Warehouses may be categorized by type, which is primarily defined by the customers they serve. Here are some of the more important distinctions:
      A retail distribution center typically supplies product to retail stores, such as Wal- Mart or Target. The immediate customer of the distribution center is a retail store, which is likely to be a regular or even captive customer, receiving ship- ments on regularly scheduled days. A typical order might comprise hundreds or thousands of items; and because the distribution center might
serve hundreds of stores, the flow of product is huge. The suite of products changes with customer tastes and marketing plans; but because the orders are typically known a day or more in advance, it is possible to plan ahead. Some product may be pushed from the distribution center to the stores, especially in support of marketing cam- paigns.
      A service parts distribution center is among the most challenging of facilities to manage. They hold spare parts for expensive capital equipment, such as automo- biles, airplanes,computer systems, or medical equipment. Consequently, one facility may represent a huge investment in inventory: tens or even hundreds of thousands of parts, some very expensive. (A typical automobile contains almost 10,000 parts.) Because of the large number of parts, total activity in the DC may be statistically predictable, but the demand for any particular part is relatively small and therefore hard to predict. This means that the variance of demand can be large and so relatively large quantities of safety stock must be held, especially since there can be usually long lead times to replenish parts to the warehouse. Indeed, sometimes there is as much safety stock as cycle stock, and so, in aggre- gate, these skus require much space. This in turn increases travel distances and makes order-picking less efficient.
      A typical service parts warehouse manages two distinct order streams: stock orders, by which dealers replenish their shelves; and emergency orders, in which an equipment owner or independent repair shop urgently requires a few special parts to repair a broken piece of capital
equipment. Stock orders tend to be large and fairly predictable replenishments of popular consumables, while emergency orders are typically small (two to three pick-lines), unpredictable,
and urgent, because expensive capital equipment is likely waiting for repair. Emergency orders are typically for items that are ordered infrequently (otherwise they could have been provided by the dealer from stock inventory). Such orders—a few, slow-moving items that must be picked immediately—are relatively expensive to handle. Worse, customers ordering for repair might order before they are absolutely sure which parts need replacement; and so there can be a significant percentage of returns to be handled at the warehouse.
     For most product in a service parts warehouse there are not sufficiently reliable patterns of movement to justify special processes, but one can layout stock to be more space efficient by storing similar sizes together, thereby reducing travel.Furthermore, one can hedge chances of having to travel long distances. For example, it can be advantageous, especially for emergency orders, to store products together that are likely to be ordered together.

Figure 1.3: The failure rate of many mechanical components follows a “bathtub” distribution,
which means demand for these parts is higher at the beginning and at the end
of life.

Another complication is that the life cycle of a service part is unusual, with three stages of product life, as shown in Figure 1.3. Early failures are generally due to manufacturing imperfections; mid-life failures are generally due to random events that stress the part beyond its tolerance; and end-of-life failures are due to expected wearing out of the product. Demand for product generally reflects this pattern, and creates challenges in the warehouse. For example, there is little time to ramp up availability of new product at the start of its life cycle. Also, parts are more frequently requested at the end of the product life cycle, and so it is easy for the warehouse to be stuck with obsolete merchandise. Finally, it may be necessary to relocate roduct
as its popularity changes.
      A catalog fulfillment or e-commerce distribution center typically receives small orders from individuals by phone, fax, or the Internet. Orders are typically small, for only 1–3 items, but there may be many such orders, and they are to be filled and shipped immediately after receipt. Because customer orders require instant re- sponse, such distributors typically try to shape demand by offering special prices for ordering at certain times or in certain quantities or for accepting more variable delivery dates.
     A 3PL warehouse is one to which a company might outsource its warehousing op- erations. The 3PL provider might service multiple customers from one facility, thereby gaining economies of scale or complementary seasons that the customers would be unable to achieve on their own. 3PL facilities may also be contracted as overflow facilities to handle surges in product flow.
      A perishables warehouse may handle food, fresh flowers, vaccines, or other product requiring refrigeration to protect its very short shelf life. They are typically one link in an extended cold chain, along which perishable product is rushed to the consumer. Such DCs are distinctive in that product dwells within for very short times, frequently only hours. Also, there is a great emphasis on using space effectively because, with refrigeration, it is so expensive. They face many challenges in inventory management, including requirements to ship product accord- ing to FIFO (First-In-First-Out) or FEFO (First-Expired-First-Out). Also, there are typically many restrictions on how product is handled. For example, chicken cannot be stacked on top of anything else, to protect against juices dripping onto product below and contaminating it. Finally, appropriate temperatures must be maintained and this can be different for different kind of products. A typical food DC operates separate areas for ambient temperatures, chilled (around 2 degrees C, 35 degrees F), and frozen product (-18 degrees C, around 0 degrees F). To protect stored product, it is important to avoid bringing in anything warmer.

This type of warehouse will become more common as China, India, Brazil, and other rapidly industrializing countries build a middle class, which will increasingly want fresh fruit, vegetables, meat, and dairy.

While there are many types of warehouses in the supply chain, one of the main themes of this book is that there is a systematic way to think about a warehouse system regardless of the industry in which it operates. As we shall show, the selection of equipment and the organization of material flow are largely determined by：

•   Inventory characteristics, such as the number of products, their sizes, and turn rates;
•   Throughput and service requirements, including the number of lines and orders shipped per day;
• The footprint of the building and capital cost of equipment;
• The cost of labor.