Warehouse functionality

The wise adapt themselves to circumstances, as water molds itself to the pitcher. Chinese Proverb

🧠 Learning objectives

• Understand warehouse functions in supply chains.
• Recognize main warehouse types.

Three overlapping classification dimensions. The diagram combines ownership, facility function, and item-size specialization. These dimensions overlap: a privately operated building can also be a fulfillment center, and a fulfillment center can be sortable or non-sortable. The map is therefore a teaching overview, not one exhaustive mutually exclusive taxonomy.

Ownership. PIARC’s road-transport dictionary, citing EN 14943, defines a private warehouse as a “Warehouse operated by the owner of the goods stored there” (PIARC, n.d.-a, sec. “Term of the Road Dictionary”). It defines a public warehouse as a “Warehouse which is available to all companies and persons” seeking its services (PIARC, n.d.-b, sec. “Term of the Road Dictionary”). Ownership does not determine the warehouse’s process or product-size specialization.

Amazon item-size specialization. Amazon distinguishes sortable fulfillment centers that pick, pack, and ship smaller items such as books, toys, and housewares from non-sortable centers that handle bulky or larger products (About Amazon Staff, n.d., secs. “Sortable fulfilment centre” and “Non-sortable fulfilment centre”). These are Amazon operating categories, not universal ownership classes.

Warehouse type

Raw material warehouses hold inventory near or in factories where the timely support of production and assembly schedules is the key to success. Work-in-process warehouses hold inventory in or near factories and serve primarily as variation buffers between production schedules and demand. Finished-goods warehouses, or plant warehouses, typically hold large quantities of finished goods awaiting deployment to distribution centers. Overflow warehouses are typically located near plant warehouses, often hold seasonal inventory, and are frequently operated by a third party.

Distribution center warehouses are located much closer to the customer base than are plant warehouses. Distribution centers typically receive product from many plant warehouses and serve customers with same- or next-day delivery. Home delivery distribution centers deliver to homes. Retail distribution centers deliver to retail stores. Omni-channel distribution centers deliver to a mix of homes and retail stores. Cross-dock distribution centers do not hold product but simply mix and sort.

— World-Class Warehousing and Material Handling (Frazelle 2016, 15–16).

The growth of e-retailing has seen an increase in the number of customer fulfilment centres. These warehouses have been designed and equipped specifically to manage large volumes of small orders. The video shows the fulfilment operation of an internet retailer called i-herb.com.

These centres can also double up as returns processing centres as e-commerce has a larger percentage of returns than normal retail activities. This area is covered in greater detail later in this chapter.

— Warehouse Management (Richards 2014, 10–11).

Supply chain network

Figure 1: Real-world supply chain networks are non-linear and have many participants (Coyle et al. 2020)

Figure 1.4 presents linear and basic flows in the supply chain. Real-world supply chains are usually more complex than this example because they may be nonlinear or have more supply chain participants. Figure 1.5 illustrates a network connecting a raw-material supplier, manufacturing plant, manufacturing warehouse, wholesaler warehouse, retailer warehouse, and retail store.

This supply chain does not adequately portray the importance of transportation and other service suppliers. In addition, some companies may be part of several supply chains. For example, chemical companies provide ingredients for many different products manufactured by different companies.

Figures 1.4 and 1.5 indicate that a supply chain is an extended enterprise that usually crosses the boundaries of several individual firms to coordinate the related flows of all the companies. This extended enterprise should attempt to execute a coordinated, two-way flow of goods and services, information, cash, and demand. Integration across organizational boundaries means that the supply chain needs to function similarly to a single organization in satisfying the ultimate consumer.

— Supply Chain Management: A Logistics Perspective (Coyle et al. 2020, 15–16).

Warehouse mission

The traditional mission of a warehouse is to effectively ship products in any configuration to the next step in the supply chain without damaging or altering the product’s basic form.

The warehouse plays a critical role in supporting a company’s supply chain success. The mission of a warehouse is to effectively ship products in any configuration to the next step in the supply chain without damaging or altering the product’s basic form. Numerous steps must be accomplished, and hence there are key warehousing opportunities to address. Doing that will optimize the methods used to achieve the mission.

— Facilities Planning (Tompkins 2010, 387).

Warehouse functionality

Functions in distribution facility operations (Coyle et al. 2020):

• Accumulation
• Sortation
• Allocation
• Assortment
• Value-adding

Distribution facilities can provide numerous services, depending on the requirements of the supply chain. In traditional distribution operations, four primary functions are carried out: accumulation, sortation, allocation, and assortment.

Beyond these traditional functions, distribution facilities can provide value-added activities that help organizations handle special customer requirements, create supply-chain efficiencies, and differentiate themselves from competitors.

— Supply Chain Management: A Logistics Perspective (Coyle et al. 2020, 370–72).

Accumulation

A DC serves as a collection point:

• Transfer, storage, and processing services.
• Consolidate orders and shipments.
• Cost-efficient deliveries.

Figure 2: Larger and cost-efficient deliveries to a central DC (Coyle et al. 2020)

Accumulation :: involves the receipt of goods from a variety of sources. The DC serves as a collection point for product coming from multiple origins and provides required transfer, storage, or processing services. The accumulation function allows organizations to consolidate orders and shipments for production and fulfillment processes. As Figure 10.1 demonstrates, with accumulation there are fewer deliveries to schedule and manage. Also, significant transportation cost savings are achieved through larger, more cost-efficient deliveries to a central distribution point.

— Supply Chain Management: A Logistics Perspective (Coyle et al. 2020, 370).

Sortation

Assembly of like products together for:

• storage in the distribution facility,
• processing, or
• transfer to customers.

Upon receiving, goods are:

1. Segmented according to their key characteristics, for example:

   • production lot number
   • stock-keeping unit (SKU) number
   • case pack size
   • expiration date

2. Prepared for safe storage in the facility or immediate distribution.

Sortation focuses on assembling like products together for storage in the distribution facility, processing, or transfer to customers. During the receiving process, goods are segmented according to their key characteristics—production lot number, stock-keeping unit (SKU) number, case pack size, expiration date, etc.—and prepared for safe storage in the facility or immediate distribution.

Proper sortation is essential for the effective management of inventory and fulfillment of customer orders.

For example, mixing cases of fresh chicken with two different expiration dates on a single pallet can lead to improper inventory rotation and some product spoilage. Likewise, improper sortation of SKUs may result in shipping the wrong products to customers.

— Supply Chain Management: A Logistics Perspective (Coyle et al. 2020, 371).

Allocation

Focuses on matching available inventory to customers orders for a SKU.

• Order is compared to inventory levels, and available units are retrieved from storage based on customer order quantities.

• Break-bulk capacity promotes product availability for multiple customers.

  • Customers can purchase only needed quantities.
  • Example: Instead of distributing beer pallets (70 cases \(\times\) 24 selling units = 1,680 beers), a DC can allocate a product on a case.

Allocation focuses on matching available inventory to customer orders for a SKU. The order is compared to inventory levels, and available units are retrieved from storage based on customer order quantities. This break-bulk capacity promotes product availability for multiple customers and allows them to purchase needed quantities rather than excess volume that is not desired. For example, rather than distributing chewing gum only by the pallet 335 (36cases 12 displayboxes 24 selling units 0 1,368 packsofgum), a DC can allocate product on a case or individual display box basis

— Supply Chain Management: A Logistics Perspective (Coyle et al. 2020, 371).

Assortment

Assembly of customer orders for multiple SKUs held in the DC.

• Different product mixes delivered from a single location.
• Larger and cost-efficient deliveries to a central DC.

Figure 3: Assortment/product mixing allows shipping orders from a single location (Coyle et al. 2020)

Assortment involves the assembly of customer orders for multiple SKUs held in the distribution facility. As Figure 10.2 highlights, the facility provides a product mixing capability, allowing customers to quickly order a variety of items from a single location. This avoids the expenses related to placing numerous orders and having them shipped from a variety of locations. Just as companies benefit from the assortment function, individuals gain from the assortment/product mixing concept when shopping for food. Rather than traveling to the butcher shop, bakery, dairy store, and produce market, we make a single trip to the grocery store, saving us time and transportation costs. Given the congestion, capacity, and fuel costs faced by industry today, this product mixing role is a key distribution facility capability.

— Supply Chain Management: A Logistics Perspective (Coyle et al. 2020, 371).

Value-adding

Value-added activities help organizations handle special customer requirements, create supply chain efficiencies, and differentiate themselves from the competition.

• Assembly
• Inventory management and visibility
• Product kitting, bundling, and unbundling
• Product postponement
• Production sequencing
• Quality control
• Recycling, repair, and returns management

Assembly services—Handle limited/light assembly of products such as building and filling in-store display units. - Inventory management and visibility—Provide consignment and vendor-managed inventory programs. - Product kitting, bundling, and unbundling—Build customized combinations of products to meet specific customer requirements such as all components needed for a customized smartphone bundle or repacking a combination of goods for retail promotion (gift with purchase or multipack goods). - Product postponement—Conduct specific activities (assembly, sizing, packaging, and/or labeling) that have been delayed until customer places order. - Production sequencing—Prepare inventory for just-in-time line-side delivery to manufacturing facilities. Components are picked, loaded, and delivered in the precise sequence needed for assembly. - Quality control—Verify the product quality, condition, and count before it is delivered to the customer. - Recycling, repair, and returns management—Provide services related to reverse flows of products from customers such as inspection, disposal, refurbishment, or credit.

The value-added activities highlighted in Table 10.1 help organizations handle special customer requirements, create supply chain efficiencies, and differentiate themselves from their competition.

— Supply Chain Management: A Logistics Perspective (Coyle et al. 2020, 372).

Main warehouse types in a supply chain

Figure 4: Main warehouse types (Frazelle 2016)

Raw material warehouses hold inventory near or in factories where the timely support of production and assembly schedules is the key to success. Work-in-process warehouses hold inventory in or near factories and serve primarily as variation buffers between production schedules and demand. Finished-goods warehouses, or plant warehouses, typically hold large quantities of finished goods awaiting deployment to distribution centers. Overflow warehouses are typically located near plant warehouses, often hold seasonal inventory, and are frequently operated by a third party. Nearly two-thirds of all plant warehouses have overflow warehouses.

Distribution center warehouses are located much closer to the customer base than are plant warehouses. Distribution centers typically receive product from many plant warehouses and serve customers with same- or next-day delivery. The delivery point for the distribution center determines its name. Home delivery distribution centers deliver to homes. Retail distribution centers deliver to retail stores. Omni-channel distribution centers deliver to a mix of homes and retail stores. Cross-dock distribution centers do not hold product but simply mix and sort.

Bonded warehouses typically sit inside free-trade zones and facilitate delayed duty payments. Public warehouses are operated by third parties and are open to the public for what are typically short-term storage agreements. Contract warehouses are operated by third parties and typically are dedicated to single users for extended periods.

Retail back rooms, tool cribs, storerooms, and parts lockers are also forms of warehouses that do not carry the warehousing name.

— World-Class Warehousing and Material Handling (Frazelle 2016, 15–16).

Raw material warehouses

Store raw materials (e.g., plastics, sand, precious metals, etc.) near:

• Extraction point
• Manufacturing point

Raw materials are held to ensure continuous production.

Raw material warehouses hold inventory near or in factories where the timely support of production and assembly schedules is the key to success.

— World-Class Warehousing and Material Handling (Frazelle 2016, 15).

Raw materials storage: These warehouses store raw materials and components either close to the point of extraction or close to the manufacturing point. Raw materials must be held in order to ensure continuous production. These materials include plastics, precious metals, sand, aggregates, and other inputs.

— Warehouse Management (Richards 2014, 7).

Work-in-process (WIP) warehouses

Hold inventory in or near factories.

• Serve primarily as variation buffers between production schedules and demand.

Work-in-process warehouses hold inventory in or near factories and serve primarily as variation buffers between production schedules and demand.

— World-Class Warehousing and Material Handling (Frazelle 2016, 15).

Finished-goods warehouses (or plant warehouses)

Store products ready for sale (awaiting deployment to DCs), on behalf of manufacturers, wholesalers, and retailers.

• Provide a safety stock for companies, building up stock in preparation for:
  • New product launches.
  • Expected increase in demand.
  • Seasonal demand.

Figure 5: Samsung products moving through the supply chain via several finished good warehouses (Richards 2014).

Finished-goods warehouses store products ready for sale on behalf of manufacturers, wholesalers, and retailers. They provide a buffer or safety stock for companies, enabling them to build up stock in preparation for new product launches, expected increases in demand, and seasonality.

— Warehouse Management (Richards 2014, 9).

Overflow warehouses

Typically located near plant warehouses.

• Often hold seasonal inventory and are frequently operated by a third party.
• Nearly two-thirds of all plant warehouses have overflow warehouses.

Overflow warehouses are typically located near plant warehouses, often hold seasonal inventory, and are frequently operated by a third party. Nearly two-thirds of all plant warehouses have overflow warehouses.

— World-Class Warehousing and Material Handling (Frazelle 2016, 15).

Distribution center (DC) warehouses

• Located much closer to the customer base than are plant warehouses.

• Typically receive product from many plant warehouses and serve customers with same- or next-day delivery.

• The delivery point for the DC determines its name:

  • Home delivery DCs deliver to homes.
  • Retail DCs deliver to retail stores.
  • Omni-channel DCs deliver to a mix of homes and retail stores.
  • Cross-dock DCs do not hold product but simply mix and sort.

Distribution center warehouses are located much closer to the customer base than are plant warehouses. Distribution centers typically receive product from many plant warehouses and serve customers with same- or next-day delivery. The delivery point for the distribution center determines its name. Home delivery distribution centers deliver to homes. Retail distribution centers deliver to retail stores. Omni-channel distribution centers deliver to a mix of homes and retail stores. Cross-dock distribution centers do not hold product but simply mix and sort.

— World-Class Warehousing and Material Handling (Frazelle 2016, 16).

Distribution center: flow role

Figure 6: The role of distribution centers (source: transportgeography.org).

Distribution center warehouses are located much closer to the customer base than are plant warehouses. Distribution centers typically receive product from many plant warehouses and serve customers with same- or next-day delivery. The delivery point for the distribution center determines its name. Home delivery distribution centers deliver to homes. Retail distribution centers deliver to retail stores. Omni-channel distribution centers deliver to a mix of homes and retail stores. Cross-dock distribution centers do not hold product but simply mix and sort.

— World-Class Warehousing and Material Handling (Frazelle 2016, 16).

Fulfillment center (FC) warehouses

Supply chain link between manufacturing and the end consumer.

• Warehouses designed and equipped specifically to manage large volumes of small orders (typically from e-retailing).
• Aims at shipping orders quickly in and out, not long-term storage.
• Can function as returns processing centers because e-commerce generates substantial return flows.

Fulfilment centres The growth of e-retailing has seen an increase in the number of customer fulfilment centres. These warehouses have been designed and equipped specifically to manage large volumes of small orders. The video shows the fulfilment operation of an internet retailer called i-herb.com. www.youtube.com/watch?v=uasl8-uQJFi (Dematic Corp) These centres can also double up as returns processing centres as e-commerce has a larger percentage of returns than normal retail activities. This area is covered in greater detail later in this chapter.

— Warehouse Management (Richards 2014, 10–11).

Fulfillment center: one order’s journey

Figure 7: A teddy bear’s journey from the receiving area to the warehouse, where it is picked, packed, and shipped in the robotic mobile fulfillment system.

Fulfilment centres The growth of e-retailing has seen an increase in the number of customer fulfilment centres. These warehouses have been designed and equipped specifically to manage large volumes of small orders. The video shows the fulfilment operation of an internet retailer called i-herb.com. www.youtube.com/watch?v=uasl8-uQJFi (Dematic Corp) These centres can also double up as returns processing centres as e-commerce has a larger percentage of returns than normal retail activities. This area is covered in greater detail later in this chapter.

— Warehouse Management (Richards 2014, 10–11).

Example: Fulfillment by Amazon (FBA)

Figure 8: Amazon provides storage, customer service, and returns. Products are picked, packed, and shipped to end customers.

Amazon-specific primary support. Under “How FBA works,” Step 4, “Let Amazon handle fulfillment,” Amazon explains that sellers send products into its fulfillment network; Amazon receives and stores inventory, picks and packs orders, ships them, and handles customer service and returns. Amazon summarizes the service as: “We receive and store your inventory, pack and ship orders, and handle customer service and returns on your behalf” (Amazon.com Services LLC, n.d., sec. “How FBA works,” Step 4, “Let Amazon handle fulfillment”). The embedded videos illustrate operations but are not the citation evidence.

Generic fulfillment-center context. Richards explains why e-commerce fulfillment centers are designed for many small orders and may also process returns. This book excerpt supplies warehouse context; the Amazon source above supplies the company-specific service scope.

Fulfilment centres The growth of e-retailing has seen an increase in the number of customer fulfilment centres. These warehouses have been designed and equipped specifically to manage large volumes of small orders. The video shows the fulfilment operation of an internet retailer called i-herb.com. www.youtube.com/watch?v=uasl8-uQJFi (Dematic Corp) These centres can also double up as returns processing centres as e-commerce has a larger percentage of returns than normal retail activities. This area is covered in greater detail later in this chapter.

— Warehouse Management (Richards 2014, 10–11).

Amazon’s fulfillment network

Sortable FCs: Handle items that can be sorted and packed easily (e.g., books, toys, housewares).

Non-sortable FCs: Handle bulky, larger-sized items (e.g., washing machines, pianos, patio furniture, outdoor equipment, rugs).

Sortation centers: Sort orders by final destination and consolidate them onto trucks for faster delivery.

Receive centers: Receive large quantities of quick-sell goods and distribute them across the fulfillment center network.

Delivery stations: Fed by FC, prepare orders for the last mile delivery (fast, everyday delivery).

Specialty centers: Handle specific categories of items or support peak season operations (e.g., holidays).

Figure 9: Amazon’s fulfillment: from receiving orders, to picking, packing and shipping items.

Amazon’s official building guide defines the six categories shown on the slide. They are operating roles in Amazon’s network and should not be read as mutually exclusive categories for every warehouse network.

Sortable and non-sortable fulfillment centers. Sortable centers pick, pack, and ship smaller items such as books, toys, and housewares. Non-sortable centers handle bulky or larger products such as large appliances and outdoor equipment (About Amazon Staff, n.d., secs. “Sortable fulfilment centre” and “Non-sortable fulfilment centre”).

Sortation and receive centers. Sortation centers group packages by final destination and consolidate them onto outbound vehicles. Receive centers take large quantities of fast-selling inventory and allocate it across fulfillment centers (About Amazon Staff, n.d., secs. “Sortation centre” and “Receive centre”).

Specialty centers and delivery stations. Specialty centers handle defined product categories or add capacity for peak periods. Delivery stations prepare orders for the last mile; Amazon states, “At delivery stations, we prepare customer orders for last-mile delivery to customers” (About Amazon Staff, n.d., secs. “Specialty centre” and “Delivery station”).

The video remains contextual media. The official Amazon page, not the previous AllAboutLean placeholder, is the claim-level provenance for the six definitions.

Bonded/customs warehouses

• Typically sit inside free-trade zones and facilitate delayed duty payments.

Bonded warehouses typically sit inside free-trade zones and facilitate delayed duty payments.

— World-Class Warehousing and Material Handling (Frazelle 2016, 16).

Public or shared-user warehouses

• Operated by third parties.
• Open to the public for what are typically short-term storage agreements.

Users of public warehouses look for economies of scale through sharing facilities, equipment, and labor costs.

All the warehouse operations mentioned above can be owned, leased, or operated by third-party companies on behalf of a principal. Warehouses operated by third-party logistics providers are either dedicated operations on behalf of a single customer or shared-user or public warehouses where a number of different customers share resources and are accommodated under one roof. These can include companies with different products but common customers, companies with similar products delivering to common customers, companies needing similar services, and companies requiring the same environmental conditions. Users of shared-user warehouses are mainly companies seeking economies of scale by sharing facilities, equipment, and labor costs.

Public warehouses are operated by third parties and are open to the public for what are typically short-term storage agreements.

— World-Class Warehousing and Material Handling (Frazelle 2016, 16); Warehouse Management (Richards 2014, 12).

When sharing a warehouse helps

Sharing may benefit companies:

• With common customers and
  • different products (e.g., retailers, automotive manufacturers);
  • same/similar products (e.g., tire and bicycle manufacturers, pharmaceutical companies).
• Requiring similar types of service (e.g., fulfillment or returns processing).
• Requiring the same environmental conditions (e.g., hazardous goods, explosives or temperature controlled).

All the warehouse operations mentioned above can be owned, leased, or operated by third-party companies on behalf of a principal. Warehouses operated by third-party logistics providers are either dedicated operations on behalf of a single customer or shared-user or public warehouses where a number of different customers share resources and are accommodated under one roof. These can include companies with different products but common customers, companies with similar products delivering to common customers, companies needing similar services, and companies requiring the same environmental conditions. Users of shared-user warehouses are mainly companies seeking economies of scale by sharing facilities, equipment, and labor costs.

Public warehouses are operated by third parties and are open to the public for what are typically short-term storage agreements.

— World-Class Warehousing and Material Handling (Frazelle 2016, 16); Warehouse Management (Richards 2014, 12).

Contract warehouses

• Operated by third parties.
• Typically dedicated to single users for extended periods.

Contract warehouses are operated by third parties and typically are dedicated to single users for extended periods.

— World-Class Warehousing and Material Handling (Frazelle 2016, 16).

Public sector warehousing

• Facilities supporting the public sector, armed forces, and the third sector. For example:
  • Third-sector organizations are opening up warehouses in strategic locations across the globe to react quicker to natural disasters.
  • Local government facilities (e.g., schools, offices) use warehouses to store stationery, uniforms, furniture, hardware, etc.

Public sector warehousing Outside the commercial world there are also warehouse operations which support the public sector, armed forces and the third sector. The increasing number of natural disasters such as earthquakes, droughts and tsunamis is resulting in third-sector organizations opening up warehouses in strategic locations across the globe. This ensures that they are closer to the disaster areas and thus able to react quicker.Other public sector warehouses will store supplies for local government facilities such as schools and offices. Products will include stationery, uniforms, furniture, computer hardware and software, etc. third-sector (e.g., charities, community groups) stationery = the things needed for writing, such as paper, pens, pencils, and envelopes

— Warehouse Management (Richards 2014, 11–12).

Humanitarian warehouse locations

Figure 10: Warehouse location determination for humanitarian relief distribution in Nepal considering different coverage distance scenarios (Maharjan and Hanaoka 2017)

Public sector warehousing Outside the commercial world there are also warehouse operations which support the public sector, armed forces and the third sector. The increasing number of natural disasters such as earthquakes, droughts and tsunamis is resulting in third-sector organizations opening up warehouses in strategic locations across the globe. This ensures that they are closer to the disaster areas and thus able to react quicker.Other public sector warehouses will store supplies for local government facilities such as schools and offices. Products will include stationery, uniforms, furniture, computer hardware and software, etc. third-sector (e.g., charities, community groups) stationery = the things needed for writing, such as paper, pens, pencils, and envelopes

— Warehouse Management (Richards 2014, 11–12).

Intermediate, postponement, customization, or sub-assembly warehouses

Facilities used to:

• store products temporarily at different stages in production;
• customize products before final delivery to the customer.

These warehouses are used to store products temporarily at different stages in production. These centers are also used to customize products before final delivery to the customer.

Postponement and sub-assembly activities can include specific packaging or labeling being changed or added, for example for store-ready items or printing in different languages; computer assembly to include different graphics cards, memory chips, or software; product bundling for promotional activity; country-specific items such as electrical plugs being added; and special messages being added, for example stenciling greeting messages on mobile phones.

— Warehouse Management (Richards 2014, 7–9).

Postponement and sub-assembly examples

Postponement and sub-assembly activities can include, for example:

• specific packaging or labeling being changed or added (e.g., different language labeling);
• computer assembly to include different hardware (e.g., graphics cards, memory chips);
• adding country-specific items (e.g., electrical plugs);
• product bundling for promotional activity.

These warehouses are used to store products temporarily at different stages in production. These centers are also used to customize products before final delivery to the customer.

Postponement and sub-assembly activities can include specific packaging or labeling being changed or added, for example for store-ready items or printing in different languages; computer assembly to include different graphics cards, memory chips, or software; product bundling for promotional activity; country-specific items such as electrical plugs being added; and special messages being added, for example stenciling greeting messages on mobile phones.

— Warehouse Management (Richards 2014, 7–9).

Cross-dock centers

Facilities where items are identified and consolidated with other deliveries, ready for dispatch.

• Aim: same-day receipt and dispatch (items should remain in the warehouse for as short a time as possible).
• Items must be already labeled and ready for onward delivery.
• Typical cross-dock products are perishable items (e.g., fruit and vegetables, meat and fish) that must be moved quickly through the supply chain.

Cross-dock centres Cross-dock centres are seen as being the future for warehousing. Efficient consumer response and quick response within retail require operations to be able to move goods quickly through the supply chain. Cross docking requires deliveries into these centres to be already labelled and ready for onward delivery. Here the items are identified and consolidated with other deliveries, ready for despatch. Items should remain in the warehouse for as short a time as possible. Same-day receipt and despatch is the target. Although companies are beginning to realize the efficiency of cross docking, there are a number of barriers to a successful introduction. These can include warehouse management systems support, quality control systems, reliability and cooperation of suppliers and carriers, warehouse design and uncertain demand. Cross-dock warehouses or transhipment centres are also utilized in outlying geographic areas to transfer products onto local, radial distribution vehicles. This transhipment process can take place either inside or outside the warehouse. Typical cross-dock products are perishable items such as fruit and vegetables, meat and fish, which need to be moved quickly through the supply chain. Motorola’s recent study (2013) showed that 31 per cent of companies practised cross docking and this was expected to increase to 45 per cent by 2018.

— Warehouse Management (Richards 2014, 10).

Barriers to cross-docking

Main barriers to cross-docking:

• Warehouse management systems support
• Quality control systems
• Reliability and cooperation of suppliers and carriers
• Warehouse design
• Uncertain demand

Cross-dock centres Cross-dock centres are seen as being the future for warehousing. Efficient consumer response and quick response within retail require operations to be able to move goods quickly through the supply chain. Cross docking requires deliveries into these centres to be already labelled and ready for onward delivery. Here the items are identified and consolidated with other deliveries, ready for despatch. Items should remain in the warehouse for as short a time as possible. Same-day receipt and despatch is the target. Although companies are beginning to realize the efficiency of cross docking, there are a number of barriers to a successful introduction. These can include warehouse management systems support, quality control systems, reliability and cooperation of suppliers and carriers, warehouse design and uncertain demand. Cross-dock warehouses or transhipment centres are also utilized in outlying geographic areas to transfer products onto local, radial distribution vehicles. This transhipment process can take place either inside or outside the warehouse. Typical cross-dock products are perishable items such as fruit and vegetables, meat and fish, which need to be moved quickly through the supply chain. Motorola’s recent study (2013) showed that 31 per cent of companies practised cross docking and this was expected to increase to 45 per cent by 2018.

— Warehouse Management (Richards 2014, 10).

Consolidation centers and transit warehouses

Facilities that:

• receive products from different sources and
• amalgamate them for onward delivery to the customer or onto a production line.

Consolidation centres and transit warehouses Consolidation centres receive products from different sources and amalgamate them for onward delivery to the customer or onto a production line. This can include just-in-time centres where automotive parts are delivered to a warehouse where they are brought together and sequenced for delivery onto the production line. They can also be retail stock consolidation warehouses where products from different suppliers are consolidated for onward delivery to the stores. Rather than deliver part-loads to the Retail Distribution Centres (RDC), manufacturers deliver to these facilities where their stock is consolidated with other suppliers for onward delivery to the RDC. These differ from cross-dock centres in that product can remain in the centre for a period of time awaiting call-off from the final destination.

Many of these consolidation centers are operated by third parties. Rather than deliver part-loads to Retail Distribution Centers (RDC), manufacturers deliver to these facilities where their stock is consolidated with other suppliers for onward delivery to the RDC.

— Warehouse Management (Richards 2014, 9).

Consolidation-center examples and distinction

• Just-in-time centers where automotive parts are delivered to a warehouse.
  • Parts are brought together and sequenced for delivery onto the production line.
• Retail stock consolidation warehouses.
  • Products from different suppliers are consolidated for onward delivery to the stores.

Difference from cross-dock centers: Products can remain in consolidation centers for a period of time awaiting call-off from the final destination.

Consolidation centres and transit warehouses Consolidation centres receive products from different sources and amalgamate them for onward delivery to the customer or onto a production line. This can include just-in-time centres where automotive parts are delivered to a warehouse where they are brought together and sequenced for delivery onto the production line. They can also be retail stock consolidation warehouses where products from different suppliers are consolidated for onward delivery to the stores. Rather than deliver part-loads to the Retail Distribution Centres (RDC), manufacturers deliver to these facilities where their stock is consolidated with other suppliers for onward delivery to the RDC. These differ from cross-dock centres in that product can remain in the centre for a period of time awaiting call-off from the final destination.

Many of these consolidation centers are operated by third parties. Rather than deliver part-loads to Retail Distribution Centers (RDC), manufacturers deliver to these facilities where their stock is consolidated with other suppliers for onward delivery to the RDC.

— Warehouse Management (Richards 2014, 9).

Transshipment or break-bulk warehouses

Facilities that:

• receive products in large quantities from suppliers (e.g., containers, raw materials) and
• break them down into manageable quantities for onward delivery to various locations.

Figure 11: Transshipment warehouse for agricultural products in the port of Rotterdam (source: Port of Rotterdam)

Transhipment or break-bulk centres: Transhipment centres receive products in large quantities from suppliers and break them down into manageable quantities for onward delivery to various locations.

— Warehouse Management (Richards 2014, 10).

Sortation centers (hubs)

Facilities where goods from all parts of the country are:

• sorted by zip/postcode;

• consolidated, and

• delivered overnight to their respective distribution areas for onward delivery.

Used mainly by letter, parcel, and pallet distribution companies.

Figure 12: Robots sorting system helps Chinese company finish at least 200,000 packages a day in the warehouse.

Sortation centres Sortation centres are used in the main by letter, parcel and pallet distribution companies. Goods are collected from all parts of the country, delivered into hubs or sortation centres, sorted by zip or post code, consolidated and delivered overnight to their respective distribution areas for onward delivery. Today’s retailers are also moving towards automated sortation centres with pallets being de-layered on entry, the use of mini-load systems for temporary storage and retrieval and finally automated pallet build on exit.

— Warehouse Management (Richards 2014, 10).

Perishables warehouse

Handle short-shelf-life products (e.g., food, fresh flowers, vaccines).

• A link in an extended cold chain, along which perishable product is rushed to the consumer.
• Products dwell in these warehouses for very short periods, frequently only hours.
• Space management optimization (refrigeration is expensive).
• Ship products according to FIFO (First-In-First-Out) or FEFO (First-Expired-First-Out).
• Restrictions on how to handle products:
  • Different temperatures for different products (chilled and frozen areas).
  • Stacking rules.

Figure 13: Picnic national refrigerated DC in Utrecht (source: Warehouse Totaal)

A perishables warehouse may handle food, fresh flowers, vaccines, or other product requiring refrigeration to protect its very short shelf life. They are typically one link in an extended cold chain, along which perishable product is rushed to the consumer. Such DCs are distinctive in that product dwells within for very short times, frequently only hours. Also, there is a great emphasis on using space effectively because, with refrigeration, it is so expensive.

They face many challenges in inventory management, including requirements to ship product according to FIFO (First-In-First-Out) or FEFO (First-Expired-First-Out). Also, there are typically many restrictions on how product is handled. For example, chicken cannot be stacked on top of anything else, to protect against juices dripping onto product below and contaminating it. Finally, appropriate temperatures must be maintained and this can be different for different kind of products. A typical food DC operates separate areas for ambient temperatures, chilled (around 2 degrees C, 35 degrees F), and frozen product (-18 degrees C, around 0 degrees F). To protect stored product, it is important to avoid bringing in anything warmer.

— Warehouse & Distribution Science (Bartholdi and Hackman 2019, 9–10).

Reverse logistics (returns) centers

Warehouses dealing with returned items, such as:

1. Unwanted or defective items. They are returned to the stores by customers, consolidated by third-party contractors, and sent to returns centers. After being checked, items can be:
   • repackaged,
   • repaired,
   • recycled, or
   • disposed of (in an environmentally friendly manner, e.g., used as fuel).

2. Reusable transit packaging (e.g., roll cages, barrels, kegs, pallets, tote boxes, trays).
   • When used in the food industry, added services include washing and sanitizing the items before they re-enter the supply chain (e.g., kegs, “empties” returned to Heineken’s warehouses).

Reverse logistics centres The growth of e-retailing and specific environmental legislation such as the European Union’s Waste Electrical and Electronic Equipment (WEEE) Directive (2007) has compelled companies to focus time and energy on reverse logistics. Today, companies recognize that returning product to stock or disposing of it quickly can positively affect cash flow. As a result, a number of warehouses have been set up specifically to deal with returned items. Third-party contractors are providing a service to retailers where customers return unwanted or defective items to the stores; the items are then consolidated and sent to the returns centre, where they are checked and either repackaged, repaired, recycled or disposed of. Waste legislation has also resulted in large quantities of returned packaging having to be disposed of in an environmentally friendly manner. This includes sortation by type and use as fuel or recycled material. There are case studies in the environmental section that go into more detail on this subject. Other reverse logistics processes include the return of reusable transit packaging equipment such as roll cages, barrels, kegs, pallets, tote boxes and trays. When used in the food industry added services include washing and sanitizing the items before they re-enter the supply chain. For example, Norbert Dentressangle, a 3PL, service and maintain more than a million roll cages, as well as 230 million trays and flower buckets and dollies for Tesco.

— Warehouse Management (Richards 2014, 11).

Typology of distribution facilities

Figure 14: Cross section of facility types into size ranges (Onstein et al. 2021)

The contexts in which very large (type 8) and small size DCs (types 1 and 2) operate are relatively easy to identify, while the context for medium sized DCs (type 3–5) is more heterogeneous. Type 8 are agricultural auctions that have a very large size because of their European or worldwide market service area in combination with agricultural products being space extensive products to store. Types 1 and 2 are parcel lockers, parcel pick-up points and city hubs. These facilities have a small size because they handle small volumes and serve a minor geographic area such as a neighbourhood. Types 1 are often located in urban areas (e.g. city centres, suburban shopping centres) that are too expensive to construct large logistics facilities.

Types 3–7 have facilities in similar size ranges, but the diversity in sizes within each type can be explained by the functional criteria. Type 3 are Parcel and postal sorting facilities of which the largest number of facilities has a size S or M, followed by L, XL and XXL. Sizes S and M are somewhat older facilities or facilities that serve a small geographic area. The larger facilities are especially popular to parcel companies because of two reasons. First, larger regional facilities are needed because of the rapid e-commerce growth, and second, because parcel companies apply a network structure that includes large national hubs—used to supply regional hubs.

Type 4 are Regional food wholesale and retail facilities, the largest number of these facilities have a size M or XL. The Medium facilities are older facilities, while the XL facilities are recent facilities that include new constructions or facility expansions by food wholesale or retail companies in order to centralise operations that were previously executed from multiple facilities. Type 5 (National retail and e-commerce facilities) have a size ranging from M to XXL, while type 6 (Manufacturer DC facilities) have a size between L and XXL. The variety in sizes can be explained by their functional characteristics such as product range, customer demand and market service area. Bulk facilities (Type 7) have a size between M and XL, but most bulk facilities have a size XL as bulk products are space extensive products that require large storage space. Table 1 presents a summary of the above facility types categorized into diverse size ranges.

— From XXS to XXL: Towards a Typology of Distribution Centre Facilities (Onstein et al. 2021, 7–8).

References

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