The impact of resource sharing on the design of multi-client warehouses

Abstract

Third-party logistics (3PL) services are essential in many supply chains and aim at providing flexible and cost-effective transport and warehouse solutions. This study focuses on Warehouse Service Providers (WSPs) with shared, multi-client warehouses. We investigate how the main internal resources should be shared among clients. We focus on labor (order pickers and sorters) and pick storage space (zones) as the main internal resources in the order picking process in such a warehouse. We evaluate different possible resource-sharing configurations and develop a model to find the configuration that can satisfy set service-level agreements at minimum cost. The cost consists of labor and space cost, whereas the service-level requirements are based on the mean and tail of the order-throughput-time distribution. The results show that whether to share the resources or not highly depends on the clients’ characteristics, such as the order demand rate. Generally, for low-demand clients, sharing all the resources is optimal, whereas for high-demand clients, dedicating all resources is preferred. In addition, the decision to share resources depends on the warehouse’s characteristics, similarities between clients’ product and order picking characteristics. The findings of this article provide valuable insights for WSPs to minimize cost, while meeting the service-level requirements of clients by optimally selecting the warehouse configuration. This may, in turn, benefit their clients by offering better pricing policies to them, which can also be a compelling selling point, ultimately contributing to business growth and attracting more clients.