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Effect of Supply Chain on Competitive Advantage of a Firm

Info: 3940 words (16 pages) Essay
Published: 23rd Sep 2019 in Business

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There has been extensive research within the last fifteen years that illustrates that a firm’s competitive advantage now lies within the effectiveness and efficiency of its supply chain over other supply chains rather than singular or individual efforts within an organization. The effectiveness and efficiency is created through a wide variety of systems and technologies but especially within an Organizations Warehousing ability. What is a warehouse? It is a place where goods are stored prior to their use, distribution, or sale (Collinsdictionary.com, 2018). Within in this assignment I will discuss the importance of Warehousing and Inventory within certain industries and from a general viewpoint.

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The concept of a warehouse or also known as Distribution centres are sites where raw materials, semi-finished or finished products are stored. A warehouse represents an “interruption in the flow of material and thus adding cost to the system” (Mukit, 2016). I will analyse the beverage industry to develop an understanding of the types of warehouses in which they use and why they may hold inventory.

Improved Economic factors has allowed a higher level within consumers disposable income which intern leads to consumption of premium beverages and higher quantities of previously chosen drinks. This results in increased speeds and productivity requirements whilst forcing the beverage industry into automation(Supplychain247.com, 2018).   

Introduction to Warehousing layout & designs

The process of laying out a warehouse is a lot like putting a puzzle together (Frazelle, 2001). How do we find the right place for materials to be placed in a warehouse? According to Grant, Lambert, Stock & Ellram, the optimal layout and design for each firm will be different & will differ to the products being sold (for example frozen foods vs Electronic goods), the amount of money the organisation has to spend on the layout and design, the competition and lastly fulfilling all customer needs such as quality speed and cost. (Grant et al., 2006). There are a multiple of elements to evaluate when it comes to layout and design and to follow common warehouse layouts such as “U” and “I” shaped material flows (Frazelle, 2001). Whilst keeping in mind the safety, dimension and structure as well as handling equipment (Forklifts) and space requirements. When designing a warehouse, the organisation needs to choose what type of warehouse they need to create to suit their flow of goods. The warehouse common types are U-shaped, L-shaped, I-shaped and multi-story designs each containing their own benefits (REB Storage Systems International, 2018).

U-shaped warehouse product flows

This type of warehouse is the most common amongst the category. From the diagram below, the shipping and receiving docks are located beside each other. This allows the shared usage of the docks and resources. Within this design and layout, it minimises the handling of the commodity allowing a “high cross docking capability” (REB Storage Systems International, 2018).

L-shaped warehouse product flows

This layout design, known as through flow and are beneficial for certain organisations. This L shaped warehouse design allows companies to receive goods on “one side and dispatch on the adjacent side at a 90 degrees angle” (Logisticsbureau.com, 2018) which is visualised on the diagram below. A large number of organisations employ this layout that receive goods on large trailers and pallets but dispatch through smaller transport options. Often modern companies include a mixture of I, U and L shaped layout s to meet the needs of the market requirements whether its B2B, B2C or Business to Route

0(Walker, 2018). This layout allows large sorting areas within shipping and receiving docks thus not meeting the needs for the beverage industry.

(REB Storage Systems International, 2018).

I-shaped warehouse product flows 

These types of warehouses allow the good to be received at one end and then dispatched at the opposite end of the warehouse also known as a flow through warehouse. These warehouses are only beneficial for organisations that have a high flow of goods in and out of their warehouse (Walker, 2018). This layout is seen in manufacturing warehouse and isn’t commonly used within the drinks & beverages industry.

Layout Planning

(Hassan, 2002) States the most “appropriate warehouse layout depends on its particular operational conditions and characteristics like adaptability, modularity, distribution of movements, accessibility, flexibility and compactness”. Within this statement, the layout of a warehouse is problem-dependant meaning there is no certain design all carry their own strengths and weaknesses only recommendations and previous experience in the chosen industry will allow the choice to be made.  Hale (2006) states there are three functions and fundamentals that occur being Relationships, Space and Adjustments. The relationships refer to the relative degree of closeness desired and the organisation and the industry they operate in. certain fundamentals are more important than others and placed at an accessible location. When designing a warehouse, it is important to establish a layouts processes accordingly to allow future adaptions (Hales, 2006).

Space required can be developed from an analysis of equipment and process machinery necessary for the organisation. Each of the requirement needs are to be balanced contra to the space available. The Systematic Layout Planning Pattern, Space relationship diagram is a layout of the warehouse. It is a layout that is not effective until certain adjustments and modification are made to accommodate the organisations considerations. Each adjustment like handling method, storage scheduling etc, all have to be taken into account. These all face limitations like safety, cost and time.

Key Input Data

The layout for an organisation cannot proceed without input data. Its shows the information behind each process and there are five categories within Key Input Data “P Q R S T”

  • Product
  • Quantity
  • Routing
  • Support
  • Timing

Product includes the types of packaging, product and the type of loading units which all depend on Internal transport. The Quantity refers to the collection time of each product and the quantity per loading unit. Routing allows the best route to be chosen to store goods and to collect goods. Through the Support or Service sector it includes the different types of administration, transport, and wholesaler methods. Lastly timing revolves around the timing of packaging, collection storage of product and is a crucial part in the key input stage (prezi.com, 2018). The Beverage industry has to pay close attention to the layout planning stage due to the high volume of good thy receive in and out of their warehouses. The high traffic of goods must ensure a flow and layout is created that will match the high volumes in which they operate.

Dexion material handling organisation state the beverage industry are continual pressured to maximise their available space. There are certain elements within food & beverage warehouse that must be equipped to meet your storage needs. Adjustable racking systems allows the assemble of a “single or deep double configuration” (Dexion, 2018). With the adjustable racking system, it allows heights of 30 metres, Operational temperatures from -30oC to +40oC and also a Galvanized finish to prevent rust (Dexion, 2018).

On review of the beverage industry, it expresses the demand different drinks greatly changes over the course of the year. The different climates and temperatures cause a rise in certain products and a fall in others. As a beverage system logistics provider, wholesaler, distributor and manufacturer the ability to adapt to different demands is essential within the industry (LTD, 2018). Herchenbach offer “Temporary Warehouses to allow organisation to adapt quickly to the change in demand.  

Firstly, Herchenbach allow rapid response times meaning the warehouse can be placed on the current site and would not affect operations that are currently in progress. The warehouses offered by Herchenbach can be installed on paving and do not need a foundation laid. Another benefit this organisation provide is the uncertain demand and future forecasting for a company to plan ahead. The warehouses can be installed and dismantled in a couple of weeks. The warehouses offered can range from being fully insulated, partially insulated, or no insulation at all. Allows the demand in different seasons and climates to be met quickly and efficiently. The low margins created within the beverage industry relies on excellent financial management. These warehouses are built from durable reinforced aluminium and Herchenbach offer them to be purchased, leased and hired. Their largest project has created a temporary warehouse with space for over 16,000 pallets (LTD, 2018).

Operations in Warehouses

Operation within a warehouse are an integrated sector of the organisations business strategy. Efficient warehouses operations occur through the excellence of the four categories, being Receiving, Inventory movement, Shipping and lastly warehouse safety (Smallbusiness.chron.com, 2018). When designing the layout for a warehouse we have to evaluate the different operations that will be going on. Also, the organisation needs to develop what strategies are used to fulfil the customer’s needs and gain the competitive advantage as the beverage industry is highly competitive with small financial margins.

Capacity Management

Capacity is a huge part of the reason why warehouses are successful it establishes planning for determining the production capacity needed by a company in order to meet changing demands. The utilization and effiecny play a major role within capacity management. Within capacity management if you intrinsically tie the organisations business goals and their objectives it is a highly useful tool. The Capacity management within a warehouse can always be constantly improved but the warehouse management must have a understanding of the certain demand of the goods and raw materials in a warehouse.

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For the effective design and mapping of a company’s warehouse understanding the industry and product demand is vital. This is down to forecasting, which is a way of trying to understand future demand and how much space is needed. Organisation can forecast through the different seasons allowing them the create an estimate, for example more Ice creams to be sold in the summer months or more chilled bervagers to be sold in the summer months. It allows businesses to be prepared for this and to use all the space available to them to meet the consumers demand. If demand cannot be met with full utilisation of the warehouse, outsourcing for the high demand seasons may be an option for the company to invest in. (Slack, Brandon-Jones and Johnston, 2016).

Within a warehouse there are certain systems that allow the utilisation of space to be maximized. These storage systems are FIFO, the First in First out method, used for goods that have a high demand and short shelf life. It allows the first or oldest stock to be used first to avoid the cost of obsolete inventory. If goods like technology or fashion that have a life cycle don’t move they lose money and go out of date. This type of storage method use commonality used in the beverage industry due to the high volume of goods demanded throughout the country.

The second method of the storage system is the LIFO, Last in first out. This means the last goods to be stocked are the first to be removed from the warehouse. This means different racking types may be used within the last in first out storage method including push back, gravity flow, triple deep and lastly gravity racking  

Warehouse management systems and technology’s

The introduction of technology systems and improved technology developments within the last decade have allowed the automation of previously maned jobs and allowing a more efficient work force.

Warehouse Management systems allow the collection and management of all kinds of data regarding the operations within the company’s warehouse. It allows the organisation to track and obtain vital information regarding the efficiency of the operations in which they complete. (Systems? 2018).

The selection of the right management system for your warehouse is vital. The beverage and drinks industry currently is still labour intensive even with the introduction of machines like the forklift. Organisation started to turn to fully automated warehouses in order to achieve a less labour intensive or hands on approach. With demand at an all-time high we see the huge increases or alcoholic and non-alcoholic beverages, meaning a higher rate of distribution as the products need to be moved more efficiently. The introduction of Automated storage and retrieval systems linked with software applications like warehouse execution systems allow lower inventory levels in the organisations warehouse increasing the turnover and profits for the company (Williams, 2017). 

By combining these two systems together it allows the beversge industry to take total control of the inventory in which they have, even if its seasonal slow moving or high demand drinks it creates economical and productive organisation.

The WES (warehouse management system) shows the observations of the operations labour and material handling which is vital in an effective operation. This operation has allowed the growth of the beverage industry as it reduces the need to use several different applications which adds to the unnecessary complexity of the warehouse (Williams, 2017)

If an industry doesn’t have applications like WES and AS/RS another highly important piece of machinery is the Forklift. Organisation have to account for everything when it comes to the purchasing of equipment to fit the warehouses layout, maximum height requirement and aisle width. One of the most common technologies found within a warehouse is the Forklift. In order for a forklift to complete a turnabout and shift goods around, it needs about 10 feet to complete the turn. The space that is lost in order to allow a forklift to operate does create lost space within the warehouse, but the machine can lift up to 20 tonnes at a time through it hydraulics system. Within the beverage industry fuel cell forklifts produces little emissions and are often used within refrigerated warehouses. The creation of the forklift has allowed the increase within the efficiency of any warehouse where the machine operates (Brower, Warren, April 2010).

The aim of this report was the analyses the current warehouse and inventory systems in operations and to allow a greater insight into the beverage industry. It has allowed a more coherent understanding of the different types of technologies used in the warehouses and has emphasised how important they are in a highly operation warehouse. The seasonal demands create a wide range of orders and it is through the automated warehouse and the application system they use that helps deliver the goods to the consumers in a effiecnt manner. I have learnt the choice of the warehouse the industry picks impact the layout and the type of flow in which it may have. The management in which the organisations choose within the warehouse also greatly the capacity and storage of the resources and the stock systems suited to their warehouse wheate its FIFO or LIFO  



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Either extensive operations in the target export markets or a strong network of partners that can be used if the requirements change, including: o Warehousing operations (with capability in the relevant temperature regimes) in or near the target markets or at strategic ports in the EU o



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