LESSON 3

Dangerous goods

Learning outcomes
By the end of this topic you should be able to;

• Explain Classification & Documentation

• Understand Safe packing (containment)

• Explain Hazard warning signs

• Describe Safe transport operations and Safe stowage

• Outline Segregation of incompatible goods

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1
 3.1. Packaged Dangerous Goods
Dangerous goods can be defined as any substances whether packaged or in
bulk, in-tended for carriage or storage and have properties coming under the
classes listed in the International Maritime Dangerous Goods (IMDG) Code.
Packaged Dangerous Goods are dangerous cargo contained in a receptacle
packages, portable tank and freight container or in a vehicle. Dangerous
Goods classified under IMDG Code are as follows:

• Explosives

• Gases

• Flammable liquids and Solids

• Oxidizing substances

• Organic peroxides

• Toxic and infectious substances

• Radioactive material

• Corrosive substances

• Miscellaneous dangerous goods and articles.

It is evident that the improper packing of above listed goods can cause
serious threat to a lot of factors. (Armstrong,2007)

3.1.1. Safe movement of dangerous cargo

In order to confirm the safe movement of the packaged cargoes categorized
under IMDG code, special care to be taken on each process from packing of
the goods to the delivery of cargo at the destination point. The first procedure
involving in this process is to determine the class of goods and sorting it,
which should be done by the shipper in accordance with IMDG code.

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 Packing of cargo
Packing is the process of assembling items into a unit with necessary
protection coatings and marking , it plays an important role in minimizing
the risk associated with the nature of the goods(Willinger,1981). Packing
is done for the following reasons

• To avoid exposure to the atmosphere

• Easy identification from other goods

• Durability of the goods

• Easy and safe recovery of the cargo in case of incidents

Dangerous goods should use good quality packing’s to withstand shock

and load occurring during transportation and it must be closed tightly to
prevent leakage and loss of contend. Packing should be done in such a
way that it should not be affected by

• Outside force such as impact or vibration.

• Contamination due to unwanted substances like water, air.

• Climatic condition.

Packing is either done by the shipper himself or by a third-party and naturally the
responsibility falls on him for the comprehensive and relative legislation which
must be observed during the preparation for transportation (Wong, 1976)

Loading, Stowage and Separation of Dangerous Packaged Goods

Stowing and lashing of cargo comes under loading operation and can be defined as
placing of goods in a ship’s spot or container. (Karan, 2004) Goods on ship are
subjected to all type of stresses mainly during handling, transfer between ships and
shore and due to bad climate, therefore stowage must be perfect because poor
stowage can lead to serious problems both at sea and land. Detailed provisions
regarding stowage and segregation of dangerous goods are given in chapter 7 of the
IMDG Code. It is the duty of a carrier to carefully load, handle, stow, carry and keep
the cargo according to the applicable regulation. (IMO)

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 Two incompatible articles when kept together may result in undue hazard in case of
leakage, spillage or if an accident occurs .This is where importance of segregation or
separation takes place. Segregation is obtained by maintaining certain distances
between incompatible goods or separating by one or more steel bulkheads or decks
between them, or a combination thereof. For the purpose of segregation, dangerous
goods having certain similar chemical properties should be grouped together in
segregation groups (Williams, 1999) Stowage into containers must be properly and
carefully done, with proper bracing, blocking and dunnage inside. It’s important that
stowage plan for dangerous goods should ensure that only valid positions are used
for dangerous goods when planning and loading For protecting the dangerous goods
from adverse weather and from the collision impact it is better to stow goods in
outboard stacks. Dangerous goods plan must be properly filled with information
pertaining to the dangerous goods on board and this helps quick and easy location of
dangerous goods(Peermohamed,2002)

Marking, Labelling and Placarding of Dangerous Goods

The main aim of marking and labelling dangerous goods is to inform related per-
sons about package contents , for appropriate handling of the goods for the
safety and health purposes and for identifying the goods during transportation.
This is predominantly important because when an accident involving these goods
occurs, marking and labelling give more clear and immediate notice of dangerous
characteristics of the goods. If the dangerous goods are not properly packed,
marked, labelled and documented in accordance with the regulations, the carrier
should not take the goods on board (SOLAS). Some of the guidelines of marking
dangerous packaged goods are stated below :

• The size of the labels depends on amounts of goods packaged

• Labels should be placed in such a way that they should be visible

when pack-ages are stacked.

• Format, design and colour of the labels should follow the standards
as per the Dangerous Goods Code.

• Packaging should be of a contrasting colour or be clearly visible

against the packaging used on the other goods.

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• Requirements for inner package marking are different from standard
marking and for packages the standard marking must include:

– Proper shipping name of each type of dangerous goods in the package

– UN Number
– Class label for each class of dangerous goods in package

• Markings must pass tests for legibility, water resistance, colour fastness
and staying affixed (stickers are commercially available) (Armstrong,2007)

Placards should be attached on cargo transport units to notify that the

contents of the unit are dangerous goods and present risks, unless the labels
affixed on the packages are clearly visible from the exterior of the cargo

Transportation of Packaged Dangerous Goods

There are lot of factors to be considered during the carriage of dangerous goods
and most important of it is information. It’s very vital that all the persons
especially crew and master involved in a voyage must be aware of the nature
and properties of the cargo and this is mainly for cargo protection and safety of
the lives and properties in ship. If the carrier is unaware of the nature of the cargo
loaded in his ship it will be impossible for him to take necessary precautions and
obviously consequences will be there. For example a burning cargo placed deep
down in stow cannot be discarded by a ship during its voyage .The other cargoes
stacked nearby can also catch fire and if this cargo happened to be a undeclared
hazardous cargo consequences can be unimaginable, therefore it is vital to have
a precise and dependable information about the cargo as decision made on
partial information can result in more damage (Jackson, 1981)

Documentation for Dangerous Goods

The declaration of dangerous goods by the shipper makes sure that all in the
transportation chain are aware that dangerous goods are being transported. This
ensures that they are correctly accepted, handled and loaded and if an incident or
accident occurs, either in ship or in the port, what the accurate response should be..
Accord-ing to the SOLAS Convention, the IMDG Code demands the consignor who
offers dangerous goods for transport must describe the dangerous goods in a
transport

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 document and should provide additional information and documentation as spec-
ified. The dangerous goods transport document may be in any form, provided it
contains all the information required by the IMDG Code.( Özbek, 2008)

Fig 3.1 Dangerous Goods Flow –Chart Inbound

Source:UKOOA 2002

The cargo will only be accepted if all the above steps have been taken.
Failure to comply with any of the above steps will result in rejection.
According to IMDG code following details should be included in the documentation

• Consignor’s name and contact telephone number

• Subsidiary risks, if any, of the goods

• UN number on goods

• Information about other packaged goods (non dangerous goods) within

the load and placed after listed dangerous goods(IMDG Code,1965)

3.1.2. Legal Aspect of Transportation of Dangerous Packaged Goods

Common law
In common law, the common carrier is the insurer of the goods and is bound to carry
goods he publicly professes to carry unless there is reasonable excuse. He may,
however, refuse the goods where there is no possibility to carry the goods in

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safety or where the goods are insufficiently protected. Based on these notions, it has
been said that there are no common carriers of dangerous goods.(Hameed,1996)

The International Maritime Dangerous Goods Code

There had been limited recognition of the potential problem and lack of
international response by the International Maritime Organization for a number of
years. In 1965 IMO introduced International Maritime Dangerous Goods Code
(IMDGC)
.The new code attempted to merge many varying customary rules and procedure
related to the transportation of dangerous cargo at sea. Other transport modes were
also consulted and the best and most effective methods examined and tested in con-
junction with technical experts and the insurance industry. The International Mar-
itime Dangerous Goods (IMDG) Code requires either two signatures on a single
transport document, or one signature on each of the Dangerous Goods Transport
Document and Container/Vehicle Packing Certificate which shall be attached to each
other. The IMDG Code is brought into UK law through the Merchant Ship-ping
(Dangerous Goods and Marine Pollutants) (IMO,2010).

The International Safety Management Code

The ISM Code is a major development in safety in the marine context. It
heralds a period of significant change in the marine industry and its
repercussions are likely to be felt right up to the very top of the marine food
chain. ISM Code has larger Implications for the carriage of dangerous goods.
The Safety Management System (SMS) provides the framework for compliance
with the Code. Under the ISM Code, if the cargo is to be carried on the specific
type of vessel, the company has the duty to ensure that the ship is properly.

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 LESSON 4
Warehousing packaging & packing

Learning outcomes
By the end of this topic you should be able to;

• Define warehousing and outline its importance.

• Identify different types of warehouse storage system.

• Present on overview of warehousing types and operations.

• Outline key factors to be considered in order to achieve maximum

space utilization in warehousing

• Define packaging and packing.

• Outline the importance of packaging and packing.

• List consideration when making packaging and packing choices.

• Outline the importance of marking and labeling.

4.1. Warehousing
Definition
A warehouse is a commercial building for storage of goods. Warehouses are used by
manufacturers, importers, exporters, wholesalers, transport businesses, customs,
etc. They are usually large plain buildings in industrial parts of towns. They come
equipped with loading docks to load and unload trucks; or sometimes are loaded
directly from railways, airports, or seaports. They also often have cranes and forklifts
for moving goods, which are usually placed on ISO standard pallets.

Introduction
Warehouse can play a key role in the integrated logistics strategy and its build-ing
and maintaining good relationships between supply chain partners. Warehousing
affects customer service stock-out rates and firm’s sales and marketing success. A
warehouse smoothens out market supply and demand fluctuations. When supply
exceeds demand, a demand warehouse stores products in anticipation of customers
requirements when Demand exceeds supply the warehouse can speed product
movement to the customer by performing additional services like marking prices,
packaging products or final assembling etc.
Warehousing can be defined as a location with adequate facilities where
volume shipments are received from production center, which are then
broken down into particular order and shipped onwards to the customer.
Warehousing is an integral part of any logistics system. The warehouse is
a link between producer and customer
Out-bound warehouse help consumers buy on demand without a near4by
production plant warehousing cost are about 10% of total integrated
logistics costs for most companies.

4.1.1. Types of warehouses

1. Private Warehousing

2. Public Warehousing

3. Contract Warehousing

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 Private Warehousing
A firm producing or owning the goods owns private warehouses. The
goods are stored until they are delivered to a retail outlet or sold. Potential
advantage of using a private warehouse is the ability to maintain physical
control over the facility, which allows mangers to address loss, damage,
and theft. When not in use they can rent it out.
The construction and maintenance of private warehousing can be extremely costly.
All the expenses have to be carefully analyzed and evaluated. These are:

1. Fixed expenses and building and land acquisition costs which are high;

2. Expenses incurred on ensuring that warehouses are properly

equipped with material-handling equipment like conveyors, fork lifts, hand
trucks, racks and bins, and dock levelers;

3. The costs of salaries of staff required for peak activity periods which can be
very high since retrenchment during slack periods may not be possible;

4. Extra payment to be made for work on Saturday and Sundays and holidays;

5. Generator and other services charges are required to be taken into account.

6. The office and record-keeping equipment necessary for successful

warehousing operations has to be budgeted for;

7. To this must be added the cost of such item as fuel, air-conditioning,

power and light.

8. The cost of maintaining insurance records and of the premiums paid

for fire, theft, and also for workmen’s compensation.

Advantages
The advantages and disadvantages of private warehousing as against
those of public warehousing are:

1. Private warehousing offers better control over the movement and

storage of products as required by the management from time to time.

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2. There is less likelihood of error in the case of private warehousing
since the company’s products are handled by its own employees who are able
to identify the products of their own company better.

3. If there is sufficient volume of goods to be warehoused, the costs of private

warehousing compare favorably with that of public warehousing. But private warehouse
may not be expected to be packed up to the brim all the while. Therefore, the costs of
private warehousing per unit may actually be higher.

Public Warehousing
A public warehouse rents space to individuals or firm needing storage, some
pro-vide wide array of services including packaging, labeling, testing,
inventory, maintenance, local delivery, data processing and pricing.
All the foregoing cost factors operate in public warehousing as well. But in public
warehousing, the expenses are distributed over several other consignments of other
clients. In most instances therefore can render better service with greater flexibility
for the user. A company running a private warehouse will have to compare costs
incurred with the total figure for the complete service through public warehousing.

Advantages
1. It is generally less expensive and more efficient.

2. Public warehouses are usually strategically located and immediately

avail-able.

3. Public warehousing is sufficiently flexible to meet most space requirements, for

several plans are available for the requirement of different users.

4. Fixed costs of a warehouse are distributed among many users. Therefore,

the overall cost of warehousing per unit works out to a lower figure.

5. Public warehousing facilities can be given up as soon as necessary

without any additional liability on the part of the user.

6. The costs of public warehousing can be easily and exactly ascertained,

and the user pays only for the space and services he uses.

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 Contract Warehousing
Contract warehousing is a specialized form of public warehousing. In addition
to warehousing activities such warehousing provides a combination of
integrated logistics services. Thus allowing the leasing firm to concentrate on
its specialty. They provide customized services, eg. Value Added Services.

4.1.2. Functions of warehouses

Warehouses are basically intermediate storage points in the logistics system
where raw material, work in process, finished goods and good in transit are
held for varying duration of times for a variety of purposes. The warehousing
functionality today is much more than the traditional function of storage. The
following are main function that warehousing serves today:

1. Consolidation: This helps to provide for the customer requirement of a

combination of products from different supply or manufacturing sources. Instead of
transporting the products as small shipments from different sources, it would be
more economical to have a consolidation warehouse. This ware-house will receive
these products from various sources and consolidate these into shipments, which
are economical for transportation or as required by the customers.

2. Break Bulk: As the name suggests, the warehouse in this case serves the
purpose of receiving bulk shipments through economical long distance transportation and
breaking of these into small shipments for local delivery. This enables small shipments in
place of long distance small shipments.

3. Cross Docking: This type of facility enables receipt of full shipments from a
number of suppliers, generally manufacturers, and direct distribution to different
customers without storage. As soon as the shipments are received, these are allocated
to the respective customers and are moved across to the vehicle for the onwards
shipments to the respective customers at these facilities. Smaller shipments
accompanying these full shipments are moved to the temporary storage in these
facilities awaiting shipments to the respective customers along with other full
shipments.

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4. Product Mixing: Products of different types are received from different
manufacturing plant or sources in full shipment sizes. These products are mixed at
these warehouses into right combination for the relevant customers as per their
warehouses and continuously provided for the product mixture shipments requiring
these.

5. Stock Piling: This function of warehousing is related to seasonal

manufacturing or demand. In the case of seasonal manufacturing, certain raw materials
are available during short periods of the year. Hence, manufacturing is possible only
during these periods of availability, while the demand is full year around. This requires
stockpiling of the products manufactured from these raw materials. An example is
mango pulp processing. On the other hand, certain products like woolens are required
seasonally, but are produced throughout the year, and thus need to be stockpiled as
such.

6. Postponement: This Functionality of warehousing enables

postponement of commitment of products to customer until orders are received
from them. This is utilized by manufacturers or distributors for storing products
ready up to packaging stage. These products are packaged and labeled for the
particular only on receipt of the order.

7. Positioning: This permits positioning products or materials at strategic

ware-houses near to the customers. These items are stored at the warehouse until
ordered by the customers when these can be provided to the customers in the
shortest lead-time. This function of warehousing is utilized for higher service levels
to customers for critical items and during increased marketing activists and
promotions.

8. Assortment: Assortment warehouse store a variety of products for

satisfying the variety requirements of customers. For example, retailers may
demand different brands of the same product in small quantities rather than
larger quantities of the single brand.

9. Decoupling: During manufacturing, operation lead-times may differ in order

to enable production economies. Thus, the batch size and the lead-time of production
may differ in consecutive operations. This decoupling of opera

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 tions requires intermediate storage of materials required for the
subsequent operation.

10. Safety Stocking: In order to cater to contingencies like stock outs,

transportation delays, receipt of defective or damaged goods, and strikes, safety
stocks have to be maintained. This ensures that, on the inbound site production
stoppages do not occur, and, on the outbound side customers are fulfilled on
time.

Advantages of Warehousing
Warehousing offers many advantages to the business community. Whether it
is industry or trade, it provides a number of benefits which are listed below.
• Protection and Preservation of goods - Warehouse provides
necessary facilities to the businessmen for storing their goods when they are not
required for sale. It provides protection to the stocks, ensures their safety and
pre-vents wastage. It minimizes losses from breakage, deterioration in quality,
spoilage etc. Warehouses usually adopt latest technologies to avoid losses, as
far as possible.

• Regular flow of goods- Many commodities like rice, wheat etc. are produced
during a particular season but are consumed throughout the year. Warehousing ensures
regular supply of such seasonal commodities throughout the year.

• Continuity in production- Warehouse enables the manufacturers to

carry on production continuously without bothering about the storage of raw
materials. It helps to provide seasonal raw material without any break, for
production of finished goods.

• Convenient location- Warehouses are generally located at convenient

places near road, rail or waterways to facilitate movement of goods. Convenient
location reduces the cost of transportation.

• Easy handling- Modern warehouses are generally fitted with

mechanical appliances to handle the goods. Heavy and bulky goods can be
loaded and unloaded by using modern machines, which reduces cost of
handling such goods. Mechanical handling also minimizes wastage during
loading and un-loading.

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• Useful for small businessmen- Construction of own warehouse requires
heavy capital investment, which small businessmen cannot afford. In this situation,
by paying a nominal amount as rent, they can preserve their raw materials as well as
finished products in public warehouses.

• Creation of employment - Warehouses create employment opportunities

both for skilled and unskilled workers in every part of the country. It is a source of
income for the people, to improve their standards of living.

• Facilitates sale of goods - Various steps necessary for sale of goods

such as inspection of goods by the prospective buyers, grading, branding,
packaging and labelling can be carried on by the warehouses. Ownership of
goods can be easily transferred to the buyer by transferring the warehouse
keeper’s warrant.

• Availability of finance - Loans can be easily raised from banks and

other financial institutions against the security of the warehouse-keeper’s
warrant. In some cases warehouses also provide advance to the depositors of
goods on keeping the goods as security.

• Reduces risk of loss - Goods in warehouses are well guarded and preserved.
The warehouses can economically employ security staff to avoid theft, use insecticides for
preservation and provide cold storage facility for perishable items. They can install fire-
fighting equipment to avoid fire. The goods stored can also be insured for compensation in
case of loss.

4.2. Square Root Law

In their aggressive effort to take cost of logistics network, firms are searching
for new ways to reduce levels of inventory without adversely effecting
customer service. A currently popular approach is to consolidate inventories
into fewer stocking location in order to reduce aggregate inventories and their
associated cost. Correspondingly, this strategy requires the involvement of
capable transportation and information resources to see that customer
service is held at existing levels and is even improved whenever possible.
The square root law helps to determine the extent to which inventories may be
reduced through such strategy. Assuming the total customer demand remains the

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same, the Square Root Law estimates the extent to which aggregate
inventory needs will change as a firm increases or reduced the number of
stocking location. In general, the greater the number of stocking locations, the
greater the amount of inventory needed to maintain customer service levels.
Conversely, as inventories are consolidated into fewer stocking locations,
aggregate inventory levels will decrease. The extent to which these changes
will occur is understood through application of the square root law.
The Square Root Law states that: “the total safety stock inventories in the
future number of facilities can be approximated by multiplying the total
amount of inventory at existing facilities by the square root of the number
of future facilities divided by number of existing facilities”.
Therefore
Where
N1 = Number of existing facilities
N2 = Number of future facilities
X1 = Total inventory in existing facility
X2 = Total inventory in future facility
Example
A company presently distributing 40,000 units of product to its customer from eight
facility location throughout India is located at A, B, C, D, E, F, G and H. The
company is evaluating an opportunity to consolidate its operation into two facilities.
Square Root Law we will find the total amount of inventory in the two future facility.
Solution
Here,
X1 = 40,000
N1 = 8
N2 = 2

4.3. The number of warehouses

The number of warehouses is another decision parameter impacting a number of
cost variables and customer service. If customer service is taken in cost terms as
cost of customer dissatisfaction, the number of warehouses will affect
transportation, inventory, warehousing and customer dissatisfaction costs.

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Transportation costs initially decreases with increasing number of warehouses. This
is due to the transportation economics obtained by having large-volume long-range
transportation from consolidation warehouses and short-range small-volume trans-
portation from break-bulk warehouses. However, as the number of warehouses
increases beyond a certain value, the transportation costs starts increasing due to
large number of transportation trips in – between the larger numbers of warehouses.
Inventory costs continuously increases with the increasing number of warehouses
beyond the increased space available needs to be utilized and firms increase the
commitment of inventory at these warehouses beyond those actually needed. Tran-
sit inventory costs continuously decrease with the increased number of warehouses
due to the shorter transportation times between the larger number of warehouses.
The warehousing costs increase with more warehouses due to the maintenance and
facility costs associated with each warehouse. For the same space, a single ware-
house incurs less warehousing cost than two warehouses.
The increasing number of warehousing leads to increasing customer
service levels, thus, decreasing customer dissatisfaction cost.

4.3.1. Warehouse Location

Warehousing is important to the firms since it improves service and reduces cost im-
provements in service are gained through rapid response to customer request (time
utility), which is a primary factor leading to increased sales. The location decision
regarding warehouses is affected by manufacturing plant, customer and market lo-
cations. A traditional classification by Edgar Hoover classifies warehouse locations
as market-positioned, manufacturing-positioned, or intermediately-positioned.

Market-positioned warehouses
Market-positioned warehouses are located near to the customers and markets (point
of product consumption) with the objective of serving them. These generally have a
large variety and low volume of items to service local requirements. Such ware-
houses reduce cost by providing place utility. A Market-positioned warehouses
functions as a collection point for the products of distant firms with the resulting
accumulations of product serving as the supply source for retail inventory
replenishment. This approach allows large and cost-effective shipments from the
manufacturer with lower-cost, local transportation providing service to individual
retailers.

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 Market-positioned warehouses may be owned by the firm or the retailer
(private warehouses), or they may be an independent business providing
warehouses service for profit (public).

Manufacturing-Positioned Warehouses
Manufacturing positioned warehouse are located near to the manufacturing
facilities in order to support manufacturing on the inbound side and to
facilitate assortment-creation and shipping on the outbound side. Improve
customer services and manufacturing support achieved through type of
warehouse which acts as the collection point for products needed in filing
customer orders and material needed for manufacturing.

Intermediately-Positioned Warehouses
Intermediately-positioned warehouses are those located between manufacturing
and market-position warehouses. These help in consolidation of assortments for
shipments from different manufacturing facilities. A firm may have many
manufacturing plant located, for economic reasons, near the sources of raw
material. Under these conditions the cost-effective warehouse may be at some
intermediate point. A few of the factors governing the warehouse locations are:

• Availability of services

• Land cost

• Availability of transport linkages for example, to a rail siding

• Availability of utilities of water and power

• Taxes and insurance cost

• Expansion space availability

• And soil strength and lay off land for drainage.

4.3.2. Size of warehouse

Many factors influence how large a warehouse should be. First it is necessary to
define how size is measured. In general, size can be defined in terms of square

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 footage or cubic space. Some of the most important factors affecting the
size of warehouse are

1. Customer service levels

2. Size of market

3. Number of products marketed

4. Size of the product

5. Material handling system used

6. Production lead time

7. Office area in warehouse

8. Types of racks and shelves used

As a company service levels increase, it typically requires more warehousing space

to provide storage for higher levels of inventory. As the market served by a ware-
house increases in number or size, additional pace is required. When a firm has
multiple products or product groupings, especially if they are diverse, it needs larger
warehouse to maintain at least minimal inventory levels of all products. In general,
greater space requirements are necessary when products are large, production lead-
time is long, manual material handling system are used the warehouse contains
office, sales or computer activities and demand is erratic and unpredictable.

Demand fluctuations impact warehouse size

Demand also has an impact on warehouse size. Whenever demand
fluctuates significantly or is unpredictable, inventory levels generally must be
higher. This result in a need for more space and thus a larger warehouse.

4.3.3. Warehouse layout and design

A good warehouse layout can increase output, improve product flow, reduce cost,
improve service to customers and provide better employee working condition. The
optimal warehouse layout and design for a firm will vary by the type of product being
stored, the company financial resources, competitive environment and needs of
customer. The warehouse manager must consider cost of trade between labor,

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equipment, space and information. Whatever layout the company finally
selects for its warehouse it is vital that all available space be utilized as fully
and efficiently as possible.

4.3.4. Warehouse operating principles

Design criteria: Three factors, which have to be considered in the design process, are
the number of stories in the facility, height utilization and product flow. Most warehouse
houses have 20-30 foot ceiling. Through the use of racking or other hardware it is
possible to store product up to the building ceiling. Warehouse design should also allow
for straight product flow through the facility whether items are stored or not. In general
this means that product should be received at one end of the building, stored in the
middle and then shipped from other end.

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