[SOUND] Welcome back to our lesson on Warehousing Operations.
Upon completion of this lesson, learners should be able to provide a general definition of warehousing, describe the various reasons to use warehousing, and discuss some of the industry nuances that impact warehousing.
Warehouses are facilities of widely varying sizes, designs, levels of automation, and other characteristics that are part of the supply chain that stores and handles materials between points of origin and points of consumption.
Some warehouses may be prior to finished product manufacturing, operating on the supply side, where they are used to store, stage and kit combinations of raw materials, work-in-process, and other components. And warehouses may also be found after finished product manufacturing to support the demand fulfillment side of the supply chain.
Terms such as distribution center or fulfillment center are often used to refer to warehouses that prepare and ship orders of products often a variety of products per order to end consumers or other channel partners, such as wholesalers or distributors.
Some large retail operations with substantial inventory quantities serve as a type of warehouse-style retail store. For example, Home Depot. Retail stores are sort of warehouse if you think about it with the customers doing the picking of orders and the transport of orders via their shopping carts.
Interestingly with the history of Home Depot, originally they didn’t have regional distribution centers. The suppliers supplied the products of all kinds directly to the stores which their stores were quite substantial sized warehouses themselves. And over time Home Depot came to realize that there might be some synergies of having regional distribution centers in place where multiple suppliers could ship to large regional distribution centers. Multiple products from multiple suppliers could then be bundled together in truckload shipments to the stores. And the stores would then be able to handle fewer truckload shipments a day as they would be consolidated shipments from the regional distribution centers as opposed to small individual shipments of replenishment goods from each supplier.
Warehouses generally provide basic functionality for the receipt of goods, storage, retrieval, and preparation for shipment. In addition to these basic functions, additional services may take place in warehouses. These are often referred to as value add services. The term distribution center or DC, or fulfillment center is typically use to describe facilities that provide services beyond basic receipts, storage, and shipment.
Examples of value added services are cross talking, marking, labeling, and light final product to assembly.
Cross docking occurs when incoming goods from various sources are immediately prepared for an outbound shipment to a customer so that no storage is required. Cross docking may be carried out to sort material intended for different destinations, or to combine material with different origins into transport vehicles with the same or similar destinations.
Marking and labeling is perform to satisfy unique customer request for product identification while light final product assembly might occur when customer options are combined to fulfill a specific customer requirement.
When thinking about why warehouses exist, most people probably generally think that they exist to store stuff. While that is true, it is instructional to consider the many ways that warehousing operations facilitate supply chain execution.
Product mixing is when products from multiple plants or suppliers are combined so that they can be shipped to customers. This is typical in retail operations. You can think of a Walmart DC receiving goods from hundreds of suppliers, combining them into truckload shipments for store replenishment.
Transportation consolidation. This entails receiving many small shipments to combine into large shipments for cross-country movement. Small shipments would be much more costly than large shipments be a rail or truck load. So through transportation consolidation, warehouse operations provide a benefit to the supply chain.
Delivery service requirements. In order to meet customer service requirements, inventory may need to be held in multiple locations not just at a manufacturing plant. Warehouses provide the responsiveness needed to meet these requirements.
Holding inventory as a contingency for a multitude of reasons, inventory may be need to be stored. Utility companies, for example, may need to store transformers and telephone poles for hurricane and other disaster relief efforts. Companies launching a new product may want to hold excess inventory in case a promotion does better than they expected rather than losing sales. Manufacturers and distributors they want to hold inventory to mitigate the risk of weather, labor unrest or other conditions that may disrupt the flow of products and materials into their manufacturing facilities.
Manufacturing smoothing is another use of warehousing. In many cases, manufacturing may not be able to, or have the capacity, to keep up with customer demand, particularly if demand is very seasonal. So storing product in a warehouse to meet peak demand may be more effective than adding manufacturing capacity. An example of this is bottled water, which is in strong demand during warmer months is relatively low cost and easy to store in warehouses and can be held in inventory rather than adding additional production capacity to meet peak demands.
Seasonal inventory build. Many products are seasonal in nature, both durable products such as gifts over the holidays and school gear at the beginning of the school year, and expendable products such as seasonal foods, say water as we describe. Warehouses can be use to hold this wide variety of seasonal inventory. Providing value-added services is another component of warehousing as we mentioned. Labeling, kitting, putting, kitting which is putting together in a format that is ready for end-user consumption. One example you might think of is dentist operations where there are different types of operations that are performed by dentists, fillings or tooth extraction, etc. And each requires a different combination of tools and expendables. The warehouse operation could pull together these different components, for specific dental operations into specific kits. Just as an example of what a kit may be.
Let’s take a few moments to discuss how the form in which warehousing is realized can be extremely different from industry to industry. Let’s consider some examples. In the chemical and petroleum industry, warehouses may be in the form of storage tanks. Receiving from pipelines, boats, holding the liquid product and then distributing via pipelines, rail, truck, or boat.
How about industrial compounds or industrial products? As an example, say, steel beams. Industrial products you might often see high bay warehousing operations with equipment to handle large items, very heavyweight items, etc. Warehouse facilities may actually be drive-thru facilities where trucks, for example, may drive through. And they’d been loaded with steel beams. There may also be yard storage. The warehouse may actually be a plot of land without a ceiling. So in industrial products and industrial compounds warehousing comes in a wide variety of sizes and different types of equipment being applied.
With consumer durables, there are a wide variety of sizes and handling considerations also. You may see in warehouse operations in this space, racking, conveyers, and other handling mechanisms that are generally operating in facilities that are ambient temperatures, where extreme temperature control isn’t necessarily needed in consumer durables.
Consumer durable DCs may typically be rectangular in shape and fit the scope of what we typically think of in terms of a traditional warehouse or distribution center.
Damage avoidance and efficient operations are some of the key considerations with consumer durables warehouses.
Food products manufacturing and distribution typically entails sanity, fast-flow production and handling. For manufacturing, product may be stored as pallets and flowed to distributors or other partners in the supply chain on this palettes. A wide variety of temperatures may be involved. Ambient, chilled, or even frozen. Food safety standards must be strictly enforced in food supply chains. Labeling products and pallets with lot numbers which can be used for lot tracking and recall is also common in food product warehousing operations.
eCommerce generalists. Think of Amazon, handling a wide variety of storage and handling equipment to meet the needs of a wide range of products, ranging in size from books to kayaks.
Velocity on many other products could be pretty high. And there’s need to be somewhat flexible to handle this wide variety of products, so there’s a wide variety of material handling and storage equipment and a different mix of material handling equipment maybe used for larger products versus small products etc. You may see pallet racks, forklifts, conveyers and the automated robots to move goods through the facility.
eCommerce specialists say think of Nike with a relatively narrow range of
accessories, footwear, and apparel is very high volume,
very high seasonality, very small orders, and fast moving.
And they can tailor their equipment given a narratively narrow size of products
to be more efficient using specialized conveyors and sorters.
Parts providers. Think of companies like Ranger or Caterpillar which has to handle hundreds of thousands of parts for a wide variety of equipment that’s been in use for decades.
With parts providers, there could be very large DCs because they may be holding hundreds of thousands of SKUs, or stock keeping units. With a wide variety of sizes, from small washers to transmissions. Some of the products may be very high volume and some very low volume, and when we’re talking about low volume in parts, it may be one sale a year or even less.
On the high side, it could be hundreds of picks per day,
and the product in the warehouses could range from very low. A few pennies type products to products that are thousands of dollars. So a wide variety of equipment is needed. Typically in a parts warehouse it’s ambient temperature. And the types of material handling equipment may include everything from cart picks to carousels and forklifts, etc.
For this lesson, in addition to watching my lecture, you will also want to watch the following YouTube videos and then answer the questions in the discussion forum after this lesson. The links to these videos can be found at the lower right hand side of the lesson shown as links. They are understanding distribution centers part 1, a day in the life of an Amazon package, National Geographic ultimate factories, Sketchers distribution center, and Amazon’s New High-Tech Distribution Center.
In this lesson, we provided the general definition of warehousing. Described the various reasons to use warehousing and discussed some of the industry nuances that impact warehousing. Thank you and we’ll see you on the next lesson. [SOUND]
[SOUND] Welcome back to our lesson on Warehousing Operations.