OMGT2224 - Warehouse and Distribution Channels notes logistics
Roles of warehouse (why is it necessary to store inventory?)
• Buildup of inventory for seasonal demand
• A place that keep safety stock to cope sudden surge in demand.
• A place to store the goods after enjoying quantity discount from manufacturers for bulk purchasing
• It serve as a place for break bulking consolidation and delivery to save transport cost.
• Support value adding activities such as price tagging and packaging
Break bulk warehouse
Seller will consolidate orders to ship as a single large shipment to the warehouse. Upon receiving the shipment is broken down to their individual orders and deliver to customer to save transport cost.
Consolidation warehouse
Consolidate products from different manufacturers into a single shipment to the customer or a single destination.
Reverse logistic
Reverse logistic focus on handling material flow from customer back to the source.
Reason for reverse logistic
• return due to excess stock
• Refurbishment.
• product repair
Cross docking
Cross docking is a process whereby inbound shipments to the warehouse are being sorted and combine with other incoming shipment and send out to customer without putting into the main storage
• It reduces the need for handling and storing the cargo.
• Reduction of operating cost as it reduces in labour.
• Reduce in product damages as handling have been reduced.
• Reduce the risk of product obsolescence as product coming in will be send out with this few days.
• Increase in customer satisfaction
• Require a large staging area to sort and combine the goods.
• Require a good IT system that have cross docking feature to keep track of the cargo.
• If inventory destination is unknown when products are received it have to stored.
Products that are suitable for cross docking: perishable products (vegetable), trendy products.
LOCATION SYSTEM
Random location system
Storage location of the goods are randomly selected and placed it in any empty location available. Need to have a system to auto generate empty location for storage.
• High utilisation of the storage space
• Most economical
• Heavily reliance on system for location of the goods, if system down picker would not be able to retrieve the goods.
**Fixed location **
Storage location of each goods has a fixed storage location the space allocated cannot be used for other items.
• Pickers became familiar with the location of the product thus product can be found and picked quickly
• Poor utilisation of storage space
Enhance the efficiency of the warehouse
• Use of technology such as barcode and RFID.
• Improve the warehouse layout to minimise time wastage due to travelling.
• Forward planning to come out with a schedule to prevent lacking of manpower and congestion to the dock.
Putaway: is a physical process of bring the goods received and placing them in the location where they are to be stored.
Picking: retrieving of cargo from the storage location to fulfil customers’ order for shipment.
Cargo stackability - Stability of the product without damaging the goods.
Inventory might fall off the shelf which result in
• Product damages
• Loss of sales
• Worker getting injured
Storage system: selection criteria
Fully make use of the vertical and horizontal space
Must have good access to stored goods which allow easy deposit and retrieval of goods.
ROI and payback periods
Ergonomic and green concerns
Choosing storage system
Based on physical characteristics and throughput rate of the product.
Block stacking: loaded pallets are placed on the floor and build up by stacking.
• Very cheap: As it does not require any investment in racking.
• Height limitation: due to safety reason
• Accessibility problem (FILO): unable to access to the pallet at the bottom if required.
Selective pallet racking
• Good accessibility as it allow direct access to every pallet which allows FIFO
• Is fairly inexpensive as compare to other racking system
• Poor warehouse space utilisation as it required large amount of aisle space for MHE.
Narrow Aisle racking
• Good accessibility as it allow direct access to every pallet and allows FIFO.
• Good space utilization it only require a very narrow aisle for MHE to pass through.
• Expensive due to special MHE required (VNA turret truck) and high setup cost.
Automated storage & retrieval system (ASRS) / Hi Bay storage
• Good space utilization where it fully make use of the vertical and horizontal space.
• Reduce in operational cost as it reduces manpower and improved productivity.
• More efficient as it reduce time required for picking. Goods to picker instead of manual picking which reduces time needed to locate the goods.
• Expensive due to high investment cost
• Total shut down of system during power failure.
Double deep racking: similar to selective racking but pallets are now stored two rows deep instead of one
• Better space utilization as compared to Selective pallet racking.
• Ideal for product with large batch of quantity. (homogeneous product)
• Special trucks (reach truck) required.
• Poor visibility for truck driver when doing picking or put away to the rear location.
• FILO
Pallet flow racking
• Good space utilization
• Great for FIFO (First in First out) products.
• Poor accessibility to all pallets
• Wheels and brakes in the system require maintenance over time.
• High investment cost.
Drive-In Racking
• Good space utilization
• Last In First out (LIFO) therefore old products might become obsoleted
MHE
Hand pallet truck
• Inexpensive
• Can be used for areas with space constraints
• Manual effort required to operate the MHE.
Powered pallet truck
• Able to cover huge distances in a short period of time therefore, employee productivity is also increased.
• Less manual effort required
• Higher cost than a hand pallet truck
• Require charging
Counter balance forklift
• Most commonly used and fairly inexpensive
• Can reach up to high level
• Require a wide turning radius
Reach truck
• smaller turning radius as compare to counter balance forklift
• Can reach up to high level
• Need to be charged in order to be use.
• Charging stations and spare batteries are required to avoid downtime.
• Unable to be used at uneven terrain
Order picker truck
• Provide picker with excellent visibility when retrieving the goods
Very Narrow Aisle truck
• Good space utilization it only require a very narrow aisle
• turret truck is expensive
Stacker cranes (ASRS)
• Can reach up to a height of 40 meters
• Fast and accurate picking
• Total shut down of system during power failure.
Conveyor
• It reduce manpower to transport the goods between point to point
• Sorting purposes.
• High installation cost
• Inflexibility of movement path.
Reasons why it is important to select the best type of material equipment in a warehouse.
• Reduce unit materials handling costs –
• Reduce handling time –
• Conserve floor space – required aisle space for MHE to manoeuvre
• Prevent injuries to staff –
• Reduce energy consumption –
Order picking improvement
• Having a good IT system to pre route the picking therefore eliminate backtracking.
• Picking instruction must be clear easy to read.
• Assign common items to same area – Items that are usually required to be picked together should be located near to one another.
• Store popular item in the forward location for picking to reduce travelling distance between staging and storage location thus increase in productivity
• Adopt batch picking strategies to reducing travel time and improves order picking productivity.
• Reduce documenting requirement
• Location system should be properly sequenced and easy to follow
Pick to order
One person complete picking the whole order, one order at a time.
• No sorting required therefore, reduce in risk of errors during sorting
• Picking errors can be easily tracked and take corrective action.
• Require picker to travel between staging and storage location after completing each order which decrease in productivity.
BATCH Picking
Batch picking is when one picker picks a group of orders at the same time, one SKU at a time. After picking, the items are sorted into separate orders and packed for shipment.
• This minimizes travelling frequency between staging and storage location thus increase in productivity
• Increase in productivity as picker can pick many orders in one trip
• Ease of merging product from many areas into one pack area.
• Requires good IT capability for sorting.
• Higher risk of picking and sorting errors
Wave Picking
Wave picking is very similar to pick to order. However, orders may be scheduled to be picked at specific times of the day, which is usually done to coordinate and maximize the picking and shipping operations.
Zone Picking
Pickers are assigned a specific zone and will stay within the zone to pick all the required items of the order located within the zone. After picking, the items are sorted into separate orders and packed for shipment.
• Pickers will become more familiar with the location of the products which will increasing the efficiency and accuracy in picking
• This minimizes travelling frequency between staging and storage location thus increase in productivity
• Higher risk of picking and sorting errors
• difficult to track down the reason for a picking error
Part to picker
It is a technology where the material handling system would move the required items from the storage area to the picker without the need of the picker to travelling to the location and pick the goods.
• Eliminate picker travel time thus increase in productive
• Reduce in operational cost as it reduces manpower and improved productivity.
• Improve in accuracy as compare to picker to parts
• Expensive due to high investment cost.
• Total shut down of system during power failure.
• High cost of disposal of equipment.
Packaging requirements for distribution
Means of transportation – package is designed to make the goods easier to transport, move and lift.
Means of storage – The shape and form of the package determines how efficiently they can be stacked or stored.
To identify the product – the packaging contain important information and identifies the product inside
Product protection – With Packaging the product is protected against being dropped, crushed, and the vibration during transport.
Order picking – such as the bar code on the packaging is extremely useful during order picking
Warehouse layout objective
Maximise the use of space such as the vertical and horizontal space. By keeping the aisles as narrow as possible and utilize the height of the building.
Improve the warehouse layout to minimise time wastage due to travelling from point to point and improve in productive.
Having a safe working environment by having a clear demarcation to keep equipment and people movement separate.
Warehouse improvement
Encourage process improvement by eliminating unnecessary process
Use of technology – such as RFID and Barcoding to keep track of products and orders, verify accuracy, speed processes and eliminate paperwork. Automation can help reduce both labour and handling of product
Reduce multiple handlings of product thus reduce in wastage and possible item being damaged.
Radio frequency identification uses radio wave to identifyt tagged object.
Location of pallet can be tracked and located in real time.
During putaway rf reader will read the tag and update the system accordingly thus eliminate manual update the location in wms which improve in accuracy.
RFID vs Barcode
the price of barcode label is cheaper as compare to Rfid
Barcode require line of sight hence it must be placed outside of the packaging. While rfid package do not require line of sight between tag and reader thus it can be placed in the package
Rfid can store more information as compare to barcode which only store limited amount of data.
Rfid can read multiple tags at any one time. barcode can only read 1 bar code at a time.
Barcode are more easily damaged because is paper if torn or covered with dirt it can't be read. while rfid is more durable and won't be affected by dirt
Increasing inventory shrinkage is causing retailers to pay more attention on how to manage shrinkage. Discuss the six (6) ways inventory shrinkage can occur. (15 marks)
• Accounting error – Errors in checking physical inventory with computer or accounting. Assume a company orders 24 items and its computer inventory shows 24 items on order. A box with 23 items is delivered. The recipient should count to ensure the box has 24 items. If the box has 23 items and the clerk receives the order of 24 into inventory, a loss of one item has already taken place.
• Incorrect packaging – Misunderstanding the unit of measure when performing a transaction which cause of inventory shrinkage.
• Incorrect receipts – Employees inaccurate records and errors during receiving
• Theft – Due to employee theft the inventory is missing.
• Damage – When inventory is damaged, the damaged products lose value and cannot be sold.
• Depreciation – When the business is no longer able to sell the inventory, the obsolete products no longer have value and contribute to shrinkage.