating a Warehouse – Capital costs • costs of space & materials handling equipment – Operating costs • cost of labor • measure of labor productivity is the number of units that an operator can move in a day DSCI 4743 3

Warehouse Activities • • Receive goods Identify the goods Dispatch goods to storage Hold goods Pick goods Marshal shipment Dispatch shipment Operate an information system DSCI 4743 4

Warehouse Activities • Receive goods – accepts goods from outside transportation or attached factory & accepts responsibility • check the goods against an order & the bill of lading • check the quantities • check for damage & fill out damage reports if necessary • inspect goods if required DSCI 4743 5

Warehouse Activities • Identify the goods – • Dispatch goods to storage – • goods are sorted & put away Hold goods – • items are identified with the appropriate stock-keeping unit (SKU) number (part number) & the quantity received recorded goods are kept in storage & under proper protection until needed Pick goods – DSCI 4743 items required from stock must be selected from storage & brought to a marshalling area 6

Warehouse Activities • Marshal the shipment – • Dispatch the shipment – • goods making up a single order are brought together & checked for omissions or errors; order records are updated orders are packaged, shipping documents are prepared, & goods loaded on the vehicle Operate an information system – DSCI 4743 a record must be maintained for each item in stock showing the quantity on hand, quantity received, quantity issued, & location in the warehouse 7

Warehouse Activities • Maximize productivity & minimize cost, warehouse management must work w/the following: – Maximize use of space • space is the largest capital cost – Effective use of labor & equipment • labor is the largest operating cost • material handling equipment is the second largest capital cost DSCI 4743 8

Warehouse Activities • Factors influencing effective use of warehouses – cube utilization and accessibility – stock location – order picking and assembly DSCI 4743 9

Warehouse Activities • Cube utilization and accessibility – Goods stored not just on the floor, but in the cubic space of the warehouse; warehouse capacity depends on how high goods can be stored – Accessibility means being able to get at the goods wanted w/ a minimum amount of work DSCI 4743 10

Warehouse Activities • Stock Location – Objectives: • To provide the required customer service • To keep track of where items are stored • To minimize effort to receive, put away, and retrieve items – Basic Stock Locating Systems • • DSCI 4743 Group functionally related items together Group fast-moving items together Group physically similar items together Locate working stock and reserve stock separately 11

Warehouse Activities (Stock Location) • Fixed Location – SKU assigned a permanent location, & no other items are stored there – Fixed-location systems usually have poor cube utilization – Usually used in small warehouses; throughput is small, & there are few SKUs DSCI 4743 12

Warehouse Activities (Stock Location) • Floating (Random) Location – Goods stored wherever there is appropriate space – Advantage is improved cube utilization – It requires accurate and up-to-date information – Warehouses using floating-location systems are usually computer-based DSCI 4743 13

Warehouse Activities (Stock Location) • Two other systems sometimes used are: – Point-of-use storage • Inventory stored close to where it will be needed • Used in repetitive manufacturing & JIT systems – Central storage • Contains all inventory in one central location DSCI 4743 14

Warehouse Activities (Stock Location) • Advantages of Point-of-use Storage – Materials are readily accessible to users – Material handling is reduced or eliminated – Central storage costs are reduced – Material is accessible all the time DSCI 4743 15

Warehouse Activities (Stock Location) • Advantages of Central Storage – Ease of control – Inventory record accuracy is easier to maintain – Specialized storage can be used – Reduced safety stock, since users do not need to carry their own safety stock DSCI 4743 16

Warehouse Activities • Order Picking and Assembly – When an order is received, items must be obtained from the warehouse, grouped, & prepared for shipment, systems used: • Area system • Zone system • Multiorder system DSCI 4743 17

Warehouse Activities • Order Picking and Assembly – Area system • Order picker circulates throughout warehouse selecting items on an order -- order is ready to ship when order picker is finished – Zone system • Warehouse is divided into zones, & each picker works only in an assigned zone -- order is divided by zone, & the items from each zone are sent to the marshaling area – Multiorder system • Same as the zone system, except that each picker collects items for a number of orders at the same time DSCI 4743 18

Warehousing: Physical Control and Security • Physical Control & Security - Elements – Good part numbering system – Simple, well-documented transaction system • • Identify the item Verify the quantity Record the transaction Physically execute the transaction – Limited access • Inventory must be kept in a safe, secure (locked) place with limited general access – Well-trained workforce DSCI 4743 19

Warehousing: Inventory Record Accuracy • Accurate inventory records enable firms to: – Operate effective materials management systems – Maintain satisfactory customer service – Operate effectively & efficiently – Analyze inventory DSCI 4743 20

Warehousing: Inventory Record Accuracy • Three pieces of information must be accurate: – – – • • Part description (part number) Quantity Location Inventory is a tangible asset that is easy to lose track of unless properly controlled Inaccurate inventory records will result in: – – – DSCI 4743 Lost sales, shortages, & disrupted schedules Excess inventory (of the wrong things) Ineffective MRP / MRPII / ERP 21

Warehousing: Inventory Record Accuracy • Causes of Inventory Record Errors – Unauthorized withdrawal of material – Unsecured stockroom – Poorly trained personnel – Inaccurate transaction recording – Poor transaction recording systems – Lack of audit capability DSCI 4743 22

Warehousing: Inventory Record Accuracy • Measuring Inventory Record Accuracy – It is not practical to expect 100% accuracy. – Tolerance • To judge inventory accuracy, a tolerance level for each part must be specified • Tolerance is the amount of permissible variation between an inventory record & a physical count. • Tolerances are set on individual items based on value, critical nature, availability, lead time, ability to stop prod. , safety problems, or difficulty of measurement. DSCI 4743 23

Warehousing: Auditing Inventory Records • Two basic methods of auditing inventory: – Periodic (usually annual) counts of all items – Cyclic (usually daily) counts of specified items • Auditing the system finds causes of record inaccuracy & eliminate them • Cycle counting does this; periodic audits tend not to DSCI 4743 24

Warehousing: Auditing Inventory Records • Factors in good preparation for a physical inventory are: – Housekeeping – Identification – Training DSCI 4743 25

Warehousing: Auditing Inventory Records • A physical inventory consists of four steps: – Count items & record count on an attached ticket – Verify this count by recounting or by sampling – When the verification is finished, collect the tickets & list the items in each department – Reconcile the inventory records for differences between the physical count & inventory dollars DSCI 4743 26

Warehousing: Auditing Inventory Records • Problems with annual physical inventory: – Usually the factory/facility has to be shut down, thus losing production or business – Labor & paperwork are expensive – Job is often done hurriedly & poorly since there is much pressure to get it done – Many times, more errors are introduced than are eliminated DSCI 4743 27

Warehousing: Auditing Inventory Records • Cycle Counting – A system of counting inventory continually throughout the year – Advantages of cycle counting: • Timely detection & correction of problems • Complete or partial reduction of lost production • Use of personnel trained & dedicated to cycle counting – Count frequency • Number of times an item is counted in a year DSCI 4743 28

Warehousing: Auditing Inventory Records • Count Frequency should increase as the value of the item & number of transactions (chance of error) increase, e. g. , base the frequency of count on annual dollar value usage – Methods used • ABC Method • Zone Method • Location Audit System DSCI 4743 29

Warehousing: Auditing Inventory Records • Cycle counts can be scheduled at regular intervals or special times • When to Count – When an order is placed – When an order is received – When the inventory record reaches zero – When an error occurs DSCI 4743 30