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1. The Warehouse Design and
Control Problem
Based on
•Rouwenhorst et. al.,EJOR, Vol. 122, pgs 515-533, 2000
•Yoon, C. S. and Sharp, G., IIE Trans., Vol. 28, pgs 379-
389, 1996

2. Topics already covered
•The roles of the Warehouse in contemporary distribution
networks
–Buffer
–Consolidation
–Value Adding Processing
•Warehouse classification based on Customer types
–Factory Warehouse
–Retail Distribution Warehouse
–Catalog Retailer
–Support to Manufacturing operations

3. Topics already covered (cont.)
• Warehouses processes and the associated material flow
Receiving Shipping
Reserve Storage
and
Pallet Picking
Case
Picking
Broken
Case
Picking
Accumulation, Sortation & Packing
Cross-docking
Direct
putaway
to reserve
Direct
putaway
to primary
Replenishment Replenishment

4. Topics already covered (cont.)
•Major warehouse equipment, its functionality, and
justification
–Containers & Unitizing Equipment
–Storage and Retrieval Equipment
•Unit Load
•Small Load
–Conveyors
–Warehouse docks and dock-related equipment
–Automatic Identification and Communication Equipment

5. Major decisions underlying the
Warehouse deployment and operations
•Configuration issues
–Organization of the material flow
•Unit Loads
•Establishment of a forward area
–items to be included in the forward area
–sizing of the forward area
•Zoning, Time Windows and Pick Waves
–Equipment selection and its sizing
•storage modes
•order picking and material handling equipment
•Warehouse management system and automatic identification and
communication equipment
–Layout: Allocation of Storage Capacity
–Personnel skills and sizing

6. Major decisions underlying the
Warehouse deployment and operations
•Policies
–Receiving policies
•Assigning trucks to docks
–Storage policies
•Assigning received material to storage locations
–Replenishment policies
–Order processing policies
•order batching policies
•zoning policies
•picker routing
–Sortation and consolidation policies
–Shipping policies

7. Decision / Performance Criteria
Responsiveness
Quality
Cost
Investment +
Operational
Space/Equipment/Labor
Product quality
Order accuracy
Order flow time
throughput
fill rate
volume flexibility/storage capacity
mix flexibility
=> Multi-criteria Optimization Problem!

8. Warehouse types/missions and
Competitive Strategies
•Factory warehouse: Interfaces production with wholesalers
–small number of large orders daily
–advance info about order composition
=> focus on cost and order accuracy
(responsiveness depends heavily on production schedules)
•Retail Distribution warehouse: Serves a number of captive retail units
–advance info about order composition
–carton and item picking from a forward area
–more orders per shift than consolidation/shipping lanes
=> focus on cost, accuracy and fill rate
(responsiveness depends heavily on truck routing schedules)
Remark: If the retail units are not captive, then responsiveness becomes a crucial
issue!

9. Warehouse types/missions and
Competitive Strategies
•Catalog Retailer: A warehouse filling orders from catalog sales
–a large number of small (frequently single-line) orders
–item and, sometimes, carton picking
–daily composition of orders usually unknown
–only statistical information available
=> focus on cost and response time
•Support of Manufacturing operations: A stock room providing raw
material and/or work-in-process to manufacturing operations
–many small orders
–only statistical information available about order composition
–stringent time requirements (e.g., response in 30 min)
=> focus on response time but also accuracy and cost

10. Yoon & Sharp’s design procedure
MANAGERIAL CONSIDERATIONS
PRODUCT DATA ORDER DATA
DATA ANALYSIS DATA ANALYSIS
SPECIFICATION OF ORDER
PICK SYSTEM STRUCTURE
SPECIFICATION
OF EQUIPMENT
SPECIFICATION
OP. STRATEGIES
MATERIAL
FLOW
INFORMATION
FLOW
SUBSYSTEM
I
SUBSYSTEM
II
SUBSYSTEM
N
SUBSYSTEM RECONCILIATION
EVALUATION & SELECTION
OVERALL PERFORMANCE ANALYSIS
INPUT
STAGE
SELECTION
STAGE
EVALUATION
STAGE

11. Defining Department and Subsystem
structure
Department A
Department B
Subsystem A1
Subsystem A2
Subsystem An
Subsystem B1
Subsystem B2
Subsystem Bn
Transport Equipment 1
Transport Equipment 2
Transport Equipment k
Storage structure (e.g., Gravity Flow Rack)
Transfer
Device
Storage
Equipment
Retrieval
Equipment
(e.g., pick to
light)
Transfer
Device
Transport
Equipment
(e.g., forklift)
Transport
Equipment
(e.g., Belt
Conveyor)

12. Determining the
basic system structure
Product data:
•Activity level
•requested quantities
•product properties
•vendor types
Order data:
•number of line items
•number of items
•cubic volume
•shipping priorities
•product correlation
Managerial requirements /
company strategy
• Definition of major functional
areas / departments
• Definition of departmental sub-
systems
• Storage and material handling
modes
• Operational policies
• storage policies
• replenishment policies
• order picking policies
• batching
• sorting
• zoning
• routing
• receiving & shipping
policies

13. Warehouse Activity Profiling
(c.f. Bartholdi & Hackman, Chpt. 10)
•The careful measurement and statistical analysis of the warehouse
activity.
•The process of understanding the customer orders that drive the
system
•Sifting through historical data for opportunities and insights that
might confer advantage.
WAP
SKU data
Order data
Location
data
Summary statistics
Distributions
“Structural”
Characterizations, e.g.,
• prevailing patterns/trends
• relations
• dominant elements

14. Addressing the problem complexity:
Hierarchical Decomposition
•Strategic-level decisions: they have the longer-lasting impact on
the operation of the warehouse, and involve major investment
–process flow design
–equipment selection
•Tactical-level decisions: medium-term decisions which might still
involve significant investment
–sizing of the facility areas and its equipment
–Storage layout
–resolution of organizational issues like the storage and replenishment
schemes, and batch sizing
•Operational-level decisions: Decisions and policies related to the
real-time operation of the facility
–assignment and control problems of people and equipment

15. Strategic-Level Concerns
(Rouwenhorst et.al.)
Receiving StoringOrderpickingShipping
Resources
Processes
Organization
Separate
reserve area?
Batching?
Different
types of
storage?
Types of
storage
Storage
unit
Types of
sorting eq.

16. Receiving StoringOrderpickingShipping
Resources
Processes
Organization
Tactical-level concerns
(Rouwenhorst et. al.)
Forward and
reserve area
Storage
concept
Pick zones
Batch size
Number
of docks
Tech. zones
Number
of docks
Layout
Storing and Picking eq. capacity
Peripheral eq. and workforce capacity

17. Operational-level concerns
(Rouwenhorst et. al.)
Receiving StoringOrderpickingShipping
Resources
Processes
OrganizationDock
Assignment
Replenish-
ment Policy
Storage
plan
Dock
Assignment
Batch
formation
Picking task
Assignment
Routing
Dwell point
Chute
Assignment
Workforce Assignment

18. General Remarks
•The decomposition is ad-hoc: no theoretical justification
•Top-down approach: Higher-level decisions constitute constraints
for lower-level decision making:
–However, they must be revised if the lower-level problems become infeasible
•Most existing quantitative analysis addresses tactical and
operational issues
•Strategic level issues hard to formally model and analyze due to
–underlying problem complexity
–elusive / intangible nature of some of the considered criteria (e.g., flexibility).
–Typically, one seeks to narrow down the design alternatives to a few
configurations that tend to minimize (annualized investment and operational)
costs, while meeting some technical and performance-related constraints

19. Course roadmap
•Familiarize ourselves with the formal theory and key analytical
results addressing some of the problems identified in the above
taxonomy.
–Storage configuration and storage policies
–the forward/reserve problem
–order-picking: batching, zoning, and routing
–Warehouse layout
–Configuring and controlling automated storage and retrieval equipment
–Cross-docking
•Address the synthesis/design problem through project assignments
•Rouwenhorst et. al.: a good starting point for tracing literature on a
particular problem.