PART II END-OF-CHAPTER QUESTIONS CHAPTER 10: WAREHOUSING MANAGEMENT 1. Distinguish between warehouses and distribution centers. Warehouses emphasize the storage of products, and their primary purpose is to maximize the use of storage space. In contrast, distribution centers emphasize the rapid movement of products through a facility, and thus attempt to maximize throughput (the amount of product entering and leaving a facility in a given time period. 2. Explain the four ways that warehousing facilitates the regrouping function.
Regrouping takes four forms: accumulating (also referred to as bulk-making), allocating (also referred to as bulk-breaking), assorting, and sorting. Accumulating involves bringing together similar stocks from different sources, while allocating involves breaking larger quantities into smaller quantities. Assorting refers to building up a variety of different products for resale to particular customers, while sorting out refers to separating products into grades and qualities desired by different target markets. 3.
Discuss some of the value-added activities that can be performed by warehouses and distribution centers. These value-added activities include assembly, light manufacturing, product testing, and affixing state tax stamps. Some goods are labeled prior to distribution to retail outlets. In addition, warehousing facilities are increasingly the places where retail point-of-sale displays are created and produced. 4. What are the advantages and disadvantages of private warehousing? One disadvantage to private warehousing is that they are characterized by high fixed costs—which necessitates high and steady demand volumes.
In addition, a high fixed cost alternative becomes less attractive in times of high interest rates because it is more costly to secure the necessary financing. Private warehousing may also reduce an organization’s flexibility with respect to responding to changes in the external environment. As for advantages, private warehousing offers users a great deal of control over their storage needs. More specifically, private warehouses can be constructed to meet user specifications and companies can also control product placement within a facility. In addition, private warehousing offers access to products when an organization needs or wants them. . Distinguish between bonded storage and field warehousing. There are several types of bonded storage. U. S. Customs-bonded warehouses hold goods until import duties are collected. Internal Revenue service-bonded warehouses hold goods until other federal taxes and fees are collected. A field warehouse is a facility temporarily established at the site of an inventory of goods, often the premises of the goods’ owner. The warehouser assumes custody of the goods and issues a receipt for them, which can then be used as collateral for a loan. 6. Explain how common sense can be helpful in terms of warehousing design and operations.
One common sense piece of advice is that prior to designing a warehousing facility, the quantity and character of goods to be handled must be known. For example, online orders tend to be much smaller than those going to retail stores; as a consequence, picking and assembling one or two items is much different than picking and assembling a pallet-load of items. Another common sense piece of advice is that it’s important for an organization to know the purpose to be served by a particular facility because the relative emphasis placed on the storage and distribution functions affects space layout.
For instance, a distribution-oriented facility attempts to maximize throughput rather than storage. 7. What is cross-docking? How might it affect warehousing design? Cross-docking can be defined as a process where a product is received in a facility, occasionally married with product going to the same destination, then shipped at the earliest opportunity, without going into long-term storage. A “pure” design of a cross-dock facility would resemble a motor carrier terminal—rectangular, long, and as narrow as possible. A facility designed for cross docking would devote more space to dock operations and less space to product storage. . In terms of warehousing design, give examples of trade-offs involving space, labor, and mechanization. Spaciousness may not always be advantageous because the distances that an individual or machine must travel in the storing and retrieving functions are increased. On the other hand, cramped conditions can lead to inefficiencies such as the product damage that can be caused by forklift puncture and movement bottlenecks caused by inefficient aisle width. 9. Distinguish between fixed and variable slot locations. How might they affect warehousing design?
A fixed slot location refers to a situation where each SKU has one or more permanent slots assigned to it, although a variable slot location involves empty slots being assigned to products based on space availability. Fixed slot systems may result in low space utilization and generally need to be larger than a variable slot facility. 10. Discuss the trade-offs associated with order-picking versus stock-replenishing functions. Organizations must decide whether workers who pick outgoing orders and those who are restocking storage facilities should work at the same time or in the same area.
When order pickers and stock replenishers are allowed to work in the same area, fewer managerial personnel may be needed, but it may also lead to congestion due to the number of workers in a relatively limited space. One suggestion is for the two sets of workers to use different aisles for their activities, but this requires a superior information system. 11. Distinguish between a two-dock and a single-dock warehousing layout. Which one requires more space? Why? A two-dock layout has receiving docks on one side of the facility and shipping docks on the other side, with goods moving between them.
In a one-dock system, each and every dock can be used for both shipping and receiving. This alternative reduces the space needed for storage docks, but it requires carriers to pick up and deliver at specific times. 12. What are some potential advantages to paperless warehousing operations? The food industry has experienced numerous benefits from paperless warehousing—to include reduced training time for new employees and 80% increases in pick accuracy. Moreover, paperless systems can be particularly useful in certain situations, such as frozen storage units, where it can be difficult to write while wearing heavy gloves. 3. Discuss how storage and handling equipment can influence warehousing operations. Before installing storage equipment, companies should be familiar with the applicable regulations; for example, building codes in earthquake-prone areas often limit the height of storage shelves and racks. The use of racks may improve space utilization by allowing for narrower aisles. However, narrower aisles require specialized equipment with the capability of moving both vertically and horizontally at the same time. 14. What is a warehouse management system (WMS)? How can it benefit warehousing operations?
Warehouse management systems are software packages that control the movement and storage of materials within an operation. Activities that can be controlled by WMS include inventory management, product receiving, and determination of storage locations, among others. Payback can be relatively quick because WMS often lead to increased worker productivity. This can allow companies to reduce the number of employees which translates into lower labor costs and fewer pick errors. Other benefits include better facility utilization, improved picking procedures, and improved customer service. 15.
What is OSHA? What is OSHA’s role in warehousing safety? OSHA is the Occupational Safety and Health Administration, an agency of the U. S. federal government that has responsibilities for industrial safety practices. In recent years, OSHA mandated that forklift drivers actually have to drive forklifts as part of the training process and that driver performance be evaluated every three years. OSHA inspectors make frequent visits to industrial workplaces; in cases of non-compliance, citations can be issued and fines can be levied. 16. What are the most common causes of warehousing fires?
Which do you think is the easiest for managers to control? Justify your answer. The most common cause of warehousing fires are arson, tobacco smoking, improper use of forklifts, electrical malfunctions, poor product disposal practices, and storage of incompatible materials. There are a variety of possible answers to the second part of the question; having said this, students should recognize that many fires can be prevented by common sense. 17. What are the four questions that should be asked with respect to HAZMAT storage? What material is being stored? Why is it being stored? Where is it being stored? How is it being stored? 8. Discuss how warehousing security can be enhanced by focusing on people, facilities, and processes. With respect to people, a starting point might be determining if a facility even has a formal hiring process. As for facilities, a number of different low-tech (e. g. , fences) and high-tech (e. g. , closed-circuit video cameras) devices can help to enhance warehousing security. Finally, with respect to processes, the more times a shipment is handled, the greater the opportunities for loss and/or damage. 19. Do you think a distribution center where cats have been used to control bird and rodent infestations is a good idea?
Why or why not? Warehouse sanitation is generally not predicated on complex theories and/or costly technology, but rather, common sense and diligence. As such, although cats might be very good at controlling birds and rodents, the unpredictability of cat behavior suggests that they could cause more problems than they solve. For instance, equipment operators might be more careful when using their equipment—so as to avoid harming the cats. This increased carefulness, however, could result in increased materials handling times—which might detract from customer service. 20.
Discuss why contract warehousing is becoming a preferred alternative for many organizations. Contract warehousing simultaneously mitigates the negative aspects and accentuates the positive aspects of public and private warehousing. For instance, contract warehousing allows a company to focus on its core competencies, with warehousing management provided by experts. Contract warehousing also tends to be more cost effective than private warehousing, with potentially the same degree of control because key specifications can be included in the relevant contract. PART III EXAMINATION QUESTIONS
CHAPTER 10: WAREHOUSING MANAGEMENT Multiple Choice Questions 1. Warehouses emphasize ____________ and their primary purpose is to maximize ____________. a. product storage; throughput b. product storage; usage of available storage space c. rapid movement of product; throughput d. rapid movement of product; usage of available storage space (b; p. 299) 2. Distribution centers emphasize ____________ and their primary purpose is to maximize ____________. a. product storage; throughput b. product storage; usage of available storage space c. rapid movement of product; throughput d. apid movement of product; usage of available storage space (c; p. 299) 3. Throughput refers to: a. storage capacity of a warehousing facility b. volume through a pipeline c. inventory turnover in a one-month period d. amount of product entering and leaving a facility in a given time period (d; p. 299) 4. The primary factor that distinguishes a distribution center from a warehouse is: a. distribution centers tend to be multi-story buildings b. distribution centers stress storage c. distribution centers stress rapid movement of products through the facility d. istribution centers tend to be smaller than warehouses (c; p. 299) 5. Warehouse ____________ is a measure of how many products are received and discharged through a facility. a. dunnage b. productivity c. capacity d. throughput (d; p. 299) 6. Warehousing and ____________ are substitutes for each other. a. transportation b. materials handling c. packaging d. procurement e. none of the above (a; p. 299) 7. ____________ and ____________ refer to adjustments associated with the quantity of product. a. accumulating; allocating b. allocating; assorting c. sorting; accumulating d. sorting; assorting a; p. 300) 8. ____________ involves breaking larger quantities into smaller quantities. a. allocating b. assorting c. accumulating d. sorting (a; p. 300) 9. ____________ involves bringing together similar stocks from similar sources. a. bulk-breaking b. assorting c. accumulating d. sorting (c; p. 300) 10. ____________ refers to building up a variety of different products for resale to particular customers. a. accumulating b. allocating c. sorting d. assorting (d; p. 300) 11. Which of the following is not a reason for why warehousing exists? a. facilitates the regrouping function b. atterns of production and consumption do not coincide c. to store surplus products d. to service production and raw material considerations e. all are reasons (e; pp. 300–301) 12. ____________ warehouses are similar to common carriers. a. public b. private c. contract d. cross dock (a; p. 301) 13. Which of the following is not a characteristic of public warehousing? a. requires no capital investment from user b. user receives a regular bill for space used c. good for companies dealing with large volumes of inventory d. lack of control by user e. all are characteristics (c; pp. 301–302) 14.
Bonded storage in a public warehouse refers to: a. products being stored in a public warehouse and no duties or taxes paid until the products leave the facility b. products that are insured by a general warranty bond c. products that are bonded as required in the order specifications d. products that are subjected to regular inspections e. none of the above (a; p. 302) 15. A field warehouse is: a. a facility that is often used as a field sales office along with the traditional storage function b. a facility established primarily to hold material serving as collateral for a loan c. facility that is primarily used as a break-bulk point d. a facility located in a number of remote areas from the main production facility (b; p. 302) 16. All are characteristics of private warehousing, except: a. owned or occupied on a long-term lease by the firm using them b. feasible when demand patterns are irregular c. users have a great deal of control d. may reduce an organization’s flexibility e. all are characteristics (b; pp. 302–304) 17. A private warehouse should be seriously considered when: a. flexibility must be maintained b. interest rates are high c. hroughput will be substantial and steady d. employee morale is a serious problem e. all of the above (c; p. 303) 18. All are true concerning contract warehousing, except: a. can also be referred to as third-party warehousing b. 3–5 year contracts appear to offer benefits to both user and provider c. more cost effective than private warehousing d. more flexible than public warehousing e. all are characteristics (d; pp. 304–305) 19. Which of the following statements is false? a. in cross docking, the time products are at rest in a storage facility should be as short as possible b. he design of a cross-dock facility would resemble a motor carrier terminal c. most cross-docking operations have emphasized pallet loads of product d. a cross-docking facility should devote more space to dock operations and less space to product storage e. all are true (e; p. 308) 20. The primary advantage of variable slot locations in a warehouse is: a. increased space utilization b. better materials handling c. ease of record keeping d. more logical and simple product layout (a; p. 310) 21. The primary advantage of fixed slot locations in a warehouse is: a. increased space utilization . better materials handling c. knowledge of where specific products are located d. improved employee morale (c; pp. 309–310) 22. As one builds higher, building costs ____________, while warehousing equipment costs tend to ____________. a. increase; decrease b. increase; increase c. decrease; decrease d. decrease; increase (d; p. 310) 23. Which of the following statements is false? a. a two-dock layout reduces the chances of product being reloaded into the vehicle that delivered it b. the order picking and stock replenishment functions may sometimes lead to congestion c. single-dock layout reduces the space needed for storage docks d. a key tradeoff among labor, mechanization, and automation involves the relevant volumes e. all are true (e; pp. 310–311) 24. Which of the following is not a tradeoff in warehousing design? a. picker-to-part versus part-to-picker b. build up versus build out c. order picking versus order taking functions d. space devoted to aisles versus space devoted to storage e. all are tradeoffs (c; pp. 310–311) 25. What has been referred to as the crux of order picking? a. order accuracy b. travel time c. mployees who can count and read d. bar code scanning equipment e. none of the above (b; p. 311) 26. Which of the following is true? a. mechanization has higher fixed costs than automation b. wider aisles increase the space utilization of a facility c. forklifts would be used in a part-to-picker system d. travel time has been referred to as the crux of order picking e. all are false (d; pp. 310–311) 27. According to the text, two-way voice communication has become very popular in the ____________ industry. a. computer b. telecommunications c. food d. automotive (c; p. 312) 28. ___________ tend to be the standard workhorse in many warehousing facilities. a. forklifts b. pallet jacks c. dock carts d. conveyor systems (a; p. 314) 29. Which of the following is false? a. warehouse work can be strenuous and physically demanding b. the use of racks may improve space utilization by allowing for narrower aisles c. goods can be moved by a combination of manual, mechanized, and automated methods d. warehouse workers tend to be easily motivated e. all are true (d; p. 313) 30. All of the following are true, except: a. warehouse management systems generally have payback periods of one to two years b. here tend to be higher pick errors in facilities that have warehouse management systems c. warehouse management systems can reduce the required number of warehouse workers d. there are many different vendors of warehouse management systems e. all are true (b; p. 314) 31. ____________ regulations deal with many aspects of warehousing safety. a. OSHA b. FDA c. FTC d. WSA (a; p. 315) 32. What is dunnage? a. a type of packaging material that is placed inside of boxes b. a slang term for a particular type of ocean liner c. additional transportation fees that are charged to small shippers d. aterial that is used to block and brace products inside carrier equipment (d; p. 315) 33. Which of the following is not one of the four questions associated with effective management of HAZMAT storage? a. what material is being stored b. why is it being stored c. what is the material’s source d. where is it being stored e. all are questions (c; p. 317) 34. It is estimated that the theft and pilferage of products stored in warehousing facilities causes losses in the range of ____________ to ____________ times the products’ value. a. five; six b. four; five c. three; four d. two; three (b; p. 17) 35. All of the following are true, except: a. warehousing security can be enhanced by focusing on people, facilities, and processes b. warehouse sanitation is predicated on common sense and diligence c. warehousing security has increased in importance since the terrorist attacks of September 11, 2001 d. warehousing managers must keep an accurate count of merchandise moving through their storage facilities e. all are true (e; pp. 317–319) True-False Questions 1. Warehouses emphasize the storage of products, and their primary purpose is to maximize throughput. (False; p. 299) 2.
Distribution centers emphasize the rapid movement of products through a facility, and thus attempt to maximize throughput. (True; p. 299) 3. Throughput is the amount of product entering and leaving a warehousing facility in a given period of time. (True; p. 299) 4. Materials handling has been referred to as transportation at zero miles per hour. (False; p. 299) 5. Assorting and sorting refer to adjustments associated with the quantity of product. (False; p. 300) 6. Accumulating involves bringing together similar stocks from different sources. (True; p. 300) 7. Assorting involves breaking larger quantities into smaller quantities. False; p. 300) 8. Warehousing is needed because patterns of production and consumption may not coincide. (True; p. 301) 9. Because companies have different strategies, goals, and objectives, there is no “correct” mix of public, private, and contract warehousing. (True; p. 301) 10. With public warehousing, the user rents space as needed, thus avoiding the costs of unneeded space. (True; p. 301) 11. Two notable private warehouse services involve bonded storage and field warehousing. (False; p. 302) 12. Perhaps the biggest drawback to public warehousing is the inability to provide specialized services. (False; p. 02) 13. Private warehousing tends to be feasible when demand patterns are relatively stable. (True; p. 303) 14. Private warehousing offers potential users a great deal of control over their storage needs. (True; p. 303) 15. Contract warehousing tends to be more cost effective than public warehousing. (False; p. 304) 16. One to two year contracts appear to allow sufficient time for contract warehousers to learn their client’s business while at the same time allowing clients some flexibility. (False; pp. 304–305) 17. Common sense should not be ignored with respect to the design of warehousing facilities. True; p. 305) 18. A facility designed for cross docking should devote more space to product storage and less space to dock operations. (False; p. 308) 19. Tradeoffs must be made among space, labor, and mechanization with respect to warehousing design. (True; p. 308) 20. A fixed slot location warehousing system may result in low space utilization. (True; p. 310) 21. A general rule of thumb is that it is cheaper to build up than build out. (True; p. 310) 22. A one-dock warehouse (in contrast to a two-dock layout) layout increases the space needed for storage docks. (False; p. 311) 3. Mechanization refers to an absence of human intervention. (False; p. 311) 24. Narrower aisles can increase the space utilization of a facility. (True; p. 311) 25. Order accuracy is the crux of order picking. (False; p. 311) 26. According to the text, two-way voice communication has become extremely important in the computer industry. (False; p. 312) 27. Motivation of warehouse employees can be difficult because of the somewhat repetitive nature of the operation. (True; p. 313) 28. Forklifts tend to be the standard workhorse in many warehousing facilities. (True; p. 314) 29.
Because warehouse management systems can be somewhat expensive, payback periods generally run between four and six years. (False; p. 314) 30. Warehouse management systems often allow companies to reduce the number of warehousing employees, which translates into lower labor costs. (True; p. 314) 31. The Warehousing Safety Administration has primary responsibility for warehousing safety practices. (False; p. 315) 32. Fires are a constant threat in warehousing. (True; p. 316) 33. It is estimated that the theft and pilferage of products stored in warehousing facilities causes losses in the range of two to three times the products’ value. False; p. 317) 34. Warehousing security has become an even more important issue for many companies since the terrorist attacks of September 11, 2001. (True; p. 317) 35. Unsanitary warehousing facilities could cause existing customers to take their business elsewhere. (True; p. 317) PART IV CASE SOLUTIONS CASE 10-1: SANDY’S CANDY Question 1: Using those items of comparison for which costs can be calculated, determine the cost difference between the two delivery systems. The answer can best be given by calculating costs in approximately the same order as given in the text: | | | |Item |Schoenecker’s driver/salespeople |Mannix Markets | |Receipts from sales |$71. 00 |$59. 50 | | | | | |LESS: cost of goods sold plus discount |$50. 0 |$31. 00 | | | | | |Shrinkage @ w/s prices |$. 99 |$. 62 | | | | | |Spoilage |– |$. 1 | | | | | |Ordering costs |$1. 50 |$1. 44 | | | | | |Shelf-stocking |– |$1. 8 | | | | | |Warehousing |– |* | | | | | |Delivery to store |– |Negligible | | | | | |Checking goods |$1. 50 |– | | | | | |Billing costs |$1. 00 |– | | | | | |TOTAL |$15. 31 |$24. 5 | | | |(excluding | | | |warehousing costs) | *: Less than $1 calculated on a per ton basis, but $. 96 on a line-item basis Question 2: List and compare those factors to which it is difficult to assign precise costs. Warehousing costs are the most difficult to calculate and allocate. Schoenecker’s will probably offer a higher level of service than would occur if Mannix performs the function, but this is difficult to quantify.
Question 3: Given the data that Sandy has, do you believe that Mannix Model Markets should get its Schoenecker candy through the buying cooperative or continue to rely on direct deliveries by Schoenecker’s drivers/salespeople? Give your reasons. Mannix Markets’ own systems appear preferable, given the data available to Ms. Nykerk. Question 4: If you were Sandy, what additional information would you like to have before being asked to make such a recommendation? See the answer to question 2. Whether the change is desirable depends almost entirely upon how one calculates the cost of moving the candy through the Mannix distribution system. Question 5: Candy sales increase during holiday seasons.
Which of the two candy distribution systems do you think would do a better job of anticipating and supplying these seasonal increases? Why? Schoenecker’s should do a better job, because candy is their specialty. Question 6: Assume you are in charge of labor relations for Mannix Model Markets. Would you like to see continued reliance on drivers/salespeople to supply the markets’ candy needs? Why or why not? The advantage would be that we would have another firm’s labor costs and practices with which we could compare our own. CASE 10-2 MINNETONKA WAREHOUSE Question 1: For each of the four work team sizes, calculate the expected number of trucks in the queue waiting to be unloaded. Size of team |Number of trucks in queue | |2 |3. 2 | |3 | . 5 | |4 | . 27 | |5 | . 12 | Question 2: For each of the four work team sizes, calculate the expected time in the queue—that is, the expected time a truck has to wait in line to be unloaded. Size of team |Expected time in queue | |2 |. 8 hour | |3 |. 125 hour | |4 |. 067 hour | |5 |. 030 hour | Question 3: For each of the four work team sizes, what is the probability that a truck cannot be unloaded immediately? Size of team |Probability that truck must | | |wait upon arrival | |2 |80% | |3 |50% | |4 |40% | |5 |30% | Question 4: Which of the four work teams has the lowest cost to Wayne? Size of team |Total cost | |2 |$268. 00 | |3 |$102. 00 | |4 |$96. 00 | |5 |$95. 32 |
Question 5: Wayne is also considering rental of a forklift to use in truck unloading. A team of only two would be needed, but the hourly cost would be $38 per hour ($28 for the workers and $10 for the forklift). They could unload a truck in five minutes. Should Wayne rent the forklift? A two-person crew and a forklift will cost $38 per hour. Compare this with the answers in question 4; Wayne should adopt a two-man crew and use a forklift. Question 6: Disregard your answer to question 5. Labor negotiations are coming up, and Wayne thinks he can get the union to give way on the work rule that prohibits warehouse workers on the unloading dock from being given other assignments when they are not unloading trucks.
How much would Wayne save in unloading dock costs if he could reassign warehouse workers to other tasks when they are not unloading trucks, assuming that he has picked a good team of workers and each worker works 8 hours a day? From the printouts, we must determine how much “idle time” there is with the present system. This depends in part upon the crew size. For a crew of four, for example, 24 minutes per hour is spent unloading trucks, and the rest is idle time. Hence Wayne could get 36 minutes of work per hour of work elsewhere out of each worker. At $14 per hour, this is worth $8. 40 ($14/hr times . 6 hours). In theory, he could save up to $8. 40 per worker per hour assuming he could assign them to other tasks where the pay rates were the same.