wh science slides

7/29/2019 WH Science Slides

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C H A P T E R S 1 – 3

W A R E H O U S E O P E R A T I O N S

Warehouse and Distribution

Science



Definition of a Warehouse

Warehouses are points in the supply chain whereproduct pauses and is touched.

Consumes both space and time (person-hours).



Why have a warehouse?

To better match supply with customer demand

To consolidate product, reduce shipping cost



Types of Warehouses

Retail Distribution Center (DC)

Service Parts DC

Catalog fulfillment or E-commerce DC

3PL Warehouse Perishables Warehouse



Warehouse Systems Determined by

Inventory characteristics

Number of products, size, and turn rates

Throughput and service requirements

Number of lines picked and orders shipped per day Footprint of building & cost of equipment

Cost of labor



Material Flow



Fluid Flow Model of Product Flow

Insights from Fluid Dynamics: fluid flows faster innarrower segments of pipe than wider segments

Implies on average, an item will move more slowly throughthe region with large inventory than it will through a region

with little inventory.

Figure 2.1



General Warehouse Guidelines from Fluid Model

Keep the product moving

Avoid starts and stops which require extra handling andadditional space

Avoid layouts that impeded smooth flow

Identify and resolve bottlenecks to flow



A product is generally handled in smaller units

as it moves down thesupply chain.

A stock keeping unit, orsku, is the smallestphysical unit of productthat is tracked by the

organization.

Upstream in the SC, flow is in larger units, likepallets.

Product is successively

broken down intosmaller units as it movesdownstream.

Figure 2.2



Popularity vs

Volume (flow)

Popularity (number of times requested orpicks) is NOT highly correlated with physical

volume (flow) of a sku.Makes warehousedesign difficult becauseit is hard to designprocessed that work well with skus that me

be any combination of popular/unpopular nadlow-volume/high- volume.

Figure 2.3



The mostpopular 20%

of SKUs

This plot is the sameskus ranked from mostpopular to least.

This is a typical plot

that shows that a smallfraction of the skusaccount for most of theactivity. (80%/20%rule)

It is easy to designprocesses for popularskus because they arefairly predictable. Figure 2.4



The remaining80% of the

SKUs

Conisder the skus in the“long-tail” of the curve,the 80% that arerequested infrequently.

Impossible to know which of those skus will be requested tomorrow.

They occupy most of thespace of the warehouse.

Have high safety stock.

Figure 2.4



“Two Warehouses” in One

Essentially you have 2 warehouses:

The first “warehouse” Organized around a small set of predictably popular skus

Easy to plan for

Challenge is to manage flow efficiently

Labor intensive

The second “warehouse” Predictable in “aggregate” only

Harder to plan for Space intensive

Challenge to hedge space and labor tradeoff



Dedicated Storage

Each location is reserved for an assigned product

Simple to implement

Store more popular items in more convenient

locations Workers “learn” the layout making picking more

efficient

Does not use space efficiently – on average half full



Inventory

Level

Idealizedrepresentation of how inventory level at alocation changes over

time Average inventory levelover time 50%

Figure 2.5



Shared Storage

Assign a product to more than 1 location, when a locationis empty it is available for reassignment

More locations, less product in each location, so space isrecycled sooner

Better utilization of space than dedicated storage Need Warehouse Management System (WMS) to direct

workers More time consuming to put away Requires worker discipline to pick where directed not

where most convenient May have more discrepancies between book and physical

inventory



Theorem 2.1

When a sku is stored in k locations of equal size theaverage space utilization is k/(k + 1).

Moving from 1 location to 2 locations, improves

utilization from 50% to 66% Increasing the number of locations increases

utilization, but the improvement diminishes as k increases.

Increasing the number of locations also increases themanagement required.



Storage In Practice

Typically the actual space utilization for sharedstorage is slightly less than the value from Theorem2.1

Shared storage is more often used for bulk storageareas (i.e. pallets)

Dedicated storage for the most active pick area, where the area is smaller and labor benefits matter

most.



Illustration of Shared & Dedicated Storage



Example of a Hybrid System



Warehouse as a Queuing System

A queuing system is where customers arriveand join a queue to awaitservice by any of several

servers. After receivingservice, the customersdepart the system.

Fundamental result of

queuing theory is Little’sLaw.

Theorem 2.2 (Little’s Law) For a queuing system insteady state that averagelength L of the queue

equals the average arrivalrate λ times the average

waiting time W.

=



Little’s Law Example

Warehouse with 10,000pallets that turn an averageof about 4 times per year.

L = 10,000 W = ¼ year

10,000 pallets = 14 year

≈ 40,000

What labor rate isnecessary to support this?

Assuming one 8-hour shiftper day and about 250

working days per year,there are about 2,000

working hours/year.

λ ≈,

2,

≈20 pallets/hour



Super Club Music

Super Club distributes recorded musicto retail stores. Such physicaldistribution of music is, of course, adying enterprise, as it is being replaced by distribution via the web.

Super Club stores are divided in toroutes and each route is visited by a

delivery truck once a week on a regularday.

Each day they pick for about 8 routes, which total about 100 stores.

On average each store orders about 50sku's and about 3 of each sku, for a

total of about 15,000 pieces per day. The warehouse knows these orders a

day in advance of picking and so canplan its work in advance.

Unique challenges A very, very few sku's will be very, very

popular and most sku's will scarcely sellat all. In fact, it is not unusual for 20percent of the sku's to sell one or fewercopies over a year.

Popularity is very fleeting; what is apopular product now may be dead in

two weeks. A large number of returns in the music

business

More information http://www.warehouse-science.com/?b6a9d0d0

http://www.warehouse-science.com/?b6a9d0d0








Pallet rack Static shelving withoverstock on top

Super Club Music



Typical shelf 48 bays of flow rack

Super Club Music



Packing orders intocartons

Pick face of flow rack

Super Club Music



Warehouse

Operations

Most of the expense in atypical warehouse isLABOR.

Most of the labor cost is

ORDER-PICKING.

Most of the time inorder-picking is inTRAVEL.

Receive• 10 % of operating cost

Put-away • 15% of operating cost

Store • Non-value added

Pick • 55% of operating cost

Pack, Ship• 20% of operating cost

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