WAREHOUSING CONCEPTS

Week 1

Introduction to Warehousing Concepts and Functions

Warehousing
WHY and FOR WHAT?
• Need for storage arises both for raw material as well as finished
products
• STORAGE involves proper management for preserving goods from the
time of their production or purchase till actual use.
• “Warehousing is a set of activities that are involved in receiving and
storing of goods and preparing them for reshipments”
• Warehousing is not only concerned with storage facilities but also
involved in various other activities like –
• Receiving,
• Identifying,
• Holding,
• Assembling and preparing to meet the demand.
Importance of Warehouse
• A warehouse is an integral part of supply chain management which holds goods before they are
shipped and delivered to customers.
• They enable the storage of raw material, finished goods, semi-finished goods, goods in transit,
seasonal goods, etc.
• They enable the efficient distribution of goods; for example, storage of crops after harvesting to
distribution in the areas where there are shortages.
• They also ensure stable prices, as stored output can be used during the time of low production.
• They also enable grading, picking and branding of goods.
• They also provide perfect space for the preservation of perishable commodities. For example,
storage of meat, vegetables and fruits in cold storage.
• They ensure proper supply during the breakdown in production or during the unpredictable
increase in demand.
• They are used to protect goods during unfavourable climate conditions.
• They reduce the risks of theft and damage of products.
Types of Warehouses
• A warehouse is a place to store the stock or the inventory. Most of the tasks that occur in
a warehouse are related to inventory management. These tasks include accumulating the
receipt of products, issuing of products, recording changes and tracking the movement of
inventory.
1. Private Warehouses - proprietary warehouses that are owned by manufacturers,
producers or traders to store exclusively for their own stock. The design and facility are
formed based on the nature of products to be stored.
2. Public warehouses: provide storage facilities to the general public on a rental basis.
These warehouses may be owned by an individual, a partnership firm or by an
organisation. These warehouses are to be used by manufacturers, wholesalers,
exporters, importers, government agencies, etc., after paying a certain amount of fee.
3. Contract warehouses: provide receiving, storage and shipping facilities to their clients
as per the warehousing contract. Contracts are made between both the parties. These
contracts are generally long-term in nature. Contract warehouses are most beneficial
in the case of a new business or for businesses entering a new market.
Other types of Warehouses
• Bonded warehouses: imported goods are stored in a secure area before the customs or
import duty is paid by the importer. These are owned or licensed by the government. In
some cases, the government issues license to a third party to own and maintain bonded
warehouses under mandatory regulations.
• Co-operative warehouses: owned, managed and handled by cooperative societies and
cater to storage facilities at low rates; for example, a storage facility operated by a
farmer’s cooperative society.
• Raw material and component warehouses: These are maintained to store an adequate
inventory level of raw materials for production; for example, coal storage in a thermal
power plant.
• Work-in-progress warehouses: These provide storage facilities for semi-finished
products; for example, a storage facility for non-ripened fruits.
• Finished goods warehouse: These provide storage facilities for finished goods before
distribution or selling; for example, a warehouse inside an automobile manufacturing
plant to store two-wheelers before distribution.
• Distribution warehouses: Here items for distribution are stored. Generally,
distribution warehouses are maintained by manufacturing organisations to
store items which are to be delivered to distributors.
• Fulfilment warehouses: These undertake the process of receiving,
packaging and shipping orders for goods. These are the most appropriate
for e-commerce organisations where they sell products directly to
customers.
• Local warehouses: These are commonly used by organisations that work on
the sales point system or franchise system and follow up the operation on
the basis of customer requirements.
• Value-added service warehouses: These are maintained not only to provide
storage facilities, but also value-added services, i.e., assembly, kitting and
packaging.
Process of Warehousing

Putting Order Packing and

Receiving Storing
away Picking Shipping
Process of Warehousing
• Receiving: Receiving begins with an advance notice regarding the arrival of
goods. It allows warehouses to schedule receipts and unloading in order to
ensure coordination between other activities within the warehouse. At this
stage, a product typically arrives in larger quantities and most activities are
performed by machines and equipment.
• Put away: Before a product can be stored, it is important to determine an
appropriate location. All information regarding the availability of storage
locations must be in order as per record. When the product is put away, it
is important that the storage location where the product is being stored is
properly examined. It requires more labour requirements as the product
needs to be moved to their storage locations.
• Storage: The basic function of a warehouse is to store goods and bridge the
gap between the production and consumption of goods. The product
remains inside the warehouse before it is going for order picking.
• Order picking: Order picking, also called order preparation, consists of
taking and collecting items in a specified quantity before shipment to
satisfy customer’s orders. At the time of order picking, it is mandatory for a
warehouse to maintain and produce necessary documents and records and
the set schedule for shipping.
• Packing and shipping: Packing is considered to be more labour intensive as
each customer order is required to be handled individually.. Also on
request in some cases warehouses take responsibility for packaging and
branding of the products on behalf of the manufacturer.
Other Operations
• Reverse logistics centres
• Consolidation/transit
• Sortation centres
• Break-bulk centres
• Cross-dock centres
• Customization/sub-assembly facilities
• Protection of goods – from theft/loss/damage/unfavourable weather conditions
• Risk bearing – takes responsibility to return goods in a good condition as they are received.
• Financing – Receipt/warrants issued to depositor as a proof after depositing goods. He can take loans in
banks by submitting this warrant as a security.
• Processing – There are certain commodities which are not healthy to consume in the form they are
produced and processing is required to make them consumable. For example, pulses need polishing after
harvesting and raw fruits needs to ripe. A warehouse undertakes these responsibilities on behalf of owners.
• Stock rotation: Under stock rotation, oldest units are arranged in inventory before the newer ones, just to
make sure that they can be sold at first. For example, a departmental store will restock its shelves by putting
older units before the new ones.
• Cycle counting: a small sample of inventory is counted inside the warehouse at any particular place and this
sample represents the count of all items in the store.
Warehouse Location
• The location of each warehouse is directly related to market coverage,
and the effectiveness and efficiency of distribution system. An
organisation should locate its warehouse to get closer to its target
customers.
• Historically, a warehouse can be viewed as a large box used to store
surplus inventory for a long period of time, but now warehouse
facilities have become distribution activity hubs that add value by not
only storing goods but also processing them.
• Layout and flow of building: The desired or optimal layout of any warehouse can be determined according
to operations conducted under it. It ensures that the layout or product can be rightly fit in the given space.
• Availability of skilled workforce: Buying a warehouse in a remote area can definitely be cost effective but
finding a skilled labour and workforce can be a difficult task. So it is important to choose a warehouse
location in the area where there is adequate supply of labour.
• Intensity of use: The location of a warehouse also gets affected by the frequency or intensity of operations
inside the warehouse. In the case of light assembly, less intensive usage will work better. However, we must
have to consider certain factors like emissions and noise level.
• Proximity to major linkage: It involves means of transport to be used i.e. land, rail, water or air
transportation. It is important that a warehouse location site is easily accessible by any of these means of
transport depending on the preference of the organization.
• Material handling capacity: It includes the availability of handling equipment, storage facility and staging
facility. It can be moving, packing and storing of stock in any form or we can say it occurs whenever material
is moved in a warehouse.
• Size: It is important for warehouse capacity to accommodate inventory accordingly and it should be fit inside
the organisation. For start-up companies, it is essential to make sure that there is enough room around the
warehouse to make sure that it will not create any problem for their future expansion.
• Regulations: Before buying a warehouse, one has to consider all regulations and policies in the concerned
location. It becomes significant because there are certain areas or locations in which the government does
not allow the storage of certain products. For example, prohibition of LPG storage facility in residential areas.
GROWTH OF E-FULFILMENT AND ITS EFFECT
ON WAREHOUSING
• E-commerce warehouses are mega e-fulfilment centres with a floor
area of up to 1 million square feet for the storage of products until
online orders come. Generally, these warehouses are placed near
parcel hubs.
• E-fulfilment is applicable when a company sells its products directly to
its customers or end users via means of physical mail, e-mail,
catalogues and various other modes of online shopping. In general, e-
fulfilment includes various activities such as receiving, packaging and
shipping order of goods
E-Fulfilment
Process
Keywords
• Order Picking
• Public Warehouse
• Warehouse
• Work-in-Progress
• E-fulfilment
• Lead time
• Receiving
• Raw Materials
• Finished goods
Activity 2
QUESTIONS

1. Why was the owner of XYZ & Co. thinking of expansion in Haryana?

2. What were various factors that had to be considered before setting up the establishments?

3. Why did the owner of XYZ & Co. construct two warehouses?

4. What did XYZ & Co. introduce to facilitate the smooth flow of warehouse operations?

5. What were the activities conducted in the warehouse?

Set of activities common to most warehouses
• Receiving – receipt and ensuring quality and quantity.
• Pre-packing – happens when products received in bulk.
• Transporting to the appropriate storing place – put away (identifying
location, material handling, location identification, and placement).
• Storage – depends on the size, quantity, and handling characteristics
of the product.
• Order picking – physical picking of the product from the storage place
to meet the demand.
• Packaging or pricing – activities left till the last moment to avoid
repricing as the inventory sits in storage.
Set of activities common to most warehouses
• Sorting – Shipment of products as per their packaging and
destination.
• Consolidation and Shipping – Checking orders for completeness and
preparing shipping documents, such as bill of lading, weighing
shipments, loading trucks, and related tasks.
• Claim Settlements – Any transit damage material and material
rejection claim settlements are done in the warehouse to control
shrinkage.
Basic Functions of a Warehouse
• Store goods in a systematic and orderly manner – from stage of production to consumption.
• Provide protection – heat, wind and rain
• Risk bearing – the responsibility of products including any losses on shrinkage, theft or damage is
borne by the warehouse operator.
• Financing – receipt/warrant can be used as a collateral to take loans.
• Processing
• Transportation – this facility is provided by some warehouses, collecting products from point of
origin and delivers it to the desired location.
• Provide regular flow – Example: commodities such as rice/wheat or produced during a particular
season but consumed throughout the year.
• Easy handling – mechanical equipment including loading and unloading.
• Job creation – Employment opportunities for skilled and unskilled workers in semi-urban areas.