WAREHOUSING

Business Studies
Radhika Jaiswal
XI D
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PREFACE
As a part of CBSE curriculum, we were required to make a report
on any topic relating to business studies of our choosing. The basic
objective behind doing this project is to get knowledge tools of
different aspects of business.

In this project, I have included various concepts, effects and

implications regarding ‘Warehousing’.

Doing this project report has helped me gain an in-depth knowledge

of warehousing, how it has developed, its functioning and various
other aspects of it.

In truth, I could not have done this project without the guidance of
my teachers and support of my parents.

Now, I am pleased to present my project. Although precautions

have been taken to avoid them, some mistakes are inevitable.
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INDEX

1. What is warehousing?
2. Functions of warehousing
3. Pro and cons
4. Importance of Warehousing In the Development of Trade and
Commerce
5. Types of warehouses
6. Warehousing processes
7. How warehouses fit into e-commerce operations
8. Warehouse Logistics
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What is Warehousing?

Warehousing is the storing of physical goods before they are sold.

Warehouses safely and securely store products in an organized
way to track where items are located, when they arrived, how long
they have been there, and the quantity on hand.

In e-commerce, products are stored until an order is placed online,

at which point the order is shipped directly to the consumer from the
facility in which it was stored. In traditional retail, inventory may be
temporarily stored in a warehouse before it’s shipped to a brick and
mortar store.

For small or new businesses, warehousing may be done from home

until they outgrow the space. At that point, a business will have to
rent storage space, lease a warehouse, or outsource logistics to a
third-party and store inventory in their facility. You may store goods
in a warehouse, spare room, or other facilities. This all depends on
how much stock you have, and how big your business is. If you
have a small business your warehousing option doesn’t need to
include transport access.

Warehousing is important for businesses that import, export,

transport and manufacture goods. Having a central location for your
products gives you control over your products and helps you ensure
that your customers receive their orders on time. Keeping
everything organized in one place can also save you money and
boost your productivity.
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Warehousing Terminologies
3PL:Third Party Logistics – a warehouse or group of warehouses
managed on behalf of the owner of the stock.

4PL :Fourth Party Logistics – a single interface between the client

and multiple logistic service providers

Active Stock:Stock in active pick locations and ready for order

fulfilment.

Aisle:Any passageway within a storage area.

ATA:Actual Time of Arrival.

ATD:Actual Time of Departure.

Backorder:A piece of stock ordered but out of stock and promised

to be shipped when the item of stock becomes available.

Bar Coding:A way of encoding data for fast and accurate

readability. Bar codes are a series of alternating bars and spaces
representing encoded information which is read by scanners.

Blind Receiving; Receiving goods in a DC (Distribution Centre)

without any PO or invoice.

Buffer Stock:A quantity of stock kept in storage to protect against

unforeseen shortages or demands.

Cage: Used for security and to transport stock from one location to
another.

Cargo: Merchandise to be carried by some form of transportation.

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Compliance:All products, services, processes and documentation

comply with specific requirements.

Consolidation: Combining two or more shipments.

COTD:Complete and On Time Delivery.

Course:A single layer of units making up a unit load also known as

a tier.

Cross Aisle:A passageway at right angles to main aisles, used for

the movement of supplies, equipment and staff.

Cross Docking:Merchandise that is received at the warehouse or

DC is not put away but prepared for shipment to retail stores.

Cycle Count:Systematic counting of a portion of the total stock on a

certain day, so all stock can be counted without disruption to the
warehouse.

DC:Distribution Centre

DDP:Delivered Duty Paid

DDU:Delivered Duty Unpaid

DSD:Direct Store Delivery

EAN:European Article Number, this is the European version of UPC

and contains 13 digits called EA13 or 14 digits called EAN14.

FIFO:First In First Out – using stock based on when it was received.

Fixed Slot:A slot that is reserved for a specific SKU (stock taking
unit).
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Floating Slot: A slot that is available for any SKU (stock taking unit)
as soon as it is empty and available.

Fulfillment:Fulfilling a customer order.

GTIN:Global Tracking Item Number.

Landed Cost:Cost of product including logistic costs.

Merge in Transit:Merging shipments from suppliers sent directly to

the store.

Order Picker:A staff member that is assigned to make withdrawals

of warehousing units.

Pallet:Is a flat transport structure that supports goods in a stable

fashion while being lifted by a forklift, pallet jack, front loader, work
saver, or other jacking device, or a crane?

Pallet Picking:Retrieval of full pallets.

Perpetual Stocktaking: Stock record keeping system where every

transaction both in and out is recorded.

Physical Stocktaking:Counting all stock within a warehouse in a

single event – also known as a wall to wall count.

Picking:A staff member pulls the relevant stock items from storage
areas to complete a customer order.

Pick List:A list of stock items to be picked to fill an order.

POD:Proof Of Delivery
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RFID:Radio Frequency Identification – electromagnetic field to

identify and track tags on objects.

RTV:Return To Vendor

Shrinkage:Losses of stock from theft, damages and administrative

errors.

SKU:Stock Keeping Unit, this is a product or service identification

number assigned to a unique item by a retailer. The SKU can be a
number used internally or may be linked to the UPC (Universal
Product Code) or EAN (European Article Number).

Slotting:Placement of stock within a warehouse to increase picking

efficiency.

Sortation:Identifying and separating stock to be sent to specific

destinations.

SSCC:Serial Shipping Container Code

UPC:Universal Product Code, this is a 12 digit code which is split

into 4 parts. The first part is a single digit used to identify the
remaining digits. E.g. 0 would designate a regular UPC code where
a 3 would show a National Drug Code and 5 would identify a
coupon or voucher. The next 5 digits show the identification of the
manufacturer and the following five is the item number. A single
digit at the end is a character check used to validate the code when
scanned.

WMS:Warehouse Management System – systems used to

effectively manage processes, activities within the warehouse.

Zone Picking:Subdividing a picking list by areas for more efficient

picking.
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History of Warehousing

The warehousing concept takes us way back to the creation of

granaries to store food, which was stored for drought and famine
and this food was available for purchase in the conditions of
emergency, famine, drought etc. As the European explorers began
to discover new shipping trade routes all over the world, the
importance of warehouses grew for the storage of products and
commodities which were brought from far away places. The ports
were the main locations of the warehouses, since the majority of
the trade between the countries was carried by ships.

In early days man used to store excess food and keeping animals
for emergency surplus. As the civilisation developed, local
warehouses were introduced. Normally merchandise is stored in
connection with shipping, trading, and manufacturing activities.
During the Middle Ages improvement in human knowledge gave
rise to warehousing to handle the storage of shipped items. The first
known major commercial warehouse was built in Venice, a centre of
major trade routes. In late 1800’s in the United States,
transportation between port cities and inland cities were effectively
provided by railroad. Freight cars were used as warehouses on
wheels, and were especially used in grain harvest season.
Shortages in freight cars induced the railroad companies to partition
the transportation and warehousing functions. During this time
period because of monopoly on both warehousing and freight by
railroad companies favoured large corporations, giving them free
warehousing services with the use of the railroads.The warehousing
facility was provided as an additional service to transportation, and
the service so provided was part of the clearance terminal. The
word terminal describes the warehouses located in the centre of the
city, normally close to the wholesale market district and railroad
depot. Tompkins, Smith, 1998).
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Functions of Warehousing
1. Consolidation: In this function, the warehouse receives and
consolidates, materials/goods from different production plants and
dispatches the same to a particular customer on a single
transportation shipment.

2. Break the bulk: The warehouse performs the function of dividing

the bulk quantity of goods received from the production plants into
smaller quantities. These smaller quantities are then transported
according to the requirements of clients to their places of business.

3. Risk bearing:
When the goods are stored in warehouses they are exposed to
many risks in the form of theft, deterioration, fire etc. Warehouses
are constructed in such a way as to minimise these risks. Contract
of bailment operates when the goods are stored in wave-houses.
The person keeping the goods in warehouses acts as boiler and
warehouse keeper acts as boiler. A warehouse keeper has to take
reasonable care of the goods and safeguard them against various
risks. For any loss or damage sustained by goods, the warehouse
keeper shall be liable to the owner of the goods.

4. Financing:
Loans can be raised from the warehouse keeper against the goods
stored by the owner. Goods act as security for the warehouse
keeper. Similarly, banks and other financial institutions also
advance loans against warehouse receipts. In this manner,
warehousing acts as a source of finance for the businessmen for
meeting business operations.

5. Grading and Packing:

Warehouses nowadays provide the facilities of packing, processing
and grading of goods. Goods can be packed in convenient sizes as
per the instructions of the owner.
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6. Stock piling: The next function of warehousing is the seasonal

storage of goods to select businesses. Goods or raw materials,
which are not required immediately for sale or manufacturing, are
stored in warehouses. They are made available to business
depending on customers’ demand. Agricultural products which are
harvested at specific times with subsequent consumption
throughout the year also need to be stored and released in lots.

7.Price stablisation: By adjusting the supply of goods with the

demand situation, warehousing performs the function of stabilising
prices. Thus, prices are controlled when supply is increasing and
demand is slack and vice versa.
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Pros and Cons of Warehousing

CONS:
Warehousing benefits typically outweigh the cons, however, below
are some issues you may find when outsourcing your warehousing.

● Determining Which Type of Warehouse You Need

Determining which type of warehouse you need is not going to be
an easy task. You’ll need to have superb knowledge of your
business operations, your goods, and the amount of storage you
need to determine which type of warehouse is right for you. Picking
the wrong option could result in a world of drawbacks. Luckily,
through contract warehousing, you’re not tied down to a long-term
investment.

● Less Control
With contract warehousing, many are wary due to the belief that
they’ll have less control over their operations. While this can be true
with the wrong provider, choosing the right provider, clearly defining
needs, and understanding the services offered can help businesses
attain greater control.

PROS:

● Regular production:
Raw materials need to be stored to enable mass production to be
carried on continuously. Sometimes, goods are stored in
anticipation of a rise in prices. Warehouses enable manufacturers
to produce goods in anticipation of demand in future.

● Time utility:
A warehouse creates time utility by bringing the time gap between
the production and consumption of goods. It helps in making
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available the goods whenever required or demanded by the

customers.

Some goods are produced throughout the year but demanded only
during particular seasons, e.g., wool, raincoat, umbrella, heater, etc.
on the other hand, some products are demanded throughout the
year but they are produced in a certain region, e.g., wheat, rice,
potatoes, etc. Goods like rice, tobacco, liquor and jaggery become
more valuable with the passage of time.

● Store of surplus goods:

A warehouse acts as a store of surplus goods which are not needed
immediately. Goods are often produced in anticipation of demand
and need to be preserved properly until they are demanded by the
customers. Goods which are not required immediately can be
stored in a warehouse to meet the demand in future.

● Price stabilization:
Warehouses reduce violent fluctuations in prices by storing goods
when their supply exceeds demand and by releasing them when
the demand is more than immediate productions. Warehouses
ensure a regular supply of goods in the market. This matching of
supply with demand helps to stabilise prices.

● Minimisation of risk:
Warehouses provide for the safe custody of goods. Perishable
products can be preserved in cold storage. By keeping their goods
in warehouses, businessmen can minimise the loss from damage,
fire, theft etc. The goods kept in the warehouse are generally
insured. In case of loss or damage to the goods, the owner of
goods can get full compensation from the insurance company.

● Packing and grading:

Certain products have to be conditioned or processed to make them
fit for human use, e.g., coffee, tobacco, etc. A modern warehouse
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provides facilities for processing, packing, blending, grading etc., of

the goods for the purpose of sale. The prospective buyers can
inspect the goods kept in a warehouse.

● Financing:
Warehouses provide a receipt to the owner of goods for the goods
kept in the warehouse. The owner can borrow money against the
security of goods by making an endorsement on the warehouse
receipt. In some countries, warehouse authorities advance money
against the goods deposited in the warehouse. By keeping the
imported goods in a bonded warehouse, a businessman can pay
customs duty in instalments.
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Importance of Warehousing In the Development of

Trade and Commerce

Warehousing or storage refers to the holding and preservation of

goods until they are dispatched to the consumers. Generally, there
is a time gap between the production and consumption of products.
By bridging this gap, storage creates time utility.

There is a need for storing the goods so as to make them available

to buyers as and when required. Some amount of goods is stored at
every stage in the marketing process. Proper and adequate
arrangements to retail the goods in perfect condition are essential
for success in marketing. Storage enables a firm to carry on
production in anticipation of demand in future.

A warehouse is a place used for the storage or accumulation of

goods. It may also be defined as an establishment that assumes
responsibility for the safe custody of goods. Warehouses enable the
businessmen to carry on production throughout the year and to sell
their products, whenever there is adequate demand.

Need for warehouse arises also because some goods are produced
only in a particular season but are demanded throughout the year.
Similarly, certain products are produced throughout the year but
demanded only during a particular season. Warehousing facilitates
production and distribution on a large scale.
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Types of Warehouses

1. Private warehouses: Private warehouses are operated, owned

or leased by a company handling their goods, such as retail
chain stores or multi-brand multi-product companies. As a
general rule, an efficient warehouse is planned around a
material handling system to encourage maximum efficiency of
product movement. The benefit of private warehousing
includes control, flexibility, and other benefits like improved
dealer relationships.

2. Public warehouses: Public warehouses can be used for

storage of goods by traders, manufacturers or any member of
the public after the payment of a storage fee or charges. The
government regulates the operation of these warehouses by
issuing licences for them to private parties.
The owner of the warehouse stands as an agent of the owner
of the goods and is expected to take appropriate care of the
goods.

These warehouses provide other facilities also like

transportation by rail and road. They are responsible for the
safety of the goods. Small manufacturers find it convenient as
they cannot afford to construct their own warehouses.
The other benefits include flexibility in the number of locations,
no fixed cost and capability of offering value added services,
like packaging and labelling.

3. Bonded warehouses: Bonded warehouses are licensed by the

government to accept imported goods prior to payment of tax
and customs duty. These are goods which are imported from
other countries. Importers are not permitted to remove goods
from the docks or the airport till customs duty is paid.
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At times, importers are not in a position to pay the duty in full

or does not require all the goods immediately. The goods are
kept in bonded warehouses by the customs authorities till the
customs duty is paid. These goods are said to be in bond.

These warehouses have facilities for branding, grading and

blending. Importers may bring their buyers for inspection of
goods and repackage them according to their requirements.
Thus, it facilitates the marketing of goods.

Goods can be removed in part as and when required by the

importers and buyers, and import duty can be paid
instalments.

The importer need not block funds for payment of import

duties before goods are sold or used. Even if wishes to export
the goods kept in the bonded warehouse he may do so
without payment of customs duty. Thus, bonded warehouses
facilitate entrepot trade.

4. Government warehouses: These warehouses are fully owned

and managed by the government. The government manages
them through organisations set up in the public sector. For
example, Food Corporation of India, State Trading
Corporation, and Central Warehousing Corporations.

5. Cooperative warehouses: Some marketing cooperative

societies or agricultural cooperative societies have set up their
own warehouses for members of their cooperative society.
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Warehousing processes

The exact warehousing process depends on the magnitude of the

warehouse operation, the type of warehouse and storage, the
company culture, the temperature of the products, any applicable
legislative requirements, and the volume of goods moving through
the facility. However, every warehousing operation has 5 key
processes in common. They are:

1. Receiving

2. Putaway

3. Picking

4. Packing

5. Shipping

Receiving

Receiving is one of the most important processes in warehousing. It

involves a lot of activity, and any disruption in this step can have an
impact throughout the entire operation. First, the goods received
are checked with the supplier’s packing document. Then the goods
are inspected for damage. If there is any physical damage, a
thorough investigation of all of the goods in the shipment is carried
out. After inspection, the goods are taken to the putaway area.

Putaway
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Putaway is the process of moving the goods from the receiving area
to the place where they will be stored. This process involves
calculating the resource and space requirements for each item.
Goods that are similar to each other are usually stored together so
that they can be located and distributed easily. The operators
handling the putaway process confirm that the correct storage
location has been found and place the goods into their assigned
slot before confirming the completion of the process.

Picking

Picking consists of collecting articles according to a customer’s

order before shipping them. Picking uses a huge amount of
resources and usually takes 60% or more of the warehouse’s staff
to perform the process. This means that it has a significant
influence on your supply chain’s productivity.

Packing

Packing consists of combining all the items in a sales order together

and getting it ready for shipment. This process involves packing the
items in a suitable container, weighing the packed order, printing
relevant labels, and selecting the right courier service to complete
your delivery.

Shipping

Shipping is the process of dispatching your orders to their

respective customers. The shipped goods are packed early to avoid
cluttering in the staging areas which will lead to late deliveries and
confusion. The process is aligned with the carrier pick up times.
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Warehousing a complex activity where each step should be

handled efficiently in accordance with your organization. A good
work-flow implementation for your warehousing process ensures a
smooth logistical process and will contribute positively to your
business.
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Changing trends of warehousing

Due to the changing trends in the businesses, warehousing and

distribution operations should adapt to the emerging changes
and growing needs of the customers. The term ‘Globalization’
brought rigorous changes in the field of logistics. The
distribution operations now pay more emphasis on fewer
inventories, smaller order sizes, larger SKU catalogues, quicker
order turnaround, increased customised packaging and value
adding services. Once the businesses concentrated only on
local distribution centres and now all the companies give more
importance on having more globalised distribution centres, and
instead of having a single network channel, they are having
multiple distribution channels.

In order to cope to these changing trends every second, most

of the companies have deployed new technologies such as
Warehouse management systems (WMS) and Transportation
management systems (TMS) and some have decided to
redesign the processes and facilities to meet the emerging
requirements as well as to reduce costs and improve service
levels to the customers at the same time. Some large scale
businesses have gone one step ahead and decided to deploy
automation of the whole warehousing operations. Some have
already opted to outsource all their warehousing operations to
third-party logistics provider (3PL).
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How Warehouses fit into E-commerce Operations

When you buy something online, it magically shows up at your
home. But before it gets there, it was likely stored in a warehouse.
Ecommerce is driving logistics to deliver orders placed on websites
and marketplaces at record speeds — here’s how it’s made
possible.

Storing inventory
Storing inventory is placing specific products in designated
locations. Each SKU you sell should have its own storage spot
within the ecommerce warehouse. Warehousing and storage make
it possible to:

● Pinpoint the exact location of any item of inventory

● Count the actual number of units on hand and compare it to
the number of units listed
● Respond to product recalls, expired goods, and damaged
inventory by knowing exactly which products are affected and
where they are
● Ship out the oldest inventory first before anything that was
more recently received

Shipping and receiving

Shippers send inventory to a warehouse where products are
received, stowed, and arranged in a way that makes for efficient
movement to keep operations running smoothly. Warehousing
operations must be optimized to accept incoming inventory in a
timely manner by knowing which products are arriving and how
many units of each.
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After the inventory has been stored and is ready to be transported

again, shipping carriers such as DHL, USPS, and UPS pick up
orders from the warehouse and ship them to their next destination.

Distribution centers
Distribution centers are most often used by big box companies that
have both a physical and online presence. They are best for
shorter-term storage until products are needed, at which point it is
typically sent directly to retail locations, wholesalers, or consumers.
Distribution centers are demand-driven with products moving in and
out at a rapid pace by trucks constantly dropping off and picking up
items.

Returns
Warehousing logistics includes being prepared for returns,
especially when there is no in-store return option. Warehousing
operations must be able to receive, assess, and process each
returned item. You may even aim to provide customers with prepaid
return labels, share return tracking and refund information, and
make it as painless of an experience as possible for customers.
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Warehouse Logistics

Warehouse logistics is the management, planning, and organization

of operations within a warehouse. This includes managing space,
planning shipments, and organizing information so that the
warehouse operates to the best of its abilities. It is important to
strive for better warehouse logistics so that you can offer customers
better delivery times, and drive down costs where possible.

Much of warehousing revolves around logistical issues such as the

flow of physical goods as well as information and time. Issues such
as damaged goods management, safety procedures, and customer
returns affect warehouse logistics as well.

By selecting and implementing a centralized computer system such

as a warehouse management system, facility managers can begin
collecting and organizing the data required to improve warehouse
logistics.

Defining 3 key parts of warehousing logistics

Warehousing logistics is at the core of any business that sells
physical goods. A few of the most important elements of
warehousing include warehouse management, warehousing
operations, and warehouse management systems.

1. Warehouse management
Warehouse management is the strategic day-to-day running of
operations in a warehouse to promote, improve, and ensure
operational excellence. Managing a warehouse means overseeing
all staff, training, inventory, equipment, safety and security,
relationships with shipping carriers, and other moving pieces.
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Responsibilities include:

● Forecasting and managing projected volume and labor

● Ensuring the proper safety gear is used and best safety
practices are followed at all times
● Obtaining the proper licenses and certifications for anyone
operating equipment
● Maintaining compliance and requirements for regulatory
agencies
● Continuously planning and managing operations as the
business grows and becomes more complex
● Keeping goods secure and accessible and performing
warehouse audits as needed
● Providing clear instructions on how to receive, unpack,
retrieve, pack, and ship inventory
● Setting up bins and other storage spots in optimal places to
minimize the effort required to move between destinations
● Recording all inbound and outbound shipments and collecting
the proper documentation

2. Warehouse operations
Warehousing operations refers to the processes that take place in a
warehouse revolving around the movement of goods and tracking
inventory.

Principles of warehousing include functions such as receiving

inventory, then placing each SKU into a separate dedicated storage
location (e.g., in a shelf, bin, or on a pallet), and sending product to
its next destination.

Efficient warehousing operations help keep:

● Costs low
● Inventory received and shipped on time
● Staff productive
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● Sufficient quantities of product on hand

● Space below capacity
● Storage optimized and aisles clear
● Equipment used effectively
● Customers happy

3. Warehouse management systems

A warehouse management system (WMS) is a type of software that
provides the tools necessary to manage warehouse operations and
inventory movement to save time and eliminate manual processes.
Warehouse management systems help optimize inventory storage
and tracking, warehousing operations, workload distribution, and
shipping.

These types of warehousing solutions give you unprecedented

visibility and real-time insight into every action that’s happening in
the warehouse. A good warehouse management system will even
help generate electronic picking lists based on orders that have
inventory stored close to one another to decrease inefficiencies.
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CONCLUSION

In a perfect supply chain, warehouses would have no place. As yet

though, the perfect supply chain doesn’t exist, so warehousing is
essential to maintain an efficient, uninterrupted flow of materials
and goods from source to point-of-use.
Warehousing a complex activity where each step should be
handled efficiently in accordance with your organization. A good
work-flow implementation for your warehousing process ensures a
smooth logistical process and will contribute positively to your
business.