Warehouse location

Warehouse location is determined by many factors that include the strategic priority for competition (made to stock or assemble to order) transportation cost 

If the cost of lost sales is very high, a firm can justify more warehouses. If customers order small quantities frequently, the firm will need more warehouses located closer to the markets. A firm will also have more warehouses if the level of competition is high. 

If the logistics cost is high, the distances traveled will be short so that one would expect to see both manufacturing plants and warehouses built closer to the markets. The other option would be to use contract manufacturer at customer locations and have them ship the product direct to the customers (drop shipping). 

A warehouse for made-to-stock products needs the capability of handling a large number of finished products of different types. For such a warehouse efficiency in storing and retrieving the items would be imperative. An automated warehouse with RFID tags on pallets or containers would be a good fit in terms of creating value for the customer. 

In this section, we will apply the IP models, discussed in Section 5.1, to different supply chain network optimization problems, including warehouse location, network design, and distribution problems. 

Given a set of potential warehouse sites, the problem is to choose the best site that will serve all the customers at minimum cost. 

A firm has four possible sites for locating its warehouses. The cost of locating a warehouse at site i is k,. There are nine retail outlets, each of which must be supplied by at least one warehouse. It is not possible for any one site to supply all the retail outlets as shown in Figme 5.3. 

The problem is to determine the location of the warehouse such that the total cost is minimized. 

The IP formulation of the warehouse selection problem becomes Minimize Z = XiXi + K2X2 + K3X3 + K4X4 

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Transit inventories cause additional capital costs in addition to the stationary inventories in warehouse locations that need to be considered in value chain planning. 

Kathawala Y, Gholamnezhad H (1987) New approach to facility location decisions. International Journal of Systems Science 18 389-402 Kaufman L, Vanden Eede M (1977) A Plant and Warehouse Location Problem. Operational Research Quarterly 28 547-554 Keeney RL (1992) Value-Focused Thinking. Harvard University Press, Cambridge, Massachusetts... 

Keeney RL, Raiffa H (1976) Decisions with Multiple Objectives Preferences and Value Tradeoffs. John Wiley Sons, New York et al. Kelly DL, Marucheck AS (1984) Planning Horizon Results For the Dynamic Warehouse Location Problem. Journal of Operations Management 4 279-294... 

Where bar code labels are generated and applied on site, a unique inventory number can be generated and applied to the specific carton, pallet load, or packaging system. The system should be engineered so that bar code labels correspond with storage standards. The inventory number can then be assigned specific warehouse location information. 

The potential consequence of a chemical release from a warehouse located in an area having a high population density is greater than a warehouse located in a sparsely populated area. Additionally, certain segments of the population are more susceptible to chemical exposure related health problems than others. Children, the elderly, and people with preexisting health problems will be more sensitive to low level chemical exposure than young healthy adults. 

General chemicals non-reactive Store on general laboratory benches or shelving, in chemical storage rooms or warehouse locations. Agar, sodium chloride, sodium bicarbonate, and most non-reactive salts See MSDS... 

Packaging used for finished products can significantly affect the quality of the final product at the distribution and warehouse location. The final package should meet all lATA (International Air Transport Association), DOT (Department of Transportation), UFC (Uniform Freight Glassification), uniform packaging codes and transportation requirements for both dry and liquid biopesticides. 

The ABC business consisted of two warehouses located about 200 miles apart. Each carried about the same line of products, although there were some differences and some seasonal variations. Some of the team members thought the locations might be performing a little differently, it was decided to construct a run chart of the data but to stratify the data by warehouse 1 and 2. This run chart with stratification is shown in Figure 23. 

Warehouse location fixed costs variable costs (labor, utilities)... 

Khumawala, B. M. (1972), An Efficient Branch and Bound Algorithm for the Warehouse Location Problem, Management Science, Vol. 18, No. 12, pp. B718-B733. 

Meidan, A. (1978), The Use of Quantitative Techniques in Warehouse Location, International Journal of Physical Distribution and Materials Management, Vol. 8, No. 6, pp. 347-358. 

An excellent example of postponement is the mixing of paint colors at the retail store. Rather them having to forecast the exact colors that consumers will want to buy, the retailer mixes paint in any color the consumer wishes to acquire at the time of purchase. Other examples include color pemels in the front of built-in kitchen appliances that enable the same unit to be any one of a number of colors the centialization of slow-selling products in one warehouse location tmd the assembly of slow-moving items only tifter orders have been received. 

The supply chain was complex and involved seven countries, two plants, twenty-one distribution centers, ten candidate distribution centers, 5,700 SKUs, and multiple channels of distribution. There was substantial overlap in plants and warehouse locations across both companies, with the US company having six plants and eight warehouses and the European company having four plants and seven warehouses. 

An alternate approach to increase customer service level is to decrease manufacturer and retailer lead times by adjusting choice of the warehouse location such that the retailer can pick up product during backhaul trips. Such an adjustment of location may represent an optimal approach to improve overall performance. 

The apphcation of bucket brigades at Revco su ests that even after the warehouse location and layout are defined, there continue to be opportunities to improve performance by adjusting task allocation across workers to become more flexible and demand driven. 

Any excess quantities produced above the demand forecast can be dispatched to warehouses located at strategic places for catering to nearby areas in future. 

Step 4 Identify facility requirements. Facilities need to be tailored to achieve the desired objectives (e.g., products with high service level may require distribution warehouses located near the marketplace). 

Intermediately positioned warehouse—A warehouse located between customers and manufacturing plants to provide increased customer service and reduced distribution cost. 

Initial data loading Afterthe software was tested satisfactorily, clean and most updated data were loaded into the system. The datasets included initial inventory information, warehouse location information, purchase orders, and so forth. Extra efforts were made to ensure that accurate and high-quality data were loaded. Another set of tests was performed with these real-life datasets, and after successful completion ofthese, test data were reloaded and the old and new systems were run in parallel for some periods before switching to the new system. 

POC (Point of Consumption) Positions in the supply chain that are controlled by 3C rules. The POC signals to suppliers what amount to provide to replace what has been consumed. A POC can be a warehouse location, finished goods stock at a factory, staging point in front of a critical operation, or at the point of entry of material into the plant. 

Optimization The application of operations research tools to a supply chain function. Examples include distribution planning (warehouse location and transportation planning) and planning a scheduling production. Optimization technology applies in complex supply chains and when the potential for improvement justifies its use. 

Khumawala, B.H. and D.L. Kelly, Warehouse Location with Concave Costs , INFOR, 12 (1974), 55-65. 

In applying the set covering model to the warehouse location problem in supply chain, we treat the potential warehouse locations as "colunms" and the customer regions as "rows" of the set covering matrix A. We construct the matrix A, by setting its elements as follows ... 

By including the cost of building a warehouse at location j as K, we will minimize the total cost of building warehouses such that every customer region can be supplied by at least one warehouse. We will illustrate this with Example 5.3 in the next section. In addition to the warehouse location problem. Section 5.2 will also include other examples in supply chain network design and distribution problems using binary variables for modeling. 

The warehouse location problem is basically a set covering problem. The first step is to define the set covering matrix (A) based on the network configuration shown in Figure 5.3. The rows of the matrix will be the nine retail outlets and the columns will be the four potential warehouse locations. The elements of matrix A, a, will be set to 1 if retailer i (R ) can be supplied by warehouse location j (Wj), that is, there is a direct link between R and W. Otherwise, we set a, = 0. 

The selection of optimal sites for warehouse location is a strategic decision. We shall now consider the tactical decision of distributing products to retail outlets from a given set of warehouses. The distribution problem is basically... 

Each warehouse site has a fixed capital cost independent of the quantity stored, and a variable cost proportional to the quantity shipped. Thus the total cost of opening and operating a warehouse is a nonlinear function of the quantity stored. Through the use of binary integer variables, the warehouse location-distribution problem can be formulated as an integer program. 

When site 1 is not selected, 81 will be zero. This will force Xu, X and X14 to become zero. Similarly, the cost functions for sites 2 and 3 can be written. Thus the complete formulation of the warehouse location problem reduces to the following mixed integer program ... 

Which products should be stored or warehoused at a certain warehouse location ... 

The main issues to be addressed in the bi-criteria model are to (i) determine the numbers and locations of suppliers, (ii) select the appropriate set of warehouse locations and capacity levels in the network, and (iii) determine the optimal manufacturing and distribution of products through the selected set of facilities. The conflicting objectives of the model are (1) maximizing supply chain profit and (2) maximizing supply density. 

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