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.