Consolidating Orders for a Group of Secondary Warehouses

Charles J. Bodenstab

Companies that utilize a master warehouse, or mixing warehouse, will usually stock the master warehouse from the supplying vendor on a routine basis. The secondary warehouses order the product from the shelves of the master warehouse as if it was a vendor in its own right. This technique is covered in a previous white paper titled “The Use Of MARS In A Multiple Warehousing Environment”.

An alternate approach is to create independent purchase orders for each of the secondary warehouses that will not get co-mingled with the product at the master warehouse. In this case the key parameters, such as the lead time, are set to recognize that the product is going to be shipped from the original supplying vendor rather than from the shelf stocks of the master warehouse. In this approach the purchase orders will be consolidated and sent to the vendor for shipment to the master warehouse, with the understanding that the product will not go onto the shelves of the master warehouse, but rather will be transshipped to the secondary point.

Usually, the rational for this approach is to avoid processing the product through the central warehouse shelves. It arrives at the master warehouse where it is received, split immediately into the separate shipments and sent to the secondary warehouse. The negative to this approach is that more inventory ends up at the secondary locations, since the lead times are inherently longer (e.g. it is the sum of the vendors lead time, the time to split the order, and finally the time to ship it down to the secondary warehouse), and the order frequency may be longer. Issues of lot size can also force larger shipments.

Assuming that a company has weighed all the tradeoffs and has decided to operate with this consolidation approach, the following is a discussion of how to use the MARS system in this environment.

1. Insure that all the parameters such as lead time and order frequency reflect the reality of the product coming directly from the vendor via the master warehouse.
2. When getting ready to build an order on a specific vendor, designate the vendor in the pre-select screen and all the warehouses that are to be included in the order. This will bring up all the items from all the warehouses that are normally supplied by that vendor. Note that each item for each warehouse will be separate, with its on sales history, and not consolidated at this point.
3. Go to the order screen which will now contain the individual order amounts by item for each secondary warehouse. Edit the information as you would normally.
4. When you are ready to create the requisition, click on the button in the lower right called “Consolidated Req”. This action will sum the SUG QTY (Info screen) by item so that items for all the secondary warehouses will be stated as a single SUG QTY for the consolidated warehouse selected. MARS will have addressed the lot sizing issue by using the lot size from the consolidated warehouse record. For example, the sum of SUG QTY for each of the warehouses for a given item may be 52 units with a carton size of 20. This last step will force the order up to 3 cartons of 20 or 60.
5. MARS will restore SUG QTY for the individual purchase orders that made up the total when the Refresh button is clicked. These “memo Reqs” can be printed out in custom format by clicking the Custom Req button on the Gen Req window and saving them for purposes of breaking down the vendors shipment when it arrives at the central warehouse.

An alternative to the above is to have the individual warehouses comprehend the lot size requirements directly (e.g., insure that each warehouse quantity independently meets the lot sizes). In this case MARS will find that all the lot size requirements are automatically met (i.e., if each warehouse meets the lot size, then the sum of the parts will meet the lot size). The tradeoffs here are that, on one hand, you do not have to break apart the lots when they arrive at the central warehouse, but on the other hand, you are going to add to the total inventory due to rounding up at each location.

It may be that with this latter approach of having each location deal with the lot size issues, the vendor will accept a purchase order with each warehouse isolated separately and even compartmentalized on the truck. This makes for very efficient handling at the central warehouse, but again will increase the secondary warehouse inventory levels. (Incidentally, if this technique is used, MARS will prepare the order without having to use the “Consolidated Order” feature.)

Just an editorial comment that has nothing to do with MARS per se – be sure that you have analyzed all the numerous economic issues and tradeoffs for the various methods of reordering and shipping that we have outlined above. My fear is that an approach is being used because it is a carryover from some prior period and has not been recently analyzed in depth.