I have this problem in hands and I would very much appreciate to know your viewpoints on the following case:

There are three warehouses in a large area facility and all of them keep the same part number in stock in order to make the picking process easier and faster.

Which do you think it is the best course of action: 1) give the person in charge of each warehouse the responsibility of managing materials independently and put orders to vendors whenever he (or she) feels the time has come to do it, or 2) each warehouse communicates specific needs on a timely basis to a central (or main) warehouse which put orders to vendors after consolidation?

Apart from the qualitative pros and cons, I would like to have your opinions in what costs are concerned. Which do you think it is the most cost effective solution?

As an example, suppose that you have the following figures on an ordinary fast moving consumable (conclusions can then be extended to the rest of the products in stock, I suppose – or am I wrong?):

Warehouse A: Average demand = 15 units/ day; Standard deviation = 3 units/day;
Warehouse B: Average demand = 25 units/ day; Standard deviation = 2 units/day;
Warehouse C: Average demand = 45 units/ day; Standard deviation = 5 units/day.

The company works 230 days/year;
The unit cost is $40;
The holding cost is 25% a year;
The purchasing cost is $60 per order;
The lead time from vendor is 20 days;
The target service level is 98%.

I am looking forward to your news.

Regards,

Rui

My guess is to have one material management software for a central warehouse with satellite stores if the disctances are really far.

P/s perhap we need one more forum here entittled "Improving material management".

Nobody dares to do trial and error? I guess we can learn from mistakes (lessons learnt) and correctness (best practices).

Rui,

I will definitely have to think about this one to show financial justification. I have worked at two sites with multiple warehousing and one with a single warehouse. But I have no quick answers.

So many have been said about maintenance organization:

http://www.plant-maintenance.com/maintenance_articles_organisation.shtml

10 essentail features for warehouse management:

http://www.knowledgestorm.com/search/viewabstract/82420...results_researchname

There must be a central system, the stores administrators can have their responsibilities, but at the end of the day one person must be acountable.
If sites are receiving differentiated service (quality, price etc..), this will create problems in the organization.

With the current technology you could look if the needed part is in store A, and it must be possible to obtain, but seeing the part somewhere in the company, and not being able to obtain it... because of separated kingdoms...
Reminds me of some battery clamps..

Thank you so much for your viewpoints and links.

I attach an Excel file with my findings on this subject.

Regards,

Rui

Centralized_or_not.xls (26 Kb, 14 downloads)