Partial pallet turnover rate

July 29, 2009 No comments yet

All warehouses have partial pallets occupying full pallet positions.  This may be no more than a statistical element in calculating warehouse utilization if the facility is operating comfortably below it’s maximum effective working capacity.  When the warehouse is nearly full, partial pallets can have an impact.  It may be useful to compare the cost of relocating material to the cost of keeping the partial pallet in place.  The three principle factors in the calculation are:

  1. The partial pallet turnover time. This is the number of days that half pallets or less remain in storage.
  2. The cost of  relocation calculated as the fully burdened labor cost of moving the partial pallet to a half pallet size location
  3. The daily cost of a pallet location.  For this, cost I use the total non-labor building costs of the storage space; i.e., total building cost time the percent of the building used for storage all divided by the number of pallet locations.

When the partial pallet turnover times multiplied by the daily location exceeds the relocation cost, it is time to create a partial pallet area near the picking and shipping operation.  I chose this location because the partial should be the prime next use location.

Health care reform and the supply chain

July 27, 2009 7 comments

While no one knows what, if any, health care reform will come out of congress, it is certain that it will have an impact on the supply chain.  From the employee cost side, there will be a change in health care cost that the system will have to absorb.  If the government will be providing a “public option” , will employers be allowed to  use it for their staff?  If not, would the employer help the workers more by shifting the current health care cost to wages and allow the workers to use the public option or subsidies to buy insurance?

On the transportation side, what will be the effect on the drug delivery side of the supply chain.  It is likely that any insurance will strongly encourage refills of drugs for chronic care be filled through mail order provider to reduce costs.  That would change the volume through the retail pharmacies and drug wholesalers which may shift volume for TL and LTL carriers to parcel carriers.

It is clear that all members of the pharmaceutical supply chain need to start developing contingency plans that will take advantage of whatever legislation is enacted.

Network modeling assumptions.

July 24, 2009 No comments yet

One assumption often made in supply chain network models is that the sources are fixed.  That may not be the right assumption in all cases.  Many products, whether commodities or manufactured products can have alternative sources with differing acquisition costs, minimum purchase quantities, lead times and delivery costs that will change the left total cost source as the Distribution Centers location moves.