IE6202: Warehousing Systems
Instructor: Spyros Reveliotis
Office: Room 316, ISyE Bldng
tel #: (404) 894-6608
e-mail: spyros@isye.gatech.edu
homepage: www.isye.gatech.edu/~spyros
“Course Logistics”
• Office Hours: 2-3:30pm MW (ow, an open-door policy
will be generally adopted, but an appointment arranged by
e-mail is preferred)
• Grading policy:
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Homework & Projects: 25%
Midterm I: 20% (Tent. Date: Thursday, Oct. 4)
Midterm II: 20% (Tent. Date: Thursday, Nov. 1)
Final: 35%
Exams closed-book, with 2 pages of notes per exam
Make-up exams and Incompletes: Only for very serious reasons,
which are officially documented.
“Course Logistics” (cont.)
• Course Reading Materials
– J. Bartholdi and S. Hackman, “Warehouse and Distribution
Science”, Release 0.08, unpublished manuscript, 2000, URL:
http://www.isye.gatech.edu/~jjb/wh/book/wh.pdf
– An assembled package of various books excerpts and papers on
warehousing topics, available by the Georgia Tech bookstore
– Any other material distributed or cited in the lectures
– Books on reserve:
• Tompkins et al., “Facilities Planning”, John Wiley & Sons, 1996.
• Heragu, S., “Facilites Design” PWS Publishing Co., 1997.
Course Objectives
(What is this course all about?)
– An introduction to the fundamental concepts and techniques
involved in the design and operation of contemporary warehouses
and distribution centers
– In particular, a balanced development of the following issues:
• Familiarization with contemporary warehouses and their operation
• A systematic exposition of the overall design, planning and control
problem, as it arises in the context of contemporary warehouses
• The decomposition of the problem to a series of sub-problems, and
the development of analytical/quantitative methodologies for
addressing these sub-problems
• (Time permitting,) an introduction to the emerging issues and needs
that arise from modern, globalized and internet-based economy.
Next...
• Understanding the role of warehouses in contemporary
distribution networks
• A description of the warehouse operations and equipment
• A (conceptual) description of the major design, planning
and control problems arising in contemporary warehousing
• Key References
– J. Bartholdi and S. Hackman, “Warehouse and Distribution
Science”, Release 0.08, unpublished manuscript, 2000, URL:
http://www.isye.gatech.edu/~jjb/wh/book/wh.pdf: Chpts 1-4
– G. Sharp, “Warehouse Management”, Chpt 81 in Handbook of
Industrial Engineering, by G. Salvendy (ed.), John Wiley & Sons,
NY, 2000.
– B. Rouwenhorst et. al., “Warehouse design and control:
Framework and literature review”, European Journal of OR, Vol.
122, pgs 515-533, 2000.
– Tompkins et al., “Facilities Planning”, John Wiley & Sons, 1996:
Chpt. 9
The role of warehousing in
contemporary distribution networks
• Buffer: It holds inventory for downstream stages of the
supply chain, in order to allow the entire production /
distribution network to deal efficiently with the systematic
and random variation in the network operations, or to
exploit significant economies of scale.
– Typical sources/examples of systematic variation
• product seasonalities (e.g., Toys R Us, CVS merchandise)
• cyclical / batched production due to large set-up costs
– Typical sources of random variation
• variations in transportation times due to weather, traffic congestion,
bereaucracy, etc.
• variations in production times due to unreliable operations, unreliable
suppliers
– Typical economies of scale involved
• Price breaks in bulk purchasing
The role of warehousing in
contemporary distribution networks
(cont.)
• Consolidation center: It accumulates and consolidates
products from various points of manufacture within a
single firm, or several firms, for combined shipment to
common customers.
• Consolidation allows to control the overheads of
transportation operations by:
– allowing the operation of the carriers to their capacity, and
therefore, the more effective amortizing of the fixed transportation
costs
– reducing the number of shipping and receiving operations
• Cross-docking: Consolidation without staging
The role of consolidation in
contemporary distribution networks
Retailers
Manufacturers
Manufacturers
Consolidator
Retailers
The role of warehousing in
contemporary distribution networks
(cont.)
• Value-Added-Processing (VAP): Increasingly, warehouses
are required to undertake some value-added-processing
tasks like:
– pricing and labeling
– kitting (i.e., repackaging items to form a new item; e.g., “beauty”
products)
– light final assembly (e.g., assembly of a computer unit from its
constituent components, delivered by different suppliers)
– invoicing
• In general, this development is aligned to and suggested by
the idea/policy of postponement of product differentiation,
which allows for customized product configuration, while
maintaining a small number of generic product
components.
The major warehouse operations
• Inbound processes
– Receiving (~10% of warehouse operating costs): the collection of
activities involved in
• the orderly receipt of all materials coming into the warehouse;
• providing the assurance that the quantity and quality of such materials
are as ordered;
• disbursing materials to storage or to other organizational functions
requiring them.
– Put-away (~15% of warehouse operating costs): the act of placing
merchandise to storage; it includes
• determining and registering the actual storage location(s)
• transportation
• placement
The major warehouse operations (cont.)
• Outbound processes
– Processing customer orders (typically done by the computerized
warehouse management system of the facility): This set of
activities includes
• checking that the requested material is available to ship;
• if necessary, coordinating order fulfillment with other facilities of the
distribution network;
• producing the “pick” lists to guide the order picking and the necessary
shipping documentation;
• scheduling the order picking and the shipping activity.
– Order-picking (~55% of warehouse operating costs): the set of
physical activities involved in collecting from the storage area the
materials necessary for the fulfillment of the various customer
orders, typically identified as:
•
•
•
•
traveling (~55% of the order picking time)
searching (~15% of the order picking time)
extracting (~10% of the order picking time)
documentation and other activities (~20 % of the order picking time)
The major warehouse operations (cont.)
• Outbound processes (cont.)
– Checking: Checking orders for completeness (and quality of
product)
– Packing: Packaging the merchandise in appropriate shipping
containers, and attaching the necessary documentation / labels.
– Shipping: The activities of
• preparing the shipping documents (packing list, address label, bill of
lading);
• accumulating orders to outbound carrier;
• loading trucks (although, in many instances, this may be the carrier’s
responsibility).
– Others: Handling returns, and performing the additional valueadded-processing supported by contemporary warehouses, as
discussed in a previous slide.
Product concepts related to the
characterization of material flow in a
contemporary warehouse
• Item (otherwise piece or each): The smallest unit of
product sold by a distribution center, e.g.,
– a 1-liter bottle of a soft drink
– a box of 100 paper clips
• Carton: a paperboard container holding identical product,
usually of a size and weight allowing manual handling;
example dimensions: 14x10x20in or 30x20x40cm.
• Tote: a container usually made of plastic and often used for
storing and handling different products; usually similar in
size to a carton, but re-usable.
Product concepts related to the
characterization of material flow in a
contemporary warehouse (cont.)
• Inner pack: several units of a product secured together and
sold by the distribution center as a unit, if many items are
contained in a carton, and purchase quantities per item are
large; a carton contains several inner packs.
• Pallet: a set of cartons or totes of identical product
arranged in a cubical pattern and usually supported by a
base that may be of wood or plastic; example dimensions
are 40x48x54in and 80x120x100cm.
• Mixed unit load: a set of cartons or totes of different
products arranged to a cubical pattern similar to a pallet,
often wrapped or strapped for stability.
• Overpack: a large carton or tote containing different
products; smaller than a pallet but larger than a carton, so
that manual handling may be difficult.
Product concepts related to the
characterization of material flow in a
contemporary warehouse (cont.)
• Stock Keeping Unit (SKU): a set of product(s), packaged
in a pre-specified manner, that it is identified as a distinct
entity for distribution purposes; e.g.,
– a 2-liter bottle of Coca-Cola Classic
– 6 2-liter bottles of Coca-Cola Classic packed in a carton
– 12-ounce cans of Coca-Cola Classic, packed 24 in a carton.
• Order: a document from a customer, requesting specific
SKU’s in specific quantities.
• Line item: a “line” in an order document designating a
specific SKU and quantity
A schematic representation of the
warehouse material flow
Replenishment
Case
Picking
Reserve Storage
and
Pallet Picking
Replenishment
Broken
Case
Picking
Accumulation, Sortation & Packing
Direct
putaway
to reserve
Direct
putaway
to primary
Receiving
Shipping
Cross-docking
Operational Cost Breakdown
20%
10%
15%
Receiving
Putaway
Order Picking
Others
55%
The major concerns underlying the
organization of order-picking
• Establish an efficient operation by controlling the orderpicking labor costs, especially those due to traveling, and
• maintain a high level of responsiveness to customer orders,
while
• preserving the order integrity.
Responsiveness
Costs
Quality
How?
• By organizing the associated work-flow so that it presents
– high pick density, i.e., average number of picks per foot of travel
– short (order) flow time, i.e., the amount of time elapsed between
the arrival of an order into the warehouse management system and
the time it is loaded on the shipping carrier.