Вы находитесь на странице: 1из 48

WARE HOUSING

-AN OVERVIEW

KHUZEMA LOKHANDWALA
ROLL NO: HPGD / JL15 / 3032
SPCIALIZATION: SUPPLY CHAIN MANAGEMENT

WELINGKAR INSTITUTE OF MANAGMENT


DEVELOPMENT & RESEARCH
YEAR OF SUBMISSION: FEB, 2017

Page | 1
APPENDIX I

CERTIFICATE FROM THE GUIDE

This is to certify that the Project work titled Ware Housing -An Overview is a confide work

carried out by Khuzema Lokhandwala Admission No. HPGD/JL15/3032 a candidate for

the Post Graduate Diploma examination of the Welingkar Institute of Management under my

guidance and direction.

SIGNATURE OF GUIDE:

NAME: Somesh Balla

DESIGNATION: Manager, Operations

ADDRESS: MOL-IPS, Skyline Icon, Marol


Village, Andheri (east)

DATE: 20-02-2017
PLACE: MUMBAI

Page | 2
UNDERTAKING BY CANDIDATE

I declare that project work entitled Ware Housing -An Overview is my own work

conducted as part of my syllabus.

I further declare that project work presented has been prepared personally by me and it is not

sourced from any outside agency. I understand that, any such malpractice will have very

serious consequence and my admission to the program will be cancelled without any refund

of fees. I am also aware that, I may face legal action, if I follow such malpractice.

(Khuzema Lokhandwala)

Signature of Candidate

Page | 3
Table of Content

SR.NO INDEX PG.NO


1. Introduction 5
2. Uses and Importance of Warehousing 6
3. History 7
4. Warehousing Elements 8
5. Functions of Warehousing 9
6. Importance of Warehousing in the Development of Trade and Commerce 11
7. Benefits from Warehouses 12
8. Types of Warehouses 14
9. Indias Warehousing Industry 16
10. Warehouse Management 22
11. Organisation Structure of Store Division 25
12. Warehousing World Class Practices 26
13. Material Storage and Handling 30
14. Location and Layout of Warehouse 33
15. Warehouse Design Criteria 38
16. Operational Standards Needed 40
17. Warehouse Safety and Security 42
18. Warehouse Management System (WMS) 43
19. Interpretation 46
20. Conclusion 48
21. Bibliography 49

1) Introduction

Page | 4
A warehouse is a place where different goods are stored or accumulated for a temporary
period. It created time utility. The need for warehouses arises out of the lack of adjustment
between times of production and times of consumption of goods. At present time the goods
are produced for in advance of demand. So before the goods are bright in the market, they
should be stored. It is the warehouse which stores the goods from the time of production to
the time they are sold. In this way warehouse removes the hindrance of time between the
places of production and consumption.

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 areas of cities, towns and villages.

They usually have loading docks to load and unload goods from trucks. Sometimes
warehouses are designed for the loading and unloading of goods directly from railways,
airports, or seaports. They often have cranes and forklifts for moving goods, which are
usually placed on ISO standard pallets loaded into pallet racks. Stored goods can include any
raw materials, packing materials, spare parts, components, or finished goods associated with
agriculture, manufacturing and production. In Indian English a warehouse may be referred to
as a go-down.

What is Warehousing?
Warehousing is the act of storing goods that will be sold or distributed later. While a small,
home-based business might be warehousing products in a spare room, basement, or garage,
larger businesses typically own or rent space in a building that is specifically designed for
storage.

Page | 5
2) Uses and Importance of Warehousing

Many goods are not produced regularly at the point where they are wanted for consumption
and they must be stored from the time of production until they are wanted by the consumer, if
they are to be used in satisfying human wants. Goods produced at a distance from the
consumer must be transported to the consumer. In order to ensure on even supply, a stock of
such goods must be maintained near the consumers as protection against delays and
uncertainties of transport and to permit transport in economical units. Many agricultural
goods produced seasonally are supplied to consumers more of less evenly throughout the
year. Grain, Cotton, Tobacco and Sugar furnish can be stored for several years without any
deterioration. The demand for some products is irregular. In such cases storage may be called
into use so that production can be more regular.

If factories producing such goods are to be operated throughout the year, the goods produced
in the off months must be stored until they are wanted by 1he consumers. Storage involves
expense, but much expense in often less than the extra cost of providing buildings, machinery
and labour to produce seasonal products as needed. Moreover, production and transport may
be interrupted by fire, flood, strike, cold or storm. Storage is a safeguard against such risks.

It offers facilities to the traders or merchants to get loan from the credit agencies on the goods
stored in the warehouse. The credit agencies will be in a position to give loans by the transfer
of warehouse receipt, which is a negotiable instrument of title.

It offers goods facilities for the transfer of ownership of goods warehoused there in without
the actual transfer of goods simply by transfer of warehouse warrants with the endorsement
of the owner thereon.

It removes the hindrance of time which would otherwise be involved in obtaining possession
of the goods from the places of their production

Page | 6
3) HISTORY

The origins of the warehouse are difficult to pinpoint. Early civilizations relied on storage
pits rather than large structures to protect seeds and surplus food. Sociologists like Alain
Testart have argued that these early storage techniques were essential to the evolution of
societies.

Some of the earliest examples of warehouses that resemble the buildings of today are
Roman horrea. These were rectangular buildings, built of stone, with a raised ground
floor and overhanging roof to keep the walls cool and dry. Roman horrea were typically
used to store grain, but other consumables such as olive oil, wine, clothing and even
marble were also stored inside.

Though horrea were built throughout the Roman empire, some of the most studied
examples are found in or around Rome, particularly at Ostia, a harbor city that served
ancient Rome. The Horrea Galbae, a warehouse complex in the southern part of ancient
Rome, demonstrates that these buildings could be substantial, even by modern standards.
The horrea complex contained 140 rooms on the ground floor alone, covering an area of
some 225,000 square feet (21,000 m). As a point of reference, less than half of U.S.
warehouses today are larger than 100,000 square feet (9290 m).

As attested by legislation concerning the levy of duties, medieval merchants across


Europe commonly kept goods in household storerooms, often on the ground floor or one
or more storeys below the ground. However, dedicated warehouses could be found
around ports and other commercial hubs to facilitate overseas trade. Examples of these
buildings include the Venetian fondaci, which combined a palace, warehouse, market and
living quarters for lodging travellers. A number of representative medieval warehouses
can also be seen in King's Lynn, U.K., where a complex of buildings, including dwelling-
houses, shops, counting houses and warehouses, once served the Hanseatic League.

During the industrial revolution the function of warehouses evolved and became more
specialised. Some warehouses from the period are even considered architecturally
significant, such as Manchester's cotton warehouses.

Page | 7
4) Warehousing Elements

Whether the purpose is strictly storage or storage plus order fulfilment, warehouses use
specific elements that help manufacturers, distributors, and retailers monitor inventory
and store it safely. An overview of basic elements includes:

Shelving and rack systems that offer maximum storage capacity and easy product access.
A climate control system for the product being stored. This is particularly important for
frozen products or those requiring refrigeration, including certain pharmaceutical or
laboratory products, and others that degrade if exposed to too much heat.
Inventory control software that tells the product owner who isnt necessarily the
building owner where all individual units are in the system at all times.
Equipment that can move products from point A to point B forklifts, pallet jacks, bins
that hold products for orders, and conveyor belts, for example.
Shipping supplies for order fulfilment.
People who load products into a warehouse and others (pickers) who fill orders in a
true distribution centre, plus those who manage the facility and operation.
Security to protect stored products.
Access to cost-effective transportation to bring products in or move them out as orders are
fulfilled. That often means easy access to interstates, rail lines, or airports.

Page | 8
5) Functions of Warehousing:

5.1. Storage:
This is the basic function of warehousing. Surplus commodities which are not needed
immediately can be stored in warehouses. They can be supplied as and when needed by
the customers.

5.2. Price Stabilization:


Warehouses play an important role in the process of price stabilization. It is achieved by
the creation of time utility by warehousing. Fall in the prices of goods when their supply
is in abundance and rise in their prices during the slack season are avoided.

5.3. Risk bearing:


When the goods are stored in warehouses they are exposed to many risks in the form of
theft, deterioration, exploration, 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 the reasonable care of the goods and safeguard
them against various risks. For any loss or damage sustained by goods, warehouse keeper
shall be liable to the owner of the goods.

Page | 9
5.4. 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.

5.5. 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.

Page | 10
6) 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 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.

Page | 11
7) Benefits from Warehouses:

7.1. 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.

7.2. Time utility:


A warehouse creates time utility by bringing the time gap between the production and
consumption of goods. It helps in making 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 certain region, e.g., wheat, rice,
potatoes, etc. Goods like rice, tobacco, liquor and jaggery become more valuable with the
passage of time.

7.3. Store of surplus goods:


Basically, 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.

Page | 12
7.4. 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 stabilize prices.

7.5. 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 minimize 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.

7.6. 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 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.

7.7. 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 installments.

Page | 13
8) Type of Warehouses:

There are three types of warehouses as described below:

8.1. Private Warehouses:


The private warehouses are owned and operated by big manufacturers and merchants to
fulfill their own storage needs. The goods manufactured or purchased by the owner of the
warehouses have a limited value or utility as businessmen in general cannot make use of
them because of the heavy investment required in the construction of a warehouse, some
big business firms which need large storage capacity on a regular basis and who can
afford money, construct and maintain their private warehouses. A big manufacturer or
wholesaler may have a network of his own warehouses in different parts of the country.

8.2. Public Warehouses:


A public warehouse is a specialized business establishment that provides storage facilities
to the general public for a certain charge. It may be owned and operated by an individual
or a cooperative society. It has to work under a license from the government in
accordance with the prescribed rules and regulations.
Public warehouses are very important in the marketing of agricultural products and
therefore the government is encouraging the establishment of public warehouses in the
cooperative sector. A public warehouse is also known as duty-paid warehouse.
Public warehouses are very useful to the business community. Most of the business
enterprises cannot afford to maintain their own warehouses due to huge capital
Investment. In many cases the storage facilities required by a business enterprise do not
warrant the maintenance of a private warehouse. Such enterprises can meet their storage
needs easily and economically by making use of the public warehouses, without heavy
investment.
Public warehouses provide storage facilities to small manufacturers and traders at low
cost. These warehouses are well constructed and guarded round the clock to ensure safe
custody of goods. Public warehouses are generally located near the junctions of railways,
highways and waterways.

Page | 14
They provide, therefore, excellent facilities for the easy receipt, dispatch, loading and
unloading of goods. They also use mechanical devices for the handling of heavy and
bulky goods. A public warehouse enables a businessman to serve his customers quickly
and economically by carrying regional stocks near the important trading centers or
markets of two countries.
Public warehouses provide facilities for the inspection of goods by prospective buyers.
They also permit packaging, grading and grading of goods. The public warehouses
receipts are good collateral securities for borrowings.

8.3. Bonded Warehouses:


Bonded warehouses are licensed by the government to accept imported goods for storage
until the payment of custom duty. They are located near the ports. These warehouses are
either operated by the government or work under the control of custom authorities.
The warehouse is required to give an undertaking or Bond that it will not allow the
goods to be removed without the consent of the custom authorities. The goods are held in
bond and cannot be withdrawn without paying the custom duty. The goods stored in
bonded warehouses cannot be interfered by the owner without the permission of customs
authorities. Hence the name bonded warehouse.
Bonded warehouses are very helpful to importers and exporters. If an importer is unable
or unwilling to pay customs duty immediately after the arrival of goods he can store the
goods in a bonded warehouse. He can withdraw the goods in installments by paying the
customs duty proportionately.
In case he wishes to export the goods, he need not pay customs duty. Moreover, a bonded
warehouse provides all services which are provided by public warehouses. Goods lying in
a bonded warehouse can be packaged, graded and branded for the purpose of sale.

Page | 15
9) Indias warehousing industry

The size of the Indian warehousing industry (across commodities and modes) is pegged at
about INR560 billion (excluding inventory carrying costs, which amount to another
~INR4,340 billion). The industry is growing at over 10% annually.

Multiple business models exist within the warehousing industry. The key segments can be
represented as:
Industrial/Retail warehousing: accounts for ~55% of the total market
CFS/ICD: ~14% share
Agri warehousing: 15% share
Cold stores: ~16% share
Current warehouse industry size with sub segments in FY13

Page | 16
9.1. Industry/retail warehousing
Industrial/Retail warehousing has a market size of ~INR310 billion in FY13 and it has
been growing at a CAGR of 10%12% over the last few years. Demand for industrial
warehousing space is estimated to have grown from around 420 million sq. ft. in FY11 to
475 million sq. ft. in FY13, at a CAGR of 6%.

Significant growth drivers:

Growth in GDP and changing demographics


Demand for high-end services and infrastructure
Growing external trade
Rising share of organized retail
GST implementation

Key players:
DHL, Safexpress, Continental Warehousing, Indo Arya, MJ Logistics, Allcargo, Nippon
Express, etc. are the major players in industrial warehousing.

Page | 17
9.2. Liquid storage
The terms liquid storage mainly refers to the storage of liquid bulk such as crude,
petroleum products, chemical and edible oil. Liquid bulk cargo handled at ports has been
growing at a CAGR of 5%6% between FY10 and FY13.
Demand for liquid storage space is increasing in India amid increasing traffic and limited
existing capacities. Currently, the utilization of commercial tank farms in India is between
75% and 80% in FY13.

Significant growth drivers:


Increased edible oil consumption
Shifting consumer preferences
Improved operational efficiencies
High utilization levels for tank farms
Development of private airports

Key players:
Major players in the commercial segment include IMC Ltd., Vopak India, Kesar Terminal,
Ganesh Benzoplast, Indian Oil Tanking, Aegis Logistics, Sealord

Page | 18
9.3. Agri-warehousing
Agri warehousing accounts for ~15% of the warehousing market in India, or ~INR8085
billion, in FY13. It has been growing at a 10%12% rate over the last 3 years. Agri
warehousing capacity in India is 110120 million metric ton (MT), and it has been
growing at a CAGR of 8%10% over the last 5 years.

Significant growth drivers:


Growing annual agriculture production
Increased private sector intervention
Improved agri warehousing infrastructure
Standardized warehousing operations as per the Warehousing (Development &
Regulation) Act
Subsidy schemes
Tax incentives

Key players:
Key public sector players include Food Corporation of India (FCI), Central Warehousing
Corporation (CWC) and 17 State Warehousing Corporations (SWCs). The remaining 30%
of the capacity is primarily held by unorganized small godown players.
A few large national-level players have emerged in this field over the last decade owing to
the available capital subsidy. These include National Bulk Handling Corporation Ltd.,
National Collateral Management Services Ltd., Adani Agri Logistics, Star
Agriwarehousing & Collateral Management Ltd., Shree Shubham Logistics Ltd., Ruchi
Infrastructure Ltd., Guru Warehousing Corporation, Paras Warehousing and LTC
Commercial.

Page | 19
9.4. Cold stores
Cold stores account for ~16% of the total warehousing industry and it estimated to worth
a ~INR90 billion industry. The cold storage industry is expected to grow at ~15% per
annum on a sustained basis over the next 5 years, with the organized market growing at a
faster pace of ~20%.

Significant growth drivers:


Increase in organized retail
Growing GDP
Increasing population
Improving per capita consumption
Healthy growth of niche categories such as chemicals, pharmaceuticals, etc.
Government incentives

Key players:
Snowman, Gati Kausar, Cold Star, ColdEx, Kelvin cold chain, RadhaKrishna Foodland,
MJ Logistics, Dev Bhumi Cold Chain, Fresh and Healthy Enterprise, etc., are the major
organized players in the industry.

Page | 20
9.5. Container handling and storage
CFS/ICD accounts for ~14% of total warehousing market in India and is estimated at
around ~Rs.75-80 bn in FY13 in India and has grown with a CAGR of 10-15% over last 3
years.

Significant growth drivers:


Growth in containerized cargo
Opening up of container rail transport
Government incentives

Key players:
The government run Container Corporation of India (CONCOR) continues to be the
largest player operating 48 terminals which handle EXIM cargo, while 14 others handle
domestic traffic only.

10) Warehouse Management:

Warehouse Management provides the insight into your inventory and the warehouse
management tools to help you increase customer satisfaction and reduce costs. Warehouse
Management exchanges information with many other functional areas in the solution

Page | 21
including Logistics, Production and Trade, to help improve your overall business
performance.

Warehouse Management is used to optimize:


Inventory: With our complete inventory management capabilities, track data on every
unit utilizing the latest technologies.

Labor: Make people more efficient by managing their tasks and improving their
processes. Plan and balance workload and monitor activities with integration to Labor
Management.

Physical Space: Cross-docking and flow-through capabilities, plus integration with


Yard Management, reduce the need for warehouse space.

Time: Automate picking, packing and shipping, and minimize the number of moves
per order

10.1. Literature Review:


Warehouse:
A warehouse is a planned space for the storage and handling of goods and material. Its main
purpose is to keep the goods for the longer time and whenever there is a demand for the
product, it will be supplied as fast as possible and reaches the customer in its original
position.

NEED FOR WAREHOUSES


Page | 22
1. Seasonal Production:
The 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.

2. 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.
3. Large-scale Production:
In case of manufactured goods, the 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.
4. 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.

5. 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.
6. 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 in the supply of goods, warehousing ensures price stabilization.
Five basic service benefits are achieved through warehousing:
Spot stock,
Assortment,
Mixing,
Production support, and

Page | 23
Market presence

11) ORGANISATION STRUCTURE OF STORES DIVISION

Stores manager

Engineer, Inventory Control Officer 1 Officer 2

Inventory Control & Stock


Records Room

Inventory Control Records Warehouse A Inspection

Inventory Controller 1 Stock Record Controller Store Keeper 1 Inspection Controller

Page | 24

Inventory Controller 2 Material Clerk Store Keeper 2 Materials Inspectors


12) Warehousing World class Practices
Using the best practices in managing the stocks of the industry becomes the part of world
class practices. Using most efficient methods for controlling the product inventory and
adopting outsourced techniques in order to control warehouse activities, including receiving,
storing, assembling, kitting, picking and the dispatching of customers/ users orders. Some
of the points need to be kept in mind in relation to the world class practices. They become a
platform for the adaptation of the world class practices in the organization. They are,

12.1. Receipt and Inspection of Materials:


The following procedures are adopted in a warehouse on receipt of materials;
Receipt of material: The materials on receipt are taken to their allotted spaces in the
warehouses. The delivery slip and the bill copy are filed in the warehouse for
reference. The original bill reaches the accounts department for the payment to be
made.
The materials are then Unloaded from the delivery trucks. The materials are handled
carefully while unloading. Old worn out truck tires are used to provide a cushioning
effect while unloading heavy materials.
The materials are then inspected for any defects against the required and standard
specifications. This is done by inspection controller in large organizations. The quality
controller also plays a vital role in material inspection.

Page | 25
The Control samples or standards are kept separately to check the materials to be
inspected.
The Storekeeper documents the accepted materials.

12.2. Issue of Materials


The procedure for the issue of stock items includes that the materials are to be issued, to
authorized persons only and upon presentation of completed and approved store requisition
and issue note.
In large organizations the distribution of issue notes is done by authorized persons. They
issue different colored slips to the different departments when a stock item is issued.
Pink Copy User
Green Copy Finance Department
Original (White) Stores Division

12.3. Stock & Inventory Management


The biggest problem comes when we keep too much stock with us, so we need a proper
check on getting and sending the material. Stock within the warehouse need to take care
which will surely increase the cost of the organization and finally, it will increase the price of
the product.
Stock Control is used to evaluate how much stock is used. Stock taking is done by
the Store Keeper. It is also used to know what is needed to be ordered. Stock control
can only happen if a stock take has taken place. Stock rotation must be put into use
with stock control by using the oldest products before the newer products.
Periodic Stock Checking: There must be proper check over the stock; it must be
evaluated from time to time. The task of the operation manager is to make a proper
flow of stock as when it is required. From time to time it must be checked that how
much of goods are with them and give the required information from time to time to
the production department, so that none of the stock will remain stand still.
To ensure a proper check on the product that is with us, we need to use tools, such as;

ABC (Or Pareto) Analysis

Page | 26
ABC analysis is an inventory categorization technique often used in materials management
system. It is also known as Selective Inventory Control. ABC analysis provides a mechanism
for identifying items which will have a significant impact on overall inventory cost whilst
also providing a mechanism for identifying different categories of stock that will require
different management and controls
When carrying out an ABC analysis, inventory items are valued (item cost multiplied by
quantity issued/consumed in period) with the results then ranked. The results are then
grouped typically into three bands. These bands are called ABC codes. It divides inventory
into three classes based on annual cost volume
Class A - high annual cost volume
Class B - medium annual cost volume
Class C - low annual cost volume

12.4. Cycle Counting


A cycle count is an inventory management procedure where a small subset of inventory is
counted on any given day. Cycle counts are less disruptive to daily operations, provide an
ongoing measure of inventory accuracy and procedure execution, and can be tailored to focus
on items with higher value or higher movement.
To conduct efficient and accurate cycle counts, many organizations use some form of
software to implement an inventory control system, which is part of a warehouse
management system. These systems may include mobile computers with integrated barcode
scanners that allow the operator to automatically identify items, and enter inventory counts
via keypad. The software then transmits data to a database on a host system which can
generate inventory reports.

12.5. Product coding:


Product code is a unique identifier, assigned to each finished/manufactured product which is
ready, to be marketed or for sale. It enables easy method of tracking the product until it
reaches the customer or end user. The various Codes used are:
Universal Product Code, common bar code used to identify products
Electronic Product Code
Serial number, a number identifying an item

Page | 27
Quality records are maintained for the materials/stock specification.
These include
Procedures to be followed in handling material/stock
Detail specifications of every item.
Inspection reports.
Quality reports.
Descriptive reports.
Details of approval period of retention of various documents.

13) Material Storage & Handling:

Page | 28
Handling the material is one the most important part of warehousing. Material Handling is
the movement, storage, control and protection of materials, goods and products throughout
the process of manufacturing, distribution, consumption and disposal.
The focus is on the methods, mechanical equipment, systems and related controls used to
achieve these functions. The material handling industry manufactures and distributes the
equipment and services required to implement material handling systems.
Material handling systems range from simple pallet rack and shelving projects, to complex
convey or belt and Automated Storage and Retrieval Systems (AS/RS).

Equipment used for handling material include:


Hydraulic jacks, Dump trucks, Wheel Barrows, Trolleys, Forklift Truck (Diesel/ Battery
operated), Damaged tires used for providing cushion support for heavy materials during
unloading; Iron bars, Slings and ropes, Chain Pulley Blocks, Hammers, Spanners, Pliers,
Wooden Blocks, pallets (Wooden, plastic)

13.1. Effective Materials Handling

Good materials handling practice is the responsibility of all members of the


manufacturing team, form the top management down to the trucker working in the
aisle of the plant.

Optimum effectiveness of materials handling procedures can only be attained if each


individual recognizes and plays his part. Education and training in materials handling
are prerequisite to minimum materials handling costs.

In world class warehouses the responsibilities assigned such a staff group may well
include:
1. Determining all new methods for the handling of new materials or products
and selecting the equipment to be utilized.
2. Conducting research in materials handling methods and equipment.
3. Conducting education and training for all manufacturing personnel in good
Material handling practices.
4. Establishing controls of current materials handling costs by analysis of costs
and comparison to budgets of either unit or total materials handling costs.

Page | 29
5. Initiating and conducting a continuing materials handling cost-reduction or
cost improvement program.
6. Determining measurements for effectiveness of materials handling that can
become the yard sticks for progress in this activity.
7. Developing and conducting a preventive maintenance program for all the
materials handling equipment.

13.2. Material Handling Time:

Reducing handling increases the productivity and lowers costs. If we are putting the product
into the store and picking from store it will raise its handling time and will prove to be cost
ejective for the firm.

Again and again putting the resources on a material; whether in its transportation, packaging,
storing, etc. will raise the expenses of the firm which is not acceptable in any form.

If we are putting our men, material and money in sending the good to the customer again and
again it will finally affect the overall expenses of the business concern.

In a world class warehouse the materials are inspected before they are shipped, to ensure the
quality and life of the product.

13.3. Storing the product in relation to flow/ rate of movement:

Demand will not remain same for all of the year, there will be rise and fall in the demand
from time to time. For whole of the year there will be variations in the demand and supply of

Page | 30
the product, so as per this demand we need to maintain the flow of material within the
warehouse.

Demand forecasting is the way of estimating the quantity of a product or service that
consumers will purchase.

Demand forecasting involves techniques including both informal methods and quantitative
methods, such as the use of historical sales data or current data from test markets.

Demand forecasting may be used in making pricing decisions, in assessing future capacity
requirements.

The Operations manager forecasts the demand and accordingly the stock and inventories are
stocked in the warehouse.

14) Location & Layout of the Warehouse:

A proper zoning of the warehouse must be ensured.

Page | 31
Each and every product must be identified very easily when it is required.

They must be assigned with the numbers and sign marks in order to identify them
easily and save time.

We must prepare record of item quantity, time and arrival location, storage location,
quantity balance, and ultimate location.

Maintain Real-time information on the quantity, location, status, and history of every
inventory item within the warehouse. Check inventory availability across all
warehouses during order creation.

Support your complex needs with multi-location inventory, kits and assemblies,
multiple units of measure, lot tracking, serialized inventory and specific costing,
matrix items. Provides real-time indicators of material received on status ok,
discrepancy material, or part per million statistics.

14.1. Warehouse Location:


There is no limit on the number of warehouses that may be defined within an entity, and there
is no limit on the number of locations that may be defined within a warehouse.

Page | 32
Warehouse locations have many synonyms including bins, zones and storage area, among
many others, but in there must be a location is a specific storage area, which may constitute a
rack/bin type of entry, or a larger bulk storage area. The locations can also identify shop floor
areas where inventory is held prior to pull type material issues. Shop floor locations of this
type are considered by the system to be a part of the warehouse. A separate location
classification can also be given to shipping and/or receiving locations.

For warehouse picking purposes, a location sequence number can be assigned to locations
and will be used as an optional method when defining the order in which sales orders or
production material is to be picked.

A location can also be used to track the inventory of vendor and/or customer distributors. A
single location of the distributor type will be used to cover an entire customer distributor or
vendor distributor inventory.

If the user does not wish to maintain location control in the inventory, both a default
warehouse and a default location must be defined in the facilities parameters. An entry of
these two default values will indicate to the system that only the default location is to be used
for all types of inventory transaction.

14.2. Location Flexibility:

Location flexibility refers to the ability to quickly adjust warehouse location and
number in accordance with seasonal or permanent demand changes.

For example, in-season demand for agricultural chemicals requires that warehouses be
located near markets that allow customer pickup.

Outside the growing season, however, these local warehouses are unnecessary.

Thus, the desirable strategy is to be able to open and close local facilities seasonally.

Public and contract warehouses offer the location flexibility to accomplish such
requirements.

Page | 33
14.3. Warehouse Layout and Design:

The Warehouse

Provides for the transportation interface.

Provides for order-picking space.

Provides storage space.

Provides recouping, office, and miscellaneous spaces.

Determines each items order quantity.

Converts units into cubic footage requirements.

Allows room for growth.

Allows adequate aisle space for materials handling equipment.

Warehouse layout includes:

o Zones

o Locations

o Equipment

o Stations

Zones:
The zones are specific locations inside a warehouse that has common properties.

A Zone ID used to represent a group of locations that share common properties (refer
zone, shipping zone, returns zone)

Used to manage product flows into and out of groups of locations

Used to determine users work assignments in the zone

May represent a physical area

A location can belong to only one Zone

Page | 34
Locations:
They are various physical areas inside a warehouse

A Location ID is given to a space in a location where inventory is placed for any


length of time

Always associated with a zone and a location

Primary mechanism used for tracking and processing inventory as it is received,


stored, retrieved, and shipped

Example Locations:

o STOR1-01020401 = at Aisle 1, Bay 2, Level 4 Bin 1

o RECEIVE-1 = Receiving Dock 1

o V1-000001 = Value Added Services Station 1

Equipment:

Equipment defines a vehicle or piece of machinery used to perform a processing activity such
as receive, move, pick, pack, or ship within a warehouse

Stations:

A physical location that is used as a work space in order to perform a specific activity
or a group of activities

A Station is unique for a Node

Used for:

o Creating tasks

o Recording location where work is being performed

o Associating devices that may be used at the station level

Examples:

o Receiving Station

Page | 35
o Ship/Sort Location

o Value Added Services Station

15) Warehouse Design Criteria

Page | 36
Warehouse design criteria address physical facility characteristics and product movement.
Three factors to be considered in the design process are:

the number of stories in the facility,

height utilization, and

Product flow.

15.1. Number of stories in the facility


The ideal warehouse design is limited to a single story so that product does not have
to be moved up and down.

The use of elevators to move product from one floor to the next requires time and
energy.

The elevator is also often a bottleneck in product flow since many material handlers
are usually competing for a limited number of elevators

15.2. Height utilization


Regardless of facility size, the design should maximize the usage of the available
cubic space by allowing for the greatest use of height on each floor.

Most warehouses have 20- to 30-foot ceilings; although modern automated and high-
rise facilities can effectively use ceiling heights up to 100 feet.

Through the use of racking or other hardware, it should be possible to store products
up to the building's ceiling.

Maximum effective warehouse height is limited by the safe lifting capabilities of


material-handling equipment, such as forklifts

Page | 37
15.3. Product flow
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 the other end.

Straight-line product flow minimizes congestion and confusion.

Page | 38
16) Operational standards needed:

16.1. Costs & utilization of Resources:


Resources are always limited, so we need to utilize them at the optimum level and
make maximum benefit out of them. Whether it men, material or labor, resources are
always scarce in nature, which demands for its best utilization. Whenever the
resources are fully utilized, the cost will naturally come down.

16.2. Performance of activities:


A number of activities are to be performed within the organization or the warehouse.
Every activity to be looked in a better way and should take care. From lifting the
material from the trucks to taking it to the store, care should be taken, to save the
goods or product from breakage or damage. A machine has to be checked from time to
time for its smoothness of working. Projects need to be handled carefully, while
planning and their execution.

16.3. Accuracy of activities:


The orders that are to be given must be dispatched as per the guidelines and in a
complete way. Whenever there is order for the product, as the product is demanded,
guidelines are forward to the production department and as per the specification goods
are delivered.

16.4. Lead time for activities:


The time taken from the receipt of order till the time of dispatching of goods is known
as lead time.

In the manufacturing environment, Lead Time has the same definition as that of
Supply Chain Management, but it includes the time required to ship the product to the
purchaser. The shipping time is included because the manufacturing company needs
to know when the parts will be available for Material requirements planning. It is also
possible for lead time to include the time it takes for a company to process and have
the part ready for manufacturing once it has been received. The time it takes a

Page | 39
company to unload a product from a truck, inspect it, and move it into storage is non-
trivial. With tight manufacturing constraints or when a company is using Just in Time
manufacturing it is important for supply chain to know how long their own internal
processes take.

Page | 40
17) Warehouse Safety and Security:
Warehouses deals with large amount of inventory that need to be kept under proper
observation and must undertake the most efficient check system. Goods must be safely
loaded and must be taken care when they are taken out of the vehicle until it reaches the store
where it has to be kept.

Entry to warehouse must be limited to authorize personnel.

Operations Manager should hold the warehouse keys at the closing of the warehouse.

Issue of stock and inventory to authorized personnel.

There should be adequate safety from fire and the materials are to be stored under
their required storage conditions.

17.1. Multitasking work force:


World class warehouses have multitasked work force; who are able to perform several
tasks within the warehouse. Work force must be active in order to take the decisions
as per their talent in difficult situations. Certain things that need to be considered are
as follows;

Communication

In warehousing a message is transferred from one person to another by the means of


communication, which need to be taken care for accuracy.

Managing Change

To be successful with any change initiative - such as a warehouse reconfiguration, a


change in processes or in ways of working - getting the direct input of the warehouse
team to your work at all stages is of paramount importance. These are the people who
will be most affected by the change and involving them early and at all stages enables
them to become most efficient.

Page | 41
18) Warehouse Management Systems (WMS)

It is a key part of the supply chain and primarily aims to control the movement and storage of
materials within a warehouse and process the associated transactions, including shipping,
receiving, put away and picking. The systems also direct and optimize stock put away based
on real-time information about the status of bin utilization.

Warehouse management systems often utilize Auto ID Data Capture (AIDC) technology,
such as barcode scanners, mobile computers, wireless LANs and potentially Radio-
frequency identification (RFID) to efficiently monitor the flow of products. Once data has
been collected, there is either batch synchronization with, or a real-time wireless transmission
to a central database. The database can then provide useful reports about the status of goods
in the warehouse.

The objective of a warehouse management system is to provide a set of computerized


procedures to handle the receipt of stock and returns into a warehouse facility, model and
manage the logical representation of the physical storage facilities (e.g. racking etc), manage
the stock within the facility and enable a seamless link to order processing and logistics
management in order to pick, pack and ship product out of the facility.

Warehouse management systems can be standalone systems or modules of an ERP system or


supply chain execution suite.

The primary purpose of a WMS is to control the movement and storage of materials within a
warehouse you might even describe it as the legs at the end-of-the line which automates the
store, traffic and shipping management.

In its simplest form, the WMS can data track products during the production process and act
as an interpreter and message buffer between existing ERP and WMS systems.

Warehouse Management is not just managing within the boundaries of a warehouse today; it
is much wider and goes beyond the physical boundaries. Inventory management, inventory
planning, cost management, IT applications & communication technology to be used are all
related to warehouse management. The container storage, loading and unloading are also
covered by warehouse management today.

Page | 42
Even production management is to a great extent dependent on warehouse management.
Efficient warehouse management gives a cutting edge to a retail chain distribution company.
Warehouse management does not just start with receipt of material but it actually starts with
actual initial planning when container design is made for a product. Warehouse design and
process design within the warehouse is also part of warehouse management. Warehouse
management is part of Logistics and SCM.

Warehouse Management monitors the progress of products through the warehouse. It


involves the physical warehouse infrastructure, tracking systems, and communication
between product stations.

Warehouse management deals with receipt, storage and movement of goods, normally
finished goods, to intermediate storage locations or to final customer. In the multi-echelon
model for distribution, there are levels of warehouses, starting with the Central Warehouse(s),
regional warehouses services by the central warehouses and retail warehouses at the third
level services by the regional warehouses and so on. The objective of warehousing
management is to help in optimal cost of timely order fulfillment by managing the resources
economically.

Page | 43
Page | 44
19) Interpretation:

Companies are constantly trying to find ways to improve performance and warehouse
operations is area where supply chain managers can focus to gain maximum efficiency for
minimum cost. To get the most out of the operation, a number of best practices can be
adopted to improve productivity and overall customer satisfaction. Although best practices
vary from industry to industry and by the products shipped there is a number of best
practices that can be applied to most companies.

When considering the level of effort involved in warehouse operations, the greatest
expenditure of effort is in the picking process. To gain efficiencies in picking the labor time
to pick orders needs to be reduced and this can achieve in a number of ways. Companies with
the most efficient warehouses have the most frequently picked items closest to the shipping
areas to minimize picking time. These companies achieve their competitive advantage by
constantly reviewing their sales data to ensure that the items are stored close to the shipping
area are still the most frequently picked.

Warehouse layout is also important in achieve greater efficiencies. Minimizing travel time
between picking locations can greatly improve productivity. However, to achieve this
increase in efficiency, companies must develop processes to regularly monitor picking travel
times and storage locations.

Warehouse operations that still use hard copy pick tickets find that it is not very efficient and
prone to human errors. To combat this and to maximize efficiency, world class warehouse
operations had adopted technology that is some of todays most advanced systems. In
addition to hand-held RF readers and printers, companies are introducing pick-to-light and
voice recognition technology.

In a pick-to-light system, an operator will scan a bar-coded label attached to a box. A digital
display located in front of the pick bin will inform the operator of the item and quantity that
they need to pick. Companies are typically using pick-to-light systems for their top 5 to 20%
selling products. By introducing this system companies can gain significant efficiencies as it
is totally paperless and eliminates the errors caused by pick tickets.

Page | 45
Voice picking systems inform the operator of pick instructions through a headset. The pick
instructions are sent via RF from the companys ERP or order management software. The
system allows operators to perform pick operations without looking at a computer screen or
to deal with paper pick tickets. Many world class warehouse operations have adopted voice
picking to complement the pick-to-light systems in place for their fast moving products.

Although many companies will not be able to afford new technologies for picking, there are a
number of best practices that can be adopted to improve efficiency and reduce cost.

Page | 46
20) Conclusion:
Warehousing clearly has a critical part to play, in all aspects of supply chain management. It
also needs to be involved in the strategic aspects of a business and this will involve being
aware of the development of the business in terms of the future production, product,
suppliers, customers, and all the associated product volumes and throughputs.

Each and every day new technology is being evolved, so in warehousing with the help of
these world class technological innovations, we can make it more technically competent and
innovative; thereby increasing the efficiency of the business operations.

21) Bibliography:

Page | 47
1. Emmett, Stuart; Excellence in Warehouse management

2. Dr J.P. Saxena; Vikas Publishing House Pvt Ltd, India; Warehouse management and
inventory control, 3rd Print

3. K. S. Mohan; Macmillan India Limited; Stores Management, 2nd Edition

4. www.warehousingforum.com/best.html

5. www.smthacker.co.uk/lean_supply_chains.htm

6. http://logistics.about.com/od/tacticalsupplychain/a/wms_best_prac.htm

7. http://en.wikipedia.org/wiki/Warehouse_management_system

8. http://logistics.about.com/od/supplychainsoftware/a/ImplementingWMS.htm

Page | 48