• 1. CHAPTER 10 Warehousing
    • 2. Cost trade-offs in Marketing and LogisticsProductOrder processing and information costs Inventory carrying costs Place/customer service levelsOrder processing and information costsPriceLot quantity costsWarehousing costsTransportation costsLOGISTICSMARKETING
    • 3. Uses of WarehousingManufacturing support Product - mixing Consolidation Breakbulk
    • 4. Factors Influencing Warehousing in the FutureTime - The best warehouse operations are those designed to reduce every aspect of order cycle time. Quality - Users now expect performance that approaches perfection. Asset productivity - Reduce total cost, reuse, and recycle. New kind of workforce - Requirements for both management and labor will change significantly.
    • 5. Advantages of Public WarehousingConservation of capital Use of space to meet peak requirements Reduced risk Economies of scaleFlexibility Tax advantages Specific knowledge of storage and handling costs
    • 6. Disadvantages of Public WarehousingEffective communication may be difficult because of system incompatibility Specialized services may not always be available. Space may not be available on demand.
    • 7. Advantages of Private WarehousingControl Flexibility Less costly Better use of human resources Tax benefits Intangible benefits
    • 8. The Relationship of Demand to Warehouse SizeTime (months)Inventory (‘000 units) Public warehousingPrivate warehousing
    • 9. Determinants of Storage Space RequirementsInflation/forward buying These Situations Increase the Need for Storage Space Market or company expansion Shorter product life cycle Increase in number of SKUs Cross-docking Elimination of distributors Expansion into specialized products Import/export items Lengthened production process Increase in minimum manufacturing lot sizeRequirement for faster response time Carrier performing consolidationThese Situations Decrease the Need For Storage Space  Decrease in production or sales Decrease in number of SKUs Less volatile demand (including longer product life cycles) Customer handles store delivery Smaller manufacturing lot sizes Smaller purchase amounts Higher inventory turns Better information Direct store delivery on a quick response basis        Quicker transportation
    • 10. Comparison of Traditional Costing Versus Activity-based CostingGeneral ledger view of warehousing costsActivity-based view of warehousing costsStorage and handling……………...$40.1 General and administration………...30.9 Trucking and delivery………………14.5 Freight consolidation……………….. 2.4 Value-added services………………...3.3 Total ……………………………...$91.2Dry storage………………………...…$25.0 Refrigerated storage………………….…8.1 Receiving………………………………20.0 Shipping…………………………...…..18.8 Billing…………………………………...3.2 Delivery…………………………………6.0 Packaging/stenciling…...……………….1.8 Freight consolidation……………………3.0 Material handling equipment…………...5.3 Total………………………………….$91.2Source: Terrance L. Pohlen, “Activity Based Costing for Warehouse Managers,” Warehousing Forum 9, no. 5 (May 1994), p. 1.