WAREHOUSING

DEFINITION A warehouse is a commercial building for storage of goods. Warehouses are used by manufacturers, importers, exporters, wholesalers, transport businesses, customs, etc. they are usually large plain buildings in industrial parts of towns. They come equipped with loading docks to load and unload trucks; or sometimes are loaded directly from railways, airports, or seaports. They also often have cranes and forklifts for moving goods, which are usually placed on ISO standard pallets. INTRODUCTION Warehouse can play a key role in the integrated logistics strategy and its building and maintaining good relationships between supply chain partners. Warehousing affects customer service stock-out rates and firm¶s sales and marketing success. A warehouse smoothens out market supply and demand fluctuations. When supply exceeds demand, a demand warehouse stores product in anticipation of customer¶s requirements when Demand exceeds supply the warehouse can speed product movement to the customer by performing additional services like marking prices, packaging products or final assembling etc.  Warehousing can be defined as a location with adequate facilities where volume shipments are received from production center, which are then broken down into particular order and shipped onwards to the customer.  Warehousing is an integral part of any logistics system. The warehouse is a between producer&customer.  Out-bound warehouse help consumers buy on demand without a near4by production plant warehousing cost are about 10% of total integrated logistics costs for most companies.

TYPES OF WAREHOUSE    Private Warehousing, Public-Warehousing, Contract Warehousing etc«..

some provide wide array of services including packaging. maintenance. local delivery. vii. iii.Private-Warehousing A firm producing or owning the goods owns private warehouses. ii. which allows mangers to address loss. and dock levelers. vi. But private warehouse may not be expected to be packed up to the brim all the while. Advantages The advantages and disadvantages of private warehousing as against those of public warehousing are: a. damage. testing. Potential advantage of using a private warehouse is the ability to maintain physical control over the facility. Therefore the costs of private warehousing per unit may actually be higher. hand trucks. Extra payment to be made for work on Saturday and Sundays and holidays. racks and bins. viii. These are: i. Generator and other services charges are required to be taken into account. b. the costs of private warehousing compares favorably with that of public warehousing. . Private warehousing offers better control over the movement and storage of products as required by the management from time to time. v. forklifts. the expenses are distributed over several other consignments of other clients. Expenses incurred on ensuring that warehouses are properly equipped with material-handling equipment like conveyors. The costs of salaries of staff required for peak activity periods which can be very high since retrenchment during slack periods may not be possible. and theft. The cost of maintaining insurance records and of the premiums paid for fire. In most instances therefore can render better service with greater flexibility for the user. data processing and pricing. There is less likelihood of error in the case of private warehousing since the company¶s products are handled by its own employees who are able to identify the products of their own company better. A company running a private warehouse will have to compare costs incurred with the total figure for the complete service through public warehousing. power and light. Public-Warehousing A public warehouse rents space to individuals or firm needing storage. and also for workmen¶s compensation. When not in use they can rent it out. But in public warehousing. inventory. Fixed expenses and building and land acquisition costs which are high. labeling. To this must be added the cost of such item as fuel. iv. The construction and maintenance of private warehousing can be extremely costly. The office and record-keeping equipment necessary for successful warehousing operations has to be budgeted for. c. air-conditioning. All the expenses have to be carefully analyzed and evaluated. All the foregoing cost factors operate in public warehousing as well. If there is sufficient volume of goods to be warehoused. theft. The goods are stored until they are delivered to a retail outlet or sold.

Public warehousing facilities can be given up as soon as necessary without any additional liability on the part of the user. .g. Distribution Warehouses: These warehouses are located close to the manufacturing concerns or consuming areas. f. Value Added Services. b. The warehouseman releases only those goods on which the duty is paid on production of roof of such payment and release order issued by the appropriate authority. These warehouses receive agricultural commodities either directly from the farmers or through their commodities agents. for several plans are available for the requirement of different users. Bonded Warehouses Private and public warehouses can be ³bonded under the customs and excise act and municipal corporation regulations. Their location depends on the nature of the product. or from wholesalers. facilitating deferred payment of customs. Fixed costs of a warehouse are distributed among many users. excise or octroi duty. Field Warehouse Field warehouses are those which are managed by a public warehousing agency in the premises of a factory or company which needs the facility for borrowing from a bank against the certification of goods in storage or in process by an independent professional warehouseman. In addition to warehousing activities such warehousing provides a combination of integrated logistics services. Public warehousing is sufficiently flexible to meet most space requirements.Advantages: a. Agricultural Warehouses: These warehouses are meant storing agricultural produce grown in a certain area and are located in assembling or regulated markets. e. the time taken for transit. and the user pays only for the space and services he use. Thus allowing the leasing firm to concentrate on its specialty. Therefore the overall cost of warehousing per unit works out to a lower figure. Public warehouses are usually strategically located and immediately available. It is generally less expensive and more efficient. it is essential that the temperature is regulated and temperature variation is controlled to the degree particularly for certain sensitive items. The costs of public warehousing can be easily and exactly ascertained. c. e. In a cold storage. Contract-Warehousing Contract warehousing is a specialized form of public warehousing. Cold Storages: Cold storage facilities are provided for perishables against payment of a storage charge for the space utilized by different parties. d. operating coast and the need to make the product available in the market in obedience to the demand for it. They provide customized services.

This warehouse will receive these products from various sources and consolidate these into shipments. FUNCTIONS OF WAREHOUSES: Warehouses are basically intermediate storage points in the logistics system where raw material. The warehousing functionality today is much more than the traditional function of storage. . Facilities for breakbulk. it would be more economical to have a consolidation warehouse. Consolidation This helps to provide for the customer requirement of a combination of products from different supply or manufacturing sources. work in process. marketing. are available at these warehouses. inspection. 2. They provide transit storage facilities for goods awaiting onward movement. Cross Docking This type of facility enables receipt of full shipments from a number of suppliers. the warehouse in this case serves the purpose of receiving bulk shipments through economical long distance transportation and breaking of these into small shipments for local delivery. This enables small shipments in place of long distance small shipments. These products are mixed at these warehouses into right combination for the relevant customers as per their warehouses and continuously provided for the product mixture shipments requiring these. They store food grains or fertilizers. The following are main function that warehousing serves today: 1.Buffer Storage Warehouses: These warehouses are built at strategic locations with adequate transport and communication facilities. these are allocated to the respective customers and are moved across to the vehicle for the onwards shipments to the respective customers at these facilities. etc. etc. finished goods and good in transit are held for varying duration of times for a variety of purposes. packaging. Instead of transporting the products as small shipments from different sources. Export and Import Warehousing: These warehouses are located near the ports from where international trade is undertaken. Smaller shipments accompanying these full shipments are moved to the temporary storage in these facilities awaiting shipments to the respective customers along with other full shipments. 3. As soon as the shipments are received. and direct distribution to different customers without storage. 4. Product Mixing Products of different types are received from different manufacturing plant or sources in full shipment sizes.. which are economical for transportation or as required by the customers. generally manufacturers. Break Bulk As the name suggests.

while the demand is full year around. Decoupling During manufacturing. Postponement This Functionality of warehousing enables postponement of commitment of products to customer until orders are received from them. 6. on the outbound side customers are fulfilled on time. This is utilized by manufacturers or distributors for storing products ready up to packaging stage. In the case of seasonal manufacturing. For example. Assortment Assortment warehouse store a variety of products for satisfying the variety requirements of customers. . the batch size and the lead-time of production may differ in consecutive operations. and thus need to be stockpiled as such. certain products like woolens are required seasonally. operation lead-times may differ in order to enable production economies. 8. and. 9. This decoupling of operations requires intermediate storage of materials required for the subsequent operation. Hence. Thus. manufacturing is possible only during these periods of availability. but are produced throughout the year. certain raw materials are available during short periods of the year. 7. transportation delays. An example is mango pulp processing. on the inbound site production stoppages do not occur. retailers may demand different brands of the same product in small quantities rather than larger quantities of the single brand. These items are stored at the warehouse until ordered by the customers when these can be provided to the customers in the shortest lead-time. This function of warehousing is utilized for higher service levels to customers for critical items and during increased marketing activists and promotions. Positioning This permits positioning products or materials at strategic warehouses near to the customers. This requires stockpiling of the products manufactured from these raw materials.5. 10. safety stocks have to be maintained. These products are packaged and labeled for the particular only on receipt of the order. On the other hand. Safety Stocking In order to cater to contingencies like stock outs. receipt of defective or damaged goods. and strikes. This ensures that. Stock Piling This function of warehousing is related to seasonal manufacturing or demand.

Warehouses are generally located at convenient places near road. i.Warehouses create employment opportunities both for skilled and unskilled workers in every part of the country. which reduces cost of handling such goods. iii. The goods stored can also be insured for compensation in case of loss.Many commodities like rice. deterioration in quality.Loans can be easily raised from banks and other financial institutions against the security of the warehouse-keeper¶s warrant. ii. Warehousing ensures regular supply of such seasonal commodities throughout the year. Facilitates sale of goods. Availability of finance. Easy handling. use insecticides for preservation and provide cold storage facility for perishable items. wheat etc.Various steps necessary for sale of goods such as inspection of goods by the prospective buyers. iv. Convenient location. as far as possible.Construction of own warehouse requires heavy capital investment. Heavy and bulky goods can be loaded and unloaded by using modern machines. spoilage etc.Warehouse enables the manufacturers to carry on production continuously without bothering about the storage of raw materials. Useful for small businessmen.Goods in warehouses are well guarded and preserved. It is a source of income for the people. by paying a nominal amount as rent. Regular flow of goods. Reduces risk of loss . Mechanical handling also minimizes wastage during loading and unloading. rail or waterways to facilitate movement of goods. are produced during a particular season but are consumed throughout the year. grading. ix. They can install fire-fighting equipment to avoid fire. It provides protection to the stocks ensures their safety and prevents wastage. In this situation. Creation of employment . x.Modern warehouses are generally fitted with mechanical appliances to handle the goods. branding. In some cases warehouses also provide advance to the depositors of goods on keeping the goods as security. Ownership of goods can be easily transferred to the buyer by transferring the warehouse keeper¶s warrant. which small businessmen cannot afford. The warehouses can economically employ security staff to avoid theft. . vi. v.Warehouse provides necessary facilities to the businessmen for storing their goods when they are not required for sale. It minimizes losses from breakage. packaging and labelling can be carried on by the warehouses. vii. to improve their standards of living. it provides a number of benefits which are listed below. It helps to provide seasonal raw material without any break.Advantages of Warehousing Warehousing offers many advantages to the business community. Warehouses usually adopt latest technologies to avoid losses. Convenient location reduces the cost of transportation. viii. for production of finished goods. they can preserve their raw materials as well as finished products in public warehouses. Continuity in production. Protection and Preservation of goods . Whether it is industry or trade.

The company is evaluating an opportunity to consolidate its operation into two facilities. The Square Root Law states that: ³the total safety stock inventories in the future number of facilities can be approximated by multiplying the total amount of inventory at existing facilities by the square root of the number of future facilities divided by number of existing facilities´. N1 = Number of existing facilities N2 = Number of future facilities X1 = Total inventory in existing facility X2 = Total inventory in future facility Example A company presently distributing 40. Square root law: The square root law helps to determine the extent to which inventories may be reduced through such strategy. D. Correspondingly. The extent to which these changes will occur is understood through application of the square root law.SQUARE ROOT LAW In their aggressive effort to take cost of logistics network. Solution Here.000 units of product to its customer from eight facility location throughout India is located at A. Conversely. as inventories are consolidated into fewer stocking locations. firms are searching for new ways to reduce levels of inventory without adversely effecting customer service. B. aggregate inventory levels will decrease. the greater the amount of inventory needed to maintain customer service levels. X1 = 40. this strategy requires the involvement of capable transportation and information resources to see that customer service is held at existing levels and is even improved whenever possible. the greater the number of stocking locations. Therefore Where. Assuming the total customer demand remains the same. the Square Root Law estimates the extent to which aggregate inventory needs will change as a firm increases or reduced the number of stocking location. E. C. Square Root Law we will find the total amount of inventory in the two future facilities. In general. A currently popular approach is to consolidate inventories into fewer stocking location in order to reduce aggregate inventories and their associated cost.000 N1 = 8 N2 = 2 . G and H. F.

For the same space. which is a primary factor leading to increased sales. Transportation costs initially decreases with increasing number of warehouses. Such warehouses reduce cost by providing place utility. WAREHOUSE LOCATION: Warehousing is important to the firms since it improves service and reduces cost improvements in service are gained through rapid response to customer request (time utility). thus. The location decision regarding warehouses is affected by manufacturing plant. Inventory costs continuously increases with the increasing number of warehouses beyond the increased space available needs to be utilized and firms increase the commitment of inventory at these warehouses beyond those actually needed. decreasing customer dissatisfaction cost.The increasing number of warehousing leads to increasing customer service levels. or they may be an independent business providing warehouses service for profit (public). Market-positioned warehouses may be owned by the firm or the retailer (private warehouses). local transportation providing service to individual retailers. If customer service is taken in cost terms as cost of customer dissatisfaction. These generally have a large variety and low volume of items to service local requirements. A traditional classification by Edgar Hoover classifies warehouse locations as market-positioned. inventory. the number of warehouses will affect transportation.THE NUMBER OF WAREHOUSES The number of warehouses is another decision parameter impacting a number of cost variables and customer service. as the number of warehouses increases beyond a certain value. a single warehouse incurs less warehousing cost than two warehouses. This is due to the transportation economics obtained by having large-volume long-range transportation from consolidation warehouses and short-range small-volume transportation from break-bulk warehouses. Market-positioned warehouses Market-positioned warehouses are located near to the customers and markets (point of product consumption) with the objective of serving them. A Market-positioned warehouses functions as a collection point for the products of distant firms with the resulting accumulations of product serving as the supply source for retail inventory replenishment. . and warehousing and customer dissatisfaction costs. manufacturing-positioned. This approach allows large and cost-effective shipments from the manufacturer with lower-cost. Transit inventory costs continuously decrease with the increased number of warehouses due to the shorter transportation times between the larger number of warehouses. or intermediately-positioned. 1. the transportation costs starts increasing due to large number of transportation trips in ± between the larger numbers of warehouses. customer and market locations. However. The warehousing costs increase with more warehouses due to the maintenance and facility costs associated with each warehouse.

These help in consolidation of assortments for shipments from different manufacturing facilities. Office area in warehouse 8. Production lead time 7. First it is necessary to define how size is measured. near the sources of raw material. it needs larger warehouse to maintain at least minimal inventory levels of all products. especially if they are diverse. additional pace is required. . Improve customer services and manufacturing support achieved through type of warehouse which acts as the collection point for products needed in filing customer orders and material needed for manufacturing. size can be defined in terms of square footage or cubic space. Size of market 3. Intermediately-Positioned Warehouses Intermediately-positioned warehouses are those located between manufacturing and market-position warehouses. A few of the factors governing the warehouse locations are: ‡ Availability of services ‡ Land cost ‡ Availability of transport linkages for example.Customer service levels 2. 3.2. A firm may have many manufacturing plant located. When a firm has multiple products or product groupings. for economic reasons. sales or computer activities and demand is erratic and unpredictable. Some of the most important factors affecting the size of warehouse are: 1. Size of the product 5. Material handling system used 6. In general. manual material handling system are used the warehouse contains office. production lead-time is long. Number of products marketed 4. Types of racks and shelves used As a company service levels increase. greater space requirements are necessary when products are large. In general. it typically requires more warehousing space to provide storage for higher levels of inventory. As the market served by a warehouse increases in number or size. Under these conditions the cost-effective warehouse may be at some intermediate point. Manufacturing-Positioned Warehouses Manufacturing positioned warehouse are located near to the manufacturing facilities in order to support manufacturing on the inbound side and to facilitate assortment-creation and shipping on the outbound side. SIZE OF WAREHOUSE Many factors influence how large a warehouse should be. to a rail siding ‡ Availability of utilities of water and power ‡ Taxes and insurance cost ‡ Expansion space availability ‡ And soil strength and lay off land for drainage.

Relatively heavy items should be assigned to location low to the ground to minimize the effort and risk of heavy lifting. Whenever demand fluctuates significantly or is unpredictable. stored in the middle and then shipped from other end. improve product flow. Figure below illustrates the flow of production. are the number of stories in the facility. Storage plan: According to the third principles. High volume sales product should be stored in a location that minimizes the distance it is moved. competitive environment and needs of customer.Demand Fluctuations Impact Warehouse Size: Demand also has an impact on warehouse size. Through the use of racking or other hardware it is possible to store product up to the building ceiling. Storage plan must consider and address the specific characteristic of each product. low-volume product can be assigned locations that are distant from primary aisle or higher up in a storage rack. Such a locations minimizes travel distance. weight and storage. . Warehouse operating principles Design criteria: Three factors. Product flow Handling technology: The second principle focuses on the effectiveness and efficiency of material handling technology. particularly those pertaining to volume.Straight line product flow minimizes congestion and confusion. Thus. open floor space or high level racks can be used for bulky or low density product as it requires extensive storage volume. height utilization and product flow. improve service to customers and provide better employee working condition. reduce cost. The optimal warehouse layout and design for a firm will vary by the type of product being stored. Exchanging the product between handlers wastes time and increases the potential for damage. Whatever layout the company finally selects for its warehouse it is vital that all available space be utilized as fully and efficiently as possible. Most warehouse houses have 20-30 foot ceiling. The warehouse manager must consider cost of trade between labor. The element of this principle concern movement continuity. Warehouse design should also allow for straight product flow through the facility whether items are stored or not. In general this means that product should be received at one end of the building. equipment. space and information. such as near primary aisle and in low storage racks.This result in a need for more space and thus a larger warehouse. WAREHOUSE LAYOUT AND DESIGN: A good warehouse layout can increase output. the company financial resources. Movement continuity means that it is better for a movement handler to make a longer move than to have a number of handlers. as a general rule fewer longer movements in the warehouse are preferred. which have to be considered in the design process. Product volume is a major concern when defining a warehouse storage plan. Conversely. inventory levels generally must be higher. a warehouse design should consider product characteristics.

Dispatching Goods to Storage: The goods are kept aside where they can be found later. Holding Goods: The goods are kept in storage under proper protection until needed in the warehousing. Sorting Goods: The economic goods are sorted out for appropriate storage area in the warehouse. Popularity relates to different inventory turnover rates or demand rates of products. Identifying Goods: The appropriate stock. Retrieving Selective or Packing Goods: Items ordered by customers are taken out from storage and grouped in a manner useful for the next step. when needed. complementarities.A storage plan based on product movement. such as a conveyor system to handle large number of products packaged in a carton. . WAREHOUSE OPERATIONS The essential processing of materials in a warehouse involves following operations: Receiving Goods: A warehouse accepts the merchandise delivered by a transporter or an attached factory and then accepts the responsibility for this merchandise. In a warehouse layout product are grouped according to their compatibility. Items that are in greatest demand should be stored closest to shipping and receiving docks. Compatibility refers to whether products can be stored harmoniously 2. Good warehouse layout and design often involve the use of automated equipment. Dispatching Goods: The consolidated order is packaged suitably and directed to the right transport vehicle. 1. Complementarities how often product are ordered together and therefore stored together 3.keeping units are identified and a record made of the number of each item received. popularity. Marshalling Goods: The several items making up a single order are brought together and checked for completeness and order records are prepared or modified.

a form of processing.. nature of the commodity. its quality or grade. weight. to be doubly sure that the correct number of packages has been tendered. before unloading from the truck and after stocking.Preparing Records and Advices: The number of orders received. ‡ The goods are sampled as per a set procedure of sampling. ‡ The technical assistant attached to the warehouse examines the goods visually to determine whether the stocks are worth storage. number of packages. goods may be stored for aging. adaptive work for special requests. name of the depositor and his address. the depositor is required to submit an application for storage of goods. this must be done by the depositor. ‡ Warehouseman takes the specimen signature of the depositor or his agent for future verification on the cards kept at the warehouse. ‡ The stocks are graded on the basis of such characteristics as moisture content. description of commodity. ‡ The bags or packages are counted. conditioning. breaking bulk. A warehouse may be used as a physical processing station. etc. . may be carried out as a part of warehouse activity. their weight and value. are recorded for replenishment action and stock control. etc.. the items received and on hand etc. In some systems. minor assembly work. 1) Receipt of Goods The following operations are carried out before the acceptance of goods for storage and issue of a warehouse receipt: ‡ The user of the facility or depositor tenders the goods for storage. with details of his name and address. they are standardized at the warehouse. depending on the nature of the commodity. foreign matter. if they are standardized. ‡ The samples so taken are analyzed as per the specifications provided by law. ‡ The goods are in good condition and can be stored. shriveled grains dirt.The warehouseman prepares a warehouse receipt with all the particulars. ‡ If the goods or commodities require cleaning to bring them up to an acceptable standard. ‡ If the packages or bags of the stock are not of a standard weight. such as location of the warehouse. For example. etc. etc.

A notice of auction will be sent to the depositor indicating the date. These commodities or items are accepted in the specific section meant for such goods. time and place of the auction well in advance. . ‡ If there is damage of goods or if it is found that the goods are not capable further storage. ‡ Quick moving goods are stored in a separate section. ‡ Gangways and operational spaces between stacks are left for necessary disinfestations operations. ‡ If the depositor indicated in the notice does not take delivery of goods within the stipulated period. turn-over. the following steps are taken: ‡ One of the samples obtained after a scientific sampling of the stocks is duly sealed with a signed sample slip put inside the bag and is handed over to the depositor for future verification in the event of any dispute as regards quality of the commodity. In order to ensure that the quality remains the same and is well preserved. generally close to the doors. the warehouseman can take action to have them delivered. the goods may be auctioned in the prescribed manner. ‡ The warehouse is demarcated into different sections for storage of different commodities or items according to their nature. ‡ Different stacking methods are adopted. and those goods which are likely to remain in storage for a long time are stored a little away. depending on the size of the packages and the duration of storage. ‡ The goods are periodically inspected to check that there has been no damage during storage. re-stacking.2) Storage in Warehouse One of the fundamental features of warehousing is scientific storage and preservation of goods. etc.

. ‡ The storage charges. ‡ An application for delivery of goods has to be tendered by the depositor or his authorized agent. and the receipt is returned to the depositor or the bank which has produced the receipt for such delivery.3) Delivery of Goods The delivery of goods is conditioned by the following factors: ‡ The goods stored in the warehouse may be delivered in one lot or in installments. is surrendered to the warehouseman . ‡ If a part delivery is required. ‡ The stocks are delivered against an acknowledgement of the depositor or his agent to the effect that the goods have been received in goods condition and the sample kept in the warehouse is returned to the depositor at the time of delivery. depositor¶s ledger. such delivery is endorsed in the column provided for it in the warehouse receipt. etc. ‡ If the goods are to be delivered in full. duly discharged. are made after delivery is made. the warehouse receipt. . duly discharged. ‡ If the depositor is given an opportunities to examine his goods before taking delivery and if he find on the time of taking delivery that the goods have been allowed to deteriorate or to get damaged. as required by the depositor. insurance charges. payable are worked out and collected before delivery is made. he may lodge a protest within 72 hours of his examination. and defer taking delivery. ‡ The warehouse receipt is surrendered. stock register etc. godown register. He has also to advise the licensing authority under the act for necessary investigation and redresses. ‡ The specimen signature is verified before delivery is made. ‡ Necessary entries in the stack-wise register.

part of warehouse management.CONCLUSION The entire area of facilities development that is size and number of warehouses. Thus a warehouse plays a multi-faceted role in the integrated logistic system. location analysis. . computers have played a more significant role as logistics executives attempt to optimize warehouse operations. In recent years. warehouse layout and design is an important factor yet complex.

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