Warehouse Management

Is it only a storage facility?
 A warehouse is typically viewed as a place to

store inventory.
 However, in many logistical system designs,

the role of the warehouse is more properly viewed as a switching facility as contrasted to a storage facility.


A Sample Warehouse



Benefits of Warehousing
Consolidation  Shipment consolidation is an economic benefit of warehousing.  With this arrangement, the consolidating warehouse receives and consolidated materials from a number of manufacturing plants destined to a specific customer on a single transportation shipment.  he benefits are the reali!ation of the lowest possible transportation rate and reduced congestion at a customer"s receiving doc#.


Consolidation Warehouses


 &onsolidation warehousing may be used by a single firm. each individual manufacturer or shipper can en'oy lower total distribution cost that could be reali!ed on a direct shipment basis individually.  % .Consolidation Warehouses…  he primary benefit of consolidation is that it combines the logistical flow of several small shipments to a specific mar#et area. or a number of firms may 'oin together and use a for(hire consolidation service. hrough the use of such a program.

 *ecause the long(distance transportation movement is a large shipment.Break bulk warehouses  *rea# bul# warehouse operations are similar to consolidation e+cept that no storage is performed. ) . transport costs are lower and there is less difficulty in trac#ing.  A brea# bul# operation receives combined customer orders from manufacturers and ships them to individual customers.  he brea# bul# warehouse sorts or splits individual orders and arranges for local delivery.

Break bulk warehouses… . .

 A warehouse with pac#aging or labeling capability allows postponement of final production until actual demand is #nown. vegetables can be processed and canned in /brights/ at the manufacturer. or delay.  *rights are cans with no pre(attached labels.or e+ample. production by performing processing and light manufacturing activities.rocessing! ostponement  Warehouses can also be used to postpone. - .  .

01 .rocessing! ostponement…  he use of brights for a private label product means that the item does not have to be committed to a specific customer or pac#age configuration at the manufacturer"s plant.  2nce a specific customer order is received. the warehouse can complete final processing by adding the label and finali!ing the pac#aging.

 Second.rocessing! ostponement…  3rocessing and postponement provide two economic benefits4  . ris# is minimi!ed because final pac#aging is not completed until an order for a specific label and pac#age has been received. the re5uired level of total inventory can be reduced by using the basic product 6brights7 for a variety of labeling and pac#aging configurations.irst. 00 .

Stockpiling      he economic benefit of stoc#piling comes from the need of seasonal storage. .or e+ample. which allows production efficiencies within the constraints imposed by material sources and the customer. *oth situations re5uire warehouse stoc#piling to support mar#eting efforts. agricultural products are harvested at specific times with subse5uent consumption occurring throughout the year. 02 . lawn furniture and toys are produced year(round and primarily sold during a very short mar#eting period. 8n contrast. Stoc#piling provides an inventory buffer.

Video 03 .

 production support.ive basic service benefits are achieved through warehousing4 spot stoc#.  assortment.  04 .Ser"ice Benefits  . and  mar#et presence.  mi+ing.

0$ .  :ather than placing inventories in warehouse facilities on a year(round basis or shipping directly from manufacturing plants. a selected amount of a firm"s product line is placed or /spot stoc#ed/ in a warehouse to fill customer orders during a critical mar#eting period.Spot Stock  9nder spot stoc#ing. delivery time can be substantially reduced by advanced inventory commitment to strategic mar#ets. manufacturers with limited or highly seasonal product lines are partial to this service.  8n particular.

the wholesaler would create a specific team uniform including shirt.  8n the second case.  he assortments may represent multiple products from different manufacturers or special assortments as specified by customers. and shoes.  8n the first case. an athletic wholesaler would stoc# products from a number of clothing suppliers so that customers can be offered assortments. 0% .Assortment  An assortment warehouse stoc#s product combinations in anticipation of customer orders. for e+ample. pants.

and is functional year(round.Assortment "s# Spot Stock he difference between spot stoc#ing and complete line assortment is the degree and duration of warehouse utili!ation.  0) . is limited to a few strategic locations. which in turn reduce transportation cost.istribution assortment warehouse usually has a broad product line.  he combined assortments also allow larger shipment 5uantities.  A firm following a spot stocking would typically warehouse a narrow product assortment and place stoc#s in a large number of small warehouses dedicated to specific mar#ets for a limited time period.  .

overall transportation charges and warehouse re5uirements can be reduced by mi+ing. factory shipments are unloaded and the desired combination of each product for each customer or mar#et is selected.  <ach large shipment en'oys the lowest possible transportation rate. . truc#loads of products are shipped from manufacturing plants to warehouses.  9pon arrival at the mi+ing warehouse. 0.  When plants are geographically separated.Mi$ing  8n a typical mi+ing situation.

0-  .roduction Support  3roduction support warehousing provides a steady supply of components and materials to assembly plants. and subassemblies into the assembly plant in an economic and timely manner.  Safety stoc#s on items purchased from outside vendors may be 'ustified because of long lead times or significant variations in usage. components. he operation of a production support warehouse is to supply or /feed/ processed materials.

he mar#et presence factor is based on the perception or belief that local warehouses can be more responsive to customer needs and offer 5uic#er delivery than more distant warehouses. 21 . it is also thought that a local warehouse will enhance mar#et share and potentially increase profitability.Market resence  While a mar#et presence benefit may not be so obvious. it is often cited by mar#eting managers as a ma'or advantage of local warehouses.   As a result.

 20 .  Whether the warehouse is a small manual operation or a large automated facility. the following three principles are relevant4 .Warehouse %perating rinciples  2nce it has been determined to use a warehouse. and  Storage plan.esign criteria. the ne+t step is designing it.  Handling technology.

 22 . and  product flow.  hree factors to be considered in the design process are4 the number of storey"s in the facility.&esign Criteria  Warehouse design criteria address physical facility characteristics and product movement.  height utili!ation.

'umber of storey in the facility he ideal warehouse design is limited to a single storey so that product does not have to be moved up and down.  he use of elevators to move product from one floor to the ne+t re5uires time and energy. particularly in central business districts where land is restricted or e+pensive.  23 .  he elevator is also often a bottlenec# in product flow since many material handlers are usually competing for a limited number of elevators.  While it is not always possible. warehouses should be limited to a single story.

24 . although modern automated and high(rise facilities can effectively use ceiling heights up to 011 feet. it should be possible to store products up to the building"s ceiling.  =ost warehouses have 21( to 31(feet ceilings 60 foot > 02 inch? 0 inch > 2. such as for#lifts.  hrough the use of rac#ing or other hardware.  =a+imum effective warehouse height is limited by the safe lifting capabilities of material(handling e5uipment. the design should ma+imi!e the usage of the available cubic space by allowing for the greatest use of height on each floor.(eight utili)ation  :egardless of facility si!e.$4 cm7.

 8n general. stored in the middle.roduct flow  Warehouse design should also allow for straight product flow through the facility whether items are stored or not. this means that product should be received at one end of the building.  Straight(line product flow minimi!es congestion and confusion. 2$ . and then shipped from the other end.

 he elements of this principle concern4 movement continuity and  movement scale economies.  2% .(andling technology  he second principle focuses on the effectiveness and efficiency of material( handling technology.

Mo"ement continuity  =ovement continuity means that it is better for a material handler or piece of handling e5uipment to ma#e a longer move than to have a number of handlers ma#e numerous. as a general rule. 2) . fewer longer movements in the warehouse are preferred.  hus. short segments of the same move. individual.  <+changing the product between handlers or moving it from one piece of e5uipment to another wastes time and increases the potential for damage.

 While this might increase the comple+ity of an individual"s activities since multiple products or orders must be considered. the principle reduces the number of activities and the resulting cost.Mo"ement scale economies  =ovement scale economies imply that all warehouse activities should handle or move the largest 5uantities possible. warehouse activities should be designed to move groups of cases such as pallets or containers.  8nstead of moving individual cases. . 2.  his grouping or batching might mean that multiple products or orders must be moved or selected at the same time.

2- . High(volume sales or throughput product should be stored in a location that minimi!es the distance it is moved. weight. Such a location minimi!es travel distance and the need for e+tended lifting. a warehouse design     should consider product characteristics.Storage lan  According to the third principle. and storage. low(volume product can be assigned locations that are distant from primary aisles or higher up in storage rac#s. 3roduct volume is the ma'or concern when defining a warehouse storage plan. particularly those pertaining to volume. &onversely. such as near primary aisles and in low storage rac#s.

A Sample Storage Area 31 .

:elatively heavy items should be assigned to locations low to the ground to minimi!e the effort and ris# of heavy lifting. the plan should include a specific strategy     for products dependent on weight and storage characteristics. he integrated storage plan must consider and address the specific characteristics of each product. 2n the other hand. so open floor space or high(level rac#s can be used for them. *ul#y or low(density products re5uire e+tensive storage volume. 30 .Storage lan…  Similarly. smaller items may re5uire storage shelves or drawers.

Alternati"e Warehouse Strategies  Warehouse alternatives include4  607 3rivate warehouses. and transportation( on the basis of a fi+ed or variable fee. and  637 &ontract warehouses.  A public warehouse. in contrast.  A private warehouse facility is owned and managed by the same enterprise that owns the merchandise handled and stored at the facility.  3ublic warehouse operators generally offer relatively standardized services to all clients. 32 . handling.  627 3ublic warehouses. is operated as an independent business offering a range of services (such as storage.

and shared ris#. provides benefits of both the private and public alternatives.Alternati"e Warehouse Strategies###  Contract warehousing. 33 . which is evolving from the public warehouse segment. tailored services.  &ontract warehousing is a long term. where the vendor and client share the ris#s associated with the operation.  8mportant dimensions that differentiate contract warehousing operators from public warehouse operators are the e+tended time frame of the service relationship. e+clusivity. mutually beneficial arrangement which provides uni5ue and specially tailored warehousing and logistics services e+clusively to one client.

  2ften it is not possible to find a warehouse for lease that fits the e+act re5uirements of a firm.  he actual facility. he decision as to which strategy best fits an individual firm is essentially financial. may be owned or leased. 34 . however.ri"ate Warehouses  A private warehouse is operated by the firm owning the product.

ublic Warehouses  2n the basis of the range of speciali!ed operations performed. 3$ . 627 refrigerated. 647 bonded.  <ach warehouse type differs in its material handling and storage technology as a result of the product and environmental characteristics. public warehouses are classified as      607 general merchandise. 637 special commodity. and 6$7 household goods and furniture.

medical items. 3% .  Refrigerated warehouses 6either fro!en or chilled7 handle and maintain food.  Commodity warehouses are designed to handle bul# material or items with special handling considerations. and household supplies. and chemical products with special temperature re5uirements.ublic Warehouses…  General merchandise warehouses are designed to hand8e general pac#age commodities such as paper. such as tires or clothing. small appliances.

cigarettes are often stored in bonded warehouses prior to having the ta+ stamp applied.ublic Warehouses…  Bonded warehouses are licensed by the government to store goods prior to payment of ta+es or duties. 3) .  .or e+ample.  hey e+ert very tight control over all movements in and out of the facility since government documents must be filed with each move.  his tactic saves the firm money by delaying ta+ payments? it also reduces inventory value substantially.

3.ublic Warehouses…  .  2f course. bul#y items such as appliances and furniture. a household goods or furniture warehouse is designed to handle and store large. . many public warehouses offer combinations of these operations.inally.

and economies of scale by sharing management. labor. and information resources across a number of clients. e5uipment. fle+ibility.  &ontract warehouse operations can provide benefits of e+pertise. 3- .  he long(term relationship and shared ris# result in lower cost than typical public warehouse arrangements.Contract Warehouses  &ontract warehousing combines the best characteristics of both private and public operations.

space re5uirements. 41 .  hese decisions establish the character of the warehouse. and material(handling design should be developed first and a specific site for the warehouse selected. which. in turn determines the degree of attainable handling efficiency.  A master plan of the layout.lanning the &istribution Warehouse  he initial decisions of warehousing are related to planning.

Site Selection  @ocation analysis techni5ues are available to assist in selecting a general area for warehouse location.  hree areas in a community may be considered for location4  07 commercial !ones. and 37 central or downtown areas.  40 .  2nce location analysis is completed. he primary factors in site selection are the availability of services and cost.  he cost of procurement is the most important factor governing site selection. 27 outlying areas served by motor truc# only. a specific building site must be selected.

one observes warehouses among industrial plants and in areas !oned for light or heavy industry.  8n many cities. 42 .  8nterestingly.Site Selection…  A warehouse need not be located in a ma'or industrial area. this is not a legal necessity because most warehouses can operate under the restrictions placed on commercial property.

utility e+penses. setup and operating e+penses such as rail sidings.  .Site Selection…  *eyond procurement cost. a food distribution firm recently re'ected what otherwise appeared to be a totally satisfactory site because of insurance rates.or e+ample.  he site was located near the end of a water main. insurance rates. 43 .  hese e+penses vary between sites. and highway access re5uire evaluation. ta+es.

 *ecause of this deficiency.rom %431 to . the demand for water along the line was so great that a sufficient supply was not available to handle emergencies.431 in the morning and from $ to ) in the evening. abnormally high insurance rates were re5uired and the site was re'ected. 44 .  . ade5uate water supplies were available to handle operational and emergency re5uirements.Site Selection…  .uring most of the day.  he only possible water problem occurred during two short periods each day.

 Aecessary utilities must be available. 4$ .Site Selection…  Several other re5uirements must be satisfied before a site is purchased.  he soil must be capable of supporting the structure. and the site must be sufficiently high to afford proper drainage 6su a#BCBna i!in verme7.  he location must offer ade5uate room for e+pansion.

 8t is difficult to generali!e about warehouse layouts  8f pallets are to be utili!ed. standardi!ed pallets should be used because of their lower cost. the first step is to determine the pallet si!e. since they must be refined to fit specific needs.Warehouse *ayout  @ayout of a warehouse depends on the proposed material handling system and re5uires development of a floor plan to facilitate product flow. but whenever possible. 4% .  A pallet of nonstandard si!e may be desirable for speciali!ed products.

to a certain e+tent. the larger the pallet load.   :egardless of the si!e finally selected. the lower the cost of movement per pac#age over a given distance. inches and 32 by 41 inches. 4) .  8n general.Warehouse *ayout…  he most common si!es are 41 by 4. management should adopt one si!e for the total operation. the si!e of pallet best suited to the operation. he pac#ages to be placed on the pallet and the related patterns will determine.

.  he s5uare method is widely used because of layout ease. he basic method of positioning pallets in a mechani!ed warehouse is a ninety(degree. or s5uare. 4. placement.Warehouse *ayout…  he second step in planning a layout involves the pallet positioning.   S5uare placement means that the pallet is positioned perpendicular to the aisle.

only authori!ed personnel should be permitted into the facility and surrounding grounds and entry to the warehouse yard should be controlled through a single gate.  All normal precautions employed throughout the enterprise should be strictly enforced at each warehouse.  Security begins at the fence. 4- .  As standard procedure.Pilferage Protection  3rotection against theft of merchandise has become a ma'or factor in warehouse operations.  Such protection is re5uired as a result of the increased vulnerability of firms to riots and civil disturbances.

 <+ceptions were made for two handicapped office employees.  A particular firm enforced the rule that no private vehicles should be permitted in the warehouse yard.Pilferage Protection…  Without e+ception.  $1 . no private automobile(regardless of management ran# or customer status(should be allowed to penetrate the yard ad'acent to the warehouse. the following actual e+perience may be helpful. o illustrate the importance of the stated guidelines.

 he matter was promptly reported to security. which informed the employee not to alter any pac#ages taped to the car and to continue par#ing inside the yard.  Subse5uent chec#ing revealed that the car was literally a delivery truc#. the situation was fully uncovered. $0 .  2ver the ne+t several days.Pilferage Protection…  2ne night after wor#.000 of company merchandise. one of these employees accidentally discovered a bundle taped under one fender of his car. with the ultimate arrest and conviction of several warehouse employees who confessed to stealing over $100.

but the purpose of security is to restrict theft from all angles.  Shortages are always a ma'or consideration in warehouse operations.  =any are honest mista#es in order selection and shipment.Pilferage Protection…  he firm would have been better off purchasing a small vehicle to provide transportation for the handicapped employees from the regular par#ing lots to the office. $2 .  he ma'ority of thefts occur during normal wor#ing hours.

$3 .Pilferage Protection…  &omputeri!ed inventory control and order processing systems help protect merchandise from being carried out of the warehouse doors. the merchandise should be separate from other inventory.  8f samples are authori!ed for use by salespersons.  Ao items should be released from the warehouse unless accompanied by a computer release document.

 Aumerous instances have been discovered where organi!ed efforts between warehouse personnel and truc# drivers resulted in deliberate over(pic#ing or high(for(low(value product substitution in order to move unauthori!ed merchandise out of the warehouse.Pilferage Protection…  Aot all pilferage occurs on an individual basis.  <mployee rotation. $4 . total case counts. and occasional complete line(item chec#s can reduce vulnerability to such collaboration.

 he most obvious form of product deterioration is damage from careless transfer or storage. a number of factors can reduce a product or material to a non(usable or non( mar#etable state.  Another ma'or form of deterioration is non( compatibility of products stored in the same facility.Product Deterioration  Within the warehouse. $$ .

 :egardless of how often operators are warned against carrying overloads. the for#lift truc# may well be management"s worst enemy.  A constant concern is the carelessness of warehouse employees.Product Deterioration…  he primary concern is deterioration that results from improper warehouse wor# procedures.  8n this respect. $% . some still attempt such shortcuts when not properly supervised.

$) .  Standard procedure was to move two pallets per load. a stac# of four pallets was dropped off a for#lift truc# at the receiving doc# of a food warehouse.  3roduct deterioration from careless handling within the warehouse is a form of loss that cannot be insured against and constitutes a 011 percent cost with no compensating revenue.Product Deterioration…  8n one situation.  he value of the damaged merchandise e+ceeded the average daily profit of two supermar#ets.