Warehouses add value to the supply chain in many ways, from performing basic warehouse activities
with excellence to providing specialized functions. Let’s start with the basic activities.
Receiving records physical receipt of material, inspects deliveries for damage, validates the
purchase order quantity, moves materials to their destination, and creates receiving reports.
When bulk items are received, prepackaging may be done to package them in smaller quantities
or to create kits or assortments. Put-away involves moving materials from
receiving to a staging area and then to a storage area such as bulk storage or single selective rack
storage. Logging the new location is a vital step. Order picking involves selecting the right number
of the right products, sending them to the packaging area, and logging the move.
Packaging and marking involves placing the correct type and quantity of materials into a container
with materials in place to protect goods from damage for the mode of transportation selected.
It also involves marking and labeling the container with the customer destination
and so on. This step can add value such as by minimizing packing for air transport
since it is a gentle ride and space is at a premium. Conversely, rail has a rough ride
and sufficient packaging is essential. Shipping includes the prior packaging
and marking step, plus weighing and loading goods for shipment.
Warehouses have two main efficiency issues when it comes to adding value to put-away and order
picking. First, there needs to be an efficient way to find the inventory when it is needed,
and second, there needs to be an efficient way to put away or collect inventory in a
way that minimizes pick or put-away time. Two ways to organize storage include random-
and fixed-location storage. Random location uses space most efficiently because any empty bay can
be used. Warehouse management systems track these locations easily. Fixed locations are relatively
permanent locations that become familiar. Fixed locations may be useful for special items like
hazardous goods or if an information system is not used. For the minimizing travel objective,
there are numerous ways warehouse management systems can route pickers to minimize steps
taken. Advanced warehouses may instead use robots to bring inventory to stationary pickers.
Another way to minimize travel with either random or fixed locations
is to locate high-velocity SKUs in the areas that are most convenient to pick from. An ABC
analysis that ranks items by velocity could help select goods for each zone.
Now that we have an idea of how a warehouse might add value internally,
let’s take a step back and look at how warehouses can specialize in certain value-added services.
Consolidation warehouses are used to take materials from multiple sources
and combine them into full truckload or containerload shipments
rather than needing to send many less than truckload or containerload shipments
at greater expense. It also reduces traffic at the receiving docks.
Break-bulk is basically a warehouse that specializes in prepackaging.
Cross-dock omits the storage step entirely and sorts what is received
rapidly into different loads so that inventory is never at rest.
This eliminates warehouse put-away and picking labor. Such warehouses may be long and narrow.
Postponement involves warehouses performing final assembly of components or modules
to enable differentiation after actual customer orders come in. This reduces forecast error
and warehouse space needs relative to multiple finished unit types being held.
Anticipation or stockpiling involves the warehouse providing seasonal or on demand storage.
Mixing is simply break-bulk from multiple sources. Each customer gets custom product mixes.
We hope you enjoyed this overview of value-added warehousing.