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T07 Warehouse & Distribution Channels (Dist. Operations (Dist.…
T07
Warehouse & Distribution Channels
Dist. Operations
Eg. Dis. centers, warehouses, cross-docks, retail stores
Role of warehousing (dist. facilities)
Create time & place utility
Customer service
Dist. facility functionalities
Accumulation
the receipt of goods from a variety of sources
consolidate orders and shipments for production and fulfillment processes
consolidation
on the other hand means collecting smaller shipments to form larger quantity => lower transportation rates
Sortation
Assembling like products together for storage in the dist. facility/ for transfer to customers
Goods segmented according to their key characteristics
Product lot number
SKU
Case pack size
expiration date
Allocation
Matching available inventory to customer orders for a SKU
Break-bulk capacity => Product availability for multiple customers, allows them to purchase needed quantities
Break-bulk
The separation of a consolidated bulk load into smaller indi shipments for delivery to the ultimate consignee
Assortment
Assembly of customer orders for multiple SKUs held in the dist. facility
Facility provides a product mixing capability, allowing customers to quickly order a variety of items from a single location
Product mixing
products arriving from different suppliers are mixed in to the precise combination for the relevant cust. , continuously provided for the product mixture shipments requiring these
Dist. trade-offs
Total cost trade-off: build too may warehouses
Inventory trade-off: more DCs & warehouses => higher total inventory carrying costs
Customer service trade-offs
Space vs. equipment - larger facility and more space used for dist. operations, more equipment will be needed in the facility
Equipment vs. ppl - greater use of equipment to automate materials handling & dist. activity, lower labour requirements of a facility
Ppl vs. space - larger facility workforce, larger facility size & operation possible
Dist. Challenges
Labour availability issues
Demand variation
Increasing customer requirements
Value-adding roles of dist. operators
Assembly services
Inventory Management & visibility
Product Kitting/ Bundling & Unbundling
Product postponement
Production sequencing
Recycling/Repair/Returns management
Planning & Strategy
Capability Requirements
Product characteristics => design of the distribution process
Product flow requirements
Direct shipment of goods from manu to retailer of retailer to consumer
movement of goods through dist. facilities to customers
Roles to be fulfilled
Network Design issues
Strategic Planning
Inventory positioning (where inventory is located within SC)
Centralized inventory
=> long distance to cust.
=> longer lead times, higher transportation costs
Decentralized inventory
More facilities tor stock products => higher handling costs
Avrg. inventory levels will rise as each facility have to hold safety stock to over demand variation within the region
Cost trade-offs
Transportation costs
Inbound: truckload quantities => reduced costs
Outbound: increase no. of warehouses => warehouses closer to cust. and market area => reduced transportation distance and costs
Cost of lost sales
increase in no. of facilities improve cust. proximity & inventory availability
Warehousing costs
increases as total amount of space increases as more warehouses
Inventory costs
Increase in stock points
=> increases overall safety stock levels
=> increases inventory carrying costs in the SC
Facility Ownership
Private dist. facilities
Public warehousing (3PL distribution)
No. & location of dist. facilities
Facility considerations
3PL => facility design not required
Facilities privately owned and operated
Size of operations
Interior layout of operations
Product Location
Slotting: placement of product in a facility for optimizing materials handling and space efficiency
Aim: lowest total cost
Execution
Product handling functions
Receiving
Put away
Order picking
Customer orders
Replenishment and shipping
DC Support functions
Inventory control
Safety, maintenance and sanitation
Security
Performance analysis
Information technology
Basic warehousing process
Receipt
Inbound inspection
Putaway
Storage
Order Picking
Order sorting & packing
Dispatch/Shipping
Cross-docking
Dist. Metrics
KPIs that measure fulfillment performance
Customer Facing Measures
To achieve
order accuracy
order completeness
timely fulfilment of orders
Perfect Order Index (POI) metric
delivered to the right place
at the right time
in defect-free condition
with correct documentation, pricing, invoicing
Internal Measures
Dist. Technology
Warehouse Management System (WMS)
Automatic identification Tools (Auto-ID)