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Ho Chi Minh city University of Transport
Department of Transport Economics
Logistics Science SubDivision
***
Comp. by Nguyen Huynh Luu Phuong
(Internal Use only)
Warehouse Management
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* Agenda:
Chapter 1: Inventory management
Chapter 2: Warehouse management
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Chapter 1: Inventory management
1.1 Definition of Inventory:
Inventory is a stock or store of goods. It generally refers to material in stock. It is
also called the idle resource of an enterprise for current and future demand.
* Quiz: How many forms of inventory do you think?
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1.1 Definition of Inventory:
Do you remember Dependent and Independent demand that you studied in the
subject Production management?
Yes, sir. No, Im sorry, sir.
Yeah, Go on the next lesson. Oops, Take up studies again to learn more.
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1.2 Functions of inventory:
To meet anticipated demand
Inventory
To smooth production requirements
To decouple components of production distribution system
To protect against stockouts.
To take advantage of order cycle
To hedge against price increases or to take advantage of
quality discounts.
To permit operations
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1.3 Objectives of inventory control:
1. What happens if under
and overstocking occur?
2. What concerns do I need
to focus on?
Level of
customer
service
Cost of
inventory
management
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1.3 Requirements for effective inventory
management:
To be effective, manager must have the following:
A system to keep track of inventory on hand and on order.
A reliable forecast of demand.
Knowledge of lead time and lead time variability.
Resonable estimates of inventory holding cost, ordering cost and shortage
cost.
A classification system for inventory items.
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8 9 3 3 4 8 1 0 0 1 0 6 3
1.3.1 Inventory counting system:
Periodic system: Physical count of items in inventory made at periodic intervals.
Perpetual system: System that keeps track of removals from inventory
continuously, thus monitoring current levels of each item.
Trend in usage of Computerized check out systems nowadays. Some devices
facilitate the counting activities.
Portable data
collection terminal
Bar code reader
EAN13 barcode
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1.3.2 Demand forcast and lead time information:
1.3.3 Cost information:
Four basic costs are associated with inventory:
Holding cost (Carrying cost)
Purchasing cost
Ordering cost
Shortage cost
Forecasting Inventory Management
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1.3.4 Classification system:
A-B-C Approach: Classifying inventory according to some measure of importance,
and allocating control efforts accordingly.
A item
B item
C item
High
Low
Few Many
Annual dollar
volume of
items
Number of items
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1.3.4 Classification system:
* Example 1: Classify the inventory items as A, B, or C based on annual dollar value,
given the following information:
Item
Annual demand
(unit)
Unit cost
(USD)
1 1.000 4.300
2 5.000 720
3 1.900 500
4 1.000 710
5 2.500 250
6 2.500 192
7 400 200
8 500 100
9 200 210
10 1.000 35
11 3.000 10
12 9.000 3
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1.4 Economic Order Quantity model (EOQ):
* EOQ: Identifying the order size that minimizes total cost.
1.4.1 Basic EOQ model:
* Assumptions of basic EOQ:
Only one product is involed.
Annual damand requirements are known.
Demand is spread throughout the year so that the demand rate is reasonbly
constant.
Lead time doesnt vary.
Each order is received in a single delivery.
There are no quantity discounts.
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1.4.1 Basic EOQ model:
The inventory cycle: Profile of inventory level over time
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1.4.1 Basic EOQ model:
The relation between average inventory and number of orders per year
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1.4.1 Basic EOQ model:
Total annual cost = Annual carrying cost + Annual ordering cost
Where:
D: Demand, usually in units per year.
O: Order quantity, in units.
S: Ordering cost, in dollars USD (or other currency code)
H: Carrying cost, usually in dollars per unit per year.
S
Q
D
H
Q
TC
2
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1.4.1 Basic EOQ model:
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1.4.1 Basic EOQ model:
By the profile above or by the calculus, we can obtain the optimal (economic) order
quantity. The result is the fomula:
The length of order cycle
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H
DS
Q
2
0

D
Q
0

1.4.1 Basic EOQ model:

* Example 1: A local distributor for national tire company expects to sell
approximately 9,600 steelbelted radial tires of a certain tire and tread design next
year. Annual carrying costs are $16 per tire and ordering costs are $75. The
distributor operates 288 days per year.
a/ What is the EOQ?
b/ What is the length of an order cycle?
c/ How many times per year does the store reorder?
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1.4.1 Basic EOQ model:
* Example 2: Piddling Manufacturing assembles television set. It purchases 3,600
blackandwhite picture tube a year at $65 each. Ordering cost is $31, annual
carrying cost is 20 percent of the purchase price. Compute the optimal quantity
and the total annual cost of ordering and carrying the inventory.
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1.4.2 EOQ with noninstantaneous replenishment:
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1.4.2 EOQ with noninstantaneous replenishment:
Total annual cost = Carrying cost + Setup cost (Ordering cost)
Where:
I
max
: Maximum Inventory.
p: Production or Delivery rate
u: Usage rate
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S
Q
D
H
I
TC
2
max
) (
max
u p
p
Q
I
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1.4.2 EOQ with noninstantaneous replenishment:
The economic run quantity is:
The length of order cycle is:
The run time is:
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u p
p
H
DS
Q

2
0
u
Q
0
time Cycle
p
Q
0
Run time
1.4.2 EOQ with noninstantaneous replenishment:
* Example 3: A toy manufacturer uses 48,000 rubber wheels per year for its popular
dump truck series. The firm makes its own wheels, which it can produce at the rate
of 800 per day. The toy trucks are assembled uniformly over the entire year.
Carrying cost is $1 per wheel per year. Setup cost for a production run of wheels is
$45. The firm operates 240 days per year. Determine each of the following:
a/ Optimal run size.
b/ Minimum total annual cost.
c/ Cycle size for the optimal run size.
d/ Run time.
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1.4.3 EOQ with Quantity Discounts:
Quantity discounts are price reductions for large orders offered to customers to
induce them to buy in larger quantity.
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The more you purchase,
the lower price you get
But, the more I purchase, the
more inventory I deal with
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1.4.3 EOQ with Quantity Discounts:
Total cost = Carrying cost + Ordering cost + Purchasing cost
Where:
P: Unit price
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D P S
Q
D
H
Q
TC .
2

1.4.3 EOQ with Quantity Discounts:
Adding PD doesnt change the EOQ
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1.4.3 EOQ with Quantity Discounts:
The total cost curve with quantity discounts is composed of a portion of the total
cost curve for each price.
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Order quantity Price per unit
1 to 44 $ 2
45 to 69 $ 1.7
70 or more $ 1.4
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1.4.3 EOQ with Quantity Discounts:
There are two general cases of the model:
O Carrying costs are constant.
O Carrying costs are stated as a percentage of purchase price.
When carrying costs are constant, all curves have the same EOQ.
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1.4.3 EOQ with Quantity Discounts:
When carrying costs are given as a percentage of unit price, price decreases reduce
carrying costs and that causes an increase in the EOQ.
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1.4.3 EOQ with Quantity Discounts:
The procedure for determining the overall EOQ for carrying costs are constant:
1. Compute the common EOQ.
2. Only one of the unit prices will have the EOQ in its feasible range since the
ranges do not overlap. Identify that range:
a. If the feasible EOQ is on the lowest price range, that is the optimal
order quantity.
b. If the feasible EOQ is in any other range, compute the total cost for
the EOQ and for the price breaks of all lower unit costs. Compare the
total costs, the quantity that yields the lowest total cost is the optimal
order quantity.
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1.4.3 EOQ with Quantity Discounts:
* Example 5: The maintenance department of a large hospital uses about 816 cases
of liquid cleanser annually. Ordering costs are $12, carrying costs are $4 per case a
year. And the new price schedule indicates that order of less than 50 cases will cost
$20 per case, 50 to 79 cases will cost 18 per case, 80 to 99 cases will cost $17 per
case, and larger orders will cost $16 per case. Determine the optimal order quantity
and the total cost.
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Yeah, Its too
easy !!!
1.4.3 EOQ with Quantity Discounts:
The procedure for determining the overall EOQ for carrying costs are stated as a
percentage of unit price:
1. Beginning with the lowest price, compute the EOQ for each price range
until a feasible EOQ is found.
2. If the EOQ for the lowest price is feasible, it is optimal order quantity. If the
EOQ is not the lowest price range, compare the total cost at the price
break for all lower prices with total cost of the largest feasible EOQ. The
quantity that yields the lowest total cost is the optimum.
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1.4.3 EOQ with Quantity Discounts:
* Example 6: Surge Electric uses 4,000 toggle switches a year. Switches are priced as
follow: 1 to 499, 90 cents each; 500 to 999, 85 cents each; and 1000 or more, 82
cents each. It costs $18 to prepare an order and receive it. And carrying costs are
18% of purchase price per unit on an annual basis. Determine the optimal order
quantity and the total annual cost.
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Its not so easy as
above instance, I
must try more.
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1.4.4 When to reorder with EOQ ordering:
REORDER POINT (ROP): When the quantity on hand of an item drops to this
amount, the item is reordered.
There are four determinants of the reorder point quantity:
1. The rate of demand.
2. The length of lead time.
3. The extent of demand and/or lead time variability.
4. The degree of stockout risk acceptable to management.
If demand and lead time are both constant, the reorder point is simly:
ROP = d x LT
Where:
d: Demand per day or week.
LT: Lead time in days or weeks.
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1.4.4 When to reorder with EOQ ordering:
* Example 7: Tingly takes twoaday vitamins, which are delivered to his home by a
routeman seven days after an order is called in. At what point should Tingly
telephone his order in? (Note: No safety stock involed)
Service level: Probability that demand will not exceed supply during lead time.
Service level = 100% - Stockout risk
Safety stock: Stock that is held in excess of expected demand due to variable
demand rate and/or lead time.
The ROP then increases by the amount of the safety stock.
ROP = Expected demand during lead time + safety stock
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1.4.4 When to reorder with EOQ ordering:
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1.4.4 When to reorder with EOQ ordering:
* If an estimate of expected demand during lead time and its standard deviation
are available.
The ROP formula is:
ROP = expected demand during leadtime + z.
dLT
Where:
z: Number of standard deviation (Looked up in next table).

dLT
: Standard deviation of lead time demand.
Note: The smaller the risk, the greater the value of z.
* If only demand is variable, then
dLT
= SQRT(LT).
d
and the ROP formula is:
Where:

d
: Standard deviation of demand.
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d
LT z LT d ROP . . .
1.4.4 When to reorder with EOQ ordering:
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1.4.4 When to reorder with EOQ ordering:
* If only leadtime is variable, then
dLT
= d.
LT
and the ROP formula is:
Where:

LT
: Standard deviation of lead time.
* If both demand and leadtime are variable, then:
And the ROP formula is:
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LT
d z LT d ROP . . .
2
2
2
. .
LT d dLT
d LT
2
2
2
. . . .
LT d
d LT z LT d ROP
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z and E(z) look-up table.
1.4.4 When to reorder with EOQ ordering:
* Example 8: Suppose that the manager of a construction supply house determined
from historical records that the lead time demand for sand averages 50 tons and a
standard deviation of 5 tons. Answer these questions, assuming that he is willing to
accept a stockout risk of no more than 3 percent.
a. What value of z is appropriate?
b. How much safety stock should be held?
c. What reorder point should be used?
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1.4.4 When to reorder with EOQ ordering:
* Example 9: A restaurant uses an average of 50 jars of a special sauce each week.
Weekly usage of sauce has a standard deviation of 3 jars. The manager is willing to
accept no more than a 10 percent risk of a stockout during lead time, which is two
weeks. Assume the distribution of usage is normal.
a. Which of the above formulas is appropriate for this situation? Why?
b. Determine the value of z?
c. Determine the ROP?
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1.4.4 When to reorder with EOQ ordering:
The expected number of units short in each order cycle is given by the formula:
Where:
E(n): Expected number of units short per order cycle.
E(z): Standardized number of units short obtained from above table.

dLT
: Standard deviation of lead time demand
E(N): Expected number of units short per year.
* Example 10: Suppose the standard deviation of lead time demand is known to be
20 units.
a. For a lead time service level of 90 percent, determine the expected
number of units short for any order cycle.
b. What lead time service level would an expected shortage of 2 units imply?
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dLT
z E n E ). ( ) (
Q
D
n E N E ) ( ) (
1.4.4 When to reorder with EOQ ordering:
Relation between lead time service level and annual service level:
Or:
* Example 11: Given a lead time service level of 90%, D=1000, Q=250,
dLT
=16,
determine the annual service level and safety stock if annual service level of 98%.
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D
N E
SL
annual
) (
1
Q
z E
SL
dLT
annual
). (
1
1.4.5 FixedOrderInterval model:
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1.4.5 FixedOrderInterval model:
Pros:
Tight control needed for A items in ABC Classification.
Savings for ordering, packing and shipping costs.
The only practical approach if inventory withdrawals cant be closely monitored.
Cons:
Larger amount of safety stock.
Costs of periodic reviews.
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A LT OI z LT OI d
d
) (
Amount
to order
=
Expected
demand during
protection
interval
+
Safety
stock
-
Amount on
hand at
reorder time
1.4.6 SinglePeriod model:
SinglePeriod model is a model for ordering of perishables and other items with
limited useful lives.
Costs in this model: Shortage and excess.
C
shortage
= C
s
= Revenue per unit Cost per unit
C
excess
= C
e
= Cost per unit Salvage value per unit
* NOTE: Watch out for continuous stocking levels and discrete stocking levels. In
case of discrete stocking levels, choose the stocking level so that the desired
service level is equaled or exceeded.
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e s
s
C C
C

Level Service
1.4.6 SinglePeriod model:
* Example 12: Sweet cider is delivered weekly to Pappys Produce Stand. Demand
varies uniformly between 300 liters and 500 liters per week. Pappy pays 20 cents
per liter for cider and charges 80 cents per liters for it. Unsold cider has no salvage
value and cannot be carried over into the next week due to spoilage. Find the
optimal stocking level and its stockout risk for that quantity.
* Example 13: Pappys Stand also sells a blend of cherry juice and apple cider.
Demand for the blend is approximately normal with a mean of 200 liters per week
and a standard deviation of 10 liters per week. C
s
= 60 cents per liter, and C
e
= 20
cents per liter. Find the optimal stocking level for the applecherry blend.
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1.4.6 SinglePeriod model:
* Example 14: Historical records on the use of spare parts for several large hydraulic
presses are to serve as an estimate of usage for spares of a newly installed press.
Stockout costs involve downtime expenses and special ordering costs. These
average $4200 per unit short. Spares cost $800 each. And unused parts have zero
salvage. Determine the optimal stocking level.
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Number of spares used Relative frequency
0 0.20
1 0.40
2 0.30
3 0.10
4 or more 0
Chapter 2: Warehouse management
2.1 Introduction of warehouse:
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What is warehouse???
Storing Receiving Picking
2.1 Introduction of warehouse:
Most people just imagine warehouse as goods storage. Is it a full definition of
warehouse?
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2.1 Introduction of warehouse:
Warehouse is a part of logistics system storing products and providing
information to management on the status, condition, and disposition of item
being stored.
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2.1 Introduction of warehouse:
Did you know?
Warehouse v.s Distribution Centre
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2.2 Importance of warehouse:
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Reduce lead time for purchasing Stock of raw materials and parts
Encourage for JustInTime system Support for customer service policy
Various products for transportation Repare for market changes
Temporary storage for returned or
reproduced items
Decrease of transport cost
Meet requirements of 7 Rs.
Reduce number of times of
purchasing or for discounting
Decrease of production cost
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2.2 Importance of warehouse:
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2.2 Importance of warehouse:
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2.2 Importance of warehouse:
Uses of warehouse:
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2.2 Importance of warehouse:
Uses of warehouse:
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2.3 Types of warehouse:
Public warehouse:
General Merchandise WH
Refrigerated or coldstorage WH
Bonded WH
Household goods and Furniture WH
Special commodity WH
Bulk storage WH
Private warehouse:
Warehouse for production
Warehouse for distribution
Warehouse for transportation
Material warehouse:
Contract warehouse:
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2.3 Types of warehouse:
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Public warehouse Private warehouse
Advantage
Conservationof capital Degree of control
Adjusts for seasonality Flexibility in service improvement
Reduced risk Less cost overlong term
Economy of scale Better use of human resource
Greater flexibility Intangiblebenefits
Tax advantages
Knowledge of exact warehousing cost
Insulation from labor desputes
Disadvantage
Communication proplem Lack of flexibility
Lack of specialized services Financial constrainst
Space may not be available Rate of return
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2.4 Main functions of warehouse:
2.4.1 Movement:
The movement function can be further divided into several activities, including:
Receiving
Transfer or put away
Order picking/selection
Crossdocking
Shipping
Cross-docking system: Cross docking system is a distribution system where
items received at the warehouse are not received into stock, but are prepared
for shipment to another location or for retail stores.
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2.4.1 Movement:
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2.4.1 Movement:
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2.4.1 Movement:
* Types of cross-docking:
Manufacturing crossdocking.
Distribution crossdocking.
Transportation crossdocking.
Retail crossdocking.
* Products suitable for cross-docking:
Perishable items.
High quality items that do not require quality inspection during goods receipt.
Products that are pretagged and ready for sale at the customer.
Staple retail products with a constant demand and low demand variance.
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2.4.1 Movement:
* Cross-docking Benefits:
Reduction in labor costs, as the products no longer requires picking and putaway
in the warehouse.
Reduction in the time from production to the customer, which helps improve
customer satisfaction.
Reduction in the need for warehouse space, as there is no requirement to
storage the products.
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2.4.1 Movement:
* When should cross-docking be considered?
Inventory destination is known when received.
Customer is ready to receive the inventory immediately.
Shipment to fewer than 200 locations daily.
Daily through put exceeds 2000 cartons.
More than 70% of inventory is conveyable.
Large quantity of individual items received by firm.
Inventory arrives at firms docks prelabled.
Some inventory is timesensative.
Firms DC is near capacity.
Some of the inventory is prepriced.
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2.4.2 Storage:
The second function of warehouse can be perfomed on a temporary or a semi
permanent basis.
Temporary storage
Semipermanent storage
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2.4.3 Information transfer:
Organisations are relying increasingly on computerized information transfer
utilizing:
Electronic Data Interchange (EDI)
Bar coding
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2.6 Storage and handling equipment:
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2way wood pallet
4way plastic pallet
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2.6 Storage and handling equipment:
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Selective rack or single-deep rack
2.6 Storage and handling equipment:
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Double-deep rack
2.6 Storage and handling equipment:
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Push-back rack
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2.6 Storage and handling equipment:
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Pallet Flow rack
2.6 Storage and handling equipment:
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Drive-Through or Drive-In rack
2.6 Storage and handling equipment:
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AS/RS
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2.7 Storage and handling equipment:
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Counter balance lift truck
2.6 Storage and handling equipment:
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Reach lift truck
2.6 Storage and handling equipment:
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Turret truck
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2.6 Storage and handling equipment:
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Stacker crane for AS/RS
2.6 Storage and handling equipment:
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Bin-Shelving or static rack
2.6 Storage and handling equipment:
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Gravity-flow rack
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2.6 Storage and handling equipment:
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Conveyor
2.6 Storage and handling equipment:
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More videos on storage
and handling equipment
Video 1: Fulfillment by Amazon
Video 2: Inside Better World Books warehouse
Video 3: Automatic picking system (Simulation)
2.7 Activities and Operations in warehouse:
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2.7.1 Arrival/checking:
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Unloading Quantity/checking
A loaded forklift should
be driven backward as
the driver cannot see
things ahead.
Are names and
quantityof goods
correct as on the
delivery
statement?
2.7.2 Receiving:
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Loading on EV
Locating work on pallet rack
H34 H35
Where to store?
2.7.3 Storing:
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Palletized goods
Stored on pallets
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2.7.3 Storing:
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Stacking patterns on pallets
Block stacking is
likely to fall
Block
stacking
Pinhole
stacking
Alternate
stacking
Brick stacking
2.7.3 Storing:
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2.7.3 Storing:
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Numbers are assigned to each lane of the shelves and each shelf, and the
shelf number and stored goods are connected for management by computer,
etc.
A02
A03
Lane No. Shelf number and barcode
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2.7.3 Storing:
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1. Fixed location: This is a management method to specify storing locations
(shelf numbers, etc.) by items, like at bookstores and libraries.
Merit: It is easy to find goods as they are always in the same location
Demerit: Other goods cannot be stored even if there is some vacancy. A
shortage in storing space may occur because of a sudden increase in the
quantity of goods to store.
2. Free location: This is a management method which allows any item to be
stored at any vacant storing space. Names of goods and their location
number are connected to be managed.
Merit: Storing space efficiency improves
Demerit: It is possible that the same kind of goods are dispersed and
stored in different locations. It is difficult to find goods, unless managed
by computer, etc.
2.7.4 Picking:
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Picking
Picking check
Are the item number
and quantity correct?
2.7.5 Inventory clearance:
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Count the number of stock on hand
1 case and 5
pieces of
NB1254
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2.7.6 Distribution processing:
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$50
Assortment work Assembling work Price-tagging
$45
Price Tag
2.7.7 Packing:
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Usually, shipping labels are
affixed, indicating delivery
addressees and delivery
addresses, etc.
2.7.8 Vehicle arrangement work:
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To arrange vehicles deciding which trucks are used to deliver
goods to which arrival goods owners in what order.
Considering the amount,
delivery dates, addresses,
etc.
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2.7.9 Overview:
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Example of a flow from order fulfillment to shipment
Invoice (Mail)
C
u
s
t
o
m
e
r
Order input by FAX operators
Ordering
form
FAX

Order input by telephone

operators

Sales agent/sal es
clerical work
Core System
ERP
Headquarters
Picki ng
Request
Order-receiving form automatic FAX
Delivery
Inventory
allocation
CTI
Double-check by other operators
Ordering
form
Issuance of delivery
sl i p/invoice
NEC

Mail/FAX
FAX
Items directly
shipped from
supplier
Supplier
Logisti c Center
WMS
Order
registration
Picking
information
TEL
FAX
Core
system
Sales
cooperation
Web
Order-receiving Center

FAX : : NEC
FA X
[ F AX ]
:
[ ]
:
-
:
2/2/20 05
:

:
E

E

E

E

E




FAX
:

:
NE C
FA X :
[ F AX ]
:
[ ]
:
-
:
2 /2 /2005
:

:
E

E

E

E

E




Delivery
2.8 Warehouse activity cost:
Receiving cost
Storage cost
Picking cost
Shipping cost
* Warehouse affects the following cost:
O Warehousing cost
O Cost of loss sale
O Inventory cost
O Transport cost
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2.9 Considered issues in warehousing:
2.9.1 Inefficient warehouse management system:
Receiving
Incorrect product, uncompleted information
Putaway
Unidentified product, unknown storage location
Storage
Different size of items, inappropriate location of storage
Order picking
Costly picking method, uncompleted picking
Shipping Prep
Unsuitable packaging, no lebeling
Shipping
No scheduling, out of date records, inefficient loading
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2.9 Considered issues in warehousing:
2.9.1 Inefficient warehouse management system:
Unknown storage location
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God helps me find
where my goods is.
2.9 Considered issues in warehousing:
2.9.1 Inefficient warehouse management system:
Order Picking
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Quantity
of i tems
A A 5
BC 3
NX 1

A A 5
BC 3
NX 1

A A 5
BC 3
NX 1

JF 1
BC 2
PI 1
ET 5
WE 1
Picking is done as many times as the
number of orders
Quantity
of i tems
A A 5
BC 3
NX 1
Quantity
of i tems
A A 5
BC 3
NX 1
Quantity
of i tems
A A 5
BC 3
NX 1
Quantity
of i tems
A A 5
BC 3
NX 1
Quantity
of i tems
A A 5
BC 3
NX 1
Quantity
of i tems
A A 5
BC 3
NX 1
Quantity
of i tems
A A 5
BC 3
NX 1
Quantity
of i tems
A A 5
BC 3
NX 1
Quantity
of i tems
A A 5
BC 3
NX 1
Quantity
of i tems
A A 5
BC 3
NX 1
FG 2
Shipping slip
Picking of 4 items
2.9 Considered issues in warehousing:
2.9.1 Inefficient warehouse management system:
Different size of items to be stored.
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2.9 Considered issues in warehousing:
2.9.2 Unproductive space utilization in warehousing:
Inappropriate position of equipment or goods in warehouse can directly or
indirectly affect to the efficiency of warehousing process.
Items characteristics
Warehouses characteristics
103
2.9 Considered issues in warehousing:
2.9.3 Inappropriate facilities and equipment
utilization:
104
2.10 Approaches for warehouse management
improvements:
2.10.1 Better plan and design for warehouse and
facility:
O Factors of warehouse investment
+ Markets demands
- Existing warehouses
- Characteristics of goods
- Economic situation
+ Resources
- Area, Equipment, Staff, Capital, Specialist
+ Regulation
+ Others
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2.10.1 Better plan and design for warehouse and
facility:
O Factors of warehouse location selection
+ Source of raw material or items
+ Transportation network, facility aroud the site
+ Source of labor, cost of labor
+ Communitys attitude, government regulations
+ Public facility
+ Environment
+ Future Opportunity
+ Land cost
+ Construction cost, tax, insurance
+ Distance between factory, supplier, customer, market
106
Which place is the most
appropriate one for our
warehouse?
2.10.1 Better plan and design for warehouse and
facility:
O Factors of warehouse design
+ Develop a demand forecast.
+ Allow for growth
+ Allow for adequate aisle space:
- Main aisle
- Cross aisle
- Aisle in retail bin area
- Personal aisle
- Service aisle
- Fire aisle
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2.10.1 Better plan and design for warehouse and
facility:
O Factors of warehouse design
+ Provide for order picking space
+ Provide for storage space
+ Provide for office, miscellanous space
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2.10.1 Better plan and design for warehouse and
facility:
O Layout and Design Principles:
+ Use one story building as possible
109
One-story warehouse
Multi-story warehouse
Ramp
way
No need to have an
elevator and work is
done quickly
2.10.1 Better plan and design for warehouse and
facility:
O Layout and Design Principles:
+ Move goods in a straight line
110
2.10.1 Better plan and design for warehouse and
facility:
O Layout and Design Principles:
+ Minimize aisle space
+ Use full building height
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2.10.1 Better plan and design for warehouse and
facility:
O Layout and Design Principles:
+ Utilize warehouses cubic capacity
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2.10.1 Better plan and design for warehouse and
facility:
O Layout and Design Principles:
+ To park lengthwise, its necessary to have a space approximately twice as
long as the length of vehicle.
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2.10.1 Better plan and design for warehouse and
facility:
O Layout and Design Principles:
+ Reduce inhouse transport by considering these receiving and shipping
docks location.
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2.10.1 Better plan and design for warehouse and
facility:
O Layout and Design Principles:
+ Consider following warehouse layouts:
Randomized storage
Dedicated storage
Products can be grouped by:
- Compatibility
- Complementarity
- Popularity
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2.10.1 Better plan and design for warehouse and
facility:
O Layout and Design Principles:
+ Other considerations: Floor load capacity, pillar interval in warehouse,
lighting ...
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2.10.2 Improvement of warehouse management:
O Receiving process:
+ Carrier scheduling
+ Have your suppliers to correctly label material before they arrive at your
warehouse.
+ Affix tag on the SKUs to be easily located and managed
+ Use RFID if possible.
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2.10.2 Improvement of warehouse management:
O Putaway/Storage:
+ Separate types of goods and storages.
+ Partition warehouse into smaller unit of storage and put clear section
indicator.
+ Color section, rack, shelve for easy recognition.
+ Standardize carrying unit.
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2.10.2 Improvement of warehouse management:
O Order processing:
+ Customer order handling methods:
- Discrete picking
- Batch picking
- Zone picking
- Wave picking
+ Basic orderpicking method:
- Pickers walk to pick item
- Pickers uses the equipment or vehicle to pick items
- Items are transported to picker
119
2.10.2 Improvement of warehouse management:
O Order processing:
+ Orderpicker routing pattern:
- SShape method
- Return method
- Midpoint method
- Largest gap method
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