Warehousing Traditional concept of warehouse as store or godown Development of modern concept of warehouse as facility Traditionally, consumer maintained his

s own store Gradually, manufacturer visualized the need of a buffer between factory and market as productivity improved All activities were manual as warehouses did not receive any engineering attention
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Post war thinking made inventory shrink and production became streamlined to demand and demand for variety in every product increased Marketing experienced the need of a warehouse to stock products and support marketing Production units started using the concept of warehouse as a facility to optimize production [minimize cost]

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Decades of 1960 & 70 saw engineering focus on material handling, storage & information Concept of JIT production system needs dependable delivery system of which warehouses are by now an integral part As we have discussed earlier decade of 1980 was a decade of TQM

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Warehousing Costs Handling Holding Order Processing Packaging Admin Maintenance

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Functions of warehouse [warehousing operations] [physical distribution management: logistical approach by K.K.Khanna page # 57] Receiving goods receive and accept responsibility Identifying goods place, label, color code Sorting goods- sort out the received goods for appropriate storage area Dispatching goods to storage- for temporary storage with easy accessibility Holding goods- security against pilferage and deterioration Selecting, retrieving, packing- items are retrieved and grouped according to customer order for dispatch
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 Marshaling goods- check the items of a single order for completeness and order records are updated Dispatching goods- consolidated order is packaged and directed to right transport Preparing records and advices- of stocks and replenishment requirements Economic and service benefits of Warehouses

Economic benefits - Consolidation, Break bulk, Cross Dock, processing postponement, stock piling[seasonal storage] Service benefits - spot stocking, Assortment, mixing, production support, market presence
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Plant A [Product A for Customer X]

Economic benefits
Consolidation warehouse
Fig [1]

Plant B
[Product B for

Customer X]
Plant C [Product C for Customer X]

Customer X [Product A+ Product B+ Product C]

Customer X Plant A [Product A for Customers X+Y+Z] Break bulk warehouse

Fig. [2]

Customer Y

Customer Z

Plant A [Product A]

Customer X [A+B+C] Cross Dock warehouse

Fig. [3]

Plant B [Product B]

Customer Y [A+B] Customer Z [B+C] Customer W Products A+B+ C

Plant C [Product C]

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Service benefits
Plant A [Product A] In transit mixing Warehouse [transit mixing point, mix & make product D] Customer X Products A+ B+ C+D Customer Y Products A+B+ C Customer Z Products A+B+ D

Plant B [Product B]

Plant C [Product C]

Fig [4]

Vendor A [part A] Assembly Line X Vendor B [part B] Manufacturing Warehouse

Fig. [5]

Assembly Line Y

Vendor C [part C]

Assembly Line Z

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Principles of Warehouse design Design criteria product flow, ware house should be designed round material handling flow

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 No of stories, one is ideal as against limitations of

space, cost of land Height utilization, principle of cubic space, principle of go vertical, limitation on height utilization due to fire safety and insurance regulations Handling Technology Movement continuity and movement scale economics Movement continuity is ensuring less number of long movements rather than large number of short movements Movement scale economies depend on movement in large bulk Moving material in cases strapped on pallets or containers rather than moving material in small packages. Handling technology is addressing these issues
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Storage Plan Characteristics of product Open air storage for bulky products Heavy items closer to floor Light items on higher rungs Fast moving items in large bulk closer to aisles Hazardous items

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Warehousing alternatives Private Warehouses Owned or leased by the product owner Control is fully with the product owner Changes can be made to integrate the warehouse with rest of the logistical system Provides market presence to the product owner There is no profit to be added to the cost

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Public Warehouses Available to companies on hire Overheads get distributed over a large customer base As warehousing is their core business public warehouses offer expertise in management Flexibility of location Significant scale economies, several users and resultant volume, benefits in transportation costs

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Contract warehouses Contract warehouse operators take over logistics responsibility from manufacturing company Long term relationship and customized service Expertise of management Shared resources with several clients General classification of Public warehouses 1. General merchandise 2. Refrigerated 3. Special commodity 4. Bonded
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Warehousing strategy
Where? How many? Of what type?
Private Market Presence Industry synergies Operating flexibility Contract Public

Location flexibility
Scale economies
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Site selection
Location considerations Cost of distribution to market area Transport requirement and facilities Transport cost Competition, presence of others Availability of utilities [power, water, gas, sewerage disposal and cost] Labour supply and cost I - R climate, labour productivity Customer expectation of D Company specific commitments Local taxation Community attitude Restrictions associated with warehouses
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 Future expansion Cost of land Topography and soil condition Possibility of title change to the land

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Ideal warehouse location Protection of stock against moisture, insects, dust, fumes, pests, thieves, fire etc. Provides facilities for ware housing activities Economics of operation Offers water for drinking and fire fighting Away from sources of detrimental conditions Easy access, proximity to A customers No geographic barriers

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Inventory at various locations, the square root law Inventory reduction and customer service How much to hold and in how many locations to hold? The square root law X2 =[X1] [n2/n1] X1 = total inventory in existing facilities X2 = total inventory in future facilities
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n1 = number of existing facilities [warehouses] n2 = number of future facilities [warehouses]

If a company distributes 40,000 units using 8 existing facilities and plans to reduce the number of facilities to 2, then what should be the inventory in two of their future facilities? If we use the square root formula, the answer is 20,000

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