FreeQuality.org
Training Presentation
Consolidation Warehousing
Burke Alder
November 29, 2005
BYU Marriott School
Consolidation Warehousing
Outline
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Definition
Brainstorming Exercise
Nuts and Bolts
How it Works
Tools of consolidation warehousing
Benefits
Real World Example
Consolidation Warehousing
Outline - continued
• An Exercise
• Summary
• Reading List
Definition of Consolidation Warehousing
What is consolidation?
The merger of two or more commercial
interests or corporations.*
What is warehousing?
A place in which goods or merchandise are
stored; a storehouse.*
*
dictionary.com
Definition of Consolidation Warehousing
• Pulls together shipments
• Same geographical area
• More economical shipping loads
*Bozarth and Handfield, Intro to operations and supply chain management, pg 344
Brainstorming Exercise
How can you use Consolidation Warehousing
in your organization?
Consolidation Warehousing – Nuts and Bolts
The goal of many organizations today
• Increase global expansion
• Meet demand for increased
customization of orders
• Decrease costs of distribution
activities
Consolidation Warehousing – Nuts and Bolts
Reasons for Warehouse Consolidation
• Duplicate or excessive inventories across
network
• Changing market conditions
• High costs to operate multiple facilities*
*www.warehousing.cc
Consolidation Warehousing – Nuts and Bolts
Reasons for Warehouse Consolidation
• Redundancies in network due to acquisition
• Ability to leverage automation technology
with higher consolidated volume*
*www.warehousing.cc
Consolidation Warehousing – Nuts and Bolts
The Solution
“For over 10,000 systems, consolidation
into a single warehouse system was
always found to be optimal.”*
*Wei-Shi Lim; Ou; Chung-Piaw Teo, Operations Research, pg 668
Consolidation Warehousing – How it works
Without (CW): Direct Process
Problems
Shipments in…
1. Cost
2. Time Efficiency
3. What a mess
…Shipments out
Consolidation Warehousing – How it works
Diagram of (CW) Process
Small shipments in…
…large, economical shipments out
Tools of Consolidation Warehousing
• Warehousing Management Systems (WMS)
Ex. Microlise
• Hand Held Terminals
• Vehicle Mounted Terminals
• Just In Time Inventory
Benefits of Consolidation Warehousing
• Reduction in order processing
• Reduction in systemwide inventory
costs
• Key Component of the logistic strategy
*Wei-Shi Lim; Ou; Chung-Piaw Teo, Operations Research, pg 668
Benefits of Consolidation Warehousing
• Increased efficiencies
• Loads from multiple customers
combined
• Higher productivity
*Wei-Shi Lim; Ou; Chung-Piaw Teo, Operations Research, pg 668
Consolidation Warehousing
Real World Example
Matthew Clark is the largest independent wholesaler
serving the pubs, club, hotels and restaurants of the UK.
The business regularly delivers to over 20,000 accounts,
ranging from small single operations to some of the
largest and most familiar national accounts.
Consolidation Warehousing
Real World Example
Company:
Situation: Decision to consolidate its
warehouse operations into one national
site.
Do the benefits justify the costs?
Consolidation Warehousing
First Step: Consolidated warehouses to
one new national distribution center.
Consolidation Warehousing
Second Step: Use (WMS) tools
• Hand Terminals
• Vehicle Mounted Terminals
• Software Microlise
Consolidation Warehousing
Real World Example
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Success
Increase to 98% Customer Service
More flexibility within system
Increased Visibility of Stock
Reduced Stock Holdings
Consolidation Warehousing - Exercise
Big Hope Logistics handles shipments from businesses in the Portland
area. Big Home has three shipments to deliver to the Houston area:
Customer
Shipment
Weight
Bob's Copy Paper
300 boxes, plain white paper
5,000 lbs.
Dave's Exercise Bikes
200 bikes, 15 lbs a piece
3,000 lbs.
Jonny's Relax BeanBags
400 bags
2,000 lbs.
Total:
10,000lbs
Info about each method of shipping (Direct Method)
Max load per truck is 20,000 lbs.
Direct shipping for each customer costs $2,000, or total of $6,000
Weight Utilization across all 3 trucks is 10,000/60,000 or 17%
Next Page
Consolidation Warehousing – Exercise
Information if Big Hope uses (Consolidation Warehousing)
Benefits of consolidation are that loads of different customers can be
combined into one truck.
Cost of consolidation below:
Cost of running warehouse is $90 per 1,000 lbs., or in logistics lingo,
$9 per hundred-weight
Cost of breaking up shipments is $200 for each customer
Under these conditions calculate the cost of the direct method vs.
the consolidation method.
Which one is best business decision?
What is the weight utilization of the consolidated shipments?
Consolidation Warehousing - Summary
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New trend in global logistics management
Reduces inventory costs
Helps improve the bottom line
Increases customer satisfaction
Consolidation Warehousing - Reading list
Wei-Shi, Lim. “Inventory Cost Effect of Consolidating Several One-Warehouse Multireatailer systems”
Operations Research Jul/Aug 2003 ABI Inform Global. ProQuest Direct .
Harold B.Library, Brigham Young University, Provo Utah. 21 Nov 2005
<http://www.um.com/proquest/>.
Macklin, Gary. “Glazier Consolidates Warehouses Operations” Refrigerated Transporter;
Feb2005, Vol. 40 Issue 9, p14-17, 4p ABI Inform Global. ProQuest Direct . Harold B. Lee
Library, Brigham Young University, Provo Utah. 21 Nov 2005
<http://www.um.com/proquest/>.
Unknown. “Warehouses That Think With Their Hands”
Frontline Solutions Europe; Feb2000, Vol. 9 Issue 1, p24, 1p,
30 Sep 2005 ABI Inform Global. ProQuest Direct .
Harold B.Library, Brigham Young University, Provo Utah. 17 Nov 2005
<http://www.um.com/proquest/>.
Consolidation Warehousing - Reading list
Pearson Specter, Sara. “Warehousing Giants” Modern Materials Handling; Oct2004,
Vol. 59 Issue 10, p29-31 ABI Inform Global. ProQuest Direct .
Harold B.Library, Brigham Young University, Provo Utah. 18 Nov 2005
<http://www.um.com/proquest/>.
Cecil C. Bozarth and Robert B. Handfield, Intro to operations and supply chain management, pg 344
“Defintions.” Homepage. 17 Nov 2005 <http://www.dictionary.com/>.
“Consolidation Warehousing.” Homepage. 21 Nov 2005<http://www.warehousing.cc/>.