Material Handling

CHAPTER Materials Handling, 9 Computerization, andPackaging IssuesChapter OutlineIntroduction 310Materials Handling Equipinent 3 10Warehousing in a Just-in-Time Environment 327Packaging 328Computer Technology. Information, and WarehouseManagement 335Sumnlary 338Suggested Readings 341Questions and Problems 332The Distribution Challenge! A Breakin the Chain 343Chapter ObjectivesTo provide an overview of the various types ofautomated and nonautomated materials handlingsystems.To examine the role of warehousing in a just-in-time(JIT) environment.To identify the role of packaging in the warehouseoperation.To demonstrate the important role of computertechnology in materials management.

Racks for flexibilityCrossbeam structure Top locatorBottom locator

Pallet stacking frames Unitized portuble racksattach directly to existing enable heavy loads to bepallets, thus providing stacked, whether palletizedstack storage for otherwise or not. Racks can beunstackable loads. nested if not disassembled.!Source: "The Trends Keep Co1n1111f1 1 lnclu\tr~alS torage Rack\." :I.lol/rrii .Il~iii,i.irr/H, oiidiiiig. 10. no. Y thug. 19X5).pp. 51-55. Modcrii M(r~eri(iIH.~tii idli~i:. Cnpyright 1985 by Cahners I'ubl~\h~nCf utnpan). Division of Reed Holdinfs. Inc.Transporting andSorting ItemsTransportation and Sorting. The order picker can use a large selection of powerecand nonpowered equipment for transporting and sorting items located in the racksshelves. and drawers. Examples of this type of apparatus include forklift trucks. platforntrucks: hand trucks, cranes, and carts.Manual sorting of items is a very labor-intensive part of warehousing. It involve:separating and regrouping picked items into customer orders. Personnel physically exam.ine items and place them onto pallets or slipsheets, or into containers for shipment to cus.

tomers. This is a time-consuming process subject to human error. As a result, most firm!attempt to minimize manual sorting.Shipping Products Shipping of products to customers invo1i.e~p reparing items for shipment and load.ing thrtn onto the transport vehicle. The powered and nonpowered equipment previousl!described are used for this purpose. Pallets. palletizers. strapping machines, and stretckwrappers also are important."'See S. M. Bhardwaj. Tlrr Pcrllc~r, Sr~ir.~~:S.yes reri~S clrc~tioirP r.oc,rrr (0;1k Brook. IL: Warehousing EducatiolandResearch Courlcil. 190r)).

Source: "Dock\ .~ndR ecelv~ng-Whr~r It -211 Rzglns." Modrril Mirieriirlv Ifur~illir~I9,~8.5 I.Viri-~~ho~rviG1~r5rr. dehnoE4. 0. no. 4tSpl.lng 1985). p 36. Moden?M rireriol~H ~ir~~lClioip~y,~~.~. ghI9t 85 by Cahnera Publi\hing Company. Dlvlsion ot ReedHoldings, Inc.In addition, the shipping and receiving activity requires equipment for handling outboundand inbound transportation \,chicles. Therefore, shipping and receiving docks areimportant elements of the material handling process. For example, new highway regulations

increasing the amount of weight a truck trailer can haul, and regulations allowingwider and longer trailers, have placed new demands on shipping and receiving docks.Some of the changes that have occured are shown in Figure 9-6, which represents a modernshipping and receiving dock. As stated previously, manual or nonautomated equipmentis often used in combination with automated equipment.Automated Materials Handling SystemsAutomated storage and retrieval syqtems (ASIRS), carousels. ca5e-picking and item-pickingequipment. conveyors. robots, and scanning systems have become commonplace in

warehouses. As a result, many firms have been able to achieve improvements in materialshandling efficiency and productivity.For example, the Park Seed Company in South Carolina, the largest family-ownecmail order seed company in the world, must be able to fill customers' orders within 24 tc36 hours during the peak season of December to April. Because of increasing business, thcfirnl replaced its 125-year-old wooden bin systerli with automated horizontal carousels. A:a result. the lines picked per hour per operator increased five times while labor was reduced

by one-third. Compared to the old system, picking speed increased from 180 tc950-1,000 lines picked per hour."Automated Storage Automated equipment can be grouped into the same categories used to describcand Order-Picking nonautomated equipment: storage and order-picking, transportation and sorting. and ship-Equipment ping. Table 9-1 listed examples of automated storage and order-picking equipmentBausch & Lomb, Chek Lap Kok Airport (Hong Kong), Conipaq. General Electric, NikePackard Bell, Posten PaketFrakt (Sweden), Rothmans Tobacco (Netherlands). Toyotaand niany other firms have ernployed automated systems with great success. The Globabox describes Packard Bell's integrated solution to materials handling.Toyota Automates Its The Toyota Marketing Company's Parts Distribution Center in South Africa was par-Warehouse tially automated between 1984 and 1991 at a cost of $5.6 million. Additional storage anchandling facilities were added; new receiving. binning, and order processing systems wertintroduced; and a high-rise bulk warehouse was constructed. The benefits were significant:Order processing productivity increased 300 percent.Product darnage rates declined by 50 percent.Stock accuracy and service rates improved by 65 percent.

The work of three clerks was eliminated and an additional three clerks werereassigned to more essential tasks.'Automated Storage Among the most important storage and order-picking equipment are automated storandRetrieval age and retrieval systems (ASIRS). In comparison wit11 manual systems, an ASIRS pro.Systems (ASIRS) vides reduced labor cost and floor space, while increasing inventory accuracy. An ASIRSis applicable to virtually all types of products and many warehouse ~onfigurations.~Advantages of Advantages of Automated Systems. Automated systems can provide several benefit:Automated Systems for warehouse operations. Table 9-2 lists some of the most important benefits of automatedsystems as identified by users. Generally, the benefits can be categorized into operatingcost savings, improved service levels, and increased control through more ancbetter information.IEd Romaine. "Ho\+ One Colnpany Increased Its Pick Rate." P(ir.cel Shil~pir~&g Distt-ib11tio112 . nc>. 1(July-Aug. 1995), pp. 27-28.'C. M. Baker. "Case Stud): De\eloprnenl of Nat~onalP art.; Di\tribution Center," Pr(jceedirl,qr of rlirCorfere~~corr ? Ae Tort11L ojirsrics Cot~~~(Pt~reptofr ia. South Africa. 1991 ).

hFor several examples of order-picking qslems and approaches. see TI!(. Wc~r~holrMtec rrlujior'v G~r~t[l(It ,Effective Orderpickit~g, Monograph Series no. MOO08 (Raleigh. KC: Tomphin~ Associates. n.d.).

TABLE9- 2 Benefits of Automated Materials Handling SystemsPercertr ufHes~)orldenrsT hat"Agree" or "Strongly Agree"Labor cost reductionAbility to increase output rateImprovement in consistency of serviceReduction in materials handlingIncreased accuracy levelService availabilityImprovement in speed of serviceSource: Koti Q Dad~iea.n d Wetle) I , luhn<con. "Inonvntive Automarlon Technolog) In Corporate Warehousing Ln$i,t~c\."Joirflinl of Rii.ciri<,~Ls o,yi.c/rc!. 2. IIU. I i1 99 1). p 76Disadvantages of Disadvantages of Automated Systems. However, automated systems are not wit110Systems disadvantages. Typical problems faced by firms choosing to automate materials handliioperations include the following:Initial capital cost.

Downtime or unreliability of equipmentlmaintenance interruptions.Software-related problems (e.g., poor documentation, incompatibility, failure).Capacity problems.Lack of flexibility to respond to changing environment.Maintenance costs.User interface and training.Worker acceptance.Ob~olescence.~Types of Equipment. The initial capital outlay is usually the most significant obstaclFor example, a miniload ASIRS (see Figures 9-7 and 9-8), where a storage/retrie.v(SIR) machine travels horizontally and vertically si~nultaneouslyi n a storage aisle, tranporting containers to and from an order-picking station at one end of the system. gentally costs between $150,000 and $300,000 per aisle."An Example of Unit When the unit to pick is a full pallet or similar large load, the AS/RS offers complete automatiLoad AS/RSs from storage to retrieval in minimal space. Unit-load AS/RSs are installed up to 100 feet high waisles only inches wider than the load to be stored. The S/R machines operate at speeds mufaster than industrial t~vcksa nd travel simultaneously in horizontal and vertical directions. Th

'Kofi Q. Dadzie and Weiley J. Johns~on", lnno\ative Automation Technology in Corporate WarehousingLogirtics," Jo~lrt~cozlf Busirru.~L.~o~ r.\rir.\ 12, no. I I 19') I), p. 7 2 .8Edward H. Frazelle, Sirrlrll Party Order PicXi11~t:. tl~~il)ril((1~1~1ldSt trtite,qy (Oak Brook, IL: WarehousingEducation and Research Council, 1988). p. 6.

Source. Departnlcnr of thc Na\y. .Ua\nl Supply Systems Corninand. Publication 529. Froln Edward H. Fralelle. Srniill Pori,Oriler Prikirig: Eilr~il~r~icrr~rirdi i. Sirnlef\ (Oak Brook. IL: Warehou\~ngE ducat~ona nd Rcsearch Council. 1988). p. 6. Rrpr~ntrdairh perini\\ionFIGUR9E-8Mii~in~i;i/~ingv enton at Ap p l e Co??~~)l~rfte,irf.h otle.~-ihlet viniload AS/RSSource: "Mini-Load ASIRS Trirn, Inventory. Speeds .\+crnbl! .' .Ilr~rl<..~If-r~irrt ,riiil\ H~rrirllr~3~9g. no. 13 iSept. 21. 1983). pp. 48-39. Mr~rlrr-rMi ~~ir,-ro/~H~ir~dliriCg,o pyr~gh1~9 84 by Cahncrs Puhli.h~ng Compi~n?U. i\~\loui~i K ccd H(ild~rlg\I.n c.

Horizontal CarouselsVertical CarouselPic 'N' Save Uses a

Conbeyor SortingSystem to Handle 100Cases Per MinuteAutomatic GuidedVehicle Systems( AGVSs)are used &hen inventories. throughput, and space coqts are high. In totally automated system.ASIRSs arc supplied by conleyors. automated guided vehicles. or electrified monorail systems."Carousels. A form of ASIRS is the carousel. Carousels are mechanical devices thahouse and rotate items for order picking. The most frequently ~~tilizecdar ousel configurations are the horizontal and vertical systems.A horizontal carousel (see Figure 9-9) is a linked series of rotating bins of adjustabltshelves driken on the top or bottom by a drive motor. Rotation takes place on an axis perpendicular to the floor at approximately 80 feet a minute. Costs for horizontal carousel^begin at S5,000 a unit."'A kertical carousel is a horizontal carousel turned on its end and enclosed in sheemetal (see Figure 9-1 0). Like horizontal carousels. an order picker operates one or multiple caroucels. The carousels are indexed either automatically by way of computer contro

or manually by the order picker operating a keypad on the carousel's work surface. Thicost of a vertical carousel begins at $10,000. 'The transportation and sorting activities are typically performed in combination wit1storage and order picking. The three pieces of transportation equipment most frequentl~used are conveyors. automatic guided vehicle systems (AGVS). and operator-controllectrucks or tractors.Corzveyors. Sorting equipmeilt can be specialized, such as a tilt-tray sorter with built-irdiverting mechanisms, or it can be assembled from other components. such as conveyor!and diverters.Pic 'N' Sake Corporation has developed a conveyor sorting system that handles ove100 cases per minute. The company has shipped up to 68,000 cases in one working dayahigh levcl of productivity under normal conditions, but even more outstanding for Pic'N' Save becaure the firm rarely has the same item in stock more than once. The company buys close-out goods (e.o~ver runs. discontinued items. style changes) froin manufact~lrers and therefore has a wide variety of merchandise in inventory. Case goods arf

stored in a reserve storage area and are then moved to a picking area four levels highAfter being picked, items move to a merge area where they are sorted and shipped.'"Azltornatic Guided Vehicle Systerns (AGVSs). Automatic guided vehicle system!(AGVSs) are "battery-powered driverless vehicles that are controlled by computers fotask assignment. path selection, and po~itioning."'A~ GVSs are often used in autoinatecwarehouse operations involving ASIRSs. The benefits of AGVSs include "lower handlingcosts, reduced handling-related product damage, improved safety. the ability to interfacf"\\l(~i-r/~loL~l(~iii\cri ,y~,r-G'\u itir to Eflrctii~c,O i.dopic~kit~,py., 2 1"'Eduilrd H. Frarelle and lame.; M. Apple. Jr.. "Material.; Handling Technologies." in nir Loyi.{ticsHeitrtlhooh, ed. lame$ F;. Kobc$on arid William C. Copacino (Neu York: Free Press. 1994). p. 571.'lFra/elle. S17rciIl Part, 01.tIe1P- ic.kitrg,p p. 1-5: Frarelle and Apple. "Materials Handling Technologic$." p. 575.""Trnn\lx)r~a~ioann d Sol-ting-Kc).$ ro Throughpllt." .2.loe/c~1,~M1!c ~tr~-iH~tii/ti\d lirl,y, 1985 Ik'cir.rlroi~.sirrgC;rtidrhoo/< 10. no. 1 (Spring 3085). p. 75.

l:"Hoa Wz So11U p ro 135 C;I$C$p cr Rlinutc." Mot/ri.ii .\ltito~ici/Hs tintllir~g4 0. no. 6 (May 1985). pp. 60-63."Ila! it1 K. Ol$on. "hlaterial H~lndl~nEgq uilment." In Tlic' Drstr~ih~ttioMr~ti i~cigeiirc~rHltc indhook, ed. lames

A. Tornpklns and Dalz Harmzlink (Ncu Yo1.k: McCira~l-Hill. 1991). pp. 19. 17.

Sourcc: Coul.Ie<! or Kaldex Sy\Ie~n\I.n c From Eduard H F~a~ellSeiir.c 111P rir.15 Ordrr Pi( king: Equil~rnri~ciir ~dS ircireg~( OakBrook. IL. h"~rehous~nEgd uc,~liona nd Kesea~chC ouncil. 1988). p. 5. Rcprinled uilh pennisaion.with other automated systems. and ~eliability.'"A~u tomated guided vehicles (AGVSscost about $30,000 for a single model at the low end of the scale and about $70,000 for :more advanced model.I6Maybelline, a cosmetics manufacturer. utilizes a combination system that includes a1Maybelline Uses ASIRS and AGVSs. The automated systems have increased the number of items picketAS/RS and AGvSs to each day by over 50 percent. On busy days. approxin~ately 90.000 items are picked. FigPick 909000 Items ure 9-1 1 shows the Maybelline operation and describes some of the specifics of the systems being used."

"Lea Gould. "Select~ng an AGVS: New Trend,. New Deuigns." Morlrrn Mnrerinls Hcmdli~zg 50, no. 6 (Ma!1'1'15). pp. 4243.I"James Aaron Cooke. "Should You Automate Your Warehou\e?" Traffic Murlngerrierlr 34. no. 1 I (Nov.1'193). pp. 6-S through 8-S."G,try Forger. "How Maybelline Sh~psS maller. More Frequent Orders." Modern Mureriul., Hcindlin!: 50.A.no. 7 (Jur~rl9 95), pp. 48-50.

Clrnprer 9 Matericrls Huntfling, Cn,npureri;i~tion, and Packaging Issues 325Robots. The robot is another type of equipment used in many phases of materials handling.Robots have been used in the manufacturing process for some time, but advancesin robotics technology have expanded their use to a larger number of application^.'^ It islikely that materials handling robots will have steady growth in many application areas(see Figure 9-12).Shipping Automation Automation in the shipping area also has occurred. The two aspects of the shippingactivity that have been most affected by automation are packaging and optical scanning.We have previously described pass-through and rotary stretchwrapping machines, andwill further address packaging later in this chapter.

ComputerizedDocumentationComputerized Tracking and Information Systems. Another aspect of shipping automationis documentation. As other components of the warehouse become automated, firmsneed to computerize their tracking and information systems. A. B. Oxford Cold StorageCompany in Melbourne? Australia, utilizes radio frequency portable data terminals and barcodescanning to manage frozen and refrigerated food storage.19 Items entering the warehouseare bar-code scanned and assigned storage locations by the computer. The data collectedbecome part of the warehouse information system. which is used for a variety ofpurposes, including the preparation of business-related documentation.Many companies are utilizing various computerized documentation procedures.Whether such technology is being used by Avia Presto of Holland (air freight cargo handling),the Royal Marines of Britain, or the Barrow-upon-Soar site of British GypsumPlaster production);20 firms are recognizing the benefits of automating the materials handlingprocess, including increased productivity, better space utilization, higher customer

service levels; reduced operating expenses; and improved flow of material^.^'The type and scope of benefits a company receives will vary according to productcharacteristics, labor intensity of the operation, existing customer service levels, and presentlevel of company expertise.lXFor a discur5ion of the use of robots in a typical materials handling environment. see "Smooth WIP Flowwith the Right Handling." Modern Mureriuls Handling 50. no. 5 (Apr. 1995), pp. 23-26.19For a thorough discussion of radio frequency data communication in warehousing, see Bruce Richmond,Radiu F~.equenc! Darn Coritniurricntiorz for Warehousing urrd Disrrihution (Oak Brook, IL: WarehousingEducation and Research Council, July 1993); "RF Pacesetter Applies Hands-On Handling Experience."Lagi.rtics und Materi~rls Handling 3, no. 7 (Feb. 17, 1995), pp. 21-24.?OMoyette Marrett-Gibbons. "Freight Flies Faster with Bar Code." ID Sjsrer~rs4 , no. 7 (Sept. 1996).pp. 46-49; Paul Quinn. "Bar Code Moves Military Munitions." ID Svsrerns 4. no. 7 (Sept. 1996), pp. 42-41, 54;British Gypsum news release, Feb. 25 1993.'IFor examples, see Tom Andel. "Automatic Data Identification: For Your Own Good," Trunsportution &

Disrrihurion 34, no. 10 (Oct. 1993), pp. 76-88: James Aaron Cooke, "Getting Your Money's Worth from AutoID," Tranffic. Mant~yemerzt.M ar. 1991. Warehousing and Distribution Supplement pp. 17-19: Gary Forger, "OurSystem Eliminates Errors and Cuts Our Customers' Costs." Modern Marericzls Hundling 50. no. 6 (May 1995).pp. S-10 through S- l I: and "Wrap It All Up the Right Way in Shipping." Moderrr Mut~riulsH andling 50, no. 5(Apr. 1995). pp. 31-34. :\rc~>t'\c ~~nccpti(!oI if~u idtd \~'Ii~c;~lr~ltrll o bo:ic\ 111 L~-,iz\ :il~cI~i~ii;\\!iI'. ;~~~:oin;~t:iu~id:i.~d lla~n d pr-ograr~ilncdli ft truck ik \~~:M.II\tackin: a load into a !?allct ~xkfl.l c r~boit\ iho\+no ri a ilcior-\ilppol-tcxI \c!?icIc c,lllahlc ol raii~ng:t nd Iunci-ins: ~tlc1 11boti hpicking irom gra\ it!. CIo\v ~r:lcl<\ :\nil building p::llc.t load\.Source: "Warehouvng Fle\lhility Aided h) Rohois." M~~rt.i-icHii ~i~~iliiGilii,q. inrvi-irii., 10. no. &(SI epl. lYX5). p. 103. Rcproducrd hy prrnlisslun oTTl~iS. t. OneeC~~nip~uYno)r.k . PA.Warehousing in a Just-in-Time EnvironmentJIT Places AdditionalDemands onWarehousing and

Materials HandlingAs manufacturing and merchandisinp firms adopt and implement just-in-time (JIT) programs,logistics components such as warehousing will be directly affected. Because JlTstresses reduced inventory levels and more responsive logistics systems. greater demandsore placed on warehousing to maximize both efficiency and effectiveness. Examples ofthese demands include the following:"Totcrl cortlrtzitrlzerlt to y~~alihW..a rehouse employees must perform their tasks(inbound and outbound) at levels specified by customers.Reduced pmdllctinn lot size.$. Items are packaged in smaller lots. and warehousedeliveries are smaller and in mixed pallet quantities.9, --Sfe Robin G. Stenper and Rohert E. hlurray. "Llhing Warehourinp Olleration.; to Support a Just-in-Tiin?Manufacturing Prc~pra~~Wi.E" RC T(?c~l~r~iPc.~~iilp rrN o. 20 (Oak Brook. IL: Warehou\ing Educalion andResearch Council. 1987). pp. I-?: ;IIILI. oui{ Ciiust. "Just-ill-Tinie Manuf~~cturin;g~ ndM ateri:iI-HandlingA.TI-ends." I~it~,ri~~itiJoorri~r-ir~i~Iil c !jPli\..\

i~~iDl i~ti~ihiitrutr~iirtl Logi.\tic..s MIIII(I~(,II2I3C, n,~u.~ 7~ ( 1093). pp. 32-38.

Zytec Corporation

Utilizes JIT in Its\\ aretiouseRio Bralo Electric05Uws J1T in hlexicoDelphi PackardElectric Sjstenls andIts JIT Distrihlltio~lCenter%ytec. C(>l.p~s;~tiiol ~IIiI.: IIILI~'~IC~LIoICII'.~ >ouesril pplics fol. cornpiitel-\ and nieclical eclil~iielit.\ ucces\l'i~IIi~lt ilized its a,rr.clio~~si~oplger ation.; to sul>lx~s;lI JIT m:~ni~l'acti~ri5~1 igkni. I'rior to iml~lemcntin=S IT. ~lict' il.~ii'\~ ;~r~I-Ioi~ssiitull;~gt ioll\ \:IS dcscrilxxl ;IS follou \Af[cr itlentif! ing (lie ~>~.cil)leall~ltli \c airxc\ (it' llic \\.al.c'l~on\illgi nel'ficiencies. proccanii 1xocc'~I~lrcahl ali?o\ acre iriiplc~lieritetl1 1i:~tr c\ill~etli n a rau ~lla~cl-iaill\i \.entory Itluclion (11S5 million 1'3S.8 niillion lo S3.S li~illion;)l licl all increase in ir~\en~oa~c-cyiu -a'from t)ti.S to 00.6 percent. 01iIy one I'aciiit!, \la\ 11ecdi,~iI~ iste:~o~f tt he (Ill-re th~h~;ltd be1ret~~ri~~ctl.Kio Rra\o Eli.ctl.ico\. ;I f'ir111i n .luare~.X 'lc.\i~o.t hal ;issenihles clc~,tric\ \iriny 11;nexxc, fo~C. ;e~isr;~Il\ ~lo~o\r~sI II\. \il~)pIic\i t\ 30 \i~h:~~sernl~alllc!i a\sc~llhl)l ines \vi

p;11't\ r\er!, t\vo IIOLI~\ 01. \o. A viriny lia~.~ic~;1\1\1 I >c a\\clilbletl in onc lioiu within RBravo'\ .TIT cnvironmelit.'.'Sinli1:u-I!. L)clphi Pi~ckar~Flle ~.tricS ! \tern\. a ~nani~f~~ofc u~ 1i1~.il~il~i~a ren~es.se \. 11sJIT ill its El P:IAO.l \iu:~s.d istribution ce~itcsIO ~iio\'e0 0 l>crcen~o f i~psr ocluct OLII of tlfi~cility\ \itliin 34 hour\. Since the Intc I')SO\. the n~~ml,cor-f outhoi~ntls hil,~ilents ul\tc)~likccpi~lig~ nilsh as incrca\ed :~n~iit;~lal!t \lie distl.ihutio~lc enter \vliilc the :injount ,stor~~gspc; ~cch as \l~ri~nh."A Ivief o\,~.~.vie0\1\' I>clphi I'a~~l,;u.tl's JIT distribution centi\ \I~(I\~,II ill Fipre 9-1 3,Packagingclo,cl!- liccl lo M~;II.~I~OLIe\f~f ic.ienc! and cl'l~ccti\cne~7\'.1 1~b cst package increases se\.ice. decreases cos~an d illil>ro\c 's Il~l~idliil(y;o. otl p;~~.k:lgiliyC LIII h:~\;ea po\itic.e impaA.011 1~o)i i~cl e\iy~i.~ LIICI el-;ill \\ :~~.c'lioi~~~\e~

~o(Iircti\~it!~.

330 Chapter 9 Materials Handling, Comprrr~ri:rrtion. trnd Prrt.Xrrgillg I.TSIIC.TStretchable rape from 3M holds dr~rtn.r czr~rl ho.res on ularehouse pu1let.y securely, while generatingfar less waste than commonly u.rerl l~lastict.v rups.Functions of Packaging

Packaging Serves Packaging serves two basic functions: marketing and logistics. In its marketing functiolTwo Basic~unctions: the package provides customers with information about the product and promotes thMarketing and product through the use of color and shape.LogisticsThe [package] is the "silent sales [person]," and it is the final interface between the companand its consumers. . . Consumers generally choose to buy from the image they perceive thatproduct has, and what they perceive is heavily influenced by the cues given on the productpackaging: brand name, color and display.?"From a logistics perspective, the function of packaging is to organize, protect, anidentify products and materials. In performing this function. packaging takes up spacand adds weight. Industrial users of packaging strive to gain the advantages packaging ofers while minimizing the disadvantages, such as added space and weight. We are gettincloser to that ideal in several types of packaging, including corrugated containers, foanin-place packaging, stretchwrapping, and strapping. The environmental aspects of paclaging are important because of reverse logistics (see Box 9-1).

ZhRod Sara. "Packaging as a Retail Marketing Tool," Internutiont~l Journal of Physicnl Distribution andA.Logistics Management 20, no. 8 (1990), p. 30.

Packaging PerformsSix LogisticsFunctionsMore specifically. packaging performs six functions:1. Co~ltclirzr~zetPit.r oducts must be contained before they can be moved from oneplace to another. I f the package breaks open, the item can be damaged or lost, or contributeto environmental pollution i f it is a hazardou\ material.2. Pi.otrctiot7. To protect the contents of the package from damage or loss from outsideenvirclnmental effects (e.g., moisture. dust. insects. conta~nination).3. Al)l)ortiotitt1et7t. To reduce the output from industrial production to a manageable.desirable "consumer" size: that is. translating the large output of manufacturing intosmaller quantities of greater use to cu\tomers.4. Ur~iti;~ltio/Tzo. permit primary packages to be unitized into \;econdury packages(e.g., placed inside n corrugated case); the secondary packages are uniti~ed into a stretchwrappedpallet, and ultimately into a container that is loaded with several pallets. This reduces

the number of tinies a product must be handled.5. Cor7veilierzc.r. To allow products to be used conveniently: that is. with little wastedeffort by customers (e.g.. blister packs. dispensers).6. Coriiril~itzic.~itiotTz.h e use o f unambiguous. readily understood syn~bolss uch as aUPC (Universal Product Code)."The package should be designed to provide the most efficient storage. Good packaginginterfaces well with the organization's materials handling equipment and allows efficientutilization of storage space as well a\ transportation cube and weight constraints.Effects of Packaging on Costs and Czrstomer ServiceAn Example of Cost In the past, packaging trade-offs were frequently ignored or downplayed in logistics de-Savings through cision making. Like all logistics decisions. packaging impacts both costs and customerPackaging service levels. From a cost perspective. suppose a company uses a carton that is 12" x12" x 8" instead of a carton that measures 12" x 12" x 16". Assi~me the smaller cartoncosts $0.30 less and recluires less loose fill. which can save a half cubic foot of dunnagecosting $0.50. In this example, that is a savings of $0.80 per carton. Multiplied by hundreds.thousands. or millions of packages distributed during a year. the savings add up

qui~hly.'~At the same time that costs are reduced. service levels are improved because curtomeraare able to obtain more of the same amount of product in less space. enablingthem to achieve cost savings. The customer is likely to realize fewer partial or split shiprnentsfrom suppliers because more products can be placed on the transport vehicle thatmakes the delivery.Saving Money through Efficient and Effective Packaging. Packaging is becoming amore visible issue with the currei~t environmental concerns about recycling arid the reuse?'Gordon L. Rohsrtson. "Gtrutl and Bad Packaging: Who Decides'?" I~~rr~rrirrrro.~/orr~rrtl~ roo/f P/~\~,ic.tr/nistr-ih~rtiol(ri ll(/ Loyitrir..~,\ ~~rir<lgc~~~2l0r.r rnlo . 8 ( 1990). pp. 38-39.'8Toby B. Goole?. "Is There H~tldenT reasure in Your Packaging?" Lo,yi\rir.\ M<cir<i~oincn3r5 . no. 12 (Dec.A.1996). p. 23.

of packitging.'"n\7esting in efficient unci effective packaging can save a company monein the following ways:Benefits of Good Lighter packaging may save transportation costs.

Packaging Careful planning of packaging sizelcube may allow better space utilization ofwarehousing and transportation.More protecti~ep ackaging may reduce damage and requirements for specialhandling.More en\,ironi-nentally conscious packaging may save disposal costs and improvethe company's image.Use of returnable containers provides cost savings as well as environmentalbenefits through the reduction of waste product^.^"Ways Packaging Changes Cut Costs and Improve Customer Service. The followinare specific examples of cost savings and customer service improvements resulting frorpackaging modifications.A fi-oren-foods supplier and a baked-goods company saved $3 million and$1 million. respectively. on annual freight costs with redesigned packaging thatbetter fit standard pallets. Both companies could put more product on a pallet andmorc pallets in each truck. greatly reducing the number of truckloads.A pharmaceuticals company cut freight costs by 25 percent on one product line by

reducing the amount of packaging used, and it did so without compromisingproduct protection.An electronic components manufacturer changed the packaging on some productsto retlect the average quantities ordered by customers. "Customers liked the largerquantities, and the reduced number of packages per order improved inventory andorder accuracy, and reduced packaging and transportation costs."31Box 9-1 describes some of the trade-offs bet~veen packaging materials and other Icgistics aspects as a result of Green Marketing and environmental concerns.Factors InfluencingPackage DesignFactors Governing Good Package Design. Good package design is intluenced b(1 ) standardization, (2) pricing (cost). (3) product or package adaptability. (4) protective leve( 5 ) handling ability. (6) product packability. and (7) reusability and recyclability. With thgrowth in automation and computerization of warehousing, the ability to utilize "high" st01age space and convey information are key. The importance a firm places on each facto~

as well as the cost-service trade-offs it makes, \:tries by company, industry, and geographilocation.'".lohn H. Sheritlan. "Pollution Prevention Picks Up Steam..' Ii~d~c,ti-U\.C s~jk,F eb. 17. 1992. p. 48: and Tom.Andcl. don'^ Recyclc \\'hc.n You Can Recirc~~lnte.T"~ .cii~i/~~~:c-irtz~d iLtliiortnri hiition 3 I . no. 9 (Sept. 1991).pp. 68-72,'"For n clisc.u~riono f returnable conr;rincrs. see Toru :\~~del".C onversion to Rrtrlrnahle5 IVina Believers."Ti.cir~s/)(u.f(itic,&rl Di~r~~ib~3~6t.i nooii. 9 (Sept. 199.5). pp. C)l-lOO: and Leo Kroon and Gahy Vrijzns."Ret~~rnahCleu nt.~iners:A n Esarnplc of Kc\cr\c Lopirtic\." liiteriicitioiic~Jl o~trrzalc !f Physii.iil Dittr.iburiotz nricLoyistic.\ .\Icirrci$:lc~~r~2c.5,r.t no. 2 (1995). pp. 5h-hX.A.3'11~l~1l1... 20

Green Manufacturing Has Major Implications for LogisticsDesign for disassembly is a hot neu trend in nianufacturing.The goal is to design, develop. and produce productwith the goal of reducing the waste created when the product

reaches the end of its useful life. That could involve recycling,refurbishing. or safely disposing of a product andits components. It has inajor implicatio~~fosr how a companydesigns it? logistics and purchasing system?.Germany has been the leader in the green movementby requiring manufacturers to "take baek" their product'\packaging. To address this requirement. manufacturersbanded together to form a private company that collects.recycles, and disposes of packaging material. In the firsttwo years of implementation. this has reduced the ;unoLlntof waste due to packaging materials by 4 percent.It has inajor in~plicationsfo r materials handling ccluipmentand packaging design. For example. companieshave been designing product to use less packaging. Colgateand several other rnanuficturefi are now n\ing I designl'or a toothp;lste tube that stands on the cap. Thus, nobox is needed.Hcu Icct-Packnrd has designed u orkstations in n "green"\\;~y. M hich li;~\ many implicatiolis for logistics. Instead ofusiny intel.nnl metal "frames" to holcl the part\ in place.HP u\e\ a polypropylene foam cli;~\sis \vitli cutouts foreach component and connection. Thi\ is \o effectibely

protective that external packaging can be reduceel-by asmuch as 30 percent. The product is lighter. Lvhich reclucestrnn\lx)rtntion cost. Di\nssemhly time has been reducedhy 90 percent.A\ coml701ienrs are re~lsed, new ways of tran\porting.\toring. and liariilling the ~~n~~smuabtelrcia ls and inventor)neetl lo bc found. Logistics uill play a key role inthis process.Packaging and1,ogistics CostTrade-offsDue LO difference\ i n (he co\~:u itl plijsical charncteri\~ic5o l' produc~s.a l'ood proccsjor.for exa~nple.i s more concernetl lli~~I: ric ornpuler manuf;~clui.cru i~hha viny a packayethat minimizes shipping ancl \toraye co\tx. A co~iip~~rtneirr n~~fnct~c~m~p.elira cirec the protecti\,e acpects of packaginp beci~~o~fs teh e h.;~yilce. .cpc~i\ie\ naL~11.eo f cornpuLcr \y\lems.Another illuctratiori n,oi~ldh e a colnlxlnj lhat complctecl cons~r~~co~fi 2o1 fnu lly automated~varehousc. Managers 01' \uch ;I I;~cilil! MOLIICI be \.cry concerned ~vith hancllin,nability. cube utilization. and the abilil! to con\.? information \o thal it could be "read"by the equipnien~.

On the other hand. a cornpan! doing bu\ine\s i n Gerlnany ~.oi11(b1e concerned withreusability and recyclability a\pects of packayinp hccau\c ol' (-;e~-manj'\ strict cnvironmentalla\vs. Th e packaging decision i\ tr~~olyne that recluirt.\ the ilsc of ;I \).\tern\ approachin order to i~nders~allt(hle true "tot;~lc o\t" pict~~r~.Exampl e s of the packagiilg and logi\tic\ c o t trade-offs are slio~,nin l':thle 9-3.There arc many important interfaces hel\vccn packaging and ;lcti\ iries. such as tr~uisportation.in~en~or~yv.i lreho~~sitilllglc.l ~nl'or~nalio5n) s~cnis.""For SPCCI~ICC OIIIP~III! tx;11111>1~'\.\ ee .'ko;111I1'I OII'CII~I~C IL C\ F,Icctr~~lPic; II.~M\ ~11."l i.iiii\l~~i.iiiS~ i~iiII~c/i~i/~ii2/i9r.~ nioi . 3 (hl;~I~OX.O J. pp. 57-58: I<oI~;II<I h~,lli~.hkli~cl.~ iii.IJ 13~~1,:L I><I I.c\l~cI .cfifi.R ~~ri,i~iiiit/RK~~~/;IIC~I.\-[, RL~2o~gIi\ rii.O\ ~I~~~I((I)i~lk ILI~IIOIIII~1.~1 .. ~C'L~I~~III.CI~Io t l,o$~,t~c\I\; II);I:cIII~I>~. IOcj31:a ~iciA.Par11R . Murpl~!. Kich,~rdI ., P(II\JI II~C 'II;IIIL0,\,

~~I,IL~I~\~IIM.LR~oIl~e~ ;.11 1cI Kels\;~nc.erl l I.U~I\~IL,\t o Corporare

B. TAIII.9E-3 Packaging Cost Trade-offs with Other Logistics Activities

C. Transportation

D. Increased package informationE.Increased package protectionF.Increased standardi~ationG. InventoryH. Increased product prutectionI. WarehousingJ. Increased package infurlnationK. Increaxd prc>duct protectionL.Increased jtandardizalionM. CommunicationsN. Increclsed packqe informationO. Decreases shipn~endt elays: increased package

informationP.decreases trackin: of lost shipmentc.Q. Dccrcacs damage and theft in trancit. but

increases packapeR. \rei:hl and trall\port costs.S.Decreaes handling costs. vchicle waiting time for

loadingT.and unlo:~d~ngin: cl.eased standardiration: increases

mnd;ilU. choices for shipper and decreases need for

special~zedV. transport equipment.W. Decreaes theft. damage. insur;ince: increases

productX. availability (aalcs); increases product value and

cclrrying

Y. costs.Z.Decreares order filling time. labor cost.AA. Increases cube utilization (stacking). but

decreases cubsBB. utiliration by increasing the size of the productCC. dimensions.DD. Decrease ~iiatcrialh andling equipment costs.EE. Decreases other cornnlunications about the

product such asFF. t~lcpl~oncacl ls to track down lost 5hipments.GG. Source Prolr..~~K~o he~tL Cool. Dsparllnsnt of

hlarkct~na~~.) cHl okp~r.~lS~~~.!r \~c\cd\m ~ni\tration.C sntr;tl Mlchignn

HH. L~ii!cr\~l\b.1 1.P I~~L~MLI.~ lI~IlI9.l .II. Of course. other factors intluence the product

package, such as the channel of distrJJ. ution and institutional require~nents. This often

is true in retail channel$. For esampKK. when compact disks (CDs) first catne out,

retailers were concerned whether they co~LL. utilize the racks they were using for albums.

And, there was concern about potentialMM. ferage because of the small size of the CDs. A

larger, environmentally unfriendly pacNN. age was chosen as a way to addrecs those

concern^.^"OO. Procter & Gamble (P&G) has examined the full

implications of the packaging de

PP. sion. The company developed a program called Direct Prc~ductP rofitabilityu which idt

QQ. tified product costs through the entire channel of distribution, including those associat

RR. with packaging. Some of the results achie\,ed by P&G included the following:

SS. Packaging Changes An Ivory 5hampoo bottle was redecigned in a quarer conf~gurationth at took up

TT. Implemented at less space and saved distributors 29 cents per case

UU. Procter & GambleVV. 3'Examplc pro\ ldetl by Dr. William A.

Cunningham. Ail- Force Institute of Technology. Wright-Pattersor

WW. Air Force Basc. Ohio.XX. '4hlartin Chriztopher. "lntegratirlg Logi\tic\

Stratey. 111 the Cotporate Financial Plan." in Tlrc, Lo,qi.\tic.\

YY. Hnntlhooi, ed. James F. Robeson and Willlanl C. Copac~no~ NevY orh: Fret Press. 1994). pp. 35-57,

Carriers Get into the Packaging ActIt may surprise some shippers, but camers can be excellentsources of information on packaging improvements.Some large trucking companies and small-package carriers

offer package testing. analysis, and consulting either as afree service to customers or on a fee-for-service basis.For example, United Parcel Service, CF MotorFreight,and Federal Express all have package-testing laboratories.Their packaging engineers employ standard testing methodsto determine whether shippers' packaging will withstandthe rigors of transportation. Federal Express, for example,employs about 50 packaging engineers in theUnited States. United Parcel Service operates four packaginglabs in the United States and Canada. CF Motor-Freight has a lab at its company headquarters.It makes sense for carriers to get involved with packaging.By assisting shippers with their packaging concerns,carriers can reduce loss and damage rates andclaims payments. They also benefit when changes inpackage size allow for better pallet and trailer utilization.Carrier-operated laboratories are independent in thesense that they have no ties to the packaging manufacturers.Dozens of independent package-testing labs havebeen certified as conforming to specified testing standardsby government agencies (e.g., Department of Transportation)and industry groups such as the International SafeTransit Association (ISTA) and the National MotorFreight Traffic Association (NMFTA). These groups can

provide shippers with a list of certified testing facilities.Source: Toby B. Gooley. "15 There Hiddsn Treasure in Your Packaging'?"Logi.sticv iMnnngemenf 33. no. I ? IDec. 1996). p. 20.Tide powder detergent was reformulated so that P&G was able to shrink the size ofthe box without reducing the number of washings per box. P&G was able to pack13 boxes in a case instead of 17. thus reducing handling and storage costs." Laterthe firm introduced an even smaller package that allowed for a comparable numberof wash loads but reduced the case size.Packaging, warehouse handling systems, and warehousing operations are interrelatedwithin the firm's logistics system. and all must be managed effectively (Box 9-2 has examples).The effectiveness of these systems can be enhanced with an excellent informationsystem.Computer Technology, Information, and Warehouse ManagementComputers and We saw in Chapter 8 that the basic functions of warehousing were movement: storage,Warehouse and information transfer. In each of those areas, the use of computer technology has be-Management come widespread. Warehousing is moving toward greater computer utilization. The fully

computerized warehouse will likely have a structure similar to that shown in Figure 9-14,where all activities of the warehouse interface with the system. including receiving, qualitycontrol, storage, order picking. error control, packing, and shipping. SignificantA.""PackaginglHandling Interaction Gsts a

Boost." ,Llurrriul Hnilrlling Enginec~ritig 30, no. 3 (Mar. 1985). p. 38.

Whethcl- !.our \+;t~.ehouhoep eration'; 21-e; iutom;lted (with an ,\SIRS for sxamlile) or m~in~~al.computer.\ cirri irnprove the efticirncy of! our opsr~tionT. he key ii :in nccuratc. tirnely databasewl~iclri mcs .IS the foundarion i,~co-r1 trol1in.r a11 of the syite~n'asc tivities.Source: "lncrzaac Productivity uith Cornputera and Soltuare." M17dr1-tMr r1tr.1-io1.sH ar~dli1~9~86~ ,IV rircliroroing G~ridrhnok4 1, no. 4 (Spring 1986). p. 68.CIo(lri.ti Mnirriiil, H~rrirlli~ic:.o,p yright 1986 by Cnhners Publishing Company. Division oi Rccd Hnldingh. Inc.advantages will result, including improved customer service. lower costs, and more effcient and effective operations.Associated Grocers Associated Grocers of Colorado. Inc., has a computerized system that controls a var

Automates Its ety of racking. conveyor, and automatic identification equipment in its distributioDistribution Center center? Approximately 6,000 SKUs of dry grocery products are stored in the facilit!Employees pick merchandise from a pick module (rack storage area) and manually applbar-code labels to the items. They place the items on a belt conveyor, where they armoved to a merge and sorting area on an upper mezzanine. Bar-code readers divert iterrto the proper conveyor lane, which transports them to floor level." There they are paletized and loaded into trucks for delivery to customers. With the exception of the manu;order-picking activity, almost all of the process is controlled by computer. Box 9-3 er'"Wo\+ We U5s Computer$ to Mallage Distriburion." Modern Materirr1.c Hrrndlir~g 40, no. 5 (Apr. 19851, p. 737Fo~il-n overview tlf variou\ applications of bar codes. see James Aaron Cooke, "Bar Code or Perish!"Trr!flic Marirrgernrnt 34, nil. Y (Sept. 1993). pp. 10-S through 13-S: Dcrrtr Aquisition anti Bcrr- Cudir~g Strategirto A(iclress Todcr?'.~C ~ZUIICIMI~oLn~ogSr,a ph Series 110. MOO1 3 (Rakish, NC: Tompkir~sA ssociates In(.. r1.d.):

and "2-D Bar Codes: One Step Clohrr to Use on Shipping L.abelr." Alorlern Matericrls Hunrllinq 50. no. 6 (Ma)A.1995). pp. S-5 through S-7.B. Texas Instruments Uses Bar Coding to

Reduce Warehouse SpaceC. Bar coding can be an essential link to inventory

management.D. For example. Texas Instruments has linked

electronicE.data interchange (EDI) and bar coding in the orderF.placement and management of office supplies, with

positiveG. results. The company reduced the amount of

cash tiedH. up in inventory by $1 million, freed up 40,000

square feetI. of warehouse space, reassigned 11 office supply

controlJ. employees, and reduced cycle time by more than one-

third.K. By bar coding inbound shipments, purchasing

and theL.entire materials function can achieve more accurate

accountsM. of actual receipts. The bar-code error rate has

been

N. quoted between 1 in 10.000 and I in 1 million, versus 1 in

O. 25 or 30 for manually keyed data. Receiving also can be

P.automated, which further contributes to cycle time reduction.

Q. These data can automatically be used by the accounts

R. payable department for generating checks and reconciling

S.invoices with purchase orders and receiving. Thus, bar coding

T.represents a logical extension of the organization's information

U. systems and an excellent linkage with EDI.V. Source: Ed Hatchett. .'Combining ED1 with Bar

Cod~ngto AuromateW. Procurement," I592 A'.4PM (Tempe. AZ:

Nation.11 Association ofX. Purchasing Management. 19Y21. pp. 45-50.Y. plains how bar coding has been a key link in

improving warehouse efficiency for TexasZ.Instruments.AA. \Ialasia Airlines Uses Malaysia Airlines,

Southeast Asia's largest airline company, was the first Asia-

BB. Bar Coding to Pacific air carrier to implement advanced bar-code and client-server technology in cargo

CC. \Ianage Cargo tracking and warehouse operati~ns.~Wthecor mpanies in diverse industries-toy retailing.

DD. blood-testing iaboratories, textbook manufacturing-are utilizing similar technology

EE. to improve materials handling efficiency and effecti~eness.~~

FF. Importance of Information is the key to successful warehouse management. However, many ware-

GG. Information in housing operations exhibit symptoms resulting from a lack of information. Not many

HH. \\arehouse warehouse managers operate in a total information vacuum, but many information gaps

II. ManagementJJ. exist in warehousing operations.KK. The importance of information in warehouse

management is significant. AccurateLL. and timely information allows a firm to

minimize inventories, improve routing andMM. scheduling of transportation vehicles, and

generally improve customer service levels. ANN. typical warehouse management system achiec.es

these improvements in three ways:

OO. 1. Reducing direct labor.PP. 2. Increasing materials handling equipment

efficiency.QQ. 3. Increasing warehouse space utilization.J0RR. 'B"Airline Adopts Barcoding." Lo~qicric.sa nd

Mo?c'riirls Ha~zdliiip4 . no. 2 (Apr. 21. 1995). p. 39.SS. i9See "Accurate Data Cuts Warehouse Costs by

$1 Million Annually." Modern M(irerierl.\ Hondlirlg 50.

TT. no. 6 (May 1995), p. S-17; "Barcodes to Track Blood," logistic.^ cinrl ~Mor(,ritrl.rH aridlir~,t1. .n o. 2 (Apr. 21, 1995),

UU. p. 41; and "Tracking What's Wot in Toys," Lo,qi.,ri~..sc md Matei.iulr Hrr~r~llir1~,gn o. 2 (,Apr. 21. 1995), p. 40.

VV. "'For discussions of warehouse rnanagcrnmt systems (WMSs), see John M. Hill. "The Elements of a

WW. Successful WMS." Trirrrsporr(~tioir & IIisri.ihr~rion 36. no. 7 (July 1995). pp. 80-84: "Warehouse hlanajiement

XX. Software: Using Good Data to Brat the Clock." Modern Miir~ricr1.Hs atldlin,g 50. no. 6 (May 1995). p. S-19: and

YY. "The Wide, Wide World of WMS." T~.c~tfMirc inapenzer~r3 4. no. 8 (Aug. 19951, pp. 61-S through 63-S.

ZZ. 338 Chapter 9 Materials Handling, Computerization, and Packaging Issues

AAA. TechnologyBBB. S runs the on-site waCCC. on system. The otherDDD. Local Area Networks Networks are

communications systems that allow transmission of data between a

EEE. (LANs) number and variety of devices such as terminals, word processors, bar-code readers, robots,

FFF. conveyors, automatic guided vehicles, and ASRSs. A local area network (LAN),

GGG. whose devices are located in close proximity to one another, is typically used in warehousing.

HHH. Figure 9-15 shows an example of a local area network.

III. Many approaches are possible to setting up a LAN system. No matter which approach

JJJ. a firm uses, the objectives are the same: to provide better control over information flows

KKK. and to allow the warehouse facility to maximize its effectiveness and efficiency. Due to direct

LLL. connection and a common database, information feeds and flows directly to the next.

MMM. This reduces redundant data entry, excessive paperwork and the potential for error.

NNN. Summary

OOO. In this chapter, we described warehousing materials handling, automation, packaging issues,

PPP. JIT warehousing, and computerization. All of these factors are closely related and interact

QQQ. in creating efficient, effective warehousing and materials handling operations. They

RRR. support the decisions related to warehouse facilities presented in Chapter 8.