Warehouse

1. Introduction

1.1 Background information of warehouse

Warehousing can be defined as an essential activity in various supply chain, and it plays an important role “in the success, or failure, of business today” (Frazelle, 2002a). Compared with the traditional inventory holding function, modern warehouse has been acting as cross-docking point, valued added service center, production postponement points, and return good centers and so on (Baker and Canessa, 2006). The cost of warehouse has become a significant issue for operators to deal with since the economic crisis. The capital and operating cost of warehouse accounts for around 22% of logistic cost in U.S., for Europe this percentage is about 25% (Baker and Canessa, 2006). Concerning the economic crisis and market competition, warehouse operation requires continuous improvement. Thus, the adoption of new management philosophies, as lean production for instance, brings challenges for warehouse management. These challenges include tighter inventory control, shorter response time, and a greater product variety (Gu et al., 2007).

1.2 Problem indication

There was a steady increasing number of new large warehouses from 1995 to 2002 (Baker, 2004), and sales gained an average of 5% annually during 2003–2005 (Baker & Canessa, 2006). Even the numbers of warehouses have increased, in recent years; some warehouses began losing their profit. For instance, automotive logistics was off about 18%, valued-added and distribution warehouses were off around 5% in 2009 (Modern Materials Handling, 2009).

One of the reasons for profit decreasing was inefficient warehouse operation“Many warehouses and distribution center operations continue to suffer from significant inefficiencies, as forklift operators waste time and resources hunting and digging because they lack adequate information on the location of items and the optimal route for put away, replenish and retrieval actions,” says Michael Giuliano, president of Meridian...