Warehouse Management

Warehouse Management
Concept & Definitions

Functions of
warehousing
Types of Warehouses
Warehousing costs
Warehousing
Decisions
Warehousing : Concept & Definitions
Warehouse:
A warehouse is a commercial
building for storage of goods.
It is used by manufacturers, importers,
exporters, wholesalers, transport business,
customers etc.
The person in-charge of warehouse is called
Warehouse-manager, Warehouse-incharge, Warehousekeeper Etc
Warehousing : Concept & Definitions

WAREHOUSING:
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.
It is part of firms logistics system that stores products at and
between point of origin and point of consumption.
It provides time and place utility for raw materials, industrial
goods, and finished products, allowing firms to use customer
service as a dynamic value-adding competitive tool.
It is considered as a switching facility in
logistical network.
Typical Warehouse Layout
Material Inward and Inspection

Bulk Storage
Place
Rack/Bin
Storage
Place
Order Picking Section

Packaging Section
Material Dispatch Section
CHARACTERISTICS OF
IDEAL WAREHOUSES
Convenient location (easy accessibility)
Proper layout and design
Availability of mechanical appliances to load and
unload goods like cranes, forklift, trolley, conveyer
belt etc
Cold storage/ Refrigeration facilities (if required)
Proper arrangement for protection
Sufficient parking space
Round the clock security arrangement
Latest fire fighting equipments
Implementation on Information Technology
Warehouse- How it can be a

tool for getting Competitive
Advantage
Maximum utilisation of storage space
(floor & cubic space).
Higher Labour productivity
Maximum assets utilisation
Reduce material handling
Reduce operating cost
Increased inventory turnover
Reduced order fulfilling time
Functions of Warehousing
Functions of warehousing can be
broadly categorized as-
Material Storage Function

Material Handling Function
Information Handling
Function
(Cont)
MATERIAL STORAGE FUNCTION
Stock holding
Stock Consolidation
Break-bulk
Cross-Docking
Mixing/Assembling
Postponement
Packaging & Labeling (Value Added Function)
Stock Holding:
This is the most basic and important function of
a warehouse for the finished products ready for
delivery. Till dispatch, the goods should be
stored safely and to be dispatched easily when
required. At the warehouse there is continuous
inflow and outflow of materials. A proper record
of inflow and outflow, storage location, level of
stock etc to be maintained.
Stock Consolidation:
If the supplies are coming from various sources
in small quantities, it must be collected at some
center(warehouse) to combine them into a large
shipment for sending to the customer
Break Bulk:
This is opposite to the consolidation. Here
goods are arriving in large quantities and
further broken down in smaller quantities as
per the order of the customer. Ex- Fertilizer,
Cement, Iron, Oil etc comes in bulk at a
place (warehouse) and further distributed in
smaller quantities.
Cross Docking:
This is similar to the break bulk activity
except that it involves multiple suppliers and
the usage of a warehouse is for a short time.
Here, warehouse is working more like a
switching facility rater than storage facility.
Mixing/Assembling :
Sometimes, Parts or ingredients from different
suppliers needs to be collected at a convenient
place to mix or assemble for further shipment
to customers.
Postponement : Sometimes production of
finished goods are required to be postponed
mainly because of poor demand and over
supply. Hence production of finished goods are
either stopped or slow down till the sale of
existing stock. One more reason of
postponement may be to defer the excise duty.
Packaging & labeling: Many times goods are
repackaged and relabeled as per the
requirement.
(cont)
MATERIAL HANDLING FUNCTION

Loading & Unloading
Material Movement (To and From the
storage area)
Order Filling
(Cont)
INFORMATION HANDLING FUNCTION

Goods inwards
Inspection & Auditing
Goods Outward
Stock Out
Excess Stock
Invoicing
Warehouse Expenses
Transit Damage & Breakages
Consignment Tracking
Types of Warehouses
On the basis of
Ownership:
Private
Warehouses
Public Warehouses
Contract
warehouses
On the basis of
Service:
Bonded Warehouse
Field Warehouse
Cold Storage
/Refrigerated
Warehouse
Distribution
Warehouse
Buffer Storage
Warehouse
Export & Import
Warehousing Costs
1. Receipt, Handling and Despatch
(RHD) Cost
RHDrefers to any expenditure on moving the
goods into or out of the warehouse.
Most of the cost is human labour, including
receiving, storing and loading the goods for
delivery etc.
Secondary to labour is the equipment cost,
depreciation and energy/fuel.
2. Storage Cost:
This cost is similar to rent for your goods.
It is often charged either per pallet per
week/month (pallet storage cost) or per
square foot of footprint.
Warehousing Costs (Cont..)

3. Construction/Installation Cost:
This refers to cost of capital involved in the
construction/installation of the warehouse
4. Operational & Administrative Costs :

This cost is the cost of keeping the facility
open and live. This includes fuel, electricity,
supervision & security, Clerical support,
Insurance, Taxes, IT
Which Warehouse to be
used..?
PUBLIC
Private
Contract
Storage Alternatives
Factors
Private
WH
Public
WH
Contract
WH
Investment
Very high
None
Very less
Controls
High
Low
Medium
Operation Flexibility
High
Low
Medium
Cost per unit stored
Inversely
related to
volumes
Low
Inversely
related to
volumes
Risk
High
Low
Medium
Warehouse Site Selection Decision

Decision regarding site selection revolves around two major
factors1, Service & 2. Cost.
The other factors affecting site
selection are:
Market proximity- If the warehouse (specially

distribution warehouse) is closer to the market, product
availability will be enhanced greatly. Frequent deliveries
in small quantities can be possible resulting in better
customer service but at the same time rental will be
higher compare to remote location warehousing facility.
Infrastructure
:
Availability of Approach Road,
Electricity, water, communication (mobile & internet
network), Distance from Railway station, Rail siding
facility, Availability of labour, Availability of material
Access to site :The location of the

warehouse has greatest effect on Primary
transportation cost.
Availability of space : The availability of

warehousing
space
in
urban
area,
particularly in metro cities is very difficult or
almost impossible. In such cases the site
has to be shifted to a suitable remote
location.
Nature of the product: In case of

perishable products, warehouse should be
near to the place of consumption.
Value Density of product: Unit price per unit weight

or volume of a product and its logistical reach will
influence decision making on investing in a warehouse
facility and its location. For example- Jewellery,
precious metals and stones, electronic devices, luxury
goods etc
Taxes and levies : Sales Tax, Service tax, Municipal

Tax, different Levies applicable to the location also
needs to be considered while site selection.
Regulation : There are different rules and regulations

regarding storage of certain types of products like
explosives,
hazardous
chemicals,
inflammable
chemicals, radio active materials etc which can cause
damage to the human life of ecological system. These
Warehouse Decision Model

Product
Characteris
tics
Tactical Decision
Value
Density
Transportation
Logistics
reach
Perishability
Hazardous
Product
Type
Solid
Liquid
Gases
Storage allocations
Order picking
Objectiv
es
Resource
s
Cost
Reduction
Competenc
y level
Customer
Service
Financial
resources
Stock
Turnover
System
Productivity
Warehou
se
Network
Strategic
Decisions
Private
Equipment
Public
Storage scheme
Contract
IT
Layout
Operational
Decisions
Work allocations
Job scheduling
Performance
monitoring
Warehousing Strategies
1. Capacity Switching : To handle
seasonal fluctuations in demand,
warehouse may be planned on the
basis of average demand and for
additional requirement a public or
contract warehouse may be used.
Warehouse Capacity Planning
Public or contract
warehouse
(for 25 % of capacity)
Storage
capacity
requireme
nt
Private warehouse
(for 75 % of
capacity)
J
N
D
Months
(Cont..)
2. Hub Networking : To reduce the
level of inventory and improve
control on the distribution,
warehousing hubs are planned at a
few strategic locations to serve the
entire market. Ex. Most FMCG
companies are having warehousing
hubs at Delhi, Mumbai, Kolkata and
Chennai to cater North, West, East
and South respectively.
3. Cobbling : (Cont..)
This strategy works
well where different market players
are not competitors and cater to the
needs of similar customer having a
similar distribution channel. ExNestle, HUL, Johnson & Johnson.
4. Outsourcing: Most of the firms
dont have expertise in warehousing
operations. Hence, for gaining
logistical competitiveness entire
warehousing operations are
Warehouse Performance Parameters
Stock turn over ratio ( Ratio of sales to average

inventory)
Warehouse cost to sales ratio.
Warehouse cost per unit handled
Warehouse occupancy rate
Assignment questions
1. Explain the function of a warehouse?
2. Explain the various types of
warehouses?
3. Explain decision making parameters
with respect to Private, public and
Contract warehouse.
4. Explain different warehousing costs
5. Explain Site selection parameters?

Warehouse Management

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What are the main functions of a warehouse?

What are the main functions of a warehouse?

What are some characteristics of an ideal warehouse?

What are some characteristics of an ideal warehouse?

Warehouse Management

Concept & Definitions

Warehousing : Concept & Definitions

Warehousing : Concept & Definitions

Typical Warehouse Layout

Material Inward and Inspection

Order Picking Section

Warehouse- How it can be a

Material Storage Function

MATERIAL HANDLING FUNCTION

INFORMATION HANDLING FUNCTION

Warehousing Costs (Cont..)

4. Operational & Administrative Costs :

Cost per unit stored

Warehouse Site Selection Decision

Market proximity- If the warehouse (specially

Access to site :The location of the

Availability of space : The availability of

Nature of the product: In case of

Value Density of product: Unit price per unit weight

Taxes and levies : Sales Tax, Service tax, Municipal

Regulation : There are different rules and regulations

Warehouse Decision Model

Warehouse Capacity Planning

Warehouse Performance Parameters

Stock turn over ratio ( Ratio of sales to average

Warehouse cost to sales ratio.

Warehouse cost per unit handled

Warehouse occupancy rate

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