Practical Handbook of Warehousing

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1 Practical Handbook of Warehousing F Kenneth B. Ackerman L8.Mfflmn,Co. Cohmbus, OH KLUWER ACADEMIC PUBLISHERS BOSTON/DORDRECHT/LONDON

2 Contents FOREWORD. v ACKNOWLEDGMENTS vii Background of the Warehouse Industry 1 THE EVOLVING ROLE OF WAREHOUSING 3 History 3 Warehousing in the Industrial Era 5 Warehousing in the Age of Information 6 The Changing Role of Human Resources Management... 7 Warehousing as Part of a Logistics System 10 Globalization of Warehousing 10 A Profile of Tomorrow's Warehouse 12 2 THE FUNCTIONS OF WAREHOUSING 13 Functions of Warehousing 13 Warehousing Alternatives 15 Cost Structure 16 The Balance Between Risk and Costs 18 The Changing Values of Warehousing 19 Elements of Warehousing: Space Equipment, and People THE PROS AND CONS OF CONTRACT WAREHOUSING 23 The Historical Perspective 24 Is the Contract Primarily for Lending Institutions?., The "Evergreen" Contract 26 The Pricing Challenge in Contracts 27 Contracts and Stability 29 ix

3 4 WAREHOUSING AND CORPORATE STRATEGY...31 A Mission Statement for Warehousing v 31 The Make or Buy Decision 32 Dealing with Growth 33 What Business Are You in Or, Should Form Follow Function? 34 Motives for Contracting Out 35 The Elements of Warehouse Management 5 COMMUNICATIONS AND ELECTRONIC DATA INTERCHANGE 39 Warehousing Forms 40 Damages 44 Stock Status Information 44 Communications and Order Picking 44 Dealing with Complaints 45 Developing a Standard Procedure 45 EDI How it Looks from the Warehouse 46 Justification for EDI 46 How Does It Work? 47 How Widely Has EDI Been Accepted? 49 The Future of EDI 49 6 PACKAGING AND IDENTIFICATION 51 Functions of a Package 51 How the Package Affects Warehousing 52 Effect on Stacking 53 Packaging for Unitization 55 Identification 55 Container Handling 56 Package Design 56 Choosing a Contract Packager 58 A Series of Compromises 60 7 TRANSPORTATION.63 Carrier Selection 63 The Bill of Lading 65

4 Shipper's Load and Count 65 Released Valuation, 66 Terms of Sale F.O.B 66 Dealing with Claims 67 The Special Problem of Hazardous Materials 69 Integrated Logistics 69 8 ACCOUNTABILITY 71 Title." 71 Inventory Responsibility 74 Product Liability 75 Insurance 76 Summary of Claims Procedures 77 9 STARTING-UP OR MOVING A WAREHOUSE OPERATION 79 Reasons for Finding Another Warehouse 79 Options for Your Next Warehouse 80 Requirements Definition 81 Finding the Best Location 81 Architectural Features 83 Estimating the Cost of Moving 84 Cost of Transferring Each Load 85 How Long Will It Take?., 86 Communications 87 Other Communications 88 Opening the Relocated Warehouse AUDITING WAREHOUSE PERFORMANCE 91 Quantifying Warehouse Space 92 Quantifying Equipment Utilization 94 Quantifying Productivity of People y Qualitative Measures 95 Tracking Accuracy 97 Account Profitability 98 XI

5 Real Estate Aspects of Warehousing 11 FINDING THE RIGHT LOCATION 103 Location Theory 103 Outside Advisers 104 Requirements Definition 106 Location Models 107 The Final Selection Process BUILDING OR REHABILITATING YOUR WAREHOUSE 113 The Floor 114 Structural System and Roof 115 Docks and Drive Areas 116 Illumination and Heating 117 Foundations and Building Heights 118 Wall Panels 118 Interior and Exterior Finish 119 The Rehabilitation Alternative 119 Planning for Future Uses THE 21ST CENTURY LOGISTICS FACILITY 121 Some Definitions and Concepts 121 Who Uses Logistics Facilities? 122 Regional and National Differences 123 The Changing Players in Logistics 124 Seven Megatrends 125 The Location Decision 127 The Building Design 129 Operational Changes 130 Financial Considerations 131 Conclusion and Recommendations 133 Planning Warehouse Operations 14 PLANNING FOR FUTURE USES 137 Design Structure for Versatility 137 Changes in Basic Function 138 XII

6 Internal and External Changes 139 Managing Change SPACE PLANNING 143 Sizing the Warehouse 143 Storage Requirements 144 Interaction of Storage and Handling Systems 144 Stock Location Systems Fixed versus Floating Slots Family Groupings 146 A Locator Address System 147 Cube Utilization 148 Lot Size 148 Reducing Aisle Losses 149 Reducing Number of Aisles 150 Managing Your Space PLANNING FOR PEOPLE AND EQUIPMENT 153 The Process of Making Flow Charts 153 The Best Sequence 156 "What If Questions 158 The Critical Role of the Supervisor 159 Planning for Equipment Use CONTINGENCY PLANNING 165 Strategies 166 Trigger Points. 166 Planning for the Impact of Strikes Your Own Firm's as Well as Others' 167 Strike Against Suppliers 168 Strike Against Customers 168 Trucking Strikes 168 Charting the Planning Process 169 Planning Steps POSTPONEMENT > 173 Background of Postponement 173 Types of Postponement 174 Postponement of Commitment 174 XIII

7 Postponement of Title Passage 175 Postponement of Branding v 176 Postponement of Consumer Packing 176 Postponement of Final Assembly 177 Postponement of Blending 177 Increased Warehouse Efficiency 177 Potential Challenges 179 Postponement in the Warehouse SELECTING A THIRD-PARTY OPERATOR 181 A Four Step Process 182 Evaluation Criteria 183 The Contract 184 Managing a Continuing Relationship 186 Protecting the Warehouse Operation 20 PREVENTING CASUALTY LOSSES 191 Types of Casualty Losses 191 Controlling Fire Risks 192 Wind Storm Losses 195 Flood and Leakage 195 Mass Theft 196 Vandalism 196 Surviving an Insurance Inspection 196 Plant Emergency Organizations "MYSTERIOUS DISAPPEARANCE" 201 Electronic Detectors and Alarms 201 Door Protection Alarms 202 Grounds Security 203 Seals,204 Storage Rack 204 Controlling Collusion Theft 204 XIV

8 Physical Deterrent 205 Restricted Access v 205 Confirming Employee Honesty 206 Giving and Checking References 208 Other Collusion Theft Controls 209 Marketability of Product 210 Hiring Honest People 210 Using Supervision for Security 211 Procedures to Promote Security 211 Customer Pick-Ups and Returns 212 Security Audits SAFETY, SANITATION, AND HOUSEKEEPING 215 Accidents in the Warehouse 215 Common Sense for Common Warehouse Operations Redesigning Lifting Tasks 218 Training 219 Safety Behavioral Factors 220 Manual Handling and Safety 221 Management's Role 221 Sanitation 222 Excellence in Housekeeping 223 Benefits VERIFICATION OF INVENTORIES AND CYCLE COUNTING 227 Purpose of Inventories 227 Inventory Carrying Cost 228 Benefits of Improvement 228 Problem Areas 228 How Can a "Physical" Be Improved? 229 Incentives 230 Managing the Inventory-Taking Job 230 Controlling the Count y Reconciliation. 233 Eliminating Inventory Errors by Cycle Counting 234 xv

9 Cycle Counting, Another Approach 239 What Does the Future Hold? 240 The Human Element 24 ORIENTATION AND TRAINING 243 Some Training Examples 246 Training Lift-Truck Operators 246 Why Training Courses Fail 248 Mentoring 249 Mentoring in the Warehouse 252 Goals of Training LABOR RELATIONS 255 Creating a Union-Free Environment in the Warehouse An Example 257 Public Warehousing Alternative 257 Public Warehouse Strikes 258 Using Subcontractor Warehouse Services 258 Transportation Strikes 259 Inventory Hedging 259 Turning from Union to Union-Free 259 Preemployment Screening 260 Employee Complaints 262 The Role of the Supervisor. 263 Arbitration Standards Pertaining to Discharge 263 The Essence of Union-Free Management MOTIVATION 267 Barriers to Productivity 267 Who Gets the Incentives? 268 Union Attitudes 268 Installing and Designing the System 269 Pitfalls 271 The Role of the Supervisor 271 The Importance of Listening 272 Feedback 274 XVI

10 27 IMPROVING PEOPLE PERFORMANCE 277 Maintaining Warehouse Discipline, 277 Peer Review A New Approach to Discipline 279 The Interviewing Process 281 Substance Abuse in the Warehouse 288 Job Performance Appraisal 291 Promotion from Within 292 Pride in the Company 293 Productivity and Quality Control 28 MAKING WAREHOUSING MORE EFFICIENT 297 Establish Targets for Improvement 297 Forecasting 298 Reduce Distances Traveled 298 Increase Unit Load Size 300 Seek Round-Trip Opportunities 300 Improve Cube Utilization 301 Free Labor Bottlenecks 302 Reduce Item Handling 303 Improve the Packaging 303 Forces for Gain in Productivity MONITORING PRODUCTIVITY 307 Is Your Warehouse Economical? 309 Monitoring Public Warehouses 315 Implementation 322 Guidelines for Measurement Systems SCHEDULING WAREHOUSE OPERATIONS 325 Scheduling for Peak Demand 326 Why 40 Hours Is No Longer Enough 326 A New Kind of Work Week CUSTOMER SATISFACTION ' THE ROLE OF THE WAREHOUSE 331 Who Is YOUR Customer? 331 XVII

11 Why Do Something Well That You Should Not Be Doing At All? 332 The Importance of the Customer's Customer 332 How Will You Use What You Learn? IMPROVING ASSET UTILIZATION 337 Space Utilization 337 Energy Utilization 337 Equipment Utilization 340 The Equipment Utilization Ratio 340 Improving Performance 341 Lift-Truck Rebuild Program 342 Key Points of the Rebuild Program 343 The Value of the Program 344 Inventory Performance 345 The Management Factor 346 Why Measure? 346 Danger Signals 347 Inventory Turnover and Distribution Analysis 349 Case History 350 An Action Plan And Potential Benefits 354 Summary "JUST-IN-TIME" AND ITS VARIATIONS 357 JIT in Manufacturing 358 JIT in Service Support Quick Response 359 Efficient Customer Response and Other Variations WAREHOUSING COSTS 365 Costs Related to Function 365 Developing a Cost for Warehouse Labor 366 Justifying Purchase of Equipment 366 Establishing a Value of Inventory 368 Cost of Goods At Rest 370 The Influence of Inventory Turns 371 The Influence of Warehouse Layout 371 Cost of Goods in Motion 372 XVIII

12 35 MANAGEMENT PRODUCTIVITY 377 Defining Management 377 Why Warehousing Is Different 378 The Effective Manager 378 Measurement Tools for the Manager 379 The Critical Tasks of a Manager 381 The Manager's Hardest Job 384 The Buck Stops Here 385 How Good Are Your Warehouse Supervisors? 385 The Supervisor Promoted from Within 387 The Importance of Clarifying Expectations REDUCING ERRORS 389 The Value of Order Checking 389 Order-Picking Errors 390 Order-Taking Errors 391 A Good Item Location System 391 Clear Item Identification 392 Clear Description of Quantity Required 393 Order Identification 394 "Good" Order-Picking Document 394 Other Factors to Consider 397 Personnel Factors 398 Identification with Work 399 Posting Error Rates, 399 Using Case Labels 399 "Picking Rhythm" 400 The Handling of Materials 37 RECEIVING AT THE WAREHOUSE 405 The Process: Eleven Steps 405 Physical Flow 408 Variations in the Receiving Process 408 Equipment 410 Locating the Receiving Function.411 Scheduling of Warehouse Receiving 413 Pitfalls of Receiving 414 XIX

13 38 SHIPPING 417 Unit Loads 417 Doors Versus Time 418 Dealing with Shipper's Load and Count (SL&C) 418 Controlling Damage Claims 423 Customer Pick-Ups CROSS-DOCKING IN THE WAREHOUSE 425 Success Factors 426 Pricing 430 Forms 431 Achieving the Goal SPECIALIZED WAREHOUSING 433 Temperature-Controlled Warehousing: The Essential Differences 433 Hazardous Materials Warehousing 438 State and Local Building Inspectors 440 Fulfillment Warehousing 442 Household Goods Storage 444 Modernization 444 Diversification 445 Summary ORDER-PICKING 449 Four Kinds of Order Picking 449 Quality in Order-Picking 450 Order-Picking Forms 450 Systems for Order-Picking 451 Fixed versus Floating Slots 452 Order-Picking Methods 453 Single-Order versus Batch Picking 453 Zone System of Picking 455 Designing Your Order-Picking System 455 Summary STORAGE EQUIPMENT 461 Defining the Job 461 Improving Storage with Racks 462 xx

14 Reducing Number of Aisles 463 Other Types of Pallet Rack t 464 Live Storage Gravity Flow Rack 465 When to Use Flow Racks 466 What Flow Racks Will Not Do for You 467 The Carousel It's More Than a Merry-Go-Round Conveyor Systems 470 Types of Conveyors 471 The Automatic Guided Vehicle Systems (AGVS) Alternative 472 Summary MOBILE EQUIPMENT 473 Choosing Lift Trucks 473 Operator Location 474 Types of Lift Attachments 475 Conventional or Narrow Aisle Trucks 476 Brand Selection 476 Automatic Guided Vehicle Systems 481 What to Look for in Mobile Equipment APPROACHING WAREHOUSE AUTOMATION The Relevance of Technology to Warehouse Operations The Benefits of Automation 489 The Risks of Automation 490 In Conclusion ' PALLETS AND UNIT LOADS 495 Standardization 495 The Problem with Pallets 497 New Kinds of Pallets 498 Alternatives to Pallets 500 Tradeoffs in Unit Handling 502 New Ways to Use Pallets DEALING WITH DAMAGE.' Causes of Damage in Physical Distribution 507 Disposal of Carrier Damage 508 XXI

15 Concealed Damage 509 Warehouse Damage 509 Reducing Warehouse Damage 510 Recooperage and Repair 511 Protecting Damaged Merchandise 512 Storage of Damaged Products 513 Loss and Damage Guidelines 513 Damage Control Ratios 514 Damaged Loads Ratio 514 Preventing Warehouse Damage: A Questionnaire REVERSE LOGISTICS IN THE WAREHOUSE 517 Three Reasons for Returns 517 The Role of the Warehouse Operator in Returns 519 Reconfiguring the Warehouse for Returns 520 Security Issues 520 Reconditioning and Repackaging 521 Running a Warehouse in Reverse 521 Keeping it Simple 523 Handling of Information 48 CLERICAL PROCEDURES 527 Customer Service Standards. 528 Location of Clerical Center. 528 Office Environment 529 Organizing the Clerical Function 529 Interaction with Marketing ; 530 Manual and Electronic Data Processing 531 Control of Automation 532 Measuring Clerical Costs 532 Management Information COMPUTERS AND WAREHOUSE MANAGEMENT..535 Some Definitions 535 Hardware versus Software Then and Now 536 So Which Comes First Hardware or Software? 537 XXII

16 Choosing Warehousing Software 538 Barriers to Implementation 539 Choosing a Warehouse Management System 539 Selecting a New System 540 How Do You Locate the Right Software Company or Package? 542 How Long Does Implementation Take? 543 Summary ELECTRONIC IDENTIFICATION 547 Bar Codes What They Are and How They Work Scanners 548 Contact and Noncontact Readers 551 Printing Bar Codes 552 A User's View of Bar Coding 552 What Will Bar Coding Do for Me? 554 The Pitfalls 555 The Training Challenge 557 Bar Coding and Luddites 558 The Future of Electronic Identification 559 ENDNOTES 561 ABOUT THE AUTHOR 565 INDEX 567 XXIII

Practical Handbook. of Warehousing. fourth [DITtON

Practical Handbook. of Warehousing. fourth [DITtON Practical Handbook of Warehousing fourth [DITtON Pra(ti(al Handbook of Warehousing fourth [DITION K e n nß. eackerman t ~ K. 8. Ackennan, (0. (olumbus, 00 ~. " SPRINGER-SCIENCE+BUSINESS MEDIA, B.V Library