BASIC CONCEPT OF

WAREHOUSE
MANAGEMENT
M O D U L E 1 – p a r t 2

I N T E R N A T I O N A L C O M M E R E C I A L L O G I S T I C S

B Y A N A M E L I S S A M O N T E N E G R O
 CONTENT
BASIC CONCEPT OF
WAREHOUSEMANAGEMENT

1. Warehousing’s role in the supply chain. (Chapter 1 “The

definitive guide to warehousing)

2. Modern warehouse concept (Chapter 1 “Almacenes”)

3. Types of warehouse (Chapter 3 “Almacenamiento de materiales”)

4. General warehousing and distribution center strategies

5. Maintenance and storage techniques. (Chapter 3 “Almacenes”)

6. Warehouse capacity structure. (Chapter 4 “Almacenes”)

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 G E NE RA L
WA RE H OU SI N G A N D • This chapter discusses the quantitative and
qualitative distinguishing traits of public,
D IST RIB UT ION contract and private warehouses.
ST RAT EGI ES • Also cost comparison example to convey the
concept of the cost point of indifference.
Introduction • A warehouse may function as a general
public warehouse for multiple clients while
also operating as a contract warehouse for
an individual client requiring more
specialized product handling, value-adding
processes, and dedicated.

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 PUBLIC WAREHOUSING

Utility
Storage area

• Offer storage and general handling services for a variety of clients and products.

• The capability for a public warehouse to shift available space, equipment, and
personnel allows the provider to offer lower cost for servicing all clients.

When to consider

• May be used to service products with demand patterns that are predictable
and to be contrary: unpredictable, unknown, minimal, or declining in
demand.

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 PUBLIC WAREHOUSING

Considerations
Storage area

• Long-term or short term storage

• Increasing, decreasing or fluctuating product demand.

• Positioning low-volume inventory widely geographically.

• Value-added services

• Client possessing little to no warehouse operating skill.

• Client waiting to minimize capital investment and risk

• Client wanting to minimize personnel cost and management

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 CONTRACT WAREHOUSING

Utility
Storage area

• Agreements are long term due to the specific nature of the services
performed and the investment in space, equipment, and employee training
to provide the specific needs – all of which are solely dedicated to servicing
the client.

When to consider

• The level of throughput is steady and potentially increasing.

• The fixed costs required to set up for the client’s needs would reduce per unit as
throughput increased.

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 CONTRACT WAREHOUSING

Considerations
Storage area

• Value-added service or special handling needed

• Significant and steady product throughput

• Postponement strategies

• Positioning inventory for single or multiple markets

• Client possessing little to no warehouse operation skills

• Client waiting to minimize capital investment and risk

• Client wanting to minimize personnel cost and management

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 PRIVATE WAREHOUSING

Utility
Storage area

• Private warehousing strategies are necessary when manufacturers

believe that service and cost to distribute can be accomplished in-
house better than outsourcing the responsibilities to 3PL warehouse.

When to consider

• Private warehouse must have strengths in managing people and process

effectively and efficiently to keep service high and cost-to-serve low.

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 PRIVATE WAREHOUSING

Considerations
Storage area
• High service quality needed

• Significant and steady product throughput

• User possesses strong warehouse operating skills

• User service and quality more than offset capital investment and risk.

• User possesses strong skills to hire, train, and effectively manage personnel and associated costs.

• Special handling and value-added services needed.

• Postponement strategies

• Positioning inventory for single or multiple markets

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 Cost points of
Practical cost differences
indifference

• Public warehousing provides minimal • User can estimate the fixed and
commitment to long-term storage cost variable cost associated with each
including those associated with the alternative.
building, labor, equipment,
administration, and others. Warehouse FC + VC(U) = FC + VC(U) Point of
comparissons indifference
• Private warehouse operation would Public = Contract $4(U) = $30,000 + $2,5(U) 20,000 units

bear all the fixed and variable cost Contact = Private $30,000 + $2,5(U)= 56,000 units
$100,000 + $1,25(U)
associated with procuring the facility
and equipment prior to any activity
moving through the facility.

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 CASE STUDY
SWEET DEAL DISTRIBUTION, INC. (SDD) – WAREHOUSE
SELECTION AND DISTRIBUTION QUALITY CASE
TO BE DELIVERY

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 CONTENT
BASIC CONCEPT OF
WAREHOUSEMANAGEMENT

1. Warehousing’s role in the supply chain. (Chapter 1 “The definitive

guide to warehousing)

2. Modern warehouse concept (Chapter 1 “Almacenes”)

3. Types of warehouse (Chapter 3 “Almacenamiento de materiales”)

4. General warehousing and distribution center strategies

5. Maintenance and storage techniques. (Chapter 3 “Almacenes”)

6. Warehouse capacity structure. (Chapter 4 “Almacenes”)

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 STORAGE TECHNIQUES
MAINTENANCE AND
Internal transport
MAINTENANCE system
AND STORAGE
Storage systems
TECHNIQUES
CHAP T E R 3 – Técnicas de
manutención y almacenaje
Robotic
“Alm acenes anális is , warehouses
diseño y organización”
Autor: J ulio Anaya Tejeiro

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 MAINTENANCE AND STORAGE
TECHNIQUES
• The word maintenance will apply either for elements used for handling
or internal transport of merchandise inside the warehouse.

• In this chapter we will explain:

• Technologies for vertical and horizontal transport

• Different storage systems.

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 INTERNAL TRANSPORT SYSTEM

• Internal transport refers to the physical movement of products inside

loading/unloading areas, docks, order preparation zones, truck load
and any other eventual activity that implies products movements
inside the warehouse.

• We are going to focus on two different systems:

• Vertical transport

• Horizontal transport

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 Horizontal transport Vertical transport

• on this type of transport merchandise do not • This transport not just allow the
need to be raise to locate in determine place.
product to be transported from one
• Industry had developed different means from the
place to another, also to be raised to
more simple to the more sophisticated.
locate in specific place.
• Pallet truck/pallet jack
• Manual pallet Jack with handlebar/control
handle
• There is a variety of resources with
• Electric pallet jack different features. We are going to
• Self-proppelled pallet truck/ Platform pallet
group as following:
truck

• Roller conveyor • Conventional fork lift/truck lift

• Conveyor belt system/roller mechanical • Retractable fork lift/truck lift
conveyor
• Trilateral truck lift
• Auto guide transport system (AGV Weasel)
(Automatic Guide Vehicle)

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 Vertical transport Vertical transport

• Conventional fork lift/truck lift (“Toros”)

• There is an important relation
Could be fixed mast or counterbalance, they need from 3
between the vertical transport to 3.5 m of minimum width for hallways to operate
means used and hallways width and correctly. The maximum height of this machine is 5 to 6
m.
racks height.
• Retractable fork lift/truck lift

• In the market, there is a lot of They need from 2.5 m of minimum width for hallways to
operate correctly. All this trucks should be maneuvered by
options with different costs, at the a trained person.

end we should evaluate the • Trilateral truck lift

advantages in terms of performance They could pick the merchandise on a retractable way
(right or left). The maximum height of this machines is 9
and available capacity. to 10 m.

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STORAGE SYSTEMS (EXPO)

Block storage

Storage system
(Block stacking)
Fixed
shelves/racks
Drive in/Drive
through system

Dynamic racks

Mobile
shelves/Racks

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 Block storage Fixed racks

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 Drive in/Drive through
Dynamic racks
racking system

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 Mobile racks

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 ROBOTIC WAREHOUSES

• Their height could be between 20 to 60 meters, in order to have the maximum utilization of
volume. The hallways could be around 1.20 meters.

• All the movements are done automatically, using stacker cranes. This machines do
simultaneously translation and rising to locate the merchandise in the correct alveolus.

• The numbers of stacker cranes that you will need, depend on the quantity and frequency of the
operations.

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 Advantages Disadvantage

• Space save • Pallets should be completely

standardized and pass a control at
• Time save
the entrance.
• Automatic management of
• Complex technical study (Organizing
warehouses
and labelling system)
• Reliability and versatility
• Hight investment and slow ROI

• Higher maintenance cost

• Pilot testing before functioning.

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 CONTENT
BASIC CONCEPT OF
WAREHOUSEMANAGEMENT

1. Warehousing’s role in the supply chain. (Chapter 1 “The

definitive guide to warehousing)

2. Modern warehouse concept (Chapter 1 “Almacenes”)

3. Types of warehouse (Chapter 3 “Almacenamiento de materiales”)

4. General warehousing and distribution center strategies

5. Maintenance and storage techniques. (Chapter 3 “Almacenes”)

6. Warehouse capacity structure. (Chapter 4 “Almacenes”)

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 MAINTENACE
WAREHOUSE AND STORAGE
CAPACITY AND TECHNIQUES

STRUCTURE
CHAPTER 4 – Estructura y
capacidad de almacenaje
Functional Storage
“Alm acenes anális is , and operative capacity
diseño y organización”
Autor: J ulio Anaya Tejeiro areas concept

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 FUNCTIONAL AND OPERATIVES
AREAS (EXPO)
Functional area

Lay-out is the physical arrangement of the different areas inside

the warehouse. It is one of the most important technical part
on the design, because it will condition the functioning of the
warehouse.

All the warehouses are formed from the following areas:

Storage Area
Product handling area
Vehicles loading/unloading area
Internal services area
External services area

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 FUNCTIONAL AND OPERATIVES
AREAS (EXPO)
Storage area

This area is the physical space occupied by the merchandise

when is block storage and for racks or any other type of storage.

Square and cubic meters occupied for this area will depend of:

Measures of
the mean of Measurements
Pallets per
Hallways width containment Height levels for the
racks/shelves
(pallets, racks/shelves
baskets, cans)

Also, warehouse should take into account all fire security

legislation.

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 FUNCTIONAL AREA (EXPO)

Products handling area:

This area is the space reserved for the orders classification and preparation
(once the picking is done), packaging, labelling, plastic cover. Also you will find
other control equipment as weighing control, retractable of pallets.

Loading/Unloading area:

This area is linked to docks/terminals available, and are essential elements for
the correct functioning. They should be wide enough to guarantee the flow of
the processes and avoid congestions that will mean delays.

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 FUNCTIONAL AREA (EXPO)
Service area

Internal Services External Services

Offices Fuel-oil equipment

File area Parking
First aide kit Surveillance lookout
Charging zones point

Flow lines = Is the sequential process that follow each one of the different areas
where the workshop is done, where is developed and interrelation that allow
the correct functioning and the materials flow.

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 FUNCTIONAL AREA (EXPO)
Outbound process

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 STORAGE CAPACITY CONCEPT

Storage capacity = is the maximum number of “containment units”

(storage spaces) that could be inside the warehouse facility.

Each business sector have different units of measurement

depending on the stored merchandise. EX: For Iron storage they will
use tons, other sectors will use sq. meters or pallets.

The warehouse capacity will depend of:

The area destined for the products storage
Hallways width
Stacking levels
Pallets measures
Pallets per space (rack/shelves)

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 STORAGE CAPACITY CONCEPT
Capacity will be affected by the technology used in the
warehouse.

You can not compare warehouses that used different

technologies of organization inside the same sector.

To calculate available capacity, it will be necessary to fill the

following forms:
• Area for pallets racks

1 2 3 4 5 6
Linear Base Location Pallets per Available Meters
Capacity spaces levels space Capacity occupied
6 20 4 2 960 800

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 STORAGE CAPACITY CONCEPT
• Area for racks without pallets
Zone B: Loose cargo with no pallets
Employed technology: Manual pallet jacks– 3,5 meters of
hallways

1 2 3 4 5 6
Linear Base Location Pallets per Available Meters
Capacity spaces levels space Capacity occupied
4 20 2 3 480 535

• Area for block storage

Zone C: Block palletizing storage 1 x 1,2 mts

1 2 3 4 5 6
Linear Base Location Available Meters
Capacity spaces levels Capacity occupied
2 20 3 120 120

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 STORAGE CAPACITY CONCEPT

Warehouse/Storage
capacity

Nominal/available Average used

capacity capacity
 STORAGE CAPACITY CONCEPT
Nominal Nominal/available
It is the maximum number of pallets or Tons that
capacity
could be stored inside the warehouse, with
defined technological characteristics. Its
calculation comes from the information of the Concept SQM Pallets SQM/
Pallet
previous forms.
Area of palletized products 800 960 0,83
The relation between square meters/pallets is
Area of non palletized 635 480 1,11
called “Occupational ratio”, and is used to know products
the sqm occupied per pallet. Area for block storage 260 120 2,17
The occupation ratio (OR) is lower when you have TOTAL 1.695 1.560 1,09
compacted storage and use major height.

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 STORAGE CAPACITY CONCEPT
Average used
• It is the average of pallets or tons storage for a year.
Average used
capacity
• To get this number we based on Average Stock and
convert to pallets or tons.

• Supposing and Av. Used cap of 1.027 pallets. The Index

will be 66%, we are not using 34% of our stored
capacity. Occupational INDEX = (Av. Used
cap/Nominal Cap) x 100
• Before to talk about under-used, we should focus on
our stock flows (see the next chart)

• It is healthy that a warehouse could have an under-

used level between 10% and 15% to absorb special
situations.

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 STORAGE CAPACITY CONCEPT

Volume Volume
UNDER-USED NON UNDER-USED
EXAMPLE Nominal EXAMPLE Nominal
cap. cap.
Under-
used Stocks
Average flow Average
Stocks
stock stock
flow
Stocks Stocks
 STORAGE CAPACITY CONCEPT
EXERCISE 1
1 2 3 4 5 6
HELLO company’s warehouse just have
Linear Base Location Pallets/product Available Meters
two areas of storage, area for palletized Capacity spaces levels s per space Capacity occupied
8 20 6 2 1000
product and area for block storage.
Taking into account the following 1 2 3 4 5 6

information please calculate the Linear Base Location Available Meters

Capacity spaces levels Capacity occupied
available capacity of HELLO company.
2 15 3 100

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 STORAGE CAPACITY CONCEPT
Concept SQM Pallets SQM/
EXERCISE 1
Pallet
With the information of the previous analysis Area of palletized products
please calculate the nominal capacity for Area of non palletized n/a n/a n/a
HELLO warehouse. products
Area for block storage
Once you get this information, calculate the
TOTAL
occupational INDEX. Please take into account
the following details:
Occupational INDEX = (Av. Used
- Average stock = 22500 cap/Nominal Cap) x 100
- Products per pallet = 22

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 STORAGE CAPACITY CONCEPT
EXERCISE 1 (Answer)
HELLO company’s warehouse just have
1 2 3 4 5 6
two areas of storage, area for palletized Linear Base Location Pallets/product Available Meters
Capacity spaces levels s per space Capacity occupied
product and area for block storage.
8 20 6 2 1920 1200
Taking into account the following
information please calculate the 1 2 3 4 5 6

available capacity of HELLO company. Linear Base Location Available Meters

Capacity spaces levels Capacity occupied
2 15 3 90 100

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 STORAGE CAPACITY CONCEPT Concept SQM Pallets SQM/
Pallet
EXERCISE 1 (Answer)
Area of palletized products 1200 1920 0,62
With the information of the previous analysis Area of non palletized n/a n/a n/a
please calculate the nominal capacity for products
HELLO warehouse. Area for block storage 100 90 1,1
TOTAL 1300 2010 1,72
Once you get this information, calculate the
occupational INDEX. Please take into account
Occupational INDEX = (Av. Used
the following details: cap/Nominal Cap) x 100
- Average stock = 29500
Occupational INDEX = (1341/2010) x
- Products per pallet = 22 100 = 67%

Average stock/Products per pallet = 1341 pallets

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 STORAGE CAPACITY CONCEPT
EXERCISE 2
DIANA company’s warehouse just have
1 2 3 4 5 6
two areas of storage, area for palletized Linear Base Location Pallets/product Available Meters
Capacity spaces levels s per space Capacity occupied
product and area for block storage.
7 15 5 2 920
Taking into account the following
information please calculate the 1 2 3 4 5 6

available capacity of HELLO company. Linear Base Location Available Meters

Capacity spaces levels Capacity occupied
2 20 2 85

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 STORAGE CAPACITY CONCEPT
Concept SQM Pallets SQM/
EXERCISE 2
Pallet
With the information of the previous analysis Area of palletized products
please calculate the nominal capacity for Area of non palletized n/a n/a n/a
HELLO warehouse. products
Area for block storage
Once you get this information, calculate the
TOTAL
occupational INDEX. Please take into account
the following details:
Occupational INDEX = (Av. Used
- Average stock = 22500 cap/Nominal Cap) x 100
- Products per pallet = 20

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