Warehouse

Q 18 – What is warehouse?
Storage involves proper arrangement for preserving goods from the time of their production or purchase
till the actual use. When this storage is done on a large scale and in a specified manner it is called
‘warehousing’. The place where goods are kept is called ‘warehouse’. The person in-charge of
warehouse is called ‘warehouse-keeper’.
Warehousing refers to the activities involving storage of goods on a large-scale in a systematic and
orderly manner and making them available conveniently when needed. In other words, warehousing
means holding or preserving goods in huge quantities from the time of their purchase or production till
their actual use or sale.
Q 19 – Need for Warehousing ?
Warehousing is necessary due to the following reasons.
(i) Seasonal Production- You know that agricultural commodities are harvested during certain seasons,
but their consumption or use takes place throughout the year. Therefore, there is a need for proper storage
or warehousing for these commodities, from where they can be supplied as and when required.
(ii) Seasonal Demand- There are certain goods, which are demanded seasonally, like woolen garments
in winters or umbrellas in the rainy season. The production of these goods takes place throughout the
year to meet the seasonal demand. So there is a need to store these goods in a warehouse to make them
available at the time of need.
(iii) Large-scale Production - In case of manufactured goods, now-a-days production takes place to
meet the existing as well as future demand of the products. Manufacturers also produce goods in huge
quantity to enjoy the benefits of large-scale production, which is more economical. So the finished
products, which are produced on a large scale, need to be stored properly till they are cleared by sales.
(iv) Quick Supply - Both industrial as well as agricultural goods are produced at some specific places
but consumed throughout the country. Therefore, it is essential to stock these goods near the place of
consumption, so that without making any delay these goods are made available to the consumers at the
time of their need.
(V) Continuous Production- Continuous production of goods in factories requires adequate supply of
raw materials. So there is a need to keep sufficient quantity of stock of raw material in the warehouse to
ensure continuous production. \
(vi) Price Stabilization- To maintain a reasonable level of the price of the goods in the market there is
a need to keep sufficient stock in the warehouses. Scarcity in supply of goods may increase their price
in the market. Again, excess production and supply may also lead to fall in prices of the product by
maintaining a balance of supply of goods, warehousing leads to price stabilization.
Q 20 – Types of Warehouses?
After getting an idea about the need for warehousing, let us identify the different types of warehouses.
In order to meet their requirement various types of warehouses came into existence, which may be
classified as follows.
1. Private Warehouses
2. Public Warehouses
 3. Government Warehouses
4. Bonded Warehouses
5. Co-operative Warehouses
Private Warehouses - The warehouses which are owned and managed by the manufacturers or traders
to store, exclusively, their own stock of goods are known as private warehouses. Generally these
warehouses are constructed by the farmers near their fields, by wholesalers and retailers near their
business centres and by manufacturers near their factories. The design and the facilities provided therein
are according to the nature of products to be stored.
Public Warehouses - The warehouses which are run to store goods of the general public are known as
public warehouses. Any one can store his goods in these warehouses on payment of rent. An individual,
a partnership firm or a company may own these warehouses. To start such warehouses a license from the
government is required. The government also regulates the functions and operations of these warehouses.
Mostly these warehouses are used by manufacturers, wholesalers, exporters, importers, government
agencies, etc.
Government Warehouses -These warehouses are owned, managed and controlled by central or state
governments or public corporations or local authorities. Both government and private enterprises may
use these warehouses to store their goods. Central Warehousing Corporation of India, State Warehousing
Corporation and Food Corporation of India are examples of agencies maintaining government
warehouses.
Bonded Warehouses - These warehouses are owned, managed and controlled by government as well as
private agencies. Private bonded warehouses have to obtain license from the government. Bonded
warehouses are used to store imported goods for which import duty is yet to be paid. Incase of imported
goods the importers are not allowed to take away the goods from the ports till such duty is paid. These
warehouses are generally owned by dock authorities and found near the ports.
Co-operative Warehouses - These warehouses are owned, managed and controlled by co-operative
societies. They provide warehousing facilities at the most economical rates to the members of their
society.
Q 21 – Public Warehouse vs Private Warehouse?
Public Warehouse Private Warehouse
The warehouses which are run to store goods of The warehouses which are owned and managed by
the general public are known as public the manufacturers or traders to store, exclusively,
warehouses their own stock of goods are known as private
warehouses
Public warehouses are accessible to anyone Private warehouses are typically restricted to the
willing to pay the rental fee, making them owner or specific parties authorized by the owner.
available for use by individuals, businesses, and
various entities.
Public warehouses are subject to government In private warehouses, the owner has full control over
regulations and may have standardized operations the operations, design, and facilities provided,
and facilities to accommodate a wide range of tailored according to their specific requirements.
goods and clients.
 Public warehouses may be strategically located in Private warehouses are often located near the owner's
industrial areas or transportation hubs to serve a facilities, such as farms, factories, or business
broader customer base and cater to various centers, and are primarily used to store their own
storage needs, including those of manufacturers, products.
wholesalers, exporters, importers, and
government agencies.

Q 22 – Construction & Maintenance of Private Warehouse ?

A warehouse may be privately owned and operated by a company making its own merchandise. This is
called a private warehouse.
The construction and maintenance of private warehousing facilities can be extremely costly. All the
expenses have to be carefully analyzed and evaluated.
These are –
1. Fixed expenses incurred on the acquisition of land and building, normally which are very high.
2. Expenses, incurred on ensuring that warehouses are properly equipped with Motorized Handling
Equipment (MHEs) like fork lifts, conveyors, semi-automatic trucks, storage racks and bins, and
mezzanine floors, etc.,
3. The cost of wages for staff required for peak activity periods like over time, which can be very
high since retrenchment during slack periods may not be possible.
4. Extra payment like over time wage to be made for work on Saturdays, Sundays, and holidays.
5. Other service charges which are required in the maintenance of warehouse operations have to be
taken into account.
6. Budgets have to be allocated for office and record keeping equipments for successful warehouse
operations.
7. The cost of regular maintenance and repairs and the cost of such items as fire extinguishers, fuel,
air-conditioning, power and light have to be taken into account.
8. The cost of maintaining insurance records of premiums paid for fire, theft, and also for
workmen’s compensation.
Q 23 – Advantage & Disadvantage of Public Warehouse?
Advantages of public warehousing
Some of the advantages of public warehousing are:
1. It is in general less expensive and more efficient and effective to achieve more customer service
level.
2. Public warehouses are usually strategically positioned and easily available.
3. Public warehousing is adequately flexible to meet most space requirements, for several plans are
available to suit the requirements 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.
 7. Conservation of capital is more in public warehousing
8. It has got enough space to handle peak requirements.
9. Public warehousing has reduced risk in their operations.
10. Public warehousing has got good economies of scale
11. It would give Tax advantages for end users.
12. Knowledge of exact storage and handling costs are available to end users.
13. It is insulated from labor disputes.
Disadvantages of public warehousing
1. problems in communication due to system incompatibility
2. Specialized services may not always be available whenever it is needed.
3. Adequate space may not always be available for end users.
Q 24 – Advantage & Disadvantage of Private Warehouse?
The advantages of private warehousing are:
1. Private warehousing offers better monitoring systems over the handling and storage of products
as required by the management from time to time which would enhance the performance of the
warehouse.
2. There is less likelihood or 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.
3. If there is sufficient volume of goods to be warehoused, the cost of private warehousing
comparatively less than that of public warehousing. The cost of private warehousing per unit may
be actually higher if the private warehouse is packed to the brim.
4. Private warehousing is the best choice for some of the locations and the products handled because
of the non-availability of the public warehousing.
5. Private warehousing has the opportunity to specially design its facilities for automatic material
handling equipment where as public warehousing may have the same.
6. Enabling the end user to increase their efficiency by means of better design and structured lay-
out.
7. Efficient use of human resources in warehouse operation improves end users’ overall
performance
8. Intangible benefits in the form of cost reduction in all the warehouse operations.
Disadvantages of private warehousing
1. Lack of Corporate flexibility which increases the complexity in the operation.
2. Financial issues
3. Low rate of return.
4. Tax issues are complicated.
Q 25 – Criteria to determine the location of warehouse?
The following considerations determine the location of a warehouse:
1. Market service area and cost of distribution from the warehouse to the market service area.
2. Satisfaction of transport requirements and facilities available in the form of rail, link roads and
road vehicles.
3. Transportation rates prevailing in the area and distribution costs per unit.
4. Competition by rival companies and whether they have warehouse in the same area.
 5. Availability of power, water, gas sewage disposal and their cost.
6. Labour supply and labour costs in the area.
7. Industrial relations climate and labour productivity.
8. Pricing arrangements and the level of service desired to be rendered in terms of availability of
the product to the customer.
9. Individual company requirements and constraints.
10. Real estate, excise and government taxes assessed in the area.
11. Attitudes of local residents and government towards establishment of the warehouse.
12. Restrictions associated with warehouses.
13. Potential for later expansion.
14. Cost of land for the warehouse and other costs.
15. Possibility of change in the use of the facility at a later date if the company so desires, and lease
or sale of the land and buildings.
Q 26 – Characteristics of Ideal Warehouses:
1. Warehouse should be located at a convenient place near highways, railway stations, airport sand
seaports where goods can be loaded and unloaded easily.
2. Mechanical appliances should be there to loading and unloading the goods. This reduces the
wastages in handling and also minimises handling costs.
3. Adequate space should be available inside the building to keep the goods in proper order.
4. Ware houses meant for preservation of perishable items like fruits, vegetables, eggs and butter
etc. should have cold storage facilities.
5. Proper arrangement should be there to protect the goods from sunlight, rain, wind,dust, moisture
and pests.
6. Sufficient parking space should be there inside the premises to facilitate easy andquick loading
and unloading of goods.
7. Round the clock security arrangement should be there to avoid theft of goods.
8. The building should be fitted with latest fire-fighting equipments to avoid loss of goods due to
fire.
Q 28 – Functions of the Warehouse
1. Receiving – This includes the physical unloading of incoming transport, checking, recording of
receipts, and deciding where the received goods are to be put away in the warehouse. It can also
include such activities as unpacking and repackaging, quality control checks and temporary
quarantine storage for goods awaiting clearance by quality control
2. Inspection – Quality and quantity check of the incoming goods for their required characteristics
3. Repackaging- Incoming lot may be having non-standard packaging which may not be stored as
it is in the respective location. In those cases these materials have to be pre packed in unit
loads/pallet loads suitable for storage.
4. Put away – Binning and storing the goods in their respective locations including the temp
locations from the receiving docking area.
5. Storage – Binning the approved material in their respective locations.
6. Order-Order picking / selection – Goods are selected from order picking stock in the required
quantities and at the required time to meet customer orders. Picking often involves break bulk
operations, when goods are received from suppliers in, say, whole pallet quantities, but ordered
 by customers in less than pallet quantity .order picking is important for achieving high levels of
customer service; it traditionally also takes a high proportion of the total warehouse staff
complement and is expensive. The good design and management of picking systems and
operations are consequently vital to effective warehouse performance
7. Sortation – This enable goods coming into a warehouse to be sorted into specific customer orders
immediately on arrival. The goods then go directly to order collation.
8. Packing and shipping – Picked goods as per the customer order are consolidated and packed
according to customer order requirement. It is shipped according to customer orders and
respective destinations.
9. Cross-docking – Move products directly from receiving to the shipping dock – these products
are not at all stored in the specific locations.
10.Replenishing – This is the movement of goods in larger order quantities, for example a whole
pallet at a time , from reserve storage to order picking, to ensure that order picking locations do
not become empty. Maintaining stock availability for order picking is important for achieving
high levels of order fill.
1.5 Location of warehouse (Also from the PDF)
It is apparent that no seller can be equally near all customers or prospective customers. The space and
time also impose significant limitation on the movement of goods from seller to buyer. In consequence,
the location of the seller’s production and distribution facilities in relation to those of customers is an
important decision making process.
In this context, the location problem can be three types:
1. locating a warehousing system at the production facility itself;
2. locating a single central distribution warehousing system away from the production plant
3. Locating warehousing system at more than one place.
But for any type of problem, the optimal location is the one that is most likely to achieve the maximum
rate of return on investment over the long run. For this optimal criterion, as a general rule, industrial
companies tend to conform to one four locational orientations; raw materials, labour market, or power.
Depending on the nature of production process, the types of materials required the characteristics of the
end product and the tendency of buying companies to cluster in a given area, proximity to raw materials
may be in overriding consideration. For other manufacturers, proximity to an adequate supply of labour
or to customers may be the chief determinant of plants locations.
Even though the above considerations of raw material, labour, labour market or power have a primary
influence on site selection, often more than one location would satisfy the primary need. This permits
selection among the alternatives, the one that represents the most advantageous utilization of costs
involved for providing the warehousing system while maintaining the desired quality of customer
service. The total costs involved are made up of the cost of transporting all inputs required from their
respective sources, the cost of transporting outputs to the markets at the various locations and the cost of
providing the warehousing facilities that have been or are to be acquired. The behavior of these
considerations may be different and opposite with respect to location. Finding the least cost combination
will require the trading off one castigatory of cost from another. That is, a higher transportation cost will
have to be accepted to realize a proportionately greater reduction in storage systems. Thus choosing the
most economical location and sizes for distribution warehouses is not a simple task. It may require the
use of linear programming transportation technique, often supplemented with computer results.
Selection of warehouse
Warehouse Management and Physical Distribution are important flow control activities in the supply
chain network. Regardless of the efficiency with which all preceding activities have been conducted,
these activities have major influence in determining the degree to which total customer service level is
achieved.
In present global business environment, the quality of warehousing and distribution management can
have major impact on corporate performance and profitability. The following flow chart clearly shows
hierarchy of decisions to be made about the selection of warehouses in the strategic marketing policies
with an objective of achieving max customer service level.
Issues affecting Warehousing
Since warehouses, stores and distribution centers have to operate as essential component elements within
supply chains net work, key decisions when setting up such facilities must be determined by the overall
supply chain strategies for service and cost. The factors that should be considered include the following.
• Market and product base stability
• Type of materials to be handled
• Warehouse Facility: type, size and location
• Inventory and Inventory Location