Warehouse costs

Specify the Plan The final step in the distribution network planning process is selling the results to top management. This must be expressed so that management can understand the impact of the strategy on the total business. This communication should express not only the finances relating to transportation and warehouse costs, but overall sales and customer satisfaction. 

Distribution is the management of inventory to achieve customer satisfaction. Today, many companies have realized that distribution is a major frontier for both customer satisfaction enhancement emd cost reduction. It is important to remember that a good strategic distribution network plan is a requirement of success and that it should not be composed simply of ideas, thoughts, or possibilities whose validity has not been researched. The distribution network plan is based upon a set of premises concerning future sales volumes, inventory levels, transportation cost, and warehouse cost. Requirements should be defined, analyzed, and evaluated and should result in the development of a specific set of strategic requirements. A good distribution network plan is action oriented and time phased and keeps the ultimate customer s requirements at the forefront at aU times. 

Warehouse operation is well executed with good operational performance (e.g., increased total warehouse productivity, low safety incidents - less than 0.5% lost time incident rate - LTIR, good inventory accuracy - greater than 99%, and downward trend on total warehouse costs over time). 

Logistics warehouse utilization, days of inventory, inventory turns, and warehouse cost per unit, delivery cost per unit, delivery capacity utilization, etc. 

Another problem with application of this formula lies in the separation of fixed and variable costs. An example is warehouse cost that s part of the cost of holding inventory. The Q term includes these costs. The cost is usually derived by totaling all the expenses associated with the warehouse — rent or depreciation, supervision, crew, and equipment. The term is computed by adding all these costs and dividing it by the average units of inventory held during the period. Unfortunately, this treatment makes all these costs appear to be variable. Fixed and variable expenses aren t separated. In fact, over the range of production we set for the supply chain, the costs are more likely to be fixed than variable. 

Manufacturing activities began with the purchase and receipt of direct materials and components and ended with the delivery of the manufactured product to its assigned location in the warehouse. Costs related to tire purchase and handling of materials and components were assigned to products as a cost per pound of material or a cost per dollar of components. Costs... 

The emphasis in vehicle manufacturing is on using returnable containers to achieve the substantial savings they represent in labor, storage, and warehouse costs. Quality improvement through elimination of dust and similar contamination as well as the improved protection from a returnable system make this a real winner. The system design eliminated the use of cardboard at Bramalea for almost 100% of parts. 

Inventory and warehousing include in-plant inventories, in-plant handling, plant warehouse costs, supply chain inventories, and supply chain warehousing costs. 

Commons, J.R. 1934. Institutional Economics, Madison, WI University of Wisconsin Press. Digest, E.o. D.W.C. 1911. Digest of Warehouse Cost Calculations and Handling Standards. Drickhamer, D. 2003. Special delivery logistics service providers want to manage you supply chain. Are they reaAyl Industry Week2A-21. 

Customers as well as corporations continue to put on pressure to reduce warehouse costs. Every time a facility handles a piece of material, it takes human work effort to complete it. The likelihood of error, which could result in injuries, grows as a result of increased demands for speed, accuracy, productivity, and value-added services. On-time deliveries at over 99 percent are expected by customers. 

Each year, Americans report over three million fires leading to 29,000 injuries and 4,500 deaths (1). The direct property losses exceed 8 biUion (1) and the total annual cost to our society has been estimated at over 100 biUion (2). Personal losses occur mosdy in residences where furniture, wall coverings, and clothes are frequently the fuel. Large financial losses occur in commercial stmctures such as office buildings and warehouses. Fires also occur in airplanes, buses, and trains. 

The cost of transportation has an important effect on the marketabiUty of chemicals. For that reason, transportation, along with numerous other factors, is often a significant consideration in determining the location of chemical production faciUties. In addition, convenient and economical access to water and rail transportation and the interstate highway system, as well as proximity to raw materials and markets, may influence the choice of warehouse and terminal sites for storage and redistribution of chemical products (see Plant location). 

When goods consigned to a shipper s warehouse or terminal are damaged, disputes frequentiy arise as to their value. Usually, the carrier contends that shippers should not earn profit on sales not made, and the shipper contends that it should not be required to produce goods merely to recover its costs. Such disputes are sometimes resolved by payment of the sales price less costs not incurred, such as the cost of deHvery from the warehouse to the consignee. 

An Example of Functional Notation Suppose that a storage warehouse of 16,000 fF is required. The construction costs per square foot are 10, 3, and 2 for walls, roof, and floor respectively. What are the minimum cost dimensions Thus, with h = height, x = width, and y = length, the respective costs are... 

Raw-materials, intermediate, and finished-product inventories Cost of handling and transportation of materials to and from stores Cost of inventory control, warehouse, associated insurance, security arrangements, etc. 

Not only the buildings themselves, but an allowance for equipment and stocks within the buildings must be included in the cost estimates, such as maintenance shop power equipment, control laboratory analytical equipment and reagents and, largest of all, the thousands of warehouse equipment spares, fittings, and supplies. For feasibility cost estimates, such items are factored from experience. 

Resin solution penetrating sealers are now available which, for very large warehouse floors, are comparable in applied costs with the concrete surface hardeners and are now being increasingly specified. Experience indicates that certain acrylic resin solutions are proving more durable and offer better protection to chemical and oil spillage than concrete surface hardeners. Acrylic resin solution sealers can markedly improve the abrasion resistance of concrete floors and have rescued a number of poor-quality floors. 

This cost will depend on the nature of the product. For liquids collected at the site in the customer s own tankers the cost to the product would be small whereas the cost of packaging and transporting synthetic fibres or polymers to a central distribution warehouse would add significantly to the product cost. 

The engineer must decide whether warehouses should be at ground level or at dock level. The latter facilitates loading trains and trucks, but costs 1520% more than one placed on the ground. It is usually difficult to justify the added expense of a dock-high warehouse. 

Suppose the proposed plant costs consisted mainly of warehouses and construction labor. Assume the ratios are as follows ... 

The sales costs are those involved with contacting the customer and convincing him to buy. Included are such items as warehouses throughout the country for quick distribution, sales offices, salaries and expenses, advertising, and technical service departments. 

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