Warehousing

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Warehouse
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Warehousing - Introduction
Warehousing is defined as storage of goods.
This definition includes a wide spectrum of
facilities and locations that provide
warehousing.
Warehousing in todays competitive world is
not what it used to be in the recent past.
Traditionally warehousing served the strategic
role of long-tem storage for raw materials and
finished goods. Manufacturers produced for
inventory and sold out of inventory stored in
warehouse. Inventory levels were 60 to 90
days in the warehouse.
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Warehousing Operation
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Warehousing
The warehouse of today is not a long-term storage facility. The
activity levels are fast paced in warehouses of today.
Warehousing has taken on a strategic role of attaining the logistics
goals of shorter cycle times, lower inventories, lower costs and
better customer services. In many companies today the product is
in the warehouse for just a few days or even a few hours. Basic
aim is to lower the inventory carrying costs.
To meet customers demand for shorter cycle times logistics
managers are examining the warehouse process for productivity
and cost improvements. In overall SCM warehousing is focusing
on CRM.
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Warehousing Operations
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Role of Warehouse in Logistics

System
Warehouse is a point in the logistics system where a firm stores
or holds raw materials, semi finished goods or finished goods
for varying periods of time. Holding goods in a warehouse
stops or interrupts the flow of goods, adding cost to the
product/s.
Some firms have viewed warehousing cost very negatively.
They sought to avoid it if possible. This view is changing due to
realization that warehousing can add more value than cost to
a product. Other firms particularly distributors or wholesalers
went to the opposite extreme and warehoused as many items
as possible. Neither end of the spectrum is usually correct.
Firms should hold or store items only if possible trade-offs exist
in other areas. Warehouses serves a few value-adding roles in
a logistics system. See table for value-addition versus trade-
offs.
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Warehouse value-adding roles v/s

Trade-Offs
Value-Adding Trade-Off Areas
Roles Transportation
Consolidation
Order Filling
Product Mixing
Lead Time ,
Service
stockouts
Contingency
Protection Stockouts
Smooth Production
Operations
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Consolidation
Sometimes companies will face less-than-truckload
i.e. LTL shipments of both raw materials and finished
goods. Shipping goods long distances at LTL rates is
more costly than shipping at full truckload FTL. For
inbound logistics over short distances, a manager
can consolidate smaller shipments (LTLs) from various
suppliers in the warehouse into a FTL and then ship to
the firms plant, thus savings transport costs. For
outbound logistics the warehouse/s would receive
consolidated FTL from various plants or LTLs directly
from various plants. From the warehouse/s goods are
then shipped in LTL shipments to various markets as
per requirement. Hence consolidation and transport
costs have a trade-off in this respect.
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Product Mixing
The second function is customer order product mixing. Companies frequently
produce a products that contain hundreds of different products in the same
category. We can give an example of colour, size and other variations e.g.
Men's shirts formal and casual. Assuming that formal shirts and casual shirts
are manufactured at two different plants a company that did not
warehouse goods would have to fill orders for various customers from two
plants. This causes different arrival times and opportunity for mix-ups at the
customers end. Therefore , a product mixing warehouse for a multi-product
line leads to efficient order filling. This is trade-off. On the supply side MRP
and JIT help in cost savings as sub-components from suppliers are
warehoused and then dispatched to the assembly line or the plant.
Cross-docking is an operation that facilitates the product mixing functions.
This was initiated by M/s. Wal-Mart Stores, USA. Products from different
suppliers arrive in very large FTLs and are moved within the warehouse. Goods
are loaded on waiting FTLs and are dispatched to stores as per their orders.
The process takes only a few hours.
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Service
The third function is to provide service. The importance of
customer service is obvious. Having goods in the
warehouse when a customer places an order, usually leads
to customer satisfaction and enhances chances of future
sales. This is more efficient if the warehouse is relatively
closer to the customer. Lead times are shorter in this case
but must be monitored for maintaining customer service
levels. This is a trade-off in addition to stockout costs as
under.
However - production schedules, which a company makes
in advance are easier to service than customers : while
customer demand is often uncertain, physical supply stock
out costs sometimes are very high. This situation is avoided
by efficient logistics and warehousing planning.
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Contingency Protection
The fourth function is protection against contingencies such as
transportation delays, vendor stockouts or strikes. To overcome
these issues buyers will generally stock larger inventories than
usual. Costs go up as larger inventory means higher costs.
This function is very important for physical supply warehouses in
that a delay in delivery of raw materials can delay the production
of finished goods. This effects the entire supply chain
Contingencies also occur with physical distribution warehouses
e.g. goods damaged in transit can effect inventory levels and
order filling. This will lead some orders not being delivered.
To care of the all the above contingencies higher inventory levels
will have to maintained in limits so as to avoid stockouts at the
customers end. This is an emergent trade-off.
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Smooth Operations
The fifth warehousing function is to achieve smooth
operations or decouple the successive stages in the
manufacturing process. Seasonal demand and the
need for a production run long enough to ensure
reasonable cost and quality are examples of smooth
operations. In order to achieve the same inventory
levels in the supply warehouses need to be
monitored.
The management makes efforts to prevent
production under overtime conditions as it is known
that during overtime scenario the efficiency of
production drops in certain markets in the world. This
is trade-off with smooth operations and
production ?
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Conclusion
We have established that basic functions of
warehousing make important contributions to the
logistics systems and companys operation. In fact
warehousing can add value to the entire supply
chain if managed in a professional manner.
However we must also view warehousing in a
trade-off context. This has been explained in
detail.
In other words Warehousings contribution to
profit must be greater than its cost ?
This is the job of the professionals working in a
company in the Warehousing Department and
SCM!