Warehousing

Synopsis Introduction To Warehousing. Warehouse V/S Distribution Center. Functions Of Warehouse. Number Of Warehouse. Warehouse Cost And Factors Determining The Cost. Benefits Of Warehouse. Principles Of Warehouse Design/Layout. Types Of Warehouse. Warehouse Strategies. Square Root Law. Location Considerations. Importance Of Warehousing. Need For Warehousing. Warehousing Operations. Warehousing Securities. Principles Of Warehouse Information System.

Introduction
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Warehousing can be defined as a location with adequate facilities where volume shipments are received from production Centre, which are then broken down in to particular order and shipped onwards to the consumers Warehousing is an integral part of any logistics system. The warehouse is a link between producer and customer Out-bound warehouse help customer buy on demand without a nearby production plant warehousing cost are about 10 % of the total integrated logistics costs for most companies. A warehouse smoothens out market supply and demand fluctuations. When supply exceeds demand, demand warehouse stores products in anticipation of customers requirement when demand exceeds supply the warehouse can speed product movement to the customer by performing additional services like marking prices, packaging products or final assembly etc.

5 marks questions
Q1. Explain the Importance of Warehousing? a) Fulfills Customer Service Expectation Level (quick response) b) Achieve Transportation Economies by moving higher volumes c) Achieve Production Economies by accommodating additional quantities produced d) Maintain steady source of supplies by balancing supply of & demand for products e) Meet changing market conditions f) Reduce distance between supplier & customer g) Provide mixed-products option to customers h) Provide temporary storage of materials to be disposed-off / salvaged. (Reverse logistics)

Q2. Explain the Need for Warehousing? Warehousing is necessary due to the following reasons. i. Seasonal Production Some agricultural commodities are harvested during certain seasons, but their consumption or use takes place throughout the year.
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Therefore, there is a need for proper storage or warehousing for these commodities, from where they can be supplied as and when required.

ii.

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.

iii.

Large-scale Production In case of manufactured goods, 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.

iv.

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.

v.

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.

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vi.

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 of supply of goods, warehousing leads to price stabilization.

A) Conventional Approach: (Push Concept) 1. Protection against delays & uncertainty in transportation 2. Availability of products on desired time & at desired place 3. Provide adjustment between the time of production & use of the product 4. Serve as a reservoir of goods

B) Modern Approach: (Pull Concept) 1. Movement of products 2. Warehouse is a location where inputs received from production are converted into outputs to the customers, at shortest possible time 3. Warehouse is defined as a location of temporary storage facility & from where they are dispatched with main objective of maintaining the flow of goods throughout the logistics system (cross docking) 4. Warehouse adds to the cost of distribution but the financial overall benefits over-weigh the cost. 5. Relationship between warehousing & transportation/ production/customer service/least total cost logistics

Q3. Explain various Warehousing Operations?

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A) Receiving Goods From Production Unit 1. Examination of goods visually 2. Sampling & sending for tests 3. Standardization of packs for storage 4. Weighing /Gradation/Counting 5. Identifying & sorting of goods

B) Storage & Stacking Of Goods 1. Protecting goods during storage tenure 2. Packing / Packaging of goods 3. Placement of goods on the basis of their movements 4. Periodical Quality & Quantity inspection of goods 5. Disposal of deteriorated goods

C) Dispatching Of Goods To Customers 1. Arranging vehicles for dispatch 2. Collecting charges 3. Preparing dispatch documents
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4. Loading of the consignments

D) Maintaining Records & Information Transfer To maintain the records and information of the goods that has been transferred.

Q4. Explain the Warehousing security? Protection from 1. Theft & pilferages, 2. Fire, Flood or any natural calamity. 3. Riots & civil Commotion. 4. Moisture, Insects, Rodents etc. 5. Climatic factors such as Rains, heat, cold Preventive Measures 1. Security from external elements by constructing higher walls, fencing, check posts 2. Providing watch & ward system 3. Installing fire fighting equipment & training to workmen on fire fighting 4. Constructing warehouse above land level 5. Carrying out perpetual pest control

Q5. Explain the various warehousing strategies? Or which warehouse types (private or public) should be used to meet market requirements? For many firms, the answer is a combination that can be differentiated by customer and products. Specifically, customer groups may be served best from a private warehouse, while a public warehouse may be appropriate for others. There are 5 qualitative decision factors that are considered:

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o Presence Synergies: Presence synergies refer to marketing benefits of having stocks located nearby the market. Customers are generally more comfortable when suppliers maintain inventory in nearby locations. This is best served by private or contract facilities. o Industry synergies: Refers to the operating benefits of co-operation with other firms serving the same industry E.g. Grocery Business. Reduced transportation cost in the major benefits here, public or contract warehouse increases the potentials of industrial synergy. o Operating flexibility: Refers to the ability of internal policies and producers to meet product and customers needs. Since private warehouses operate the complete control of firms they are more flexible. On the other hand, a private warehouse often employs policies and procedures that are consistent across its clients to minimize operating confusions. o Location flexibility: Refers to the ability to adjust quickly to warehouse location and number in accordingly to seasonal or permanent demand changes. E.g. Demand for fertilizers. Public and contract warehouse offer location flexibility to meet such requirements. o Scale economies: Refers to the ability to reduce material handling storage cost through use of advanced technologies. High volume warehouse can spread technologys fixed cost over large volumes and capital investments in mechanized equipment can reduce direct variable cost thus achieving scale economies. Public and contract warehousing offers this benefits, as they are able to design operations and facilities to meet high volumes of multiple customers. Warehousing Strategy : Private Contract Public

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Presence Synergy

Industry Synergy

Operating Flexibility

Location Flexibility

Scale Economics

Q6. EXPLAIN SQUARE ROOT LAW? The square root law states that the total inventory in a system proportional to the square root of the total number of locations at which the products are locked. The square root law helps determine the extent to which inventories may be reduced through such strategy. Assuming the total customer demand remains the same, the SRL estimates the extent to which aggregate inventory needs will change as a firm increases or reduces the number of stocking location. In general, the greater the number of stocking locations, the greater the amount of inventory needed to maintain customer service levels. Conversely, as inventories are consolidated into fewer stocking locations, aggregate inventory levels will decrease. The extent to which these changes will occur is understood through rough application of the square root law. The square root law states that: The total safety stock inventories in the future number of facilities can be approximated by multiplying the total amount of inventory at existing facilities by the square root of the number of future facilities divided by number of existing facilities.
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Formula: X2 = X1 N2N1, where: X2: Total inventory in future facility X1: Total inventory in existing facility N2: Number of future facilities N1: Number of existing facilities Assumptions

1. Inventory transfer between stock points is not a common practice 2. Lead time for supply of goods is constant 3. Customer service level is constant 4. Demand for the products is also constant ExampleA company presently distributing 40000 units of products to its customer from 8 facility location throughout India. A company is evaluating an opportunity to consolidate its operations into 2 facility. Using SRL find total amount of inventory in future facility? Solution: HereX1: 40000 X2: ? N1: 8 N2: 2 ThereforeX2 = X1

X2 = 40000 X2= 40000*1/2 X2= 20000 units

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Q7. State the factors to be considered while choosing locations for warehouse? While deciding the location following factors are to be considered keeping potential locations in mind. Availability of transportation & infrastructure. Cost of transportation. Presence of competition. Availability and cost of utilities. Availability and cost of labor. Customers expectation of service level. Any specific commitments made by the company to any A category. Local taxation levied by the local authority in the area. Local residents attitude towards business from outside. Restrictions associated with warehouse. In some areas some type of products are not permitted to be stored. Future expansion -Whether the location is able to match organizations plans to expand in future as per their strategy. Cost of land. Topography and soil condition: If warehouse needs special and heavy equipment for material handling and if the incoming loads are heavy then firm soil and flat topography are ideal. Possibility of title change to the land: Are the title changes formalities straight? E.g. In some situations this is complex, like title to MIDC land. Market oriented (closer to market / Customers) Production Oriented (closer to plant) Re-sale value in future Geographical hazards like flood, earthquakes etc.

An ideal warehouse location has the following characteristic:

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1. It protects the stocks against ground moisture, rain, objectionable odours, insects, rodents, birds, poultry, cattle, thieves, wind, fire, etc. 2. It provides the necessary facilities for manual and mechanical operations, inspections, disinfection cleaning reconditioning packaging etc of the commodities 3. It is an economic unit; close to the market or the railway siding with adequate covered platforms and connected by good motor able roads. 4. It offers the necessary amenities such as water for drinking and fire fighting, office and residential accommodation, etc. 5. As far as possible it is located away from grain mandis, grocery or shopping centre, grain fields, garbage dumping grounds, sewerage tanks and disposal plants and similar other places because their close proximity is detrimental to healthy storage facilities 6. Within a general area chosen for a warehouse the choice of a particular site depends on access, availability of transportation to and out of the site, and its proximity to major customers. 7. The site is not cut off from any part of the total service area by a river or other geographic barriers. 8. The area selected is adequate for the inside requirements of receiving storage order processing order picking and administrative work and the outside requirements of shipping receiving vehicles and equipment etc.

A traditional classification by Edgar Hoover classifies warehouse locations as market positioned, manufacturing-positioned, or intermediately positioned. a) Market positioned warehouse: Are located near to the customers and markets with the objective of serving them. These generally have a large variety and low volume of items to service local requirements. Such warehouses reduce cost by providing space utility. A market positioned warehouse functions as a collection point for the products of distant firms. This approach allows large and cost effective shipments from the manufacturer with lower cost, local transportation providing service to individual retailers. Market positioned warehouses may be owned by the firm or the retailer, or they may be an independent business providing warehouse service for profit.
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b) Manufacturing Positioned Warehouse: Are located near the manufacturing facilities in order to support manufacturing on the inbound side and facilitate assortment-creation and shipping on the outbound side. Improve customer services and manufacturing support achieved through type of warehouse which acts as a collection point for products needed in filling customer orders and material needed for manufacturing.

c) Intermediately Positioned Warehouse: Are those located between manufacturing

and market position warehouses. These help in consolidation of assortments for shipments from different manufacturing facilities. A firm may have many manufacturing plant located, for economic reasons, near the source of raw material. Under these conditions the cost effective warehouse may be at some intermediate point.

Q8. What are the Principles of Warehouse Information System? 1. Availability: readily & consistently available 2. Accuracy 3. Timeliness 4. Exception based 5. Flexibility

Q9. Explain the difference between public and private warehouse?

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Parameters Ownership Flexibility Return on investment

Public warehouse By Government (rented) Rigid Contributes amount a

Private warehouse By firms owning the product Highly flexible

considerable Contributes less

Cost Economies of scale Range of services Scale of operations

Low operating cost Yes Grater Larger

High operating cost No Lesser Small

Q10. Difference e between warehouse and distribution center (distribution center also can be asked for 3marks) WAREHOUSE A warehouse is designed accommodate long-term storage DISTRIBUTION CENTRE to A distribution center is set up to distribute suppliesa) Product comes in and within a week or so, the majority of it is shipped out (to stores, for instance). b) Thus, it is constantly moving through the building--it is received, used to fill orders and shipped out as new product is arriving. Distribution is to distribute to various locations of centralized products

Warehouse is for local storage

Warehousing means storing your goods Distribution center is from where you in a room distribute your goods

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Warehouses are generally for storing Here, trucks come to load couple of large quantity of stock that usually carry different products from warehouse to only one brand/type of product in a truck bring to the distribution center and then passed on to retail shops.

Warehouse stores all products

Distribution center stores minimum inventory which are generally of high demand items

Warehouse perform minimum value added activities Warehouse focuses on reducing operating costs to meet shipping requirements

Distribution center perform high percentage of value added activities Distribution center focuses on maximizing the profit impact of meeting customer delivery requirements. Dc is a separate entity Dc handles products in 2 stagesreceive and ship

Warehouse belongs to an organization Warehouse handles products in 4 stagesreceive, store, pick, ship

Q11. What are the factors that determine the warehouse cost and list in detail the various costs? Costs of warehousing: 1. Cost of Hiring / Constructing Warehouses 2. Total Inventory cost 3. Warehousing operations Cost (depends on nature of goods & quantity to be handled in & out of warehouse) 4. Transportation Cost (Within & between warehouses movement cost) 5. Warehouse Administration / Manpower / Equipment cost 6. Cost of Lost Sales Factors Affecting Warehousing Cost: Warehousing

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1. Sales throughput (volume) to be handled 2. Number of products to be stored 3. Size / weight / nature of individual product 4. Organizations inventory policy 5. Space utilization of warehouse 6. Storage & stacking methods

Q12. What are the factors determining the number of warehouse decision? The number of warehouses is another parameter offering a number of cost variables and customer service. If customer service is taken in cost terms as cost of customer dissatisfaction, the number of warehouses will effect transportation, inventory and warehousing and customer dissatisfaction costs. o Transportation costs: Initially decreases with increasing number of warehouses. This is due to the transportation economies obtained by having large-volume long-range transportation from consolidation warehouses and short-range small volume

transportation from break bulk warehouses. However as the number of warehouses increases beyond a certain value, the transportation cost starts increasing due to large number of transportation trips in between the large number of warehouses. o Inventory costs: Continuously increases with the increasing number of warehouses because the increased space available needs to be utilized and firms increase the commitment of inventory at these warehouses beyond those actually needed. Transit inventory costs continuously decrease with the increased number of warehouses due to the shorter transportation times between the large numbers of warehouses.

o Warehousing costs: Increase with more warehouses due to the maintenance and facility costs associated with each warehouse. For the same space, a single warehouse incurs less warehousing cost than two warehouses.

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o Customer dissatisfaction cost: The increasing number of warehousing leads to increasing customer service levels thus decreasing customer dissatisfaction
LOGISTICS COSTS RELATED TO NUMBER OF WAREHOUSES
Total Cost

Inventory Cost

Total Cost Warehousing Cost

Transportation Cost

Cost of Lost Sales

Number Of warehouses

Q13. Explain the principles of warehouse design? Systematic layout of a warehouse has considerable Influence on customer service level by providing 1. Reduction in order processing cycle time through efficient picking / packing & shipping of the products 2. Reduction in the cost of product damages / obsolescence

The Principles of warehouse design can be divided into 3 parts: I. Design criteria. Factors to be considered are number of storeys in the facility, height utilization, and product flow. o Ideally, the warehouse design should be limited to a storey so that the product does not have to be moved up and down. o The use of lift to move products from one floor to the next requires time and energy. o Often elevators become a problem in product flow since many material handlers are usually competing for a limited number of elevators. o As far as possible, warehouse should be limited to a single storey unless it is situated in central business district where land is limited. Design should maximize the usage of available space by allowing for the optimum utilization of height on each floor.
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o Maximum effective warehouse height is limited by the safe lifting capabilities of material handling equipment such as forklifts and fire safety regulations. Design should allow for straight flow whether the items are stored or not. o Products should be received at one end of the building stored in the middle and then shipped from the other end. o Straight-line product flow minimizes congestion and confusion.

II.

Handling Technology. Another important aspect in effectiveness and efficiency of material handling technology. Concerns primarily with movement continuity and movement in large quantities.

What is meant by movement continuity? Movement continuity means it is better for the material handling equipment or the person to make a longer movement rather than many persons moving goods to short distance and handling it to another handler. Exchanging the product between handlers or moving it from one equipment to another wastes time and increases the potential for damage. Little longer moves are preferred in the warehouse.

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Instead of moving individual cases, warehouse activities should be designed to move group of cases such as containers. Grouping or batching reduces the number of activities and hence the cost.

III.

Storage Plan. Considers the product characteristic such as volume, weight and storage. o High volumes sales or fast moving products should be stored in a location that minimizes the distance in moving them. o Such a location would minimize the travel distance and also the need for extended lifting. o Hazardous items should be stored at safe distance to reduce damage during dangerous situations. o Low volumes or slow moving product can be assigned locations that are distant from the center or higher up in storage rack. o Heavy goods should be kept in the lowest racks. o Smaller items may require drawer for storage.

Receiving docks
Storage Space For Low Volume Products Storage Space For Low Volume Products

Storage Space For High Volume Products

Primary Aisle

Shipping Docks

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10 Marks questions

Q1. Explain the warehouse productivity measurement? Need For Measurement 1. Productivity improvement increases the profitability (Productivity is the ratio of Real Output To Real Input) 2. It enables Optimum utilization of warehousing space (maximum utilization of per unit area) Warehouse Performance Measurement Internal 1. Cost incurred to achieve specific objectives 2. Customer service: Warehouse relative capacity to satisfy the customers in terms of order filling, stock-outs, shipping errors, on-time delivery, 3. Productivity 4. Space utilization 5. Asset Management: Inventory turnover, Inventory carrying cost, inventory levels, obsolete inventory 6. Quality of service: Zero defect External 1. Customer perception on Customer Service attained 2. Best practices benchmarking

Factors Responsible For Warehousing Inefficiencies 1. Poor utilization of space 2. Use of Redundant product handling systems / Methods 3. Excessive maintenance costs 4. Haphazard way of working 5. Lack of necessary infra structure facilities 6. Depleted receiving & shipping dock condition
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7. Lack of coordination between production /Warehousing /sales personnel

Improving warehouse productivity 1. Improving forecasting efficiency 2. Reducing labour bottlenecks 3. Use of New Technology/ Automated Material handling equipment /communication devises/ASRS / Conveyors etc 4. Reduction in unnecessary product handling 5. Use of Routes/location systems, Geographic Picking, Random location of Products in the Warehouse 6. Improving / standardizing product packaging 7. Perpetual Monitoring & inventory counting 8. Increasing size of the units to be handled 9. Constantly seeking round trip opportunities 10. Improving cube utilization of warehouse 11. Smoothing out variance in product flow in /out of warehouse 12. Employee Training, Management Development Programs, Performance Incentive System & Award Recognition 13. Installing & implementing EDI for handling various warehousing functions Q2. Define warehouse and explain types of warehouse? (each can be asked for 5 / 3 marks question as well) Warehousing may be defined as, That part of the firms logistics system that stores products at and between point-of-origin and point of consumption, and provides information to management of status, condition, and disposition of items being stored. Warehousing is a location with adequate facilities where volume shipments are received from production center, which are then broken down in to particular order and shipped onwards to the customer.

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Warehousing is an integral part of any logistics system. The warehouse is a link between Producer & Customer.

Types of warehouses TYPES OF WAREHOUSE

Private(or owned) warehousing Private warehouses:

Public warehousing

Contract warehousing

1. Private warehouses are operated by the firm owning the product .The facility may either be owned or leased. 2. Quite often the warehouse requiring specific material handling activities may not be available on hire and hence designed to fit exact needs of the firm. 3. The main benefit offered by an owned warehouse is control over the materials, facilities, protection and customer service. This means that there are no restrictions as to type of materials stored, facilities and storage environments can be designed and maintained as per requirements. 4. Also, a firm can earn extra income from renting or leasing excess space in a private warehouse.
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Advantages: a. Direct control: The private warehouse has a greater control. The company has direct control and responsibility of the product. b. Flexibility: There is a high flexibility because the operation of the warehouse can be controlled as per the need of the customer and the product. c. Intangible benefits: There are intangible benefits like customer satisfaction. d. Cost factor: Less costly than private warehousing because private facilities do not have a profit margin. Firms with specialized customers or products often develop their own warehouses. e. Tax benefit: A company can avail tax benefit if it owns a warehouse. f. Marketing advantage: Private warehouse creates a customer perception of responsiveness and continuity thereby providing a firm with a marketing advantage over other enterprises. Disadvantages: a. Geographical flexibility: Private warehouse lack geographical flexibility. b. High costs: Because of high cost involved many firms are unable to generate enough capital to own a warehouse. c. Permanent liability: Private warehouse is a permanent liability on the businessmen who own these warehouses. Public warehouses 1. A public warehouse rents space rents space to individual or firms needing storage. 2. The services of these warehouse offers may vary. Some provide a wide array of services including packaging, labeling, testing, inventory maintenance, local delivery, data processing, and pricing. 3. There are many types of public warehouse: a. General merchandise: Most common and used for store all kinds of goods. e.g. Paper, small appliances and household supplies.

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b. Refrigerated warehouse: Provide a temperature control to handle and maintain food, medical items and chemical products with special temperature requirements. c. Bonded warehouses: They are licensed by the government to store goods prior to payment of taxes or duties. Helps to reduce the inventory values of the firm. d. Special commodity warehouse: Used particularly for agricultural product like grains, wools and cotton and offer special service specific to the product. e. Household goods warehouse: Used to store only personal goods for e.g. Furniture designed warehouse for handling large and bulky item such as appliances and furniture. 4. A combination of both owned as well hired warehouse can also be utilized by larger firms. Owned warehouses may be used for stable requirements of materials and central warehousing: whereas, hired warehouses can be utilized for peak season requirements and near markets. 5. Characteristics: a. Public warehouses charge client a basic fee for handling and storage based on the number of cases or the weight handled. b. When economics of scale are not possible in a private warehouse public warehousing may be a low cost- alternative. Advantages: a. Financial flexibility: Public warehouses provide financial flexibility, greater operating and management expertise since warehousing is their core business. b. Lower costs: They have lower variable cost as compared to privately operated facilities due to lower pay scales, better productivity and economies of sales. (Advantage to large quantity) c. Efficient handling: Due to high volume operations in public warehouses, fixed costs get spread over and justify more efficient handling operations. d. Economic transportation: It is achieved by delivery of loads representing various customers E.g. Rather than vendor A and vendor B each delivering to

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a retail store from their own warehouses, a public warehouses serving both vendors could deliver a single combined load with greater ease. Disadvantages: a. In Public warehouse effective communication may be a problem. b. Specialized service may not always be available in the desired location. c. In public warehouse space may not available when needed. Contract warehouses 1. Contract warehousing is a partnership between the warehouse firm and the hiring firm. Such an arrangement is generally utilized by firm requiring specialized warehousing services for medium-term periods. 2. Contract warehousing often provides customized services. 3. Contract warehouse combines the best features of both the private and the public warehouse operations. 4. Contract warehousing is a long term, mutually beneficial arrangement which provides unique and customized (as per needs) warehousing and logistical service for a single client Advantages: a. They provide expertise , flexible and economy of scale b. Contract warehouse assumes total logistics responsibility for a firm that desire only to concentrate on manufacturing and marketing. c. Meeting seasonal requirement for products. d. Geographic coverage requirement. e. Availability of management experience and dedicated resources. f. No permanent Liability. Disadvantages: a. Less control on operations. b. Impersonal customer service.
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c. Performance of organization directly depends on performance of 3rd Party. Q3. Explain warehouse and the functions in detail? (The warehouse concept can be asked as a 3 marks concept and the functions separately can be asked as a 5 marks question) Warehousing may be defined as, That part of the firms logistics system that stores products at and between point -oforigin and point of consumption, and provides information to management of status, condition, and disposition of items being stored. Warehousing is a location with adequate facilities where volume shipments are received from production center, which are then broken down in to particular order and shipped onwards to the customer. Warehousing is an integral part of any logistics system. The warehouse is a link between Producer & Customer.

Sorted Logistics is a young company with a modern approach to business backed up by some good old fashioned principles and a work ethic thats second to none. The third-party module provides full receipt, dispatch, put away, pick and pack, stock control and all other operational requirements that are expected from warehousing software. The fourth-party module gives logistics clients full access to orders, fulfillment, stock and status information. This warehouse management software also has electronic interfaces to major transport service providers, which means documents such as packing slips and delivery dockets can be sent as either facsimile, email, or printed using an automatic setting in the organization master file. Functions of warehouse1) Receiving goods: The warehouse should receive and accept responsibility of the goods that are delivered to it. 2) Identifying goods: The goods that are received should be identified as per place, label, color, code, etc. 3) Sorting goods: Sort out the received goods for approximate storage area. The goods that are going to be used mostly should be sorted out to store at the place through where it is easily available.
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4) Dispatching goods for storage: The goods that are sorted should be dispatched for temporary storage with easy accessibility. 5) Holding goods: The goods that are received should be given security against pilferage (theft) and reduction in value; it must be stored in such a place that it does not get damaged. 6) Selecting, retrieved, packing: The items that are stored are selected m retrieved and grouped accordingly to customer order for dispatch. 7) Marshalling goods: Marshalling means checking whether all the goods ordered by the customer are dispatched properly or not. Check the items of a single order for completeness and order records are updated. 8) Dispatching goods: As per requirements order is packaged and directed to right transport. 9) Preparing records and advices: The number of orders received and on hand inventory, etc. are recorded for replenishment action and stock control, and the demand and receipt data are forwarded to control center, which can be, located elsewhere. Q4. Explain the benefits of warehouse? (Each benefit can be asked for 5/3 marks question) A. Economic Benefits They result when overall logistical costs are directly reduced by utilizing one or more facilities and can be quantified by calculating results of cost-to-cost trade off. 1. Shipment Consolidation (Concept Testing): The word consolidation means combining together small shipments. Consolidating warehouse receives & consolidates material from the number of manufacturing plants destined to a specific customer on a single transportation shipment. This results in: 1. The realization of the lowest possible transportation rate 2. Getting of the lowest possible transportation cost. 3. Reduces congestion at a customers receiving location. 4. It combines the logistical flow of several small shipments to a specific market area.

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Features: 1. Consolidation allows both inward movement from the manufacturers to the warehouse and the outbound movement from warehouse to the customers to be consolidated into larger shipments. 2. Each manufacturing plants uses the warehouse as a forward stock location or as to differentiate and assembling facility. 3. Each manufacturing plant uses the warehouse as a forward stock location or as to differentiate and assembling facility. Example: If a courier company wants to send a lot of packages from different sources in Mumbai to London, it brings all the packages to a single warehouse where all the packages, (in a given time period) are consolidated and sent as a single large package.

2. Break bulk (Concept Testing) In break bulk warehousing no storage is performed. They are facilities, which receives large shipment of products from manufacturers. In contrast to consolidation Warehouses, here the materials arriving in bulk is divided into small shipments for delivering it to the end consumer. The Firm saves substantially on freight by dispatching the shipments in bulk to its regional distribution centers where it is divided into small packets and dispatched as per local delivery.

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3. Cross docking (Concept Testing) This concept is similar to break bulk activity except that it involves multiple manufacturers . The usage of warehouse is for very short time. Warehouse receives materials from multiple suppliers, which is broken, assorted & consolidated for onward dispatch as per end users requirements.

The process of cross docking is as follows: 1. Products arrive in large quantity from multiple manufacturers. 2. As the products are received, they are immediately arranged and distributed as per the order and quantity allocated to customers. 3. The products are then moved Across the Dock to be loaded onto the trailer destined for the appropriate customer. 4. The trailer is then released for transport to retail outlets once it has been filled with mixed products from multiple manufacturers. Economic benefits of cross docking include:
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1. Large movements from manufacturers to warehouse and from warehouse to retailers. 2. Reduced handling cost at cross-dock facility since product is not stored and the regular warehouse activities are eliminated 3. Most effective use of dock facilities because all vehicles are fully loaded
maximizing the loading dock use.

4. Postponement (Concept Testing) With postponement of processing or assembling the products, the anticipated risk of maintenance of inventory of finished products and blockage or space is reduced considerably. The inputs are warehoused at a strategic location the final assembly or processing is kept on hold till the customer places the firm order.

Example: If the manufacturer has many customers demanding for the same product, but the finishing for each customer is different, then the manufacturer can produce the goods and keep it in the warehouse and do the final finishing touches in the warehouse as and when the customer demands for the product. In this way the manufacturer does not have to keep a separate inventory for each and every customer. This helps to reduce inventory and thus saves on cost

5. Stock piling (concept testing):

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The direct economic benefit of this service is secondary to the fact that the seasonal storage is essential to certain businesses. The products required during certain period or the products available during certain period, require warehouse to support marketing efforts. It provides an inventory buffer, which allows production efficiencies within the constraint of material sources and/or market demand. Example: In the paints industry in India, the demand is very high during Diwali time. But the companies produce throughout the year and store the goods in the warehouse. B. Service Benefits When a warehouse is primarily justified on the basis of service, the supporting rational is an improvement in the time & the place capability of the overall logistical system. It is often difficult to quantify the return on investment of such rational because it involves cost to service trade off. 1. Spot stock (Concept Testing): The stock spotting is often used in physical distribution of limited or highly seasonal products. A selected amount of product line is placed on spot stocked in a warehouse to fill customer orders during the critical marketing period Utilizing warehouse facilities for this purpose allows inventories to be placed in a variety of markets adjustment to key customers just prior to a maximum period of seasonal sales. 2. Assortment The warehouse stocks product combinations in anticipation of customer orders. The assortment may represent multiple products from different manufacturers or special assortment as specified by customers. Assortment warehouse improves service by reducing the number of suppliers that customers must deal with. The combined assortment also allows larger shipment quantities, which in turn reduces transportation costs. Assortment warehouses store a variety of products for satisfying the variety requirements of customers. An assortment represents multiple products from different manufacturers or special assortments as specified by the customers. Benefits:

Improves the choice available to the customer.

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The customer need not go to different warehouses in order to buy the product of different supplier.

Example: Retailers may demand different brands of the same products in small quantities rather than large quantities of a single brand

3. Mixing A warehouse sometimes is used as product mixing / assembling point for a company having a number of plants manufacturing different products which are mixed at a convenient place to make final order. A common mixing point permits volume shipments of ingredients at a single location. These shipments are then assembled in to an order and dispatched to the customer in sizable lots to achieve economies of scale in transportation costs.

Similar to break bulk process except that several shipments from different manufacturers are involved. Truckloads of products are shipped from manufacturing plants to warehouses and each large shipment benefits from lower possible transportation rate. Upon arrival at the mixing warehouse, factory shipments are unloaded and the ordered combination of each customer is selected. Mixing is considered to be an effective service benefit because inventory is sorted as per customer specifications.

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4. Production support The aspect provides a steady supply of inputs to manufacturing plant. The safety stock of items purchased from outside suppliers may be justified because of long lead time or significant variations in the usage. Production support warehousing provides a continuous supply of spare parts and materials to assembly plants. 5. Market presence The market presence factor is based on the perception that the local warehouses can be more responsible to customer needs and offer quicker response than the warehouses situated far away. It is also expected that the local warehouse will enhance the market share & potentially increase profitability.

Value added services offered by warehouse

1. Packaging: Customized packaging 2. Refining product packaging 3. Changing package characteristics (From bulk to bottles/packs etc) 4. To complete production activities such as re-assembling 5. Acclimatizing the product of perishable nature, such as promote or delay ripening process 6. To maintain Market confidentiality (Re-labeling) 7. Labeling / marking for international market requirements 8. Providing secondary (transport) packaging

FILL IN THE BLANKS

1. Location of a warehouse has considerable influence on Customer service level by providing reduction in cost of distribution. 2. Warehouse handles products in 4 cycles of receive, store, pick & ship. 3. Private warehouses owned by the manufacturer for their exclusive use for storing the goods manufactured for onward selling in the market. 4. Public warehouses hired from other agencies, Govt. or private parties, for storing the goods for a specific period of time by paying the accepted rent.

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5. Warehouse is a location with adequate facilities where volume shipments are received from production center, which are then broken down in to particular order and shipped onwards to the customer. 6. The Square root law formula is X2=(X1)
7. Cross docking facility is similar as distribution mixing center 8. Stock piling is necessary to support Selling effort 9. Contract warehousing combines the best of both the private and public warehousing operations. 10. Consolidation allows the inward movement from the manufactures to the warehouse and the outbound movement from warehouse to customer to be consolidated into larger shipments.

University Question: 1. What economic benefits are offered by warehouses? Explain (10mrks)-nov10. 2. Explain briefly the underlying principles of warehouse layout? (5 Marks)- Nov 2011

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