Page 230 - DMGT551_RETAIL_BUSINESS_ENVIRONMENT

Unit 12: Warehouse Management

The primary benefit of consolidation is that it combines the logistical flow of several small Notes
shipments to a specific market area. They realize the lowest possible transportation rate. In
order to provide effective consolidation, each manufacturing plant must use the warehouse as a
forward stock location or as a sorting and assembly facility. Through the use of such a program
the manufacturer can optimize total distribution cost.
Break Bulk

In break bulk warehouse operations no storage is involved. A break-bulk facility is for the
consolidation of long-distance transportation movement for less-than-truckload freight to lower
transport costs. It is meant for cargoes that are not in bulk. A break bulk operation receives
combined customer orders from manufacturers, sorts or splits individual orders and delivers
them to individual customers. Break bulk as used in this text should not be confused with the
maritime term. In shipping terminology, break bulk cargo is typically loose material stacked
on wooden pallets in contrast to material that is containerized.
Figure 12.3: Break Bulk Operation

Customer A Manufacturer A
Distribution
Customer B Center Manufacturer B

Customer C Manufacturer C

The philosophy behind the “break bulk approach” is that by consolidating a large amount of
freight from different locations, a larger and more diverse pool of freight is available to choose
from so as to achieve better freight mix for the long haul. For example, the freight coming from
one customer or terminal location may be relatively light and bulky, whereas the freight from
another customer or terminal location may tend to be much denser. Some freight may be
irregular in shape. By consolidating the freight originating from the different customers or
terminals in one location, there is a wider range of freight to choose from, so as to efficiently use
each truck for the longer journey.
Normally many 3PL operators create a terminal-break bulk network. In this system, a typical
shipment would first be picked-up from a customer location and dropped off at the local terminal.
It would then be moved a relatively short distance to the terminal’s associated break bulk
facility. From there, the shipment would be trucked a relatively long distance to the break bulk
facility associated with the destination terminal. From this break bulk facility it would finally
trucked to the destination terminal, to be delivered to the customer. The continual goal in this
network is, however, to minimize transfers of freight. Ideally, only one break bulk should be
involved in the process.

Processing/Postponement

Stores can also be used to postpone, or delay production. For example, a warehouse with packaging
or labeling capability allows postponement of final production until actual demand is known.
Once a specific customer order is received, the warehouse can complete final processing and
finalizing the packaging.
Processing and postponement provide two economic benefits. First, risk is minimized because
final packaging is not completed until an order has been received. Second, the required level of
total inventory can be reduced by using the basic product for a variety of labeling and packaging
configurations.

LOVELY PROFESSIONAL UNIVERSITY 225