Warehouse Costs Research Articles

Reducing national freight logistics costs risk in a high-oil-price environment

Purpose – South Africa's logistics cost measurement was expanded to include externality costs, and scenarios based on the key exogenous risks were developed to inform mitigation strategies. This paper aims to discuss these issues. Design/methodology/approach – The research approach is quantitative, based on a gravity-orientated freight flow model, a road transport cost model, actual transport costs for other modes, a warehousing cost survey, an inventory delay calculation (to inform warehousing cost calculations and inventory financing costs) and an externality cost calculation. Findings – Transport cost pressures are expected to deteriorate due to the increasingly negative outlook for the oil price and the internalisation of externality costs. The nature of these forces compels transport cost challenges to be addressed strategically through collaborative, industry-wide and even nationwide initiatives. Research limitations/implications – Key limitations are inconsistent commodity classification schemes across information sources, and incomplete container content data. The researchers are collaborating with information providers to address these issues and refine model accuracy and forecasting. Practical implications – The exogenous risks strengthen the argument for new approaches to South Africa's logistics cost challenges driven by the high densities of corridor freight flows. Social implications – The inclusion of externality costs highlighted the negative environmental impact of the current modal configuration and provides impetus for change. Originality/value – Major advancements to logistics cost modelling were made by incorporating externality costs and developing scenarios for risk mitigation. Freight flow data granularity (in excess of one million records) allows both aggregation to national-level intelligence to inform policies, large-scale infrastructure investments and industrial positioning, and disaggregation to enable practical application.

A Deteriorating Production inventory Problem with Space Restriction

With today's high competitive market, to afford the cost of warehouses is a very difficult task for the management in most of the countries. Managers are faced with the need to deliver a high level of service with minimal warehouse and inventory cost. Since a large ordered quantity increases the workforce of a warehouse. So it is necessary to develop tools which can help managers to handle warehouse to avoid the extra cost of handling.So it is economical to order the inventory according to available storage space. This problem is developed with the concept of space restriction in which demand is exponential, and deterioration is time dependent. Production is taken as a function of demand. The optimal cycle time is derived and the result is applied to numerical problems.

A fuzzy-based decision-making method for evaluating product discontinuity at the product transition point

Companies have been striving to achieve product innovation and cost savings to keep up with a rapidly changing manufacturing environment, as well as to deliver new products just in time and earlier than their competitors. Their strategic goals include effective decision making with regard to product life cycles, predicting market demand, and timing new product launches through the optimization of demand and supply of products. However, most products that enter a decline stage experience a decline in sales, which in turn causes an increase in warehouse costs, and a decline in competitiveness, owing to a delay in the release of new products. In this paper, we propose a fuzzy-based decision-making method to effectively evaluate products to be discontinued at the product transition point after taking into account market uncertainties and characteristics of businesses in companies. Therefore, we conduct the matrix analysis and the Pareto analysis for quantitative evaluation of four stages of the product life cycle based on market demand information for target product groups, apply the results of this analysis to the fuzzy-based qualitative evaluation model, and subsequently infer the discontinuity priority for product models that are expected to be replaced by new products. Furthermore, we develop the PTP portfolio system to identify a list of product models to be discontinued, as well as to review their percentage of sales contribution with respect to the overall product sales of the company.

The Reduction of Inventory and Warehouse Costs for Thai Traditional Wholesale Businesses of Consumer Products

Abstract This paper deals with the problems of inventory and warehouse costs for Thai traditional wholesale businesses in consumer products. The wholesale businesses of consumer products consist of a few hundred of suppliers and almost fifty thousand Stock Keeping Units (SKUs), which inventory and warehousing are not only costly but also hard to manage. This study's main objectives are to know the source of the high inventory and warehousing costs, and to find ways on reducing them. The study involves shop owners as respondents and uses observational study and interview for data gathering. This research also applies the concept of basic mathematical model for integrating all segments by applying Excel program in single window of purchasing, inventory, sales and marketing segments, which is decision maker. The data were then interpreted with the help of statistical tools. This research reveals that most of Thai traditional wholesale businesses lack knowledge and methodology for executing business by separating management of procurement and purchasing, inventory and warehouse, and sales segments. The result also shows that Thai traditional purchasing is decided more by feeling rather than facts. The high inventory and warehousing costs have occurred by purchasing, so sales and marketing can help to reduce inventory and warehouse costs. Therefore, if the integration of all segments is a single window management, then it becomes the best way for executing business.

Electre tri method used to storage location assignment into categories

Day after day, the importance of a company having an efficient storage location assignment system increases. Moreover, since products have different warehouse costs and customers' requirements are also different, it is important to sort products in order to adopt strategies for inventory management that are appropriate for each product. However, adopting a policy for each product is not applicable in the real world. Therefore, companies usually categorize products into classes and thereafter adopt specific inventory management policies. Given this situation, this paper puts forward the arguments for adopting a multi-criteria method, Electre TRI, to sort products that both considers criteria relating to the characteristics of a product as to its physical location in the warehouse and the criteria that are important for inventory strategies, such as, for example, the profitability of each unit held in storage.

Key performance indicators of the impact of radio frequency identification technologies on supply chain management

Although the benefits of Radio Frequency Identification Technologies (RFID) are quite well known, they are still scarce applications to agriculture and food supply chains. The aim of this study was to determine the extent to which the adoption of RFID can improve supply chain performance in agri-food supply chains. The methodology was a case study of a fruit cooperative using semi-structured interviews and other sources of evidence in order to examine the supply chain performance before and after the RFID implementation. Benefits from the RFID implementation were classified into two broad categories: strategic and operation ones. Strategic benefits included: reduction of the warehouse costs; reduction of total lead time from production to sales; improvement of customer relationship management; improved recall management. Operational benefits included: Better handling of unforeseen events; reducing lead times in warehousing and inventory; improved quality control.

Calculation of freight externality costs for South Africa

The purpose of this study is to quantify the marginal external costs associated with freight transport in South Africa. Six cost elements are included as externality cost items, namely, costs related to accidents, emissions, roadway land availability, policing, noise and congestion. Inputs in the calculations were a gravity-oriented freight flow model, a road transport cost model, actual transport costs for other modes, a warehousing cost survey, an inventory delay calculation and various national sources of information such as accident statistics and government budgets. Estimation techniques resulted in advances for externality cost measurement in South Africa. The quantification of the cost elements will be used to update the South African Freight Demand Model. The results show that the cost of transportation would have been 20% more if external factors were taken into account. The marginal rates of externalities can be used to develop scenarios based on alternative choices for South Africa's freight transport infrastructure configuration.

Management Insights

Management Insights

Effects of geographic dispersion on intra‐firm supply chain performance

PurposeThis article aims to quantify and analyse empirically how the geographic dispersion of a firm's supply chain impacts on intra‐firm supply chain performance.Design/methodology/approachGeneralised linear modelling is utilised to analyse a sample of 95 large manufacturing companies operating in Finland.FindingsResults indicate that the increased geographic dispersion of the upstream supply chain results in higher costs of warehousing and logistics administration. On the downstream side, inventory costs, inventory days of supply, and cash‐to‐cash cycle time tend to increase due to geographically dispersed sales network. Increased geographic dispersion in the upstream and downstream supply chain results in the decline of perfect orders, and increases order fulfilment cycle time. However, the increased dispersion of the production network reduces order fulfilment cycle time. The results also indicate that the larger the firm, the better it can alleviate the negative implications of dispersion on perfect order fulfilment. Make‐to‐stock companies suffer less from the supply chain dispersion related delays in comparison to companies that utilise more pull‐type production and inventory strategies.Research limitations/implicationsResearch limitations include the cross‐sectional nature of the data, the concentrated geographic origin of the respondents, and the small sample size.Originality/valueBuilding on the multidisciplinary body of prior literature on geographic dispersion, the research provides quantified insights into the general principles of international supply chain design in the presence of a performance related trade‐off between the dispersion and centralisation of operations across the tiers of the supply chain. Contributions are made to the discussions on supply chain complexity, international sales portfolio diversification and international purchasing.

중국 자동차 공장의 HT8 관리체계 구축을 통한 생산성 향상에 관한 연구

This paper deals with the productivity increment through construction of HT8 production system for automobile factory in China. HT8 production system start to build up several management indices. The important management indices consists of organization management, location management, management of order, management of defective item, management of delivery information, and warehouse management. This HT8 production system is expected to obtain the improvement for overall organization management and reduction by 50% in warehouse cost.

Estimation of the benefits for shippers from a multimodal transport network

This paper develops an economic assessment of a multimodal transport network for single pallets. A shipment-size choice model is estimated to calculate the shippers’ reactions and their economic benefits from that transport network. In the model, the major factor influencing logistics decisions—the balance between warehouse and storage cost—is explicitly taken into account. The functional form is deduced from the first-order condition of the minimization problem of total logistics cost. Transport cost is expressed in the form of a complex function depending on shipment size and transport distance in order to capture the effect of economies of scale in transportation. The model parameters are estimated based on empirical data from two major German corporations. Simulations show that the new intermodal transportation system has a significant impact on the shipment-size distributions changing them in favor of smaller shipments. This leads especially to significant reductions in warehouse costs. Finally, some implications of the analytical results on transport policy are provided: To foster green logistics and achieve further modal shifts from road to rail, public financial support and the regulatory framework have to enable railways to consolidate small and logistics demanding shipments at an industrial scale.

Robust Storage Assignment in Unit-Load Warehouses

Assigning products to and retrieving them from proper storage locations are crucial decisions in minimizing the operating cost of a unit-load warehouse. The problem becomes intractable when the warehouse faces variable supply and uncertain demand in a multiperiod setting. We assume a factor-based demand model in which demand for each product in each period is affinely dependent on some uncertain factors. The distributions of these factors are only partially characterized. We introduce a robust optimization model that minimizes the worst-case expected total travel in the warehouse with distributional ambiguity of demand. Under a linear decision rule, we obtain a storage and retrieval policy by solving a moderate-size linear optimization problem. Surprisingly, despite imprecise specification of demand distributions, our computational studies suggest that the linear policy achieves close to the expected value given perfect information and significantly outperforms existing heuristics in the literature. This paper was accepted by Gérard P. Cachon, optimization.

RFID And Supply Chain Management: An Assessment Of Its Economic, Technical, And Productive Viability In Global Operations

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.6in 0pt 0.5in;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">The integration of Radio Frequency Identification (RFID) systems within a company’s supply chain offers an abundance of economic and productive capabilities.<span style="mso-spacerun: yes;">  </span>RFIDs permit an organization’s supply chain to have increased product visibility, reduction of stock, trim warehouse costs, eliminate stock errors, reduce theft and shrinkage and allow them to update their logistics and inventory databases with real-time information.<span style="mso-spacerun: yes;">  </span>The technical capabilities and limitations of RFIDs are examined.<span style="mso-spacerun: yes;">  </span>Suppliers and retailers must create solid alliances to build an RFID network, which must support both technical and operational information needs.<span style="mso-spacerun: yes;">  </span>This is a necessary and sufficient condition for integrating RFID within their respective supply chains.<span style="mso-spacerun: yes;">  </span>While cost is identified as the predominant factor inhibiting progress in RFID tagging at the product unit level, the future remains very promising for rapid gains in RFID development as long as technology continues to advance through increased research and development initiatives.</span></span></p>

A design of distribution network and development of efficient distribution policy

The distribution system design considered in this paper is derived from current operations of a major consumer product company in India who manages products for nationwide distribution. The company is charged with Central Sales Tax (CST) along with local tax VAT for the trade that happens across the state borders while distributing the products from the factories. To avoid CST, company could consider opening warehouses in each state. This will have an extra cost of opening and operating warehouse in each state. So, this needs a cost trade-off between the option of continuing with the existing system or opening a new warehouse. Accordingly, a two-stage integrated solution framework is proposed in this study. In the first stage, a mathematical model is proposed to solve the facility location and production distribution policy for the company by minimising the cost comprising production costs at factory, fixed and labour cost of new warehouses and shipment cost from factories to warehouses and warehouses to distributors. In the second stage, a breakeven analysis is proposed to compare the new proposed network with the existing network based on the distribution cost. The workability of the proposed framework is demonstrated using a pseudocase developed based on the observation of the company, particularly for nationwide existing distribution.

Radio Frequency Identification: Transforming the Dynamics of Supply and Demand in Publishing

Radio frequency identification (RFID) is a mature technology used across many industries. However, beyond satisfying industry mandates, many in the publishing industry have stepped back from pursuing the potential of RFID. Why? Publishing was first introduced to RFID in 2003 through retailer mandates which created a negative cloud around RFID. Many focused exclusively on the technology and the cost of compliance, rather than the business benefits. Since then, the primary focus has continued to be on the technology. For a publishing industry facing new sources of competition and serious supply-chain issues, the time has come to stop focusing on the technology and start thinking about the benefits. RFID is really all about lowering costs and achieving greater efficiencies. The potential for RFID to reduce warehouse and distribution costs, in-store theft and out-of-stock conditions is exciting, as are the larger opportunities to improve forecasting, customer experience and planning. RFID is new to the book industry and there is still a lot to learn. Understanding the technology is important. But, RFID is not just a technology. It is an enabler for reducing costs, improving profitability and enhancing competitiveness. It is essential that the industry go beyond the technology and start realizing these opportunities.

Impact of Inventory and Warehousing Costs in Total Logistics Cost of Manufacturing Companies in Southwestern, Nigeria

Impact of Inventory and Warehousing Costs in Total Logistics Cost of Manufacturing Companies in Southwestern, Nigeria

The EOQ problem with decidable warehouse capacity: Analysis, solution approaches and applications

The Economic Order Quantity (EOQ) problem is a fundamental problem in supply and inventory management. In its classical setting, solutions are not affected by the warehouse capacity. We study a type of EOQ problem where the (maximum) warehouse capacity is a decision variable. Furthermore, we assume that the warehouse cost dominates all the other inventory holding costs. We call this the EOQ-Max problem and the D-EOQ-Max problem, if the product is continuously divisible and discrete, respectively. The EOQ-Max problem admits a closed form optimal solution, while the D-EOQ-Max problem does not because its objective function may have several local minima. We present an optimal polynomial time algorithm for the discrete problem. Construction of this algorithm is supported by the fact that continuous relaxation of the D-EOQ-Max problem provides a solution that can be up to 50% worse than the optimal solution, and this worst-case error bound is tight. Applications of the D-EOQ-Max problem include supply and inventory management, logistics and scheduling.

Semi-star schema for operational and analytical requirements of SMEs

Decision-making is a very complex process, as it requires complete knowledge and analysis of the business happenings. Large organisations are using data warehouse for analysis of their business because of its specialised properties. But, these organisations bear high maintenance cost, if operational sources are changed. Small and medium enterprises (SMEs) cannot afford development and maintenance cost of data warehouse therefore their decision quality suffers. In order to equip these enterprises with data warehousing functionalities, key-properties of DW are analysed and decision-support (analytical) requirements of SMEs are collected. Based on the analysis, semi-star schema is proposed and evaluated for its advantages. In our study, we have found that semi-star schema can be used for fulfilling operational and analytical requirements of SME.

A polling-based dynamic order picking system for online retailers

One of the challenging questions that online retailers are currently facing is how to organize the logistic fulfillment processes both during and after a transaction has taken place. As new information technologies become available that allow picking information to be conveyed in real time and with the ongoing need to create greater responsiveness to customers, there is increasing interest in applying dynamic picking in the warehouses of online retailers. In a Dynamic Picking System (DPS), a worker picks orders that arrive in real time during the picking operations and the picking information can dynamically change in a picking cycle. Models to describe and analyze such systems via stochastic polling theory are presented and closed-form expressions for the order line waiting times in a DPS are derived. These analytical results are verified by simulation. It is shown that the application of polling-based picking can generally lead to shorter order throughput times and higher on-time service completion ratios than traditional batch picking systems using optimal batch sizes. It is demonstrated that the proposed analysis method can be applied to minimize warehouse cost and improve service.

Regression approximation for a partially centralized inventory system considering transportation costs

Inventory centralization for multiple stores with stochastic demands reduces costs by establishing and maintaining a central ordering/distribution point. However the inventory centralization may increase the transportation costs since either the customer must travel more to reach the product, or the central warehouse must ship the product over longer distance to reach the customer. In this paper, we study a partially centralized inventory system where multiple central warehouses exist and a central warehouse fulfills the aggregated demand of stores. We want to determine the number, the location of central warehouses and an assignment of central warehouses and a set of stores. The objective is the minimization of the sum of warehouse costs and transportation cost. With the help of the regression approximation of cost function, we transform the original problem to more manageable facility location problems. Regression analysis shows that the approximated cost function is close to the original one for normally distributed demands.