A warehouse is a valuable facility for a company only when it is put to effective use. This requirement leads to the question about the optimal level of inventories in a warehouse.
Functions of inventories
The reasons for inventories
For many reasons, inventories are necessary and desirable for a company. Large producers, for example, have to use inventories in response to seasonal needs in order to offset swings in sales. A system that is unthinkable in retailing may be common in the warehouse of a chocolate maker: chocolate Santa Clauses stored right next to marzipan Easter bunnies. There are other reasons for inventories as well - including economic aspects like volume discounts from a shipper. The size of inventories is strongly linked to the goals associated with them.
The pros and cons of holding inventories
Inventories generate costs. This fact leads to a question: Wouldn’t it make sense to eliminate stored stocks entirely? If this were the case, only those raw materials directly used in manufacturing would be ordered. The finished products would then be delivered to the customers directly without having to be stored by the manufacturer. And the customer would immediately put these end products to use.
Just-in-time delivery in the automotive industry closely reflects these ideas. Individual components are delivered directly to the producer’s assembly line - and this is done just when they are required in the manufacturing sequence. The producer has no need to store the components. In just-in-time delivery, reducing stocks is considered a part of long-term efforts to exploit efficiency-improving potential. Stocks mask disruption-prone processes, uncoordinated capacities, deficient flexibility and delivery capability as well as structural weaknesses in the coordination of flows of material and information. As a result, they prevent the logistics chain from being organized in a way that reflects the flow process. To avoid such inefficiencies, the just-in-time concept aims to consistently reduce inventories to the point where no stocks exist at all.
Yet, it is not always so simple. The following points show the reasons why it makes sense for companies to maintain stocks in procurement, output and distribution warehouses.
Economies of scale
Procurement warehouses can result from a company’s desire to get volume discounts from a supplier or more favorable conditions from a carrier. Similarly, the creation of inventories in distribution warehouses can lead to better transport terms that come with larger quantities. Like production warehouses, inventories in distribution warehouses may also lead to lowering the cost of individual items by enabling larger production batches.
Seasonal fluctuations
In the case of consumer goods with a seasonal demand, the establishment of inventories in distribution and production warehouses also ensures that production can run continuously at full capacity despite swings in seasonal demand.
Agricultural goods frequently have a seasonal supply as well. To sell goods continuously throughout the year, inventories in distribution or production warehouses are required.
Specialized production
Production specialization, in which different parts are produced at separate company sites, lowers costs. If just-in-time delivery of parts to an assembly line is not possible, this specialization can be carried out only by increasing inventories.
Price speculation
Inventories of procurement and distribution warehouses are increased if the price of a good is expected to rise. In such a situation, the purchasing company aims to amass the good at the current low price. The supplier may speculate that supply shortages will drive the prices higher, and he uses the warehouse to store the good.
Speculation that leads to increased inventories is not always related to price. Generally speaking, inventories are generated by speculation about the scarcity of goods. For example, they can result from expectations that a strike will threaten the logistical operations of a supplier.
Protection against uncertainties
Creation of inventories in procurement, production and distribution warehouses can result from uncertainties, e.g., when demand from customers or from a company’s own production operation is not always predictable or when delivery from suppliers or from production is not always reliable or goods are supplied from geographically remote areas.
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Friday, August 12, 2011
Key indicators in the warehouse
The crucial factors of efficient warehousing
Operating figures are needed in order to evaluate a warehouse’s efficiency and effectiveness. In the process, quantitative indicators for both capacity utilization and movement processes must be used. Expenditures include the warehouse’s capital costs, equipment and payroll.
Key indicators in the warehouse
The tasks of a warehouse can be divided into time-bridging processes when the goods are stored and movement processes associated with storage. These must be depicted in a system of key indicators in order to determine efficiency and effectiveness. The resulting efficiency indicators are storage capacity, the number of available storage positions and stock movements. On the input side, they are matched by performance measures of warehousing costs, which are divided into personnel costs and operating costs.
=> dhl - discover logistics
Operating figures are needed in order to evaluate a warehouse’s efficiency and effectiveness. In the process, quantitative indicators for both capacity utilization and movement processes must be used. Expenditures include the warehouse’s capital costs, equipment and payroll.
Key indicators in the warehouse
=> dhl - discover logistics
Assignment of storage space
Organization is the key to warehouse logistics
Thousands of the different types and forms of goods can be stored simultaneously in the same warehouse. To optimally use this costly space and enable a specific item to be retrieved quickly, a clear, coordinated organization of storage space is necessary. This is the only way to economically and efficiently operate a warehouse. Storage space can basically be organized in two different ways: fixed storage space allocation and completely free or random space allocation.
Giving each item its own warehouse location
A very simple way to determine the location of a stored item is to always assign it to the same place. A key feature of assigned storage space is the separate storage of each group of goods. As a result, goods are easy to find. With this system, a product can still be retrieved even when the inventory-management system crashes. In this system, however, the capacity utilization of the warehouse can be limited, especially with fluctuating inventories for individual groups of goods.
In one variation of this warehouse organization system, a storage space is assigned within fixed areas. This can be accomplished through lateral distribution or a free assignment of storage space within fixed zones.
Several storage units in various aisles
One problem associated with the fixed assignment of storage space is that an item cannot be retrieved if, for example, a permanently installed means of conveyance like a storage and retrieval unit in a high-bay warehouse malfunctions. This problem can be avoided by distributing several storage units of an item in various aisles. The strength of this system, known as lateral distribution, is that it provides simultaneous access to high-demand goods in several aisles. This system requires an IT system that can show which goods are stored in which areas.
Storage space assigned within dedicated areas
Another way to efficiently assign storage space is to segregate groups of goods, for example, by picking frequency, and allocate specific groups of goods to certain sectors. In this Zoning system, goods that are frequently stored and retrieved are stored closest to the storage and retrieval points. Goods that have large quantities of selling units, by contrast, should be stored far from the storage and retrieval points in order to keep the movement distances short for as many goods as possible. For this purpose, the goods can be classified with the help of ABC analysis. One strength of the free assignment of storage space within fixed zones is that goods can be handled more frequently. The storage capacity, of course, is reduced in the process. But an IT system that provides efficient zoning and manages the storage space of specific goods is a prerequisite.
Random storage in the warehouse
A warehouse that lacks a fixed form of goods assignment is known as free assignment of storage space, random storage or chaotic storage. Any kind of good can be stored in the first space that becomes available. The goal is to optimally fill the storage space - even if demand fluctuates considerably. Since the goods in random storage are placed in the first available storage space, a system that performs electronic management and control of storage and retrieval is required for warehouses with a large number of storage spaces. This task is handled by an electronic data processing system that automatically shows a storage space of the required size for a good requiring storage. It registers which product is stored in which quantity and in which space.
=> dhl - discover logistics
Thousands of the different types and forms of goods can be stored simultaneously in the same warehouse. To optimally use this costly space and enable a specific item to be retrieved quickly, a clear, coordinated organization of storage space is necessary. This is the only way to economically and efficiently operate a warehouse. Storage space can basically be organized in two different ways: fixed storage space allocation and completely free or random space allocation.
Giving each item its own warehouse location
A very simple way to determine the location of a stored item is to always assign it to the same place. A key feature of assigned storage space is the separate storage of each group of goods. As a result, goods are easy to find. With this system, a product can still be retrieved even when the inventory-management system crashes. In this system, however, the capacity utilization of the warehouse can be limited, especially with fluctuating inventories for individual groups of goods.
In one variation of this warehouse organization system, a storage space is assigned within fixed areas. This can be accomplished through lateral distribution or a free assignment of storage space within fixed zones.
Several storage units in various aisles
One problem associated with the fixed assignment of storage space is that an item cannot be retrieved if, for example, a permanently installed means of conveyance like a storage and retrieval unit in a high-bay warehouse malfunctions. This problem can be avoided by distributing several storage units of an item in various aisles. The strength of this system, known as lateral distribution, is that it provides simultaneous access to high-demand goods in several aisles. This system requires an IT system that can show which goods are stored in which areas.
Storage space assigned within dedicated areas
Another way to efficiently assign storage space is to segregate groups of goods, for example, by picking frequency, and allocate specific groups of goods to certain sectors. In this Zoning system, goods that are frequently stored and retrieved are stored closest to the storage and retrieval points. Goods that have large quantities of selling units, by contrast, should be stored far from the storage and retrieval points in order to keep the movement distances short for as many goods as possible. For this purpose, the goods can be classified with the help of ABC analysis. One strength of the free assignment of storage space within fixed zones is that goods can be handled more frequently. The storage capacity, of course, is reduced in the process. But an IT system that provides efficient zoning and manages the storage space of specific goods is a prerequisite.
Random storage in the warehouse
A warehouse that lacks a fixed form of goods assignment is known as free assignment of storage space, random storage or chaotic storage. Any kind of good can be stored in the first space that becomes available. The goal is to optimally fill the storage space - even if demand fluctuates considerably. Since the goods in random storage are placed in the first available storage space, a system that performs electronic management and control of storage and retrieval is required for warehouses with a large number of storage spaces. This task is handled by an electronic data processing system that automatically shows a storage space of the required size for a good requiring storage. It registers which product is stored in which quantity and in which space.
=> dhl - discover logistics
Friday, August 5, 2011
Picking systems
The question that arises especially in large warehouses is: Where is a specific item located among the maze of shelves? Modern order-picking systems assist stock pickers by showing them the location of the goods. The systems include the use of light signals (pick-by-light) or even information transmission by headset (pick-by-voice).
In this process, the information “Row 14, Position 2” is passed to the picker over the headset. As a result of this communication, the worker learns about the optimal path to the pick location and the pick list [pick list]. He then identifies the storage shelf and parts of the EAN code for the items stored there, possibly including the code’s last two digits. If the item number matches, this system then informs the picker over the headset how many items need to be picked. The picker takes the goods from the shelf, checks the quantity and receives an “OK.” This procedure is repeated until the prescribed stack height is reached or an order is completely filled.
A new addition to this order-picking system is pick-by-vision. With this technology, the picker receives information through data goggles. This system is only in the prototype phase at the moment.
=> dhl - discover logistics
In this process, the information “Row 14, Position 2” is passed to the picker over the headset. As a result of this communication, the worker learns about the optimal path to the pick location and the pick list [pick list]. He then identifies the storage shelf and parts of the EAN code for the items stored there, possibly including the code’s last two digits. If the item number matches, this system then informs the picker over the headset how many items need to be picked. The picker takes the goods from the shelf, checks the quantity and receives an “OK.” This procedure is repeated until the prescribed stack height is reached or an order is completely filled.
A new addition to this order-picking system is pick-by-vision. With this technology, the picker receives information through data goggles. This system is only in the prototype phase at the moment.
Picking list
The picking list is the traditional management and information instrument used in manual picking processes.Pick-by-light
Pick-by-light is frequently used to pick fast-selling items. The system is especially useful to companies with small product quantities.Pick-by-voice
Pick-by-voice is primarily used for picking. The system is also useful in quality control as well as in packing and shipping - e.g., for communicating the carton size to be used. These systems are well suited for those areas where workers need to be able to use both hands for picking purpose due to safety concerns.Pick-by-vision
Pick-by-vision is only a research prototype at the moment. Application areas are picking of fast- and slow-selling items. The system is an alternative to pick-by-voice and pick-by-light.=> dhl - discover logistics
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