Warehouse Management

Warehouses
Store

inventory for a period of

time
storage
protection
Inventory

may be turned over

rapidly
distribution center
customer service

Stores
Perform

the same function as a

warehouse for a factory

raw materials
finished goods
supplies
repair parts

Warehousing
The

warehouse must be:

located in the right place

the right size
organized

to allow:

efficient delivery and placing

cost-effective use of its space
adequate access to stored materials
security from theft and weather
flexibility to deal with the various items.

Warehousing
The mission (or goal) of a warehouse is set by demand.
The warehouse location is a means to achieving the
mission.
Mission
Balance and buffer
Accumulate and consolidate
Rapid response

Location

Demand

Near the manufacturer

Monthly/quarterly replenishments
of stocks

Central to production locations

Weekly/monthly orders

Close to customer

Daily

Warehouse Activities
Receive

goods
Identify goods
Dispatch goods to storage
Hold goods
Pick goods
Marshal the shipment
Dispatch the shipment
Operate an information system

Receive Goods
Acceptance

of goods from
outside transportation or an
attached factory
a. Check the goods against an order
or bill of lading
b. Check the quantities
c. Check for any transit damage
d. Inspect goods if required

Identify the goods

With

appropriate stock keeping

unit (SKU) number
With part number
Indicate the quantity

Dispatch Goods to Storage

Goods

are sorted
Put away goods
record the location

Hold Goods
Storage

is meant to protect the

goods
cold
heated
explosive

Pick Goods
Goods

are picked from storage

must be accessible
location records
Brought

to marshalling area

Marshal the Shipment

All

goods for an order are

brought together
check for missing items
check for correct items
change order information if required

Dispatch the Shipment

The

order is prepared for

shipment and loaded on the right
vehicle
protective packaging for shipment
documents prepared
loaded and secured

Operate an Information
System
Need

to know what is in the

warehouse

quantity on hand
quantity received
quantity issued
location of goods

Computer

system

based or manual

Warehouse Management
Make

maximum use of space

capital cost of space is very high

Make

effective us of labor and

equipment
material handling equipment is the
second largest capital cost
need best mix of equipment and
labor
all SKUs should be easy to find
move goods efficiently

Warehouse Effectiveness
Cube

utilization and accessibility

Stock location
Order picking and assembly
Packaging

Cube Utilization and

Accessibility

Goods stored not just on the floor, but in the cubic space of
the warehouse; warehouse capacity depends on how high
goods can be stored

Space also required for:

aisles

offices

receiving

order picking

shipping docks

order assembly

Need to know the maximum space required

Accessibility means being able to get at the goods wanted

with a minimum amount of work

Cube utilization and

accessibility continued

Pallet Positions
Floor

storage
Pallets are stacked on each other
Maximum stacking height
due to ceiling height
due to weight restrictions
Need

to allow for side clearance

Pallet Spacing

40 inches

40 inches
2 inches
clearance

Total width required = 42 inches per pallet space

Pallet Spacing

6 x 42 / 12 = 21 feet required to store 16 pallets

stacked 3 high

Stock Location
Location

will depend on:

type of goods stored

storage facilities needed (i.e.
refrigeration)
throughput (volume of items picked)
size of the orders

Management

considerations

customer service
keeping track of the items
total effort required

Locating Stock - Basic

Systems
Group

functionally related items

together
Group fast moving items
together
Group physically similar items
together
Locate working stock and reserve
stock separately

Fixed Location
A

place for everything and

everything in its place
Reduces amount of record
keeping
Usually results in poor cube
utilization
space must be available for the
repenishment order quantity
average of 50% utilization

Floating Location
Goods

are stored wherever

appropriate space is available
Requires good record keeping
Improves cube utilization
Often

used for reserve stock

Order Picking and Assembly

Once

be:

an order is received it must

retrieved
assembled
prepared for shipment

Involves:

labor
movement of goods

To

provide the desired level of

customer service

Physical Control and

Security
Need

a system to make it difficult

for people to make mistakes or
forget to update inventory
records
Need:
a good part numbering system
a simple well documented
transaction system

Part Numbering
Each

part has a unique number

used only for that part
Descriptive part numbers
assist in order picking and service
difficult to keep current
Non-descriptive

part numbers

easier to keep up-to-date

Transaction System
1. Identfy the item
quantity, location, part number

2. Verify quantity
standard size containers if possible

3. Record the transaction

manual or computerized

4. Physically execute the

transaction
move the goods

Phsical Control and Security

Limited

access

locked
to ensure transactions are completed
A

well trained workforce

to ensure transactions are completed

familiar with handling the goods

Inventory Record
Accuracy
Accurate

on-hand balances are

needed to:
avoid shortages
maintain schedules
avoid excess inventory
(of the wrong goods)

provide good customer service

Inventory Record
Accuracy
Operate

an effective materials
management system
Maintain customer service
Operate effectively and
efficiently
Analyse inventory
The

system is only as good as

the data used

Inaccurate Inventories
Result

in:

Lost sales
Disrupted schedules
Excess inventory of the wrong things
Low porductivity
Poor delivery performance
Excess expediting

Causes of Inventory Errors

Unauthorized

withdrawal of

material
Unsecure stockroom
Poorly trained personnel
Inaccurate transaction recording
Poor transaction recording system
system should reduce the likelihood
of human error
Lack

of audit capability

Auditing Inventory
Records
Checking

the accuracy of
inventory records

Periodic

Inventory

usually an annual count

Cycle

Counting

daily counts of items

Auditing Inventory
Records
To

correct the on-hand balance

periodic inventory
To

find the reasons for errors and

eliminate them
cycle counting

Periodic (Annual)
Inventory
To

satisfy financial auditors

Determine the value of the
inventory
Financial auditors are concerned
with the total value
Planners are concerned with the
item detail

Cycle Counting
Count

inventory continually
throughout the year
Predetermined schedule
some items counted frequently
depending on value
past history of problems

Count

some items every day

Cycle Counting- Advantages

Timely

correction of errors
Reduction of lost production
Use of trained personnel
familiar with the items
fewer errors
able to identify problems

Technology Applications
Bar

Codes

paper labels which show a product

code
RF

Tags

Radio Frequency
do not need to see the item
Reduce

recording errors
Improve transaction speed

Warehouse Layouts
U-Flow

Warehouse

Through

Flow Warehouse

PRINCIPLES OF WAREHOUSE
LAYOUT DESIGN

RECEIVING

Schedule Carrier
Unload Vehicle
Inspect for
damage

INPU
T

WAREHOUSE PROCESS

Put-away

Storage

Identify Product
Identify Product
Location
Move Products
Update Records

Equipment
Stock Location
Popularity
Unit Size
Cube

Shipping Preparation

Packing
Labeling
Stacking

Order Picking

Information
Walk & Pick
Batch Picking

Shipping
Schedule Carrier
Load Vehicle
Bill of Loading
Record Update

OUTP
UT

Warehouse Costs
Space

Costs
Direct Labor Costs (Warehouse operators)
Indirect Labor Costs (Warehouse
management )
Labor Costs
Equipment Costs (fixed + variable)
Overhead Costs (sales and marketing,
finance, IT, HR and administration)
Miscellaneous Costs

Factors to be measured
Reliability: OTD, Fill rate , Accuracy
Flexibility: Order Cycle Time
Cost

Cost as a percentage of sales and

productivity against labor hours

Asset

Utilization :

Efficient use of

space, MHE and storage equipment