consolidation warehousing aubrey blacker brigham young university
TRANSCRIPT
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Consolidation Warehousing
Aubrey BlackerBrigham Young University
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Agenda:
• Define Consolidation Warehousing
• How can it be used in your organization?
• Nuts and Bolts
• How it Works
• Real-World Example
• Exercise
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What is Consolidation Warehousing?
• A form of warehousing that pulls together small shipments from a number of sources (often plants) in the same geographical area and combines them into larger, more economical, shipping loads intended for the same area
-Like Carpooling!
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Small, flexible shipments in-Large, economical shipments out
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How can Consolidation Warehousing be used in your
organization?
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How would implementing Consolidation Warehousing affect
your organization’s…
• Profitability?• Delivery Time?• Inventory Levels?• Customer Satisfaction?• Reputation within the industry?
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Nuts and Bolts• Consolidation warehouses are constructed at a
strategic location between manufacturers and customers
• Third-Party Logistics Providers (3PLs) manage and maintain the consolidation warehouse and the information system needed to run it– Goal: Maximize transportation utilization and minimize costs
• Warehouses can either be client-dedicated or multi-user facilities
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How it Works:
1.Customer places several small orders from multiple manufacturers in the same area
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How it Works
2. Several Less-than-truckloads (LTL) of product from manufacturers in the same area arrive at the consolidation warehouse
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How it Works
3. The 3PL strategically consolidates these small orders from multiple manufacturers into one full Truck Load (TL) headed to the customer using tactical transportation modeling tools
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How it WorksTactical Transportation Modeling Tools
– Input = Customer and purchase order date requirements
– Look to minimize cost by selecting:• Most appropriate mode of transportation• Most appropriate carrier within that mode of
transportation
– Optimize routes and generate a detailed load plan
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How it Works
4. Customer receives product orders from various manufactures in one transaction
-As load size increases, shared transportation costs among manufactures decreases
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Benefits of Consolidation Warehousing
• Lower shipping costs for participants• More efficient transportation• No capital investment required
– Reduces risk
• Allows manufactures to focus on their core competencies
• Lower product costs for customers• Lower inventory levels required
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Concerns associated with Consolidation Warehousing
• Manufacture’s and customer’s information systems must be aligned with the 3PLs– Could be costly
• Takes immediate control of product transportation out of the manufacturer’s hands
• Requires collaboration among suppliers, customers and carriers– May be hard to coordinate
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A Real World Example
Frozen Food Industry
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A Real World Example
Situation:• Retailers wanted smaller, more frequent
shipments– More profitable because it keeps inventory levels
down
• Truck shortage– Shipping LTLs became very costly
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A Real World Example
• 3PLs provided dry, refrigerated/frozen warehouse space to keep products fresh– Managed required product information by using:
• Barcodes• Scanning• Instant Messaging• Internet• Other internet-based information systems
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A Real World Example
• Multiple Manufacturers in the same area used these consolidation warehouses to combine LTL deliveries to retailers
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A Real World Example
Result:• CW maximized truck utilization
– Solved capacity shortage issue in the trucking industry
• And minimized costs/maximized profitability– Decreased shipping costs– Helped retailers maintain low inventories and retain
high profits
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An Exercise
The Penny Game!
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Summary
• Consolidation Warehousing = pulling together small shipments from a close geographical area and combining them to make larger, more economical, shipments to the customer
– Used to minimize transportation costs and maximize efficiency
– Beneficial for manufacturers and retailers– Applicable across many industries
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Readings list• Bozarth, Cecil C., Handfield, Robert B. Introduction to Operations and
Supply Chain Management. Pearson Prentice Hall, United States of America, 2005.
• Frazelle, Edward H. Supply Chain Strategy.Blacklick, OH, USA: McGraw-Hill Education Group, 2001. p 228.http://site.ebrary.com/lib/byuprovo/Doc?id=10041412&ppg=240
• “Chill Challenge”. Food Logistics Age. July 2005. Cygnus Business Media Inc.
• “US Logistics 2005”. Transport Intelligence Ltd. June 2005 USL0506.
• Warehousing Education and Research Council (WERC): www.werc.org