CHAPTER 10: WAREHOUSING MANAGEMENT
CHAPTER 10: WAREHOUSING MANAGEMENT
PART II
END-OF-CHAPTER QUESTIONS
CHAPTER 10: WAREHOUSING MANAGEMENT
1. Distinguish between warehouses and distribution centers.
Warehouses emphasize the storage of products and their primary purpose is to maximize the use of storage space. In contrast, distribution centers emphasize the rapid movement of products through a facility and thus attempt to maximize throughput (the amount of product entering and leaving a facility in a given time period).
2. Explain the four ways that warehousing facilitates the regrouping function.
Regrouping involves rearranging the quantities of products as they move through the supply chain and it takes four forms: accumulating (also referred to as bulk-making), allocating (also referred to as bulk-breaking), assorting, and sorting. Accumulating involves bringing together similar stocks from different sources, while allocating involves breaking larger quantities into smaller quantities. Assorting refers to building up a variety of different products for resale to particular customers, while sorting out refers to separating products into grades and qualities desired by different target markets.
3. Discuss some of the value-added activities that can be performed by warehouses and distribution centers.
These value-added activities include assembly, custom labeling, light manufacturing, product testing, repackaging, and reverse logistics considerations, among others.
4. What is cross-docking? How might it affect warehousing design?
Cross-docking can be defined as a process where a product is received in a facility, occasionally married with product going to the same destination, then shipped at the earliest opportunity, without going into long-term storage. There is some disagreement with respect to the design of a cross-dock facility. Some prefer a design that resembles a motor carrier terminal—rectangular, long, and as narrow as possible. Others suggest that all cross-dock doors should be on one wall or placed at 90 degrees to one another.
5. Distinguish between bonded storage and field warehousing.
There are several types of bonded storage and all refer to situations where goods are not released until applicable fees are paid.
6. What are the advantages and disadvantages of private warehousing?
One disadvantage to private warehousing is that they are characterized by high fixed costs—which necessitates high and steady demand volumes. In addition, a high fixed cost alternative becomes less attractive in times of high interest rates because it is more costly to secure the necessary financing. Private warehousing may also reduce an organization’s flexibility with respect to responding to changes in the external environment.
As for advantages, private warehousing offers users a great deal of control over their storage needs. More specifically, private warehouses can be constructed to meet user specifications and companies can also control product placement within a facility. In addition, private warehousing offers access to products when an organization needs or wants them.
7. Discuss why contract warehousing is becoming a preferred alternative for many organizations.
Contract warehousing simultaneously mitigates the negative aspects and accentuates the positive aspects of public and private warehousing. For instance, contract warehousing allows a company to focus on its core competencies, with warehousing management provided by experts. Contract warehousing also tends to be more cost effective than private warehousing, with potentially the same degree of control because key specifications can be included in the relevant contract.
8. Explain how common sense can be helpful in terms of warehousing design and operations.
One common sense piece of advice is that prior to designing a warehousing facility, the quantity and character of goods to be handled must be known. For example, online orders tend to be much smaller than those going to retail stores; as a consequence, picking and assembling one or two items is much different than picking and assembling a palletload of items.
Another common sense piece of advice is that it is important for an organization to know the purpose to be served by a particular facility because the relative emphasis placed on the storage and distribution functions affects space layout. For instance, a distribution-oriented facility attempts to maximize throughput rather than storage.
9. In terms of warehousing design, give examples of trade-offs involving space, labor, and mechanization.
Spaciousness may not always be advantageous because the distances that an individual or machine must travel in the storing and retrieving functions are increased. On the other hand, cramped conditions can lead to inefficiencies such as the product damage that can be caused by forklift puncture and movement bottlenecks caused by inefficient aisle width.
10. Distinguish between fixed and variable slot locations. How might they affect warehousing design?
A fixed slot location refers to a situation where each SKU has one or more permanent slots assigned to it, whereas a variable slot location involves empty slots being assigned to products based on space availability. Fixed slot systems may result in low space utilization and generally need to be larger than a variable slot facility.
11. Discuss the trade-offs associated with order-picking versus stock-replenishing functions.
Organizations must decide whether workers who pick outgoing orders and those who are restocking storage facilities should work at the same time or in the same area. When order pickers and stock replenishers are allowed to work in the same area, fewer managerial personnel may be needed but it may also lead to congestion due to the number of workers in a relatively limited space. One suggestion is for the two sets of workers to use different aisles for their activities, but this requires a superior information system.
12. Distinguish between a two-dock and a single-dock warehousing layout. Which one requires more space? Why?
A two-dock layout has receiving docks on one side of the facility and shipping docks on the other side with goods moving between them. In a one-dock system, each and every dock can be used for both shipping and receiving. This alternative reduces the space needed for storage docks, but it requires carriers to pick up and deliver at specific times.
13. What are some potential advantages to paperless warehousing operations?
There are several important benefits to paperless warehousing, such as reduced clerical work, improved order picking efficiency, and a decrease in picking and shipping errors. For example, most paper-based systems require picked orders to be manually entered into a computer system. This information is often verified at the order staging area, a process that can delay shipping, add to processing costs, and does not catch all errors.
14. Discuss how storage and handling equipment can influence warehousing operations.
Before installing storage equipment, companies should be familiar with the applicable regulations such as building codes in earthquake-prone areas often limit the height of storage shelves and racks. The use of racks may improve space utilization by allowing for narrower aisles. However, narrower aisles require specialized equipment with the capability of moving both vertically and horizontally at the same time.
15. What is a warehouse management system (WMS)? How can it benefit warehousing operations?
Warehouse management systems are software packages that control the movement and storage of materials within an operation. Activities that can be controlled by WMS include inventory management, product receiving, and determination of storage locations, order selection processes, and order shipping. Data entry errors can be dramatically reduced and the travel times for order picking can be reduced by nearly 50%. Other benefits to WMS include reduced operating expenses, fewer stockouts, increased inventory accuracy, and improved service to customers.
16. What is OSHA? What is OSHA’s role in warehousing safety?
OSHA is the Occupational Safety and Health Administration, an agency of the
17. What are the most common causes of warehousing fires? Which do you think is the easiest for managers to control? Justify your answer.
The most common cause of warehousing fires are arson, tobacco smoking, improper use of forklifts, electrical malfunctions, poor product disposal practices, and storage of incompatible materials. There are a variety of possible answers to the second part of the question; having said this, students should recognize that many fires can be prevented by common sense.
18. How might the storage of hazardous materials affect the design of a warehousing facility?
Buildings that store hazardous materials often have specially constructed areas so that materials can be contained in the case of an accident. Likewise, these facilities often have walls and doors that can withstand several hours of intense fire. It is also important for a hazmat storage facility to have proper sprinkling systems as well as excellent ventilation.
19. Discuss how warehousing security can be enhanced by focusing on people, facilities, and processes.
With respect to people, a starting point might be determining if a facility even has a formal hiring process. As for facilities, a number of different low-tech (e.g., fences) and high-tech (e.g., closed-circuit video cameras) devices can help to enhance warehousing security. Finally, with respect to processes, the more times a shipment is handled, the greater the opportunities for loss and/or damage.
20. Why are cleanliness and sanitation issues relevant to warehousing operations?
Unclean and unsanitary warehousing facilities are not likely to attract many new customers and could cause existing customers to take their business elsewhere. Moreover, clean and sanitary facilities have a positive impact on employee safety, morale, and productivity while also reducing employee turnover.
PART III
EXAMINATION QUESTIONS
CHAPTER 10: WAREHOUSING MANAGEMENT
Multiple Choice Questions
1. Warehouses emphasize ____ and their primary purpose is to maximize____.
a. product storage; throughput
b. product storage; usage of available storage space
c. rapid movement of product; throughput
d. rapid movement of product; usage of available storage space
(b; p. 242)
2. Distribution centers emphasize ____ and their primary purpose is to maximize____.
a. product storage; throughput
b. product storage; usage of available storage space
c. rapid movement of product; throughput
d. rapid movement of product; usage of available storage space
(c; p. 242)
3. Throughput refers to:
a. storage capacity of a warehousing facility
b. volume through a pipeline
c. inventory turnover in a one-month period
d. amount of product entering and leaving a facility in a given time period
(d; p. 242)
4. The primary factor that distinguishes a distribution center from a warehouse is:
a. distribution centers tend to be multi-story buildings
b. distribution centers stress storage
c. distribution centers stress rapid movement of products through the facility
d. distribution centers tend to be smaller than warehouses
(c; p. 242)
5. Warehousing and ____ are substitutes for each other.
a. transportation
b. materials handling
c. packaging
d. procurement
e. none of the above
(a; p. 242)
6. ____ and ____ refer to adjustments associated with the quantity of product.
a. Accumulating; allocating
b. Allocating; assorting
c. Sorting; accumulating
d. Sorting; assorting
(a; p. 3243)
7. ____ involves bringing together similar stocks from similar sources.
a. Bulk-breaking
b. Assorting
c. Accumulating
d. Sorting
(c; p. 244)
8. ____ refers to building up a variety of different products for resale to particular customers.
a. Accumulating
b. Allocating
c. Sorting
d. Assorting
(d; p. 244)
9. ____ refers to a process where a product is received in a facility, occasionally married with product going to the same destination, and then shipped at the earliest time, without going into longer-term storage.
a. Just-in-time
b. Cross-docking
c. Consolidation
d. Turbologistics
(b; p. 244)
10. ____ warehouses are similar to common carriers.
a. Public
b. Private
c. Contract
d. Cross-dock
(a; p. 245)
11. Which of the following is not a characteristic of public warehousing?
a. requires no capital investment from user
b. user receives a regular bill for space used
c. good for companies dealing with large volumes of inventory
d. lack of control by user
e. all are characteristics
(c; pp. 245-246)
12. Bonded storage in a public warehouse refers to:
a. products being stored in a public warehouse and no duties or taxes paid until the products leave the facility
b. products that are insured by a general warranty bond
c. products that are bonded as required in the order specifications
d. products that are subjected to regular inspections
e. none of the above
(a; p. 246)
13. A field warehouse is:
a. a facility that is often used as a field sales office along with the traditional storage function
b. a facility established primarily to hold material serving as collateral for a loan
c. a facility that is primarily used as a break-bulk point
d. a facility located in a number of remote areas from the main production facility
(b; p. 246)
14. ____ warehousing is owned or occupied on a long-term lease by the firm using them.
a. Public
b. Private
c. Contract
d. Multi-client
(b; p. 246)
15. All are characteristics of private warehousing, except:
a. owned or occupied on a long-term lease by the firm using them
b. feasible when demand patterns are irregular
c. users have a great deal of control
d. may reduce an organization’s flexibility
e. all are characteristics
(b; pp. 246-247)
16. All are true concerning contract warehousing, except:
a. can also be referred to as third-party warehousing
b. 3–5 year contracts appear to offer benefits to both user and provider
c. more cost effective than private warehousing
d. more flexible than public warehousing
e. all are characteristics
(d; p. 248)
17. Multi-client warehousing mixes attributes of ____ and ____ warehousing.
a. public; contract
b. public; common
c. common; private
d. private; contract
(a; pp. 248-249)
18. One of the best pieces of advice with respect to the design of warehousing facilities is to:
a. avoid consultants
b. build up rather than out
c. use common sense
d. maximize space utilization
(c; p. 249)
19. Tradeoffs must be among space, labor, and ____ with respect to warehousing design.
a. cost
b. construction materials
c. speed
d. mechanization
(d; p. 252)
20. The primary advantage of variable slot locations in a warehouse is:
a. increased space utilization
b. better materials handling
c. ease of record keeping
d. more logical and simple product layout
(a; p. 253)
21. The primary advantage of fixed slot locations in a warehouse is:
a. increased space utilization
b. better materials handling
c. knowledge of where specific products are located
d. improved employee morale
(c; p. 253)
22. As one builds higher, building costs____, while warehousing equipment costs tend to ____.
a. increase; decrease
b. increase; increase
c. decrease; decrease
d. decrease; increase
(d; p. 253)
23. Which of the following statements about a one-dock layout is false?
a. each and every dock can be used for both shipping and receiving
b. it requires carriers to pick up and deliver at specific times
c. goods move in a straight configuration
d. product may sometimes be reloaded in the vehicle that delivered it
e. all of the statements are true
(c; p. 254 )
24. Which of the following is not a tradeoff in warehousing design?
a. two-dock versus single-dock layout
b. build up versus build out
c. order picking versus order taking functions
d. space devoted to aisles versus space devoted to storage
e. all are tradeoffs
(c; pp. 253-254 )
25. Which of the following is not a benefit associated with paperless warehousing?
a. low cost
b. reduced clerical work
c. decreased picking and shipping errors
d. improved order picking efficiency
e. all are benefits
(a; p. 254)
26. It is possible for paperless warehousing facilities to have payback periods of approximately ____ months.
a. 6
b. 12
c. 18
d. 24
(c; p. 254)
27. Recent estimates suggest that only approximately ____ of a facility’s cubic capacity is actually occupied by product.
a. 55%
b. 40%
c. 25%
d. 10%
(d; p. 255 )
28. ____ tend to be the standard workhorse in many warehousing facilities.
a. Forklifts
b. Pallet jacks
c. Dock carts
d. Conveyor systems
(a; p. 256)
29. Which of the following is false?
a. warehouse work can be strenuous and physically demanding
b. the use of racks may improve space utilization by allowing for narrower aisles
c. goods can be moved by a combination of manual, mechanized, and automated methods
d. warehouse workers tend to be easily motivated
e. all are true
(d; pp. 255-256)
30. Software packages that control the movement and storage of materials within an organization refer to ____ systems.
a. enterprise resource planning
b. materials requirement planning
c. warehouse management
d. inventory management
(c; p. 256)
31. The most frequent injuries among warehousing personnel involve:
a. feet
b. the torso
c. hands
d. back and shoulder
e. none of the above
(d; p. 258)
32. ____ regulations deal with many aspects of warehousing safety.
a. OSHA
b. FDA
c. FTC
d. WSA
(a; p. 258)
33. What is dunnage?
a. a type of packaging material that is placed inside of boxes
b. a slang term for a particular type of ocean liner
c. additional transportation fees that are charged to small shippers
d. material that is used to block and brace products inside carrier equipment
(d; p. 259)
34. Which of the following is not one of the four questions associated with effective management of hazardous materials storage?
a. what material is being stored
b. why is it being stored
c. what is the material’s source
d. where is it being stored
e. all are questions
(c; p. 260)
35. It is estimated that the theft and pilferage of products stored in warehousing facilities causes losses in the range of ____ to ____ times the products’ value.
a. five; six
b. four; five
c. three; four
d. two; three
(b; p. 260)
True-False Questions
1. Warehouses emphasize the storage of products and their primary purpose is to maximize throughput. (False; p. 242)
2. Distribution centers emphasize the rapid movement of products through a facility and attempt to maximize throughput. (True; p. 242)
3. Throughput is the amount of product entering and leaving a warehousing facility in a given period of time. (True; p. 242)
4. Materials handling has been referred to as transportation at zero miles per hour. (False; p. 242)
5. Warehousing is needed because patterns of production and consumption may not coincide. (True; p. 243)
6. Assorting and sorting refer to adjustments associated with the quantity of product. (False; p. 243)
7. Accumulating involves bringing together similar stocks from different sources. (True; p. 244)
8. Assorting involves breaking larger quantities into smaller quantities. (False; p. 244)
9. A facility designed for cross docking should devote more space to product storage and less space to dock operations. (False; p. 244)
10. Because companies have different strategies, goals, and objectives, there is no “correct” mix of public, private, and contract warehousing. (True; p. 244)
11. With public warehousing the user rents space as needed, thus avoiding the costs of unneeded space. (True; p. 245)
12. Two notable private warehouse services involve bonded storage and field warehousing. (False; p. 246)
13. Perhaps the biggest drawback to public warehousing is the inability to provide specialized services. (False; p. 246)
14. Private warehousing tends to be feasible when demand patterns are relatively stable. (True; p. 246)
15. Private warehousing offers potential users a great deal of control over their storage needs. (True; p. 247)
16. The growth in contract warehousing appears to have come at the expense of public warehousing. (True; p. 248)
17. Contract warehousing tends to be more cost effective than public warehousing. (False; p. 248)
18. One to two year contracts appear to allow sufficient time for contract warehousers to learn their client’s business while at the same time allowing clients some flexibility. (False; p. 248)
19. In essence, multi-client warehousing mixes attributes of private and contract warehousing. (False; pp. 248-249)
20. Common sense should not be ignored with respect to the design of warehousing facilities. (True; p. 249)
21. Tradeoffs must be made among space, labor, and mechanization with respect to warehousing design. (True; p. 252)
22. A fixed slot location warehousing system may result in low space utilization. (True; p. 253)
23. A general rule of thumb is that it is cheaper to build up than build out. (True; p. 253)
24. A one-dock warehouse layout (in contrast to a two-dock layout) increases the space needed for storage docks. (False; p. 254)
25. Narrower aisles can increase the space utilization of a facility. (True; p. 254)
26. Narrow aisle forklifts can operate in an aisle width of four feet, compared to the nine foot width that is needed by the standard forklift. (False; p. 254)
27. It is possible for paperless warehousing facilities to have payback periods of approximately 18 months. (True; p. 254)
28. Recent estimates suggest that only approximately 25% of a warehousing facility’s cubic capacity is actually occupied by product. (False; p. 255)
29. Motivation of warehouse employees can be difficult because of the somewhat repetitive nature of the operation. (True; p. 255)
30. Forklifts tend to be the standard workhorse in many warehousing facilities. (True; p. 256)
31. The majority (over 50%) of warehouse management system installations are completed within budget. (False; p. 256)
32. Warehouse management systems can result in reduced data entry errors as well as reduced travel distances for order picking. (True; p. 256)
33. Back and shoulder injuries are the most frequent injuries among warehouse personnel. (True; p. 258)
34. The Warehousing Safety Administration has primary responsibility for warehousing safety practices. (False; p. 258)
35. Dunnage refers to charges for accessorial transportation service. (False; p. 259)
36. Fires are a constant threat in warehousing. (True; p. 259)
37. Buildings that store hazardous materials often have walls and doors that can withstand several hours of intense fire. (True; p. 260)
38. It is estimated that the theft and pilferage of products stored in warehousing facilities causes losses in the range of two to three times the products’ value. (False; p. 260)
39. In general, warehousing security can be enhanced by focusing on people, facilities, and information. (False; p. 261)
40. Unsanitary warehousing facilities could cause existing customers to take their business elsewhere. (True; p. 261)
PART IV
CASE SOLUTIONS
CASE 10-1: SANDY’S CANDY
Question 1: Using those items of comparison for which costs can be calculated, determine the cost difference between the two delivery systems.
The answer can best be given by calculating costs in approximately the same order as given in the text:
Item
Schoenecker’s driver/salespeople
Mannix Markets
Receipts from sales
$71.00
$59.50
LESS: cost of goods sold plus discount
$50.70
$31.00
Shrinkage @ w/s prices
$.99
$.62
Spoilage
--
$.31
Ordering costs
$1.50
$1.44
Shelf-stocking
--
$1.38
Warehousing
--
*
Delivery to store
--
Negligible
Checking goods
$1.50
--
Billing costs
$1.00
--
TOTAL
$15.31
$24.75
(excluding
warehousing costs)
*: Less than $1 calculated on a per ton basis but $.96 on a line-item basis
Question 2: List and compare those factors for which it is difficult to assign precise costs.
Warehousing costs are the most difficult to calculate and allocate. Schoenecker’s will probably offer a higher level of service than would occur if Mannix performs the function but this is difficult to quantify.
Question 3: Given the data that Sandy has, do you believe that Mannix Model Markets should get its Schoenecker candy through the buying cooperative or continue to rely on direct deliveries by Schoenecker’s drivers-salespeople? Give your reasons.
Mannix Markets’ own systems appear preferable given the data available to Ms. Nykerk.
Question 4: If you were Sandy, what additional information would you like to have before being asked to make such a recommendation?
See the answer to question 2. Whether the change is desirable depends almost entirely upon how one calculates the cost of moving the candy through the Mannix distribution system.
Question 5: Candy sales increase during holiday seasons. Which of the two candy distribution systems do you think would do a better job of anticipating and supplying these seasonal increases? Why?
Schoenecker’s should do a better job because candy is their specialty.
Question 6: Assume you are in charge of labor relations for Mannix Model Markets. Would you like to see continued reliance on drivers-salespeople to supply the markets’ candy needs? Why or why not?
The advantage would be that we would have another firm’s labor costs and practices with which we could compare our own.
CASE 10-2 MINNETONKA WAREHOUSE
Question 1: For each of the four work team sizes, calculate the expected number of trucks in the queue waiting to be unloaded.
Size of team
Number of trucks in queue
2
3.2
3
.5
4
.27
5
.12
Question 2: For each of the four work team sizes, calculate the expected time in the queue—that is, the expected time a truck has to wait in line to be unloaded.
Size of team
Expected time in queue
2
.8 hours
3
.125 hours
4
.067 hours
5
.030 hours
Question 3: For each of the four work team sizes, what is the probability that a truck cannot be unloaded immediately?
Size of team
Probability that truck must
wait upon arrival
2
80%
3
50%
4
40%
5
30%
Question 4: Which of the four work teams has the lowest cost to Wayne?
Size of team
Total cost
2
$268.00
3
$102.00
4
$96.00
5
$95.32
Question 5: Wayne is also considering rental of a forklift to use in truck unloading. A team of only two would be needed, but the hourly cost would be $38 per hour ($28 for the workers and $10 for the forklift). They could unload a truck in five minutes. Should Wayne rent the forklift?
A two-person crew and a forklift will cost $38 per hour. Compare this with the answers in question 4; Wayne should adopt a two-man crew and use a forklift.
Question 6: Disregard your answer to question 5. Labor negotiations are coming up and Wayne thinks he can get the union to give way on the work rule that prohibits warehouse workers on the unloading dock from being given other assignments when they are not unloading trucks. How much would Wayne save in unloading dock costs if he could reassign warehouse workers to other tasks when they are not unloading trucks, assuming that he has picked a good team of workers and each worker works 8 hours a day?
From the printouts, we must determine how much “idle time” there is with the present system. This depends in part upon the crew size. For a crew of four, for example, 24 minutes per hour is spent unloading trucks and the rest is idle time. Therefore, Wayne could get 36 minutes of work per hour of work elsewhere out of each worker. At $14 per hour, this is worth $8.40 ($14/hr times .6 hours). In theory, he could save up to $8.40 per worker per hour assuming he could assign them to other tasks where the pay rates were the same.
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