BALLOU12 - Storage and Handling Decisions Perfection is not...

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12-1 Storage and Handling Decisions Chapter 12 “Perfection is not attainable, but if we chase perfection, we catch excellence.” Vince Lombardi
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12-2 Storage/Handling Decisions in Inventory Strategy PLANNING ORGANIZING CONTROLLING Transport Strategy • Transport fundamentals • Transport decisions Customer service goals • The product • Logistics service • Ord. proc. & info. sys. Inventory Strategy • Forecasting • Inventory decisions • Purchasing and supply scheduling decisions • Storage fundamentals Storage decisions Location Strategy • Location decisions • The network planning process Storage/handling decisions
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12-3 Storage Decisions Site Selection Finds a specific real estate site as a storage location Weighted checklist is a good approach. Recall, Factor Marginal Factors Weights scores score 1 2 5 10 2 9 1 9 . . . . . . . . . . . . 12 4 8 32 Weighted score 286
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12-4 Storage Decisions (Cont’d) Sizing the Facility From inventory policy, determine the amount of inventory to be stored, that is, space needed Determine the facility’s seasonal use Balance the use of privately-owned space with rented space—a mixed strategy
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Space requirements, sq. ft. Rented space Privately- operated space Time Mixed Strategy for Warehouse Space Need for some space is seasonal 12-5
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12-6 PRIVATELY OPERATED RENTED Month Warehouse Throughput, lb. Space Require- ments, sq. ft. Private Allo- cation Monthly Fixed Cost Monthly Variable Cost Rented Allo- cation Monthly Storage Cost Monthly Handling Cost Monthly Cost Jan. 66,500 1,979 100% $ 22,500 a $ 3,325 b 0% $ 0 $ 0 $ 25,825 Feb. 328,000 9,762 100 22,500 16,400 0 0 0 38,900 Mar. 1,048,500 31,205 100 22,500 52,425 0 0 0 74,925 Apr. 2,141,000 63,720 94 c 22,500 100,627 d 6 4,282 e 8,992 f 136,401 May 2,820,000 83,929 71 22,500 100,110 29 27,260 57,246 207,116 June 2,395,000 71,280 84 22,500 100,590 16 12,773 26,824 162,687 July 1,303,000 38,780 100 22,500 65,150 0 0 0 87,650 Aug. 460,900 13,717 100 22,500 23,045 0 0 0 45,545 Sept. 99,900 2,973 100 22,500 4,995 0 0 0 27,495 Oct. 15,300 455 100 22,500 765 0 0 0 23,265 Nov. 302,200 8,994 100 22,500 15,110 0 0 0 37,610 Dec. 556,700 16,568 100 22,500 27,835 0 0 0 50,335 Totals 11,537,000 $270,000 $510,377 $44,315 $93,062 $917,754 a [90,000 + (3 × 60,000)]/12 = $22,500. b 66,500 × 0.05 = $3,325. c 60,000/63,720 = 0.94. d 2,141,000 × 0.94 × 0.05 = $100,627. e Given a monthly turnover ratio of 3 and 6% of the demand through the rented warehouse, then [(2,141,000 × 0.06)/3] × 0.1 = $4,282. f 2,141,000 × 0.06 × 0.07 = $8,992. Determination of a Mixed Warehouse Strategy for a 60,000 sq. ft. Privately-Operated Warehouse Private space exceeded
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12-7 Storage Decisions (Cont’d) Facility Configuration Configuration affects handling costs in a high throughput facility, but less important otherwise Square or rectangular shapes are best. L-shaped designs are poor unless conveyors are used. Single-story designs are popular for high throughput facilities and land costs are not prohibitively high
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12-8 Storage Decisions (Cont’d) Space Layout Configuration of racks and aisles in the building Space layout affects building dimensions and size
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