NumeroUno Academy of Banking

&
International Business
(NABIB)

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 Warehouse
A warehouse is a large, spacious and secured building intended for commerce and
government use. It functions as a storage place for large quantities of goods.

Warehousing is not simply about storage though. It also covers the administration
and manual labor required in storage such as delivery, documentation, examination
and certification

There are three types of warehouses: public, owned by third party logistics (3PL) and
company-owned.

The government through its arm uses public warehouses to store shipments and
contrabands they confiscated temporarily.

The business sector usually resorts to company-owned or 3PL-owned warehouses to

meet their storage needs.

Wholesalers, exporters, importers and manufacturers are the common clients

of warehousing service providers.

Raw materials and finished goods alike are kept in warehouses.

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 Warehouse
There are different reasons for warehousing

Warehouses are good places for their products to mature – eg Cheese and Wine

Warehouses ensures the sufficiency of supply. As a result, the prices of the goods
involved are less likely to fluctuate.

Warehousing may also cover the completion of goods before distribution. The
components and packing materials are just delivered to the building. The assembly
and packing of the goods will be done in the warehouse. By doing so, the product
cover will still look new and enticing upon delivery to distribution centers. If you
pack the goods before bringing them to the warehouse, the packaging may be
damaged while on the way.

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 Key Warehousing activities
MATERIAL RECEIVING AND INCOMING INSPECTION
This activity occurs during the unloading of inbound vehicles and includes the visual
inspection of delivered packages to ensure that products were not damaged during
transport. It is also important during this activity that staff verify the quantities of
products received against the packing slip or shipping invoice and report any
discrepancies.

PUT AWAY
This process includes moving products from the unloading dock, or receiving area,
after they are released for storage; and assigning them to their designated storage
area (rack, shelf, floor, etc.). It is important that every product moved into or out of
the racks, shelves, or any storage area is correctly recorded on the stockkeeping
records

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 Key Warehousing activities
VISUAL INSPECTION
Visual inspection is the process of examining products and their packaging to look for
obvious problems with product quality.

Maintaining appropriate storage conditions and ensuring that damaged or expired

products do not reach a service delivery point where they could be inadvertently
given to a client is essential.

Visual inspection includes:

• Receive products from the manufacturer (usually at the central level)
• Conduct a physical inventory count
• Receive a complaint about a product you issued
• Identify a product that is about to expire
• Identify a damaged product
• Notice that a product has not been stored properly.

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 Key Warehousing activities
VISUAL INSPECTION – cont..
Two basic types of damage may occur during shipping and storage that affect product
quality: mechanical and chemical.

Mechanical damage is caused by physical stresses, such as crushing or tearing when

the products are loaded, off-loaded, or when cartons or inner boxes are stacked. This
kind of damage is usually limited to crushed or torn parts.

Chemical damage is more difficult to detect and confirm during a visual inspection.
Laboratory testing is usually required. Some indications of chemical damage may
include changes in the color, odor, or consistency of the product.

Generally, mechanically-damaged items are removed from stocks; the remainder of

the box, or carton, is distributed as usual. Chemically-damaged items should be
removed from inventory, along with all like items (i.e., from the same lot),
quarantined, and tested or disposed of according to national drug authority
guidelines.

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 Key Warehousing activities
ORDER FULFILLMENT
The activities that take place between the warehouse receiving the order and the
consignee taking possession of it is sometimes referred to as order fulfillment

PICKING AND PACKING

To fill shipping requests (or picking lists), products must be located, pulled from
inventory, and prepared for shipment.
But before that can take place, a request needs to be processed through the inventory
system to reserve those commodities that are available for picking.
The individual items that make up that order can then be picked from the storage
locations throughout the warehouse, by warehouse staff and transported to a packing
station.
At the packing station, staff will conduct a series of quality control checks to confirm
that the right products have been picked in the right quantity.
To guarantee good shipping accuracy, the list of products and their quantities must be
checked against shipping orders, or requests, prior to assembling the order into
secure packing and making it ready for shipping.

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 Key Warehousing activities
There are the four main picking systems or methods used by medium to large retailers

Single order
This is the most basic picking method – typically only used by those just starting out. Quite
simply, a picker will pick one order at a time in its entirety before moving on to the next.
Best for: Retailers just starting out who aren’t yet big enough to gain the benefits of more
complex picking methods.
Avoid if: You ship more than 20 customer orders a day (or plan to in the near future)

Batch picking
The picker is assigned a batch consisting of a number of orders, picks them all in one go
and then returns to a packing desk. The picker will then get assigned a new batch to pick.
The number of orders allocated to each batch is generally between 10 and 30. But this
really depends on the physical size of your products and average order size.
Best for: High number of orders with single or low number of products per order.
Avoid if: You have a high number of products per order (or are aiming for this in the near
future).

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 Key Warehousing activities
Zone picking
This sees each picker assigned their own area (or zone) of the warehouse with them
only picking products stored in that specific zone. An order is passed through all
areas to have any required items added to it by pickers in that zone before being
returned to a packing desk. Great for preventing multiple pickers getting in each
other’s way, but it can also create a slight delay in shipping as each order needs to be
passed around the warehouse.
Best for: Retailers typically shipping a high volume of multiple item orders.
Avoid if: You typically ship single or low item orders or have very few pickers.
Wave picking
Similar to zone, but all zones pick at the same time. The various items are picked in
the according zone and are then given to a packer who will consolidate all the
separate picks for each order. This is faster than zone, but labour costs increase due
to the packer needing to spend more time combining orders at the end before
needing to be shipped.
Best for: Retailers typically shipping a high volume of multiple item orders and still
wanting to maintain a super-fast process.
Avoid if: You typically ship single or low item orders, have very few pickers or cost is
more important than speed of dispatch

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 Key Warehousing activities
SHIPPING
Shipping includes preparing commodities for shipment to customers and placing
those commodities on vehicles.

• After an order has been picked and packed, it will be ready for dispatch to the
intended recipient. At the dispatch location, the shipment will be weighed, labelled,
and recorded on a shipping manifest that provides a record of when the order was
picked and when it leaves the warehouse.

• In some cases, products need to be packed into shipping containers or palletized;

and, sometimes, bundled with other products into kits before being shipped. When
any packing or repacking activity takes place, the new package must be labeled
correctly.
To avoid damage during transit, products must be appropriately arranged and
secured within the vehicle

• The last step in processing the order is to update the warehouse inventory to reflect
that the commodities have left the warehouse

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 Key Warehousing activities
SHIPPING Cont..

The routine of picking, packing and shipping operations should ideally follow a
schedule that is agreed upon between higher and lower levels in the supply chain and
will depend on the defined inventory strategy.

Depending on the type of commodities being distributed and the number of delivery
points being serviced, the ordering frequency may vary.

However, supply chain management should aim to have warehousing picking,

packing, and shipping activities occur on a regular schedule rather than in an ad hoc
manner in order to gain efficiencies and to set clear expectations for ordering and
delivery for the warehouse staff as well as downstream recipients.

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 Potential Warehouse Issues
Some of the potential issues likely to arise in warehousing can be

Theft

Damage

Accidents

Wrong Quantities

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 Warehouse Management System
Warehouse management refers to the oversight of operations in a warehouse. This includes
receiving, tracking, and storing inventory, as well as training staff, managing shipping,
workload planning, and monitoring the movement of goods

Warehouse management is the act of organising and controlling everything within your
warehouse – and making sure it all runs in the most optimal way possible.
This includes:
• Arranging the warehouse and its inventory.
• Having and maintaining the appropriate equipment.
• Managing new stock coming into the facility.
• Picking, packing and shipping orders.
• Tracking and improving overall warehouse performance.
• Most high growth retailers would use automation tools (like some form of ......Warehouse
Management System) to control this part of their supply chain

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 Warehouse Management System
•A warehouse management system (WMS) is software designed to optimize operational
processes in a warehouse. By implementing a WMS you have full visibility into real-time
inventory levels and storage, staff productivity, demand forecasting, and order fulfillment
workflows within a warehouse.

•Warehouse Management System helps warehouse managers identify areas of

improvement and track progress to drive optimizations throughout the supply chain, from
when inventory hits the loading docks to when it’s shipped out to its next destination.

•Warehouse management software provides the tools to drive strategic big picture
improvements as well as those to monitor the day-to-day. What a management team sees in
the warehouse management system will be different from a picker or packer who relies on
the system to know what to pick or pack next on the warehouse floor.

•Each warehouse management system may have different functionality deployed depending
on the business it serves (e.g., what a direct-to-consumer ecommerce seller needs isn’t the
same as a large brick and mortar store chain).

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 Warehousing KPI’s
• Inventory Accuracy Rate: Measures the percentage of warehouse or storage locations
that had no inventory discrepancies when stock cards are compared to physical inventory
count during a defined period of time. Alternatively, can be calculated for a single facility as
the percentage of months or quarters with no discrepancies in the review period.
• Put-Away Accuracy: The percentage of items placed in the correct location or bin in a
warehouse or storage area.
• Picking Accuracy Rate: The percentage of items or lines picked accurately from storage
based on a request or packing list, and then placed into the appropriate container.
• The total number of accidents occurring in a warehouse or other storage facility during
a defined period of time.
• Warehouse Order Processing Time: The average amount of time (e.g., minutes, hours,
days, weeks) from the moment an order is received at the storage facility until the time the
order is actually shipped
• Total Warehousing Cost: All costs related to warehousing, such as labor costs and
warehouse rent; utility bills, equipment, material- and information-handling systems, etc. It
also includes costs related to systems, supplies, and any other material with specific use in
warehousing.
• Storage Space Utilization: The percentage of the total storage space actually being used
out of the total storage space available

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 Warehouse Management with 3PL
Because warehouse processes are so complicated and expensive, many brands choose to
outsource the entire fulfillment process to a third-party logistics (3PL) company.

Unlike an on-demand warehousing company that finds warehouses with excess space, 3PLs
run their own fulfillment centers and should have standardized warehouse management
across all of them.

Here are some of the advantages of working with a professional logistics company to store
inventory and ship orders.

1. Logistical optimizations
3PLs work with thousands of companies — including seasonal brands, high growth brands,
and everyone in between — so they have a lot of data and can do everything from
analyzing shipping zones to forecast demand and inventory. Continuously aggregating and
learning from data helps optimize each warehouse for greater efficiency as well as
provide reduced shipping costs and transit times for your customers, all of which help.

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 Warehouse Management with 3PL
2. Multiple warehouses and larger geographic footprint
When you run your own warehouse, you are only shipping from that one location.
Partnering with a 3PL means you can store inventory in several of their fulfillment centers
to keep inventory closer to more customers. If you ship nationwide, it’s a must that you
have warehouses coast-to-coast

3. Huge time savings

Order fulfillment services from a 3PL eliminate the most time-consuming logistics tasks
(inventory storage, picking, packing, shipping, order tracking, replenishing supplies,
returns, kitting, etc.) and the stress of managing a warehouse.
While they take care of these tasks, client can monitor their performance and use the data
they provide to grow and make better business decisions.

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 Warehouse Management with 3PL
4. Better uses of warehouse space
If you’re on the verge of outgrowing your warehouse space, working with a 3PL can make
your life a lot easier. Even once you’ve outsourced fulfillment to a 3PL, you can either
repurpose your old warehouse space to focus on a different aspect of your business

A 3PL can help you pay for only the space you need — even if that’s by the bin, shelf, pallet,
or any combination of those for your products. That way, you’ll never have to worry about
outgrowing (or never growing into) the space you’re paying for.

5. Real-time insights
Just because you’re not working inside the 3PL’s warehouse doesn’t mean you won’t know
what’s happening. Through their technology, you should be able to see your inventory flow,
including when inventory is being received, stowed or put away, picked, packed, shipped,
and any other movement.
You can search orders by tracking number, destination country, the number of items it
contains, filter by sales channel, fulfillment center location, as well as get full transparency
into performance such as fulfillment speed, orders fulfilled on time, accurately, claim-free,
etc

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 Warehouse Management Best Practices
Warehouse management is complex, but done right it can reduce costs, improve customer
satisfaction and increase warehouse operational efficiency.

•Warehouse Picking Best Practices

Use standardized containers to store materials. Standardized containers simplify
warehouse order fulfillment, making it easier to find and store materials, and giving the
warehouse a neater appearance that improves organization.
Using standardized bins minimize the variety of material handling equipment you need.
They also eliminate wasted time while pickers search for the right equipment.
Use bin locations to ensure that bins and pallets are placed carefully on shelves in the
assigned location. This can minimize lost or misplaced inventory and reduces time spent
looking for materials.
Use clear, readable labels that can be read by people as well as scanners or other equipment
to further reduce errors.
Implement cross docking to speed up operations and eliminate excessive inventory
handling by delivering goods needed for orders to the shipping dock without making a stop
in the warehouse. This reduces the order cycle time and material handling costs.

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 Warehouse Management Best Practices
•Warehouse Organization Best Practices
•Warehouse square footage is expensive, so maximize the use of all your vertical space,
even if it requires an investment in additional equipment. You will reduce operational costs,
inventory carrying costs, and increase the efficiency of picking and packing operations
•Utilize automation wherever possible.
•Use barcodes, RFID tags,or whatever technology works best for your inventory mix so you
always have accurate on-hand counts and locations.

•Warehouse Inventory Management Best Practices

•Many people think of cycle counting as an inventory management tactic for keeping on-
hand balances correct. While that is one positive aspect of the practice, the more important
aspect is to treat cycle counting as a quality assurance test.
•When you find errors, don’t just correct the balance. Instead, investigate the reason for the
discrepancy and make changes to your warehouse management procedures to prevent the
issue from occurring again. Over time, a good cycle count program will improve accuracy to
near perfection.

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 Distribution
• Distribution refers to the delivery of finished goods to buying centers such as
shopping centres, markets and retailer stores.
• Some manufacturers deliver their goods directly to their accredited retailers. This
is advantageous if the retailers’ business establishments are just nearby the
manufacturers’ places.
• Direct delivery of goods to retailers can save you from warehousing costs.
However, if you are far from distribution centers, you have to deal with trucking
costs and inventory frequently.
• Because most product manufacturers are based internationally, the most common
in-country distribution system is a system where products flow from central
stores to districts and/ or regions; and, ultimately, to service delivery points.
• As with warehousing, distribution plays an essential role in logistics management
system.
• Distribution consists of moving products down the pipeline from the national
central warehouse until they are dispensed to the final customers

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 Distribution Model
Four major steps that constitute a distribution business model

The first involves establishing the market needs which will determine the types of
distribution services to offer. Also, to be determined are the modes of distribution;
such as the choice of transport for example using railway transport for bulky goods or
air transport for perishable goods and specialized services such as transport of
hazardous goods and wide loads using appropriate vehicles.

The second step is researching and understanding the cost structure. This should
come from all the costs involved such as the equipment, licensing and staff expenses.
A full understanding of the cost structure is essential in setting the right prices that
will bring profits.

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 Distribution Model
Four major steps that constitute a distribution business model

The third step involves setting pricing structures and establishing appropriate
payment methods for the consumers. It is advisable to offer a variety of payment
methods for the consumers such as cash, checks, and credit card for their
convenience. Terms of payment should also be determined such as the incentives for
prompt payments, grace period for early buyers and penalties for late payments.

The fourth step will involve gaining economies of scale in the market to keep up
with competition and increase profitability. Economies of scale are an integral part of
any distribution business mode. This will involve increasing the magnitude of your
services, geographical cover and assets such as distribution vehicles. Such growth of
the business creates reliability within the services and gives you power to steadily
increase prices which improve the profitability of the distribution.

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 Distribution KPI’s
• Distance Traveled
• Fuel Consumption: actual fuel used, usually measured in kilometers per liter,
correlated to factors such as loading and type of equipment.
• Running Cost per Kilometer: The average transportation cost per kilometer related
to a specific driver, type of vehicle, route, region/district/facility, or carrier (if
outsourced) during a defined period,including fuel, tyres, maintenance, acquiring and
staffing a fleet, or, if outsourced, freight bills.
• Availability: The condition of the fleet can indicate the success of fleet management.
It is a function of how much time a vehicle was broken down or undergoing
maintenance, and how much time was it ready for use. Availability is calculated as a
percentage of the total possible days in a reporting period.
• Safety: Obtained from the crash/incident reports. Accidents may indicate that the
vehicle operator needs training. Critical safety defects in vehicles or their equipment
also imply training needs for vehicle operators and maintenance personnel. Beyond
the risks to life, poor safety affects vehicle availability and the cost of insurance
premiums.

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 Distribution KPI’s
• On-time Delivery: measures the percentage of shipments arriving on time or within
an agreed time window during a defined period of time.
• Damages
• Shipments Arriving in Good Condition: measures the percentage of shipments
arriving without damage to the products during a defined period of time.
• Nonconformity: Unexpected events that adversely affect (or could potentially affect)
a delivery system, including any aspect of a warehouse or distribution system. All
instances of nonconformity should be recorded and investigated.

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 Warehousing and Distribution
Warehousing and distribution are the two supply chain activities that often require
the largest proportion of a supply chain operation’s budgets.

When a supply chain has well functioning warehousing and distribution

management systems, it can extend the working life of public health infrastructure,
reduce the overall costs of transport, and improve the provision of public health
services.

Points to consider:

• How to carry out the key warehousing activities of receiving, storage and shipping
• How to plan warehouse space requirements and warehouse layout
• The key components of inventory management
• Issues to consider in positioning warehouse assets to optimize storage and
distribution
• Issues to consider in designing the transportation network and managing the
transportation function

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 Impact of Improper Warehousing and Distribution

•Major and minor mistakes alike in warehousing and distribution can result to high
losses.
•Incorrect storage can damage the goods. If the damaged goods are sold, they will
either be sold in a much lower price or not be sold at all. The manufacturers will not
be able to get back their investments.
•Failure to deliver the goods to the right destinations will cause the business to cover
another round of delivery costs to do two things: to bring back the wrong goods and
to deliver the right ones.
•Due to delays, goods can get damaged and intended recipients may not want to
accept and pay for the delivery.
•Another adverse effect of wrong warehousing and distribution is that it can
destabilize the prices of goods. If there is not enough supply due to the incompetence
of the warehousing management, the prices of goods may rise to meet the unchanged
demand of the consumers.

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 Six Sigma for Supply Chain Management
Six Sigma is a tool for optimizing operations and is focused on statistics. Six Sigma will
create a beneficial impact on the bottom line and enhance consumer relationships — both
factors leading to increased competition and market share acquisition.

Impact of Six Sigma on SCM

Improve Speed
One of the most significant advantages of supply chain productivity that you can enjoy is
pace enhancement by implementing Six Sigma. This is because Six Sigma is focused on
ensuring that procedures are done as soon as possible and eliminating redundant systems.
Six Sigma will, therefore, help you ensure your orders are put and executed quicker.

Prevent Defects
Originally designed to tackle flaws in production, the Six Sigma process reduces them
below a reasonable threshold.

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 Six Sigma for Supply Chain Management

Perfect Order Fulfillment

This is reflected in the proportion of orders that achieve the delivery target with
comprehensive and correct reporting and no disruption to delivery. Six Sigma
approach can help optimize order fulfillment by recognizing challenges such as
obsolete preparation procedures and inadequate execution mechanisms where
possible. Later Lean can be used to reduce waste and increase efficiency.

Enhance Performance
The Lean and Six Sigma approaches together are ideally suited for maximizing a
supply chain. These ideologies together have a common perspective on two essential
facets of manufacturing: productivity and efficiency.
The Six Sigma approach will help supply chain administrators to ensure that each
component of their production lines are defect-free and are customer-oriented. By
identifying their consumer base and expectations early, companies will coordinate all
their process changes to deliver differentiation to their clients.

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 Six Sigma for Supply Chain Management
Increase Supply Chain Flexibility
Performance in the supply chain requires a swift reaction to shifts in supply and
demand across the ups and downs of market cycles, as well as through emergencies.
Companies with the most flexible supply chains are the ones suited to the customer’s
needs. Establishing consumer expectations that are essential to quality in Six Sigma’s
Identify Process allows businesses to develop customer awareness and, thus, bring
stability into their supply chains.

Reduce Costs
The most important problem is in the form of accumulation of goods due to cost
inflation. The cost of the raw materials, the cost of shipping and supply, and the cost
of work will all vary. This will take the supply chain spending seriously off track. Six
Sigma will automate operations and cut prices, providing a gap between the budget
and the unforeseen supply chain costs.

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 Six Sigma for Supply Chain Management
Zero Waste
Six Sigma methodology to remove waste has been developed and can be described as
actions that do not add value to the commodity or consumer. Six Sigma makes supply
chains work more effectively by addressing non-value-added production and removing it:
•Over-production – As a result of an optimistic outlook, generating more upstream of
demand results in high inventory costs.
•Transportation – Unneeded commodity transport increases to cost of production and
processing time—lean aims to do away with unnecessary travel.
•Non-value added processing – preliminary design of production facilities require extra
work which does not bring much value to the commodity. Lean simplifies manufacturing
to make supply chain operation more efficient.

Improve Team Member Engagement

Six Sigma allows your team members the freedom to make crucial decisions on issues
about the supply chain without consulting superiors. This not only lets you make your
team more independent, reducing the number of roadblocks with each decision, but it also
creates buy-in for the team members, making them to deliver value at a high level.

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 Thank You

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