Warehouse Operations Management

Warehouse Operations Management

Warehouse Operations Management

Dr. Abdulrahman M. Aljamouss

Assistant Professor, Business Development

The economic importance of Warehousing:

  • Economic utility of Warehousing
    • The value in achieving customer needs or wants.
  • Possession utility:
    • The product can be owned by the customer.
  • Place utility:
    • Products available where they are needed by customers.
  • Time utility:
    • Products available when they are needed by customers.

 Importance of Warehousing 

  • To achieve transportation economies
  • To take advantage of quantity purchase discounts
  • To support the firm’s customer service policy
  • To meet the changing in market conditions
  • To accomplish least total cost logistics.

 Logistics in the Economy

  • United States Business Logistics Costs reached $1.6 trillion in 2018
  • United States Business Logistics Costs reached 8 % of GDP.

 Logistics in the Manufacturing Firm : 

    • Logistics Cost 21%
    • Marketing Cost 27%
    • Manufacturing Cost 48%

 Examples :

    • Boeing announced a $2.6 billion deleted in 1997 because “raw materials shortages”
    • S Surgical Corporation announced a $22 million loss in 1993 because “larger than expected inventories
    • HP and Dell found it difficult to get important components from Taiwanese suppliers in 1999 because a massive earthquake.

 Why a warehouse?

  • To store:
    • Raw materials and components
    • Work in process materials
    • Finished goods
  • warehouse is a very expensive
    • (between 2-5% of sales of corporation) 

 Every warehouse has a target:

  • To give the right product
  • To the right customer
  • In the rights conditions
  • With the right quality
  • In the right time
  • At the right costs
  • With the right information

 Warehouse management Goals

  • Maximize effective use of space.
  • Maximize effective use of equipment.
  • Maximize effective use of labor.
  • Maximize accessibility of all items.
  • Maximize protection of all items.
  • Maximize effective use of information.
  • Maximize the protection of company’s assets.
  • Minimize goods handling.
  • Minimize the company operating Cost.

 Warehouse Functions

  • Unloading
  • Receiving & Checking inbound goods
  • Internal product movement
  • Storing
  • Order-picking
  • Stock Sortation
  • Stock Rotation
  • Packing
  • Loading & Shipping
  • Cycle Counting
  • Replenishment
  • Handling Returns
  • Maintenance

 Public, Private, Contract, and Multiclient Warehousing

  • Public warehouses , Provides short or long-term storage to companies on a month-to-month basis
  • Private warehousing, Mostly owned by big companies. Can be operated as a separate division within a company.
  • Contract Warehousing, is a 3rd party storage facility which offers specialized storage services.
  • Multiclient warehousing, Outsourced management of warehousing operations to a facility that is typically shared with multiple clients

 Shelf life management

  • What is shelf life?
    • Time necessary for the item to loss 90% of its original concentration.
    • First-expired-first-out (FEFO) inventory logic
    • Information-rich barcodes
    • Minimize Wastage With FIFO 
  • shelf life data includes:
    • Maximum time a material can be stored
    • Minimum shelf life a material must have available to be accepted by the system
    • % of the total shelf life that must still be available if the goods are to be sent to another distribution point
    • Time unit used for the shelf life data (days, weeks or years)
    • Total number of days that the goods can be kept – from production to the shelf life expiration date

 Reducing costs in inventory management

  • Reduce Consumption – Stop Waste, Theft
  • Reduce Inventory Carrying Costs
  • Cut Spend on New Tools – Force use of Reconditioned Items
  • Reduce Obsolete Inventory
  • Reduce and Eliminate Stock-Outs
  • Reduce or Eliminate Purchase Orders
  • Reduce Support Staff Costs

 Controlling backorder

  • A backorder is a product that is out of stock at the moment but is promised to ship once available (with a date often provided).
  • Backordered means the shopper can buy the item now and receive it at a future date.
  • Backorders happen for a variety of reasons :
    • Unusual demand
    • Low safety stock
    • Manufacturer or supplier problem
  • Controlling backorder levels
    • Set safety stock
    • Calculate and set reorder points
    • Regularly view inventory levels of popular items
    • Have multiple suppliers
    • Order more product

 ABC Always Better Control (ABC) Analysis

What is ABC analysis?

  • ABC analysis is an inventory categorization method which consists in dividing items into three categories (A, B, C):
  • Classifying inventory according to some measure of importance and allocating control efforts accordingly.

A - very important

B - mod. important

C - least important

A Pareto analysis

  • A Items – typically 20% of the items accounting for 80% of the inventory value-use Q system
  • B Items – typically an additional 30% of the items accounting for 15% of the inventory value-use Q or P
  • C Items – Typically the remaining 50% of the items accounting for only 5% of the inventory value-use P
  • A being the most valuable items, C being the least valuable ones. This method aims to draw managers’ attention on the critical few (A-items) not on the trivial many (C-items).

 Warehousing Operations issues

  • Some operational issues include:
    • Warehousing productivity
    • Safety considerations
    • Hazardous materials
    • Warehousing security
    • Cleanliness and sanitation issues