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Chapter 7

Chapter 7 of IE 453 discusses warehouse operations, including the mission, functions, and key activities involved in receiving, storing, and shipping goods. It highlights the importance of effective warehouse management in the supply chain, detailing processes such as order picking, cross-docking, and storage space planning. The chapter also compares randomized and dedicated storage methods, emphasizing their impact on space efficiency and productivity.

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0% found this document useful (0 votes)

3 views77 pages

Chapter 7

Uploaded by

salh.2001

We take content rights seriously. If you suspect this is your content, claim it here.

Available Formats

Download as PDF, TXT or read online on Scribd

IE 453

Chapter 7
Warehouse Operations

Dr. Omar Bafail

Content
◼ Introduction
◼ Mission of Warehouse
◼ Functions of Warehouse
◼ Receiving and Shipping
◼ Storage Space Planning
◼ Storage Layout Planning
Content
◼ Introduction
◼ Mission of Warehouse
◼ Functions of Warehouse
◼ Receiving and Shipping
◼ Storage Space Planning
◼ Storage Layout Planning
Introduction
◼ Warehouse is a commercial building for storage
of goods.
◼ They are usually large plain buildings in industrial
areas of cities and towns
Content
◼ Introduction
◼ Mission of Warehouse
◼ Functions of Warehouse
◼ Receiving and Shipping
◼ Storage Space Planning
◼ Storage Layout Planning
Content
◼ Introduction
◼ Mission of Warehouse
◼ Functions of Warehouse
◼ Receiving and Shipping
◼ Storage Space Planning
◼ Storage Layout Planning
Mission of a Warehouse

◼ The warehouse play a critical role in supporting a

company supply chain success.
◼ The mission of a warehouse is to effectively ship
products in any configuration to the next step in
the supply chain without damaging or altering the
product basic form.
Mission of a Warehouse

◼ key warehouse opportunity:

1. Improve order picking operations
2. Utilizing cross-docking
3. Increase productivity
4. Utilizing space

These opportunities allow the warehouse to process and

ship orders more effectively.
Content
◼ Introduction
◼ Mission of Warehouse
◼ Functions of Warehouse
◼ Receiving and Shipping
◼ Storage Space Planning
◼ Storage Layout Planning
Content
◼ Introduction
◼ Mission of Warehouse
◼ Functions of Warehouse
◼ Receiving and Shipping
◼ Storage Space Planning
◼ Storage Layout Planning
Warehouse operation
◼ What is warehouse operation?
It is that part of the logistics system that involves
receiving, putting-away, storing, picking, packaging,
and shipping of goods from a physical site.

◼ Warehouse operation will differ by:

• Industry
• Business model
• Company’s strategy
How warehouse operations are executed?
Different types of inventory & operating models
influence how warehouse operations are executed
◼ Types of inventory: ◼ Types of business models:
• Raw materials • Make to stock
• Components/sub-assemblies • Make to order
• Build to order
How warehouse operations are executed?
Different types of inventory & operating models
influence how warehouse operations are executed
• Make to stock (MTS)
Companies produce goods in advance of demand. They then store the goods in inventory until a
customer orders them. This model is often used for products with stable demand, such as groceries or
office supplies.
• Make to order (MTO)
Companies produce goods only after a customer places an order. This model is often used for products
with high customization or short shelf lives, such as furniture or custom-made clothing.

• Build to order (MTO)

This model is a hybrid of MTS and MTO. Companies produce goods in batches in advance of demand,
but they customize the goods to meet the specific needs of each customer.
Warehouse operations activates
Warehouse operations involve three major activates
◼ Inbound activities
◼ Process activities

◼ Outbound activities
Warehouse operations activates
Warehouse operations involve three major activates
◼ Inbound activities
◼ Process activities

◼ Outbound activities
Inbound activates
◼ Receiving:
This is the process of receiving goods from suppliers. It includes
inspecting the goods for damage, verifying the quantity and quality
of the goods, and recording the receipt of the goods.

◼ Put-Away:
Is the internal logistics process from receipt of a load to when it is
stocked in its final destination within the warehouse.

◼ Storage:
Is the containment of goods/materials while waiting for an order.
The storage format depends on the size and quantity of items in
stock and the handling characteristics of the product.
Inbound activates

Unloading

Counting

Receiving Inspecting

Categorizing

Registering
Put-away process
Grouping and scanning the item will assist in identifying
the location of the item on the shelf
Put-away process
Put-away can be stored by pallet, box, or by item
Warehouse operations activates
Warehouse operations involve three major activates
◼ Inbound activities
◼ Process activities

◼ Outbound activities
Warehouse operations activates
Warehouse operations involve three major activates
◼ Inbound activities
◼ Process activities

◼ Outbound activities
Process activates

Although some warehouses have reprocessing, assembly,

and/or repackaging, the main activities in most warehouse
facilities are:

• Order picking
• Sortation
• Replenishment
Order picking
• Order picking is the process of pulling items from
inventory to fill a customer order

• It is seen as the most labor-intensive activity within a

warehouse.
Sortation
• Sortation refers to the process of organizing and
separating picked items based on their final
destinations. This typically happens after the picking
stage itself.
Replenishment
• It's the process of refilling the storage area with the
required items to keep the stock at a certain level to
avoid stockouts in the warehouse.
Replenishment
• To replenish, we need to know the re-order point.
Inventory level
100 items

Quantity

20 items
Safety Stock

Place order Lead Receive order Time

Time
Re-order point
Reorder point (ROP) is the minimum inventory level at which a new order should be placed
to avoid stockout.
Reorder point = (Lead time in days * Demand/day) + Safety Stock

Safety stock is the additional inventory that is held to protect against unexpected demand

Safety Stock = (Safety Stock in days * Demand/day)

Maximum quantity to be stored = (Safety Stock) + (Order Quantity in days * Demand)

Average quantities to be stored = ½ (Order Quantity in days * Demand) + (Safety Stock)

Re-order point

Maximum quantity to be stored

and Average quantities to be stored

Help in determining storage space

requirements in number of loads
Re-order point - example
◼ At the ABC manufacturing firm, the average daily withdrawal
rate for product A is 20 carton per day, safety stock is 5 days,
order lead time is 10 days, and the order quantity is 45 days.
◼ What is the reorder point?
◼ What are the maximum and average quantities of unit load to be stored?

Reorder point = (Lead time in days * Demand/day) + Safety Stock

Reorder point = ( 10 * 20 ) + Safety Stock = (safety stock in days * Demand/day)
Reorder point = ( 10 * 20 ) + ( 5 * 20 )

Reorder point = 300 cartons

Maximum quantity to be stored = (safety stock) + (order quantity in days * demand/day)

Maximum quantity to be stored = ( 5 * 20) + (45 * 20)
Maximum quantity to be stored = 1000 cartons
Re-order point - example
◼ At the ABC manufacturing firm, the average daily withdrawal
rate for product A is 20 carton per day, safety stock is 5 days,
order lead time is 10 days, and the order quantity is 45 days.
◼ What is the reorder point?
◼ What are the maximum and average quantities of unit load to be stored?

Reorder point = (Lead time in days * Demand/day) + Safety Stock

Reorder point = ( 10 * 20 ) + (5 * 20)
Reorder point = ( 10 * 20 ) + ( 5 * 20 )

Reorder point = 300 cartons

Average quantity to be stored = [½ (order quantity in days * demand/day)] + (safety stock)

[ ½ (900) ] + (100)
Average quantity to be stored = 550 cartons
Calculating average daily unit sales
Month Sales Quantity (units)
October 125
November 177
December 148

Average daily sales = =

Average daily sales = 5 units

Calculating average delivery lead time
Month Sales Quantity (units) Delivery time
October 125 7 days
November 177 5 days
December 148 3 days
3 ORDERS WERE PLACED

Average delivery lead time =

Average delivery lead time = =5

Calculating order quantity
Order Quantity in days refers to the number of days it
would take for the current inventory to run out.

Let's say a restaurant has 300 bread in stock, and they use 100
bread a day.

𝑄𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑖𝑛 𝑠𝑡𝑜𝑐𝑘
𝐷𝑒𝑚𝑎𝑛𝑑/𝑑𝑎𝑦

300
=3
100
Stock rotation
• The rotate stock means to arrange the oldest units in
inventory so they are sold before the newer units.

• The reason to rotate stock is to reduce the losses from

expiration
Warehouse operations activates
Warehouse operations involve three major activates
◼ Inbound activities
◼ Process activities

◼ Outbound activities
Warehouse operations activates
Warehouse operations involve three major activates
◼ Inbound activities
◼ Process activities

◼ Outbound activities
Outbound activates
◼ Packing

◼ Shipping
Outbound activates - packing
◼ Packing
Forklifts can drop materials, items
may fall from conveyor belts, or fall
from broken pallets.

◼ Packing must be designed to protect

the item from damage.
◼ Packing must protect the item from
environmental damages, such as
extreme temperature, water
damage, contamination with other
goods.
Outbound activates - Shipping
◼ Confirmation
The right product
The correct quantity
Condition
Scheduled on time

◼ Invoicing
Include order receipt with shipped item

◼ Sealing
Make sure the box/pallet is sealed properly

◼ Loading
Load items in the transportation method
Cross-docking
◼ Cross-docking: is a practice in logistics of unloading
materials from an incoming trucks and loading these materials
directly into outbound trucks, trailers with little or no storage
in between
Cross-docking

◼ Advantages of Cross-Docking
❑ Reduces handling costs, operating costs, and the storage of warehouse
❑ Products get to the distributor and consequently to the customer faster
❑ Reduces, or eliminates warehousing costs
❑ May increase available warehouse space
❑ Faster response to customer demands
◼ Disadvantages of Cross-Docking
❑ Potential partners don't have necessary storage-capacities
❑ Need an appropriate transport fleet to operate Cross-Docking (designed
equipment or vehicle which can be used only for cross-docking)
❑ Need appropriate IT-System
Content
◼ Introduction
◼ Mission of Warehouse
◼ Functions of Warehouse
◼ Receiving and Shipping
◼ Storage Space Planning
◼ Storage Layout Planning
Content
◼ Introduction
◼ Mission of Warehouse
◼ Functions of Warehouse
◼ Receiving and Shipping
◼ Storage Space Planning
◼ Storage Layout Planning
Receiving and Shipping
Receiving activities were covered in inbound activates.
Receiving and shipping functions will be defined to begin and end when carriers cross
the property line. Among top requirements for receiving and shipping goods, those are:

• Sufficient area to organize the spot/location the carriers

• Secure the carrier at the dock to facilitate carrier unloading/loading
• Sufficient area to place goods prior to dispatching/storing
Dock Locations

The location of receiving

and shipping depends on
_________
access to Transpiration facilities
Dock Locations
Dock Operations Planning
Equipment requirements for receiving and shipping areas consist of the equipment
required to properly interface between the carriers and the docks.
The dockequipment needed to perform this interface includes:

1- Dock levelers as the interface between a dock at a given height and variable height
carriers
Dock Operations Planning
Equipment requirements for receiving and shipping areas consist of the equipment
required to properly interface between the carriers and the docks.
The dock
equipment needed to perform this interface includes:

1- Dock levelers as the interface between a dock at a given height and variable
height carriers

2- Portable ramp between the dock and carrier

Dock Operations Planning
Equipment requirements for receiving and shipping areas consist of the equipment
required to properly interface between the carriers and the docks.
The dock
equipment needed to perform this interface includes:

1- Dock levelers as the interface between a dock at a given height and variable
height carriers

2- Portable ramp between the dock and carrier

3- Dock shelters
Content
◼ Introduction
◼ Mission of Warehouse
◼ Functions of Warehouse
◼ Receiving and Shipping
◼ Storage Space Planning
◼ Storage Layout Planning
Content
◼ Introduction
◼ Mission of Warehouse
◼ Functions of Warehouse
◼ Receiving and Shipping
◼ Storage Space Planning
◼ Storage Layout Planning
Storage Space Planning
◼ There are two major material storage philosophies:
❖ Randomized Storage
❖ Dedicated Storage

❖ Dedicated storage means each individual stock keeping unit

(SKU) is stored in a specific location, and no other SKU may
be stored there, even though the location may be empty

❖ Randomized storage means any may be assigned to any

available storage location.
❖ An SKU stored in location A one month might be stored in location B
the following month, and a different SKU stored in location A
Storage Space Planning
Suppose six products are received by a warehouse according to the schedule in Table 1

By summing the inventory

levels of the six products, the
aggregate inventory level is
obtained.

With dedicated storage, the

required space as given in the
table is equals the sum of the
maximum inventory level for
each product, which means
140 pallet positions
Storage Space Planning
Suppose six products are received by a warehouse according to the schedule in Table 1

With randomized storage, the

required amount of space
equals the maximum
aggregate inventory level
which means 105 pallet
positions

Randomized storage has

more space than the
dedicated space in this
example
Randomized Storage vs. Dedicated Storage

Randomized Storage
Space: Potentially more efficient. By placing items anywhere available. You can
maximize space utilization
Productivity: Lower. Locating items takes more time as there’s no designated spot.
Workers might need to spend extra time searching or rely on a strong warehouse
management system for guidance.

Dedicated Storage
Space: less efficient. Some space might be wasted due to unused gaps between
dedicated spots.
Productivity: Higher. Workers know exactly where to find each item, leading to faster
picking and order fulfillment
Randomized Storage vs. Dedicated Storage

To maximize productivity when using dedicated storage, SKUs

should be assigned to storage locations based on the ratio of their
activity to the number of openings or slots assigned to the SKU.

It means, when using dedicated storage, place SKUs with “fast

movers” up front, and “slow movers”, in the back.

Moreover, place SKUs near to receiving or shipping area based

on their popularity, demand, or ranking (importance).
Randomized Storage vs. Dedicated Storage
Randomized Storage vs. Dedicated Storage

20
10 x 20 =
200 storages