L4M7: Chapter 1. Stores and Warehouse Design

Stores and warehouse design

Warehouse / store: a facility providing efficient handling and storage of goods and materials in a planned space environment. Warehouses are larger than stores.

Stores and warehouses hold:

• Raw materials, components and parts for use in manufacturing and processing
• Finished goods for sale
• Goods returned by customers
• Different warehouses handle packages of different sizes, depending on the quantities ordered.

Pallets: a flat wooden structure on which heavy goods are placed. It allows forklift trucks to pick up and move them easily. This is the most effective way to transport and store goods.

·        Other items could be held on shelves in tote boxes (these are plastic container boxes of different sizes)

·        Small items could be held in carousels

Key principles for warehouse design include: keeping the location optimal to minimise stock movement, ensuring sufficient and optimal space and efficient operations regarding layout, handling etc.

Warehouse design

Warehouse design is intended to create an effective and efficient warehouse. It will support operational efficiency and minimise costs.

Location: choice of location should minimise movement of stock, or minimise costs – ideally both.

·        For a manufacturing company, the warehouse should be close to the manufacturing operations, for example in the same building (known as factory warehouses)

·        For finished goods, warehouses should be located between the place of manufacturing and the location of the customer

·        If warehouses serve a large area, or a number of possible customers, transportation is one of the biggest cost items. It is ideal to locate this as close to the point of demand as possible (known as distribution warehouses)

·        If the organisation has a just in time philosophy, you might not need a large warehouse. Alternatively, some goods can be held in the open air, in a stockyard

Centralised vs warehousing network

If you have a centralised warehouse covering the whole organisation, you will have lower warehousing costs but higher transport costs.

·        A warehousing network will reduce transport costs but increase warehousing costs

·        The ideal number of warehouses will minimise the total cost of warehouse operations + transport

There are two elements of transportation costs:

·        Long distance bulk trunking (primary transport): costs of transport from origin to the warehouse (often uses large carrier vehicles)

·        Local frequent deliveries (secondary transport): costs of transport from warehouse to customers (often uses smaller vehicles)

A manufacturing organisation will have a local store for materials at factory sites. On top of this, there are three approaches for warehousing of finished goods:

1.      Single central warehouse

2.      Central warehouse + regional distribution centres (RDCs). Items delivered to central warehouse and transferred to RDCs. Goods delivered to customers from nearest RDC

3.      RDCs + decentralised local stores and warehouses. Finished goods delivered from nearest local warehouse to consumer

It is worth bearing in mind that warehouse location will affect delivery times: something that customers place value on. So there is a trade-off between costs and value.

Other considerations include: accessibility, availability of labour and government incentives.

What do warehouses contain?

·        Equipment for storing items: racking and shelving. There may need to be separate areas for cold storage, hazardous items etc

·        Equipment for moving items (materials handling). Aisle space, pallets etc

·        Space for deliveries into the warehouse (inwards logistics area)

·        Picking and packing area, and equipment

·        Outward logistics areas (loading truck space etc)

·        Office space

Space required will depend on: throughput (volume flowing through the warehouse), item quantities, item sizes and need for special storage space (there could be a hot pick zone for fast-moving items). The use of automated / mechanised equipment may also affect space considerations.

There may be a decision between single storey or multi-storey warehouses. You might use tall racks in single storey, or construct multiple floors if items are smaller etc.

Docking areas

These are areas for unloading and loading vans / trucks. If small vans are used, there might be space within the warehouse building to enter. If trucks are used, you may need loading and unloading docks.

·        Most common type is a ‘flush’ loading dock. This is a garage-like door in the warehouse wall. Trucks reverse into the dock

Flow is important: efficient flow of stock items depends on 1) the location of stock items and 2) the directions of movement. An ABC analysis is used to analyse the flow of work:

·        Category A = fast-moving items

·        Category B = medium usage items

·        Category C = low usage items

Category A items should be the most easily accessible and located in a way that minimises handling and movement.

Cross docking: this applies to items that are delivered and dispatched quickly, often on the same day. These items could be kept in a cross-docking area near the entry/exit for goods. This minimises the movement of stock.

Straight line (throughflow) system

This is a one-way flow of store items. Goods come in at one end of the warehouse, get handled and stored. Dispatching takes place at the other end of the warehouse.

·        The advantages are: that the inward logistics and outward logistics areas are separate which is useful if vehicles are different between the two, and this separation reduces the scope for error

·        This disadvantages are: the separate loading bays take more space and are at opposite ends, and all materials need to be moved from one end to the other end

U-shared (horseshoe) system

The inwards receiving area is at the same end as dispatching area, and goods flow round in a horseshoe pattern.

Crossflow system

Items are stored according to frequency of usage. There are different racks according to the ABC analysis, with fast-moving items kept closest to the goods inwards/outwards point.

·        Advantages are that movement is minimised and one-way flow is clear

·        Disadvantages are that bulk and standard items may need to be on the same racks, which may be impossible, and segregated according to ABC may not be possible

Picking journeys: in some warehouses, a container truck is given a picking list and moves along the aisles collecting the items. It then takes them to the packing area.

Space utilisation

Warehousing systems are inherently a compromise between efficient use of space and quicker access to goods.

‘using the cube’: this refers to the fact that it’s more economical to build upwards than outwards. This can be done using high-density racking or using mezzanine floors.

·        Mezzanine floors: these are non-structural floors attached to a wall of a building. They effectively add an extra storey to the building for lighter items.

·        Alternatively, using taller racks means you can add more shelves, adding storage space. This means that you need to ensure equipment can reach top shelves.

Aisle width: wider aisles make movement easier, but mean space isn’t used. As a general rule, narrow aisles are 1.5-2m wide, normal aisles are 2.5m. Small item shelves may only have an aisle width of 1m.

·        Aisle width affects the equipment that can be used. Narrow aisles may require reach trucks / forklifts that do side-loading rather than front-loading

·        Reach trucks are designed for narrow aisles

High density racking: this is made possible by storage equipment with moving shelving. This means that aisles aren’t needed as much. High density storage can offer storage for ½ of the space.

If stock is turned over quickly, high density racking would be preferable, minimising aisle space.

Just in time: this philosophy reduces the need for storage space and means faster turnover of stock. Cross docking might be appropriate if turnover is very quick.

Flexibility

The usage and demand of stock may change over time. This might mean that stock needs to be moved around the warehouse if a crossflow system is being used, for example.

·        A fixed location storage plan would be appropriate if demand is stable. But this means there isn’t flexibility to move stock around

·        Random location storage: empty shelves are used for stock wherever they are, maximising utilisation but can cause inefficiencies in movement. Efficient IT systems would be needed for stock tracking

·        Semi-random location storage: similar to random, but there are some rules about location, and random placing occurs within these constraints. E.g. fast-moving items may have a particular section that they must be kept within

If demand is seasonal (e.g. for Christmas), organisations may need to hire additional space for parts of the year. They will need to form a rental agreement. Demand planning is important for this.

 

Product coding

Coding is giving a unique identification reference for each item. This ensures that each item is recognised, inputted into IT systems and be communicated shorthand.

There are different options for coding systems: it could be the company’s own coding system, manufacturers’, customers’ or industry standards. If an organisation has lots of different stock types, they should develop a common coding system for all items (SKUs).

·        If there are a wider range of SKUs, a more complex coding system is needed

·        Most product coding systems are numeric, but some could be alphanumeric or alphabetic

·        In a sequential coding scheme, SKU codes follow a number sequence. E.g. 01, 02, 03 for each additional product

o   Codes aren’t linked to particular products, meaning that items aren’t easily recognisable from their code

o   Therefore, sequential coding is not efficient, and only really used by small organisations

·        Significant coding: each set of digits represent a characteristic of the stock. These codes are longer than sequential codes, because there needs to be extra space for new items to be added

o   An example could be an 8 digit code, split by: 3 digits for product type, 2 digits for manufacturer, and 3 digits for model number

·        Randomly generated codes: a random number generator used to create a code. Humans can’t understand these codes

·        Letter codes: 24 symbols, excluding I and O for confusion. The letters could form abbreviations, which is helpful for humans to recognise. Alphanumeric codes combine numbers and letters

·        Colour-based coding: not really relevant nowadays because stock is on IT systems. Colour marking might be used on the items for staff to see e.g. to represent a particular metal

Check digits: a risk of staff inputting numerical codes into IT systems is that they make a mistake. There is therefore an extra digit sometimes added (a ‘check digit’) to identify mistakes.

·        One system for generating check digits is modulus 10. All digits in the code are given a weighting, and the Code multiplied by the Weighting is added up for all digits. This is then divided by 10 to identify the check digit

·        The check digit should always divide by 10 without a decimal. If there’s a decimal, there’s been a mistake

A successful coding system should be:

·        Simple

·        Unique

·        Comprehensive

·        Consistent

·        Expandable

·        Significant (optional – use of significant coding)

·        Self-validating (optional – use of check digits)

Use of product codes

Product codes are used by multiple departments for different purposes:

·        Warehouse staff will use them to check locations, stock, movements of stock

·        Procurement staff will include codes in purchase orders

·        User departments will use codes for requisitions

·        Accounting will record costs via codes

Industry standard codes

The Universal Product Code (UPC) and European Articles Numbers (EAN/UPC) are widely used.

·        UPC is 12 digits and used in North America for consumer products.

·        EAN/UPC is 13 digits used across the rest of the world; the 1^st digit is used to identify the country of origin.

·        The UPC code is made up of manufacturer identification (6 digits), product item number (5 digits) and a check digit

·        UPC is used in barcodes commonly in supermarkets

The ISBN system for books is commonly used. There are 13 digits, made up of a prefix (3 digits), registration group (country of origin, language), registrant element (publisher, edition) and a check digit.

The Standard Industrial Classification (SIC) system codes for type of industries.

Shell Oil developed the Pantone colour system for the printing industry, and the Materials Equipment Standards and Code (MESC) system.

 

 

Barcoding

Numerical codes are represented by bars and spaces, where 0-9 has unique combination of bars and spaces each.