9 – Warehousing

Introduction

Manufacturers recognise that, to maintain a consumer, his wants must be met as soon as he requests the goods. This storage perspective led to a tendency to regard warehouses as “necessary evils” that added costs to the distribution process and resulted in operating expenses. There was little understanding of the broader logistical spectrum in which warehousing played a critical role. Warehousing capabilities, used to arrange products into customer-desired assortments, received little attention. Managers paid little attention to internal control and inventory turnover.

Early literature accurately portrayed the problem. Firms aiming to successfully operate between points of procurement, manufacturing, and consumption gave internal warehouse operations little thought. Although the construction of warehouses was critical for survival, little attention was placed on enhancing storage and handling efficiency. Manufacturing concerns were the focus of engineering initiatives.

The operation of early warehouses demonstrated a disregard for material management standards. Merchandise was typically delivered to a warehouse by rail, car, or truck. The things were manually transferred to a warehouse storage space and hand-piled in piles on the floor. Merchandise was constantly lost when diverse products were kept in the same warehouse. The stock rotation was mishandled. After receiving customer orders, products were hand-picked for placement on waggons. The wagons or carts were then pushed to the shipping area, where the cargo was reassembled and hand-loaded onto delivery vehicles. Human resources were widely employed because labour was very affordable. Little thought was given to efficiency in space utilisation, job practises, or material management. Despite their flaws, these early warehouses were a vital link between production and marketing.

9.1 Strategic Warehousing

The advantages of strategic warehousing are classified according to their economic and service value. From a conceptual standpoint, no warehouse should be included in a logistical system until it is completely justified in terms of cost-benefit. While there is some overlap, the primary warehousing benefits are discussed separately.

9.1.1 Economic Advantages

The economic benefits of warehousing become apparent when overall logistics expenses are decreased directly by employing one or more facilities. The return on investment of an economic advantage is easy to calculate since it is reflected in a straightforward cost-to-cost trade-off.

For example, if adding a warehouse to a logistical system reduces overall transportation costs by an amount greater than the facility’s fixed and variable costs, then the total price is lowered. The warehouse is economically justified whenever total cost reductions are achieved. Consolidation, break bulk and cross-dock, processing/postponement, and storing are the primary economic benefits.

Consolidation

Shipment consolidation is a monetary advantage of warehousing. Under this arrangement, the consolidating warehouse accepts and consolidates items from multiple manufacturing plants destined for a single customer on a single transportation package. The advantages include obtaining the lowest feasible transportation charge and reducing congestion at a customer’s receiving dock. The warehouse allows for consolidating both the inbound movement from the manufacturer to the warehouse and the outgoing movement from the warehouse to the customer into larger shipments.

Each manufacturing plant must use the warehouse as a forward stock site or a sorting and assembly facility to ensure effective consolidation.

Consolidation is the primary advantage of combining the logistical flow of multiple small shipments to a given market location. A single company or a group working together to use a for-hire consolidation service can use consolidation warehousing. Each producer or shipper can benefit from cheaper total distribution costs by using such a scheme than they might independently on a direct shipment basis.

Break Bulk and Cross Dock 

Break bulk and cross-dock warehouse activities are comparable to consolidation, except no storage is involved. A break-bulk business receives and transports combined client orders from manufacturers to individual customers. The breakbulk flow is depicted in Figure. Individual orders are sorted or separated at the break bulk warehouse or terminal, and local delivery is arranged. Because long-distance transportation involves a considerable shipment, transportation costs are lower, and tracking is more straightforward.

Break Bulk Flow

A cross-dock facility is similar, but numerous manufacturers are involved. Retail chains widely use cross-dock operations to refill fast-moving store inventory, such as when several manufacturers’ complete trailer loads of items arrive. When the goods arrive, the customer either sorts them if labelled or assigns them to a customer. If the merchandise has not been labelled, it is transferred “across the dock” to be placed onto the trailer bound for the appropriate consumer. Once the trailer has been loaded with mixed merchandise from several manufacturers, it is ready for transfer to the retail outlet. Cross docking provides economic benefits such as complete trailer movements from manufacturers to warehouses and from warehouses to retailers, reduced handling costs at the cross-dock facility because the product is not stored, and more effective use of dock facilities because all vehicles are fully loaded, maximising loading dock utilisation.

Processing/Postponement

Warehouses can also postpone or delay production by processing and light manufacturing tasks. For example, a warehouse with packing or labelling capabilities delays final manufacturing until actual demand is known.

For example, at the factory, vegetables can be prepared and canned in “Brights.”

Brights are cans that do not have pre-attached labels.

When Brights are used for a private label product, the item must not be committed to a particular customer or package configuration at the manufacturer’s plant. After receiving a specific customer order, the warehouse can complete final processing by attaching the label and finalising the packaging.

Processing and delay have two economic advantages. The risk is reduced because final packaging is not produced until an order for a specific label and package is received. Second, using the primary product (Brights) in several labelling and package combinations can decrease the required total inventory level. Even if the cost of packaging at the warehouse is higher than at the manufacturer’s site, the combination of lower risk and inventory level frequently reduces the total system cost.

Stockpiling

The immediate economic value of this warehousing service is secondary to certain firms requiring seasonal storage.

Lawn furniture and toys, for example, are manufactured all year and primarily marketed during a reasonably brief time.

Agricultural products, on the other hand, are harvested at specified periods and consumed throughout the year. Warehouse stockpiling is required in both cases to support marketing initiatives. Stockpiling creates an inventory buffer, allowing for production savings within the limits of material suppliers and the client.

Service Benefits

Benefits achieved from warehouses in a logistical system may or may not result in cost savings. When a warehouse is justified primarily based on service, the supporting argument is improving the logistical system’s time and place capability.

For example, locating a warehouse in a logistical system to serve a particular market segment may increase costs while increasing market share, revenue, and gross margin.

If the net effect was profit-justified, a service-justified warehouse would be added on a conceptual level. At the operational level, the issue is determining how to quantify the direct revenue impact.

Warehousing provides five core service benefits: spot stock, selection, blending, product assistance, and market presence.

Spot Stock

Physical distribution is where stock spotting is most commonly applied. Manufacturers with restricted or highly seasonal product lines, in particular, benefit from this service. Rather than storing stockpiles in warehouses all year or shipping directly from manufacturing plants, prior inventory commitment to selected customers can significantly shorten delivery time. During a vital marketing season, a specific amount of a company’s product line is placed or “spot stocked” in a warehouse to fulfil client orders. Using warehouse facilities for stock spotting allows supplies to be placed in marketplaces near important customers right before a peak seasonal sales period.

Agricultural product suppliers frequently use spot stockings to farmers to position their products closer to a service-sensitive market throughout the growing season. Following the end of the sales season, the remaining inventory is transferred to a central warehouse.

9.1.2 Assortment

A manufacturer, wholesaler, or retailer may use an assortment warehouse to store product combinations in preparation for consumer orders. The assortments may include numerous products from different manufacturers or customer-specified unique assortments. For example, in the first situation, an athletic distributor would carry products from various clothing providers so that buyers may be offered assortments. In the second example, the wholesaler would design a team uniform consisting of a shirt, pants, and shoes.

The degree and length of warehouse utilisation distinguish stock spotting from the whole-line assortment. A stock spotting approach would normally warehouse a limited product selection and place supplies in many small warehouses specialised to various markets for a brief time. The distribution assortment warehouse often has a diverse product line, is limited to a few critical sites, and is open all year.

Notes: Assortment warehouses increase service by minimising the number of vendors a client must interact with. The combined assortments also increase shipment numbers, lowering transportation costs.

9.1.3 Mixing

Warehouse mixing is comparable to breaking bulk, but many manufacturer shipments may be involved. In-transit mixing can minimise transportation costs and warehousing requirements when factories are geographically isolated. In a typical mixing situation, carloads or truckloads of merchandise are typically shipped from manufacturing plants to warehouses. Each huge shipment receives the most affordable transportation rate feasible. Factory shipments are unloaded at the mixing warehouse, and the required mixture of each product for each customer or market is chosen.

Special transportation charges based on in-transit privileges have typically supported in-transit mixing economies. Under the mixing warehouse concept, inbound products may also be blended with products usually housed in the warehouse. In-transit mixing warehouses have the net benefit of lowering overall product storage in a logistical system. Mixing is a service benefit because inventory is sorted to exact client specifications.

9.1.4 Production Support

Manufacturing economics may justify relatively extended production runs of individual components. Production support warehousing ensures that assembly facilities consistently supply components and materials. Because of extended lead times or considerable changes in usage, safety stocks on items obtained from outside vendors may be warranted. In these and other cases, the most cost-effective total-cost solution may be the operation of a production support warehouse to deliver or “feed” processed materials, components, and sub-assemblies into the assembly plant cost-effectively and timely.

9.1.5 Market Assistance

While the benefit of market presence may not be as visible as other service perks, marketing managers frequently highlight it as a primary advantage of local warehouses. The market presence factor is predicated on the idea or notion that local warehouses (and therefore local inventory) can be more responsive to customer needs and provide faster delivery than distant warehouses. As a result, a local warehouse is expected to grow market share and profitability. While market presence is a commonly debated approach, there is insufficient good evidence to back up its actual benefit impact.

9.2 Warehouse Operations

Stores range from simple ones with shelves and bins to cold or dehumidified storages, massive silos for food grain storage, and bonded stores for storing commodities on which customs and excise charges have not been paid. The variety of storage devices is virtually as diverse as the variety of materials.

The functions of stores are concerned with the physical transfer and storage of commodities and materials. This includes controlling the physical flow of materials into and out of the organisation and creating and administering warehouse networks as needed.

General Schematic of Stores Activities

The functions can be broken down into a variety of roles and obligations. These are the following:

• Receive items, organise for examination, and accept them after proper document verification.
• Prepare stores received notice promptly and distribute copies to other departments.
• To keep accepted materials in proper quantities by permitted store requisitions.
• To issue accurate materials in the correct quantities in response to authorised store requisitions.
• Enter receipts, issue and return materials in bin cards, and maintain other store records.
• Issue purchase requisition when the reordering level is reached
• Check bin card balances with physical quantities in bins regularly
• Follow stock rotation to avoid holding old stocks
• I Report on waste, scrap, slow-moving, non-moving, and obsolete items
• Maintain stores in a tidy manner for easy access to bins at any time

The receipt procedures begin before the material arrives at the plant; a copy is forwarded to the retailers when a purchase order is placed. When a Purchase Order is issued, the information is stored in the system until the goods/services are delivered. Inbound deliveries, which comprise stock transport orders, production orders, and Advanced Shipping Notification (vendor document), specify the exact materials, quantities, and delivery date with a purchase order reference. This serves as the foundation for the receipt procedure.

9.2.1  Goods Receipt

The received products are recorded in the Inward Consignment Register. This document records all P.O.s No’s, dates of receipt, incoming Railway Receipts, Lorry Receipts, Consignment Notes, Airway Bills, and so on.

Store receipts follow purchase orders. They are the foundation for updating financial and inventory data and triggering warehouse and quality management operations. Receiving and inspection have traditionally shared facilities. When material arrives, it is logged and sent to quality control for examination before being transported to stores for inward delivery to manufacturing.

A challan is attached to the materials as they arrive from the supplier. The receipt is entered into the Daily Receipts Register, which is kept in the receipt area using the original copy of the challan. This is done by following physical counting and verifying the purchase order’s parameters.

The storekeeper then creates a Goods Receipt Note (GRN), which can be automated or handwritten. The storekeeper then sends two copies of the GRN and sample material to the quality control department for inspection and quality approval.

The GRN specifies the circulation, supplier’s name, codes, date, purchase order no., challan no. and date, description code number, unit amount, bin card, and received/rejected/accepted reference. It also contains information on what was received, how much was received, and when it was received.

The goods received note is a temporary document that ensures the financial and physical stock is correct from when the products are accepted until the purchase invoice is issued. It debits the stock asset account with the amount and cost of the products minus VAT.

The net amount on the goods received note is accounted for by credit pending goods received notes.

Although the items received notice include VAT amounts, no VAT posts are made. VAT cannot be deducted until a compliant VAT invoice is received from the supplier.

9.2.2 Payment to Supplier

When the quality control department accepts the materials, one copy of the GRN is delivered to stores for recording in the bin card, and the first copy is provided to accounts as a record of acceptance of materials requested and supplied by the vendor. Once this has occurred and an invoice has been generated, it is time to complete a GRN. For payment, the GRN copy is verified with the invoice. Once the accounts department has reviewed and priced out the purchase order, it is ready to issue a pay order.

When the quality control department rejects materials, the procurement department notifies the supplier and arranges for a free replacement. The storekeeper must keep the rejected material separate to return it to the supplier. When a rejected shop is not restocked, the accounts department will issue a debit notice to the supplier if payment has already been made.

9.2.3 Recordkeeping

All relevant departments must have access to the correct material information to plan and control operations. When supplies are received, information about their descriptions, quantities, and locations is recorded in the organization’s information system. This is accomplished by inserting the data onto a bin card. Each bin or location in the store has a bin card that contains all of the material’s information.

For each item, a separate bin card is kept. Each card is filled up by the physical movement of items, such as on receipt and issue. It captures the movement of your items whenever you take them out or put them in. This makes calculating the consumption for each article simple. Without a bin card, you’d have to go back through your issue orders to determine each item’s status, which may be time-consuming. Bin cards are thus an essential internal control measure and a handy tool for position/consumption reports.

Usually, an account is kept for each item sold in stores, debited for the number and value of stores acquired and credited for the quantity and value of stores provided. The shop’s ledger is the name given to this account. The Stores Ledger is a quantitative and monetary record of each store item’s receipt, issue, and closing balance. It is completed using a goods received note and material issue requisitions.

All transactions are recorded in the Stores Ledger using copies of vouchers received from various areas.

When managing a warehouse, controlling the product reception and goods issuance operations on a physical level is possible. The goal of a store is to get items into a facility as quickly as possible. Ideally, the material would be moved directly to the production line without stopping at a warehouse or other storage place. However, it is stored if the content cannot be used immediately.

9.2.4  Issues of Material

Material Requisition Notes and Material Transfer Notes regulate the release of materials from storage. The data needed for goods issue posting is duplicated from the Material Requisition Note into the Material Transfer Note so that the delivery quantity reduces warehouse stock.

• In inventory accounting, value changes are reported to the balance sheet account.
• The delivery quantity reduces the requirements.
• The serial number status has been updated.
• The posting of goods issue is automatically documented in the document flow.
• The vendor’s consignment stock is subjected to stock determination.
• A work list is created as evidence of delivery.

After a goods problem is reported for an outbound delivery, the shipment may be dispatched directly to the customer from the fulfilling locations (many deliveries), or consolidation may occur at one point before one full cargo is transported to the ultimate customer.

When materials are dispatched for outward delivery, a packing slip is created and attached to other documents at the time of dispatch. Its function is to identify the products that have been packed at the receiver’s end. It makes it easier for the consignee to inspect the contents and notify the consignor of any anomalies.

Receipt of Stores must implement adequate physical safeguards in the goods receipt procedure; properly document and account for each goods receipt voucher; develop policies and procedures for dealing with exceptional matters of goods receipt; and develop written procedures for lodging claims for supply and delivery problems.

Stores must correctly document and account for all delivery vouchers, consistently issue store items, and manage the issue of goods, for example, by checking voucher authorizations against a record of sample authorised signatures.

The ultimate goal of shop documentation is to verify that goods are consistently received, verified, kept, distributed, and returned.

9.3 Ownership Arrangements

The company does not need to own and operate its warehousing needs. Owner-operated, private, and public warehousing are all options.

The same business that owns the goods processed and stored in the facility also owns or manages an owner-operated warehouse.

A private warehouse facility is warehoused on a contractual basis by third-party Logistics Providers (3PL), who provide clients with unique, custom-tailored warehousing and logistics services.

The Central Warehousing Corporation of India, or one of the State Warehousing Corporations, runs a public warehouse in India.

These definitions are frequently perplexing, mainly when “private” and “public” are employed differently in numerous US learning papers. As a result, this clarity is critical.

9.3.1 Owner-operated Warehouses

The company that owns the product is in charge of an owner-operated warehouse. The actual facility, on the other hand, may be owned or leased. The decision to buy or lease the facility is primarily a financial one. The main advantages of owner-operated warehouses are greater control and flexibility. Control, in particular, makes it easier to integrate warehouse operations with the rest of the company’s internal logistics procedures. Where flexibility is needed, owner-operated facilities can change operational policies and procedures to match the firm’s specific needs. Because the profit markup is avoided, owner-operated warehouses may be less expensive than private warehousing in many circumstances. This benefit may be deceptive because private warehouses are typically more efficient because they use their resources better.

There may be many other intangible benefits, particularly in terms of market presence. Customers may perceive responsiveness and stability if they see a private warehouse with their company’s name on it. This perception can provide a competitive marketing advantage over other businesses.

9.3.2 Private Warehouses

Private warehouses charge a flat rate for processing and storage. The handling fee is calculated based on the number of cases or weights handled, and the storage rate is based on the number of cases or weights in storage during the month. Public storage is a low-cost option when economies of scale in a private facility are not attainable.

The following is a classification of private warehouses based on the range of specialised operations performed:

• General merchandise,
• Refrigerated
• Special commodity, and
• Bonded warehouse

Because of product and environmental features, each warehouse type has a unique material handling and storage technology.

General Merchandise Warehouses:

This is a warehouse where commodities that can be easily handled and packaged and do not require a controlled environment, such as paper, small appliances, and domestic supplies, are stored.

Traditional general warehousing companies receive and ship items for their customers, acting as middlemen in the transportation process and an essential aspect of the logistics industry. Either the client or the warehouse manager, who then serves as the customer’s agent, chooses the carrier.

Because of the rising reliance on warehouse operators for services other than storage, several warehouses have begun to diversify into other transportation fields, such as running private truck fleets for distribution. Others became interested in merging minor freight shipments from several shippers into truckload shipments. These services were more common among freight forwarders and transportation companies than among conventional warehouse owners. Because of this overlap in services, the 3PL sector arose, with many warehouse operators progressing from temporary custodians of raw materials and finished items to logistics experts.

Companies are using Just-in-Time (JIT) inventory management more than ever before. The successful implementation of JIT necessitates regular inventory management and flexibility on the part of shippers. JIT usually necessitates more frequent but smaller shipments of commodities to and from warehouses. Private and contract warehouses are frequently more able to implement time-based inventory management than in-house warehouses. The potential of private warehouses to provide distribution economies of scale is a significant benefit. With this capacity, warehouses frequently have more negotiating power with suppliers and transporters than small businesses and can better handle JIT inventory requirements.

General warehouses utilise EDI and other electronic devices, such as bar coding and radio frequency monitoring, to improve productivity and efficiency and simplify inventory tracking. As customer expectations have risen and competition in the general warehouse sector has intensified, more warehouses are investing in technology to stay competitive.

Refrigerated (frozen or chilled) Warehouses:

These are specialised warehouses designed to handle and store perishable products such as food, medical supplies, and chemical products with specific temperature needs.

Onions, for example, are available all year because they are held in such warehouses and then distributed to the market based on demand. Onions must be cured and stored at 0°C and a relative humidity of 65–70%.

These warehouses must not only consistently meet high standards for product quality and safety but also be efficient and reliable. Energy is a significant contributor to business costs, and the prospect of higher power prices can put additional pressure on the profit margin. Additional environmental regulations, equipment flexibility, and logistical management challenges must also be considered. Even slight changes in customer dining patterns, such as the introduction of in-store take-out and heat-and-serve goods, can significantly impact the refrigerated food supply chain.

Unfortunately, the nature of refrigeration systems makes large-scale adjustments challenging to implement. Standard operating procedures and process hazard analyses must be performed regularly. Long-term planning and collaboration with equipment makers are becoming increasingly important. Many of these warehouses collaborate with professional service providers to provide solutions for preventive maintenance, customized lubrication systems and filtration, constant chemical water treatment, etc.

New refrigeration design technologies have proven relatively effective in removing germs from processed meals. Because of environmental concerns, ammonia refrigeration systems are gradually replacing Freon-based systems. Private refrigerated warehouse operators increasingly rely on automation technologies to provide the efficient, cost-effective services that today’s food processors require.

Commodity warehouses:

Commodity warehouses are designed to handle bulk materials such as wheat, rice, sugar, lentils, cotton, edible beans, and milk. Examples include Jute, fertilisers, tyres, wood pulp, tobacco, and other non-food goods. Some commodities, such as most petroleum products and many chemicals, can also be found in liquid form.

Because commodities are so diverse, many require special handling or storage considerations, such as grain storage warehouses requiring elevators, liquid commodities requiring tank farms, and tobacco requiring a barn.

The Central and State Warehousing Corporations handle the majority of agricultural commodities in India. The section on public warehouses covers this.

Bonded Warehouses :

The government licences these warehouses to store goods before paying taxes or duties. Customs has a facility for holding imported goods. Bonded warehouses are permitted under the Customs Act of 1962 without payment of customs duty, which is otherwise leviable on import. Essentially, items can be removed from a warehouse without paying duty, and duty is collected when the products are cleared from the warehouse. The law specifies the duration for which products may be stored in a warehouse without incurring interest responsibility and with interest liability.

The warehouses are only to be appointed/licensed in specific locations designated by the Central Board of Excise and Customs. The Board has delegated the Chief Commissioners of Customs the authority to declare locations as Warehousing Stations. The Commissioners of Customs have been assigned the authority to declare areas as Warehousing Stations in the case of 100 percent EOUs.

Customs issues licences for the storage of sensitive products such as liquor, cigarettes, groceries, consumables, and so on, and storage of other non-sensitive commodities. Customs officers have authority over all warehoused commodities. With the authorization of the proper authority, the owner of the warehoused goods may inspect, sort, show for sale, take samples, and so on from the bonded products. The owner of the bound items must additionally pay the warehouse keeper’s rent and warehouse costs in legal amounts.

Bonded warehouses are utilised for items that are subject to excise taxes in addition to imported items. Excise duty is a tax levied on products manufactured or produced. The state government collects excise duty on alcohol, alcoholic preparations, and narcotic substances, known as “State Excise” duty. The excise levy on the remainder of the items is known as the “Central Excise” duty. Manufacturers can set up holding bonded warehouses to store non-dutiable items. While different procedures for levying and collecting Central Excise Duties have been prescribed to meet the needs of various industry sectors, the self-assessment procedure covers most excisable items. However, each state has its procedures for state excise.

9.3.3 Public Warehouse

The Central Warehousing Corporation (CWC) was established in 1957 due to the Agricultural Produce Development and Warehousing Corporations Act of 1956. CWC’s functions under the Act are as follows:

• Acquire and construct godowns and warehouses in such suitable locations in India as it deems fit;
• Operate warehouses for the storage of agricultural produce, seeds, manures, fertilisers, farming implements, and notified commodities offered by individuals, cooperative societies, and other institutions; and
• Arrange facilities for transporting agricultural produce, seeds, manures, fertilisers, and agricultural implements.

The Central Warehousing Corporations Act of 1962 aimed to provide scientific storage for agricultural commodities and market funding. CWC is an essential link in the marketing chain of farming products. It includes place value to the commodities and time and space value.

Food Corporation of India (FCI), Central Warehousing Corporation (CWC), and 17 State Warehousing Corporations are three public-sector organisations involved in developing large-scale storage/warehousing capacity (SWCs). As of October 2006, the overall capacity of public warehousing was 56.50 million tonnes.

The Central Warehousing Corporation (CWC) is the world’s largest public warehousing enterprise, founded in 1957. During the fiscal year 2005–06, it had a revenue of $6,190 million and a net profit of $1060 million. The CWC has two types of warehouses: owned capacity warehouses and hired capacity warehouses. Under the owned capacity category, CWC owns 4,564 warehouses in India with a total capacity of 8.00 million MTs. The hired capacity is estimated to be around 2.40 million tonnes.

CWC provides services such as clearing and forwarding, handling and transportation, distribution, disinfestation, fumigation, and other ancillary services such as safety and security, insurance, standardisation, documentation, and storage. The CWC has also implemented a Farmers’ Extension Service at chosen centres to educate farmers on the benefits of scientific storage.

The CWC also manages custom-bonded warehouses. These bonded warehouses are built near a seaport or airport and accept imported commodities for storage until the importer pays customs charges. Though CWC primarily concentrates on trade and commerce in food grains and supply and distribution, its most lucrative area is custom-bonded warehouses.

Furthermore, seventeen states have State Warehousing Corporations (SWCs) supplementing CWC capacity. Though each state contributes 50% of the initial capital for state warehouses, CWC must spend 50% of the SWCs’ equity capital, even if CWC has no representation on the Boards.

The capacity of the State Warehousing Corporations is 19.40 million metric tons. These governmental warehouses mainly store agricultural products such as seeds, manures, and fertilisers.

The Warehousing Corporations (Amendment) Bill, 2001, is being brought to allow the Central Warehousing Corporation to expand and broaden its operations to improve the service sector. This also enables it to appoint members to the boards of the SWCs.

9.4 Warehouse Decisions

After deciding to use a warehouse, the next step is to design it. The following talk goes through fundamental warehouse design principles. Whether the warehouse is a small manual operation or a large automated facility, the following three concepts apply: design criteria, handling technology, and storage strategy. Each of these is described and illustrated.

9.4.1 Design Criteria

Warehouse design guidelines take into account physical facility aspects as well as product flow. The number of stories in the facility, height utilisation, and product movement are three aspects to consider during the design phase.

Designing a Warehousing System

In most situations, products are transported from the producer to the consumer via a long and winding chain that includes numerous tiers of warehouses and marketing intermediaries. The following basic questions about this flow become important when constructing a storage system.

• How many warehouses do we need?
• Where should they be placed?
• What size or capacity should each of them have?

The ideal warehouse design has only one storey so that products do not have to be moved up and down. Using elevators to transport goods from one floor to the next takes time and energy. Because many material handlers compete for a limited number of elevators, the elevator is frequently a bottleneck in product flow. While this is not always practical, especially in core business districts where land is scarce or prohibitively costly, warehouses should be limited to a single level.

Most warehouses have 20- to 30-foot ceilings, while modern automated and high-rise facilities can effectively use ceiling heights of up to 100 feet. Racking or other gear should allow storage up to the building’s ceiling. Maximum effective warehouse height is limited by material-handling equipment’s safe lifting capabilities, such as forklifts, and fire safety restrictions imposed by overhead sprinkler systems.

Whether products are stored or not, warehouse architecture should allow for continuous product movement through the facility. In general, products should be accepted at one end of the building, stored in the middle, and shipped from the other.

9.4.2  Handling Technology

The second principle concerns the efficacy and efficiency of material-handling technology. Its components are movement continuity and movement scale economies.

Movement continuity refers to the preference for a material handler or piece of handling equipment to make a more extended motion than for several handlers to create numerous, individual, short segments of the same move. Transferring the product between handlers or from one piece of equipment to another wastes time and raises the risk of harm. As a result, fewer lengthier movements in the warehouse are preferable as a general rule.

Warehouse activities should be planned to transport groupings of cases, such as pallets or containers, rather than individual cases. Because of this grouping or batching, numerous products or orders may need to be moved or selected simultaneously. While this may raise the complexity of an individual’s tasks due to the need to examine various items or orders, the approach minimises the number of actions and the resulting cost.

9.4.3 Storage Plan

The third principle states that a warehouse design should consider product characteristics, particularly those pertaining to volume, weight, and storage.

The most important consideration when developing a warehouse storage strategy is product volume. High-volume sales or throughput products should be placed in a location that reduces the distance they must be moved, such as along key aisles and in low storage racks. This reduces travel distance and the requirement for heavy lifting. On the other hand, low-volume products can be assigned placements away from key aisles or higher up in storage racks.

Similarly, the approach for products based on weight and storage qualities should be included in the plan. To reduce the labour and risk of heavy lifting, assign relatively heavy things to locations low to the ground. Bulky or low-density products necessitate a large amount of storage space, therefore open floor space or high-level racks can be employed for them. On the other hand, more minor things may necessitate the use of storage shelves or drawers. These must be considered and addressed in the integrated storage design.

9.4.4 Warehouse Management Systems

The creation of work practices is inextricably linked with the training of warehouse staff. Most businesses use a work management system (WMS) to standardise work procedures and encourage best practices. Management is responsible for ensuring that all workers understand and follow these processes.

Approximately 65 percent of staff in an automated warehouse are involved in some aspect of order selection. Individual and area selection, often known as batch selection, are the two primary ways of picking. One employee completes a customer’s comprehensive order via individual selection. This system is rarely used. Its principal application is when many small orders are chosen for repacking or consolidation shipment, such as e-commerce fulfilment. The most regularly used area selection approach assigns each employee accountability for a specific warehouse section. Several distinct choices are necessary to fulfil a customer’s order. Because each employee is well-versed in a specialised selection region, it takes less time to locate things.

Receiving and shipping work methods are equally critical. Establishing procedures for receiving and assuring product input into inventory records is vital. The merchandise must be placed in specific patterns when using pallets to provide optimal load stability and constant case counts. Personnel engaged in shipping must be familiar with trailer loading procedures. Items must be examined while loading some operations, notably when product ownership changes.

Floor staff are not the only ones who must follow work procedures. Procedures for administration and maintenance must be created. If proper ordering procedures are not followed, the replenishment of warehouse inventory might cause operational issues. Usually, there is little connection between buyers and warehouse staff, though this is changing thanks to integrated supply chain management organisations. Buyers typically purchase in numbers that provide the most incredible price, with minimal regard for pallet-compatible volumes or available warehouse space.

Buyers should ideally cooperate with warehouse workers before executing large orders or introducing new products. Some organisations’ experiences have compelled management to require purchasers to predetermine warehouse space assignment before ordering. Another potential issue is the number of cases ordered. The idea is to buy in pallet-sized volumes.

For example, if a product is best stacked on pallets in 50-case increments, the buyer should place orders in multiples of 50. If an order for 120 cases is placed, the instances will fill two pallets plus 20 on a third pallet when they arrive. The additional 20 cases will demand the same amount of warehouse cubic space as a pallet of 50 and the same number of materials handling capability to move.

9.4.5 Material Handling

Material handling is a crucial aspect of material management. How will the material be transported? Physically transporting material necessitates using several types of equipment, depending on the type and quantity of material to be moved. Handling technology has advanced to the point where it has fundamentally altered the old warehouse paradigm.

Material handling equipment is divided into three categories: transport equipment, positioning equipment, and unit load formation equipment.

Materials are moved from one area to another using transport equipment. Cranes and industrial trucks are included.

Positioning equipment is used to handle material in a single spot to correctly position it for further handling, machining, transport, or storage. Hoists and lifts are included. Unlike transportation equipment, positioning equipment is often employed in a single workplace.

When transporting and storing a single load, unit load formation equipment ensures its integrity. Pallets, sacks, and skids are all part of it.

Though the above classification is based on application, the Material Handling Equipment Industry divides itself into four distinct sectors based on equipment category, namely: cranes and hoists, conveying equipment (including specialist bulk handling equipment such as stackers and reclaimers), general equipment (elevators, industrial trucks, etc.), and forklift trucks.

REVIEW QUESTIONS:

1. Define Economic Benefits and their significance in business and financial contexts.
2. Define Break Bulk and Cross Dock and their logistics and supply chain operations roles.
3. Outline the five essential service benefits achieved through warehousing in logistics and supply chain management.
4. Discuss the general schematic of store activities involved in warehousing operations.
5. Provide a brief overview of Goods Receipt Note (GRN) and its importance in inventory management and control.
6. Explain the Stores Material Requisition Note (SMRN) concept and its role in inventory replenishment processes.
7. Differentiate between private and public warehouses, highlighting their respective characteristics and functions.
8. Discuss the classification of private warehouses based on various criteria such as ownership, usage, and services offered.
9. Explore the design criteria of warehouses, focusing on factors influencing warehouse layout, space utilization, and operational efficiency.
10. Define Warehouse Management Systems (WMS) and their role in optimizing warehouse operations, inventory control, and order fulfilment.
11. Explain the criteria used in the selection of Material Handling Equipment (MHE) for warehouse operations, considering factors such as load capacity, manoeuvrability, and safety feature