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After completing this chapter, students will be able to: Costs relevant to inventory management, the storage and handling system, storage fundamentals in inventory strategy, the storage system, consolidation warehouse, space comparison, the materials handling system, storage/handling systems.
Logistics Management LSM 730 Lecture 27 Dr Khurrum S Mughal 1-1 Costs Relevant to Inventory Management • Procurement Costs • Carrying costs • Out-of-stock costs CR (2004) Prentice Hall, Inc 9-2 The Storage and Handling System “The day soldiers (subordinates) stop bringing you their problems is the day you have stopped leading them.” Colin Powell CR (2004) Prentice Hall, Inc 11-3 Location Strategy •Location decisions •The network planning process CR (2004) Prentice Hall, Inc 11-4 CONTROLLING Transport Strategy •Transport fundamentals •Transport decisions ORGANIZING Inventory Strategy •Forecasting •Inventory decisions •Purchasing and supply Customer scheduling decisions service goals •Storage fundamentals • The product •Storage decisions • Logistics service • Ord proc & info sys PLANNING Storage Fundamentals in Inventory Strategy The Storage System Except where customer service is a concern: Storage is an economic convenience, not a necessity Reasons for storage • Transportation and production costs can be reduced • Better coordination of supply and demand • Storage can be an integral part of the production process • Storage may enhance sales Storage Functions • Holding • Consolidation • Break-bulk • Mixing (merge-in-transit) 11-5 The Storage System (Cont’d) Note Storage functions are performed in an attempt to reduce transportation, production, and purchasing costs, which justify their added expense Storage Space Alternatives • Ownership • Leasing • Rental • In- transit CR (2004) Prentice Hall, Inc 11-6 Consolidation Warehouse 10,000 lb A Similar to a merge-in-transit facility Manufacturer A 8,000 lb B Manufacturer B 15,000 lb C Manufacturer C 40,000 lb ABCD Consolidation warehouse Customer 7,000 lb D Manufacturer D 11-6 Distribution, Break Bulk, or Pool Point Warehouse Customer A L LT LTL Manufacturer Low rate TL shipment Warehouse may or may not hold inventories CR (2004) Prentice Hall, Inc Distribution warehouse LT L Customer B Customer C 11-7 Storage Cost Savings Direct shipments to customers MANUFACTURER SHIPPING WEIGHT (lb.) A 10,000 B C D 8,000 15,000 7,000 Total CR (2004) Prentice Hall, Inc LTL RATE TO CUSTOMER $2.00/cwt 1.80 3.40 1.60 COST $200 133 510 112 $966 11-8 Storage Cost Savings (Cont’d) Shipments through a distribution center SHIPPING WEIGHT (lb.) MANUFACTURER LTL RATE TO DISTRIBUTION CENTER TOTAL LTL A 10,000 $0.75 $75 B 8,000 0.60 48 C 15,000 1.20 180 D 7,000 0.50 35 Total 40,000 DISTRIBUTION WAREHOUSE CHARGE $10 TL RATE FROM DISTRIBUTION WAREHOUSE TO CUSTOMER $1.00/cwt TOTAL TL COST $100 $185 1.00 80 136 15 1.00 150 345 1.00 70 112 $778 11-9 Space Comparison Ownership alternative • Less expensive under high utilization • High degree of control over operations • Benefits of real estate ownership • Space may be converted to uses other than storage Rental alternative • No fixed investment • Lower cost under seasonal or low utilization of an owned facility • Location flexibility CR (2004) Prentice Hall, Inc 11-11 The Materials Handling System Materials Handling Functions • • • Loading and unloading Movement to and from storage Order filling Materials - Handling Considerations • Load unitization • Space layout • Storage equipment • Movement equipment CR (2004) Prentice Hall, Inc 11-12 A Low Throughput, Holding Warehouse Semipermanent storage bay Product Inbound and outbound CR (2004) Prentice Hall, Inc 11-13 A High Throughput, Distribution Warehouse Product C Semi-permanent storage bay A Replenishment A C D Order picking and product mixing bays CR (2004) Prentice Hall, Inc Order-picking route Outbound Inbound B 11-13 Storage/Handling Systems • Manual handling system • Forklift truck-pallet system • Conveyorized system • Automated storage and retrieval system CR (2004) Prentice Hall, Inc 11-15 Order Picking Area System Semipermanent storage bay Product A B C Order-picking route Inbound and outbound CR (2004) Prentice Hall, Inc 11-16 Order Picking Modified Area System Product C Semipermanent storage bay A Replenishment A C D Order picking and product mixing bays CR (2004) Prentice Hall, Inc Order-picking route Outbound Inbound B 11-16 ... Storage may enhance sales Storage Functions • Holding • Consolidation • Break-bulk • Mixing (merge-in-transit) 1 1-5 The Storage System (Cont’d) Note Storage functions are performed in an attempt... Alternatives • Ownership • Leasing • Rental • In- transit CR (2004) Prentice Hall, Inc 1 1-6 Consolidation Warehouse 10,000 lb A Similar to a merge-in-transit facility Manufacturer A 8,000 lb B Manufacturer... Relevant to Inventory Management • Procurement Costs • Carrying costs • Out-of-stock costs CR (2004) Prentice Hall, Inc 9-2 The Storage and Handling System “The day soldiers (subordinates) stop