Warehouses enables the businessmen to carry on production throughout the year and sell their products whenever there is adequate demand. Need for warehouses arises also because some goods are produced only in a particular season but are demanded throughout the year.
Warehouses enables the businessmen to carry on production throughout the year and sell their products whenever there is adequate demand. Need for warehouses arises also because some goods are produced only in a particular season but are demanded throughout the year.
Warehouses enables the businessmen to carry on production throughout the year and sell their products whenever there is adequate demand. Need for warehouses arises also because some goods are produced only in a particular season but are demanded throughout the year.
Warehouse is a storage structure constructed for the protection of
the quality and quantity of the stored produce. The need for a warehouse arises due to the time gap between production and consumption of products. Warehousing or storage refers to the holding and preservation of goods until they are dIspatched to the consumers. By bridging this gap, storage creates time utility. There is a need for storing the goods so as to make them available to buyers as and when required. Storage enables a firm to carry on production in anticipation of demand in future. Warehouses enables the businessmen to carry on production throughout the year and sell their products, whenever there is adequate demand. Need for warehouses arises also because some goods are produced only in a particular season but are demanded throughout the year. Similarly, certain products are produced throughout the year but demanded only during a particular season.
Need for Warehousing Warehousing is necessary due the following reasons.(i) Seasonal Production- You know that agricultural commodities are harvested duringcertain seasons, but their consumption or use takes place throughout the year.Therefore, there is a need for proper storage or warehousing for these commodities,from where they can be supplied as and when required.(ii) Seasonal Demand- There are certain goods, which are demanded seasonally, likewoollen garments in winters or umbrellas in the rainy season. The production of thesegoods takes place throughout the year to meet the seasonal demand. So there is aneed to store these goods in a warehouse to make them available at the time of need.
Large-scale Production - In case of manufactured goods, now-a-days productiontakes place to meet the existing as well as future demand of the products. Manufacturersalso 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 largescale, need to be stored properly till they are cleared by sales.(iv) Quick Supply - Both industrial as well as agricultural goods are produced at somespecific 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 thesegoods are made available to the consumers at the time of their need.(v) Continuous Production- Continuous production of goods in factories requiresadequate 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.(vi) Price Stabilization- To maintain a reasonable level of the price of the goods in themarket there is a need to keep sufficient stock in the warehouses. Scarcity in supplyof goods may increase their price in the market. Again, excess production and supplymay also lead to fall in prices of the product. By maintaining a balance of supply of goods, warehousing leads to price stabilization.
FUNCTIONS OF WAREHOUSE : 1.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. 3. Sorting goods: Sort out the received goods for appropriate 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. 4.Dispatching goods to 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 stored in such a place that it does not get damaged. 6.Selecting, retrieved, packing: The items that are stored are selected, retrieved and grouped according to customer order for dispatch. 7.Marshalling goods: Marshaling means checking whether all the goods ordered by 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 numbers of orders received, the items 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 located elsewhere.
Warehouse costs Handling Holding Order Processing Packaging Administration Maintenance
EXAMPLE HARYANA WAREHOUSING CORPORATION: PANIPAT
Haryana Warehousing Corporation was set up on November 1, 1967 under the Warehousing Corporation Act, 1962. It carries out the following functions at large: a) Acquire and build godowns and warehouses at such places within the State as it may, with the previous approval of the Central Warehousing Corporation. b) Run Warehouses in the State for storage of agricultural products, seeds, manures, fertilizer, agriculture implements and other notified commodities. c) Arrange facilities for the transport of agricultural produce, seeds, manures, fertilizers agricultural implements and notified commodities to and from warehouses. d) Act as an agent of the Central Warehousing or of the Govt. for the purpose of purchase, sale, storage and distribution of agricultural produce, seeds, manures, fertilizers, agricultural implements and notified commodities.
BENEFITS ECONOMIC
1. Consolidation This helps to provide for the customer requirement of a combination of products from different supply or manufacturing sources. Instead of transporting the products as small shipments from different sources, it would be more economical to have a consolidation warehouse. This warehouse will receive these products from various sources and consolidate these into shipments, which are economical for transportation or as required by the customers.
2. Break Bulk As the name suggests, the warehouse in this case serves the purpose of receiving bulk shipments through economical long distance transportation and breaking of these into small shipments for local delivery. This enables small shipments in place of long distance small shipments.
ECONOMICS BENEFITS CONSOLIDATION BREAKBULK CROSS DOCK POSTPONEMENT STOCK PILING 3. Cross Docking This type of facility enables receipt of full shipments from a number of suppliers, generally manufacturers, and direct distribution to different customers without storage. As soon as the shipments are received, these are allocated to the respective customers and are moved across to the vehicle for the onwards shipments to the respective customers at these facilities. Smaller shipments accompanying these full shipments are moved to the temporary storage in these facilities awaiting shipments to the respective customers along with other full shipments.
6. Postponement This Functionality of warehousing enables postponement of commitment of products to customer until orders are received from them. This is utilized by manufacturers or distributors for storing products ready up to packaging stage. These products are packaged and labeled for the particular only on receipt of the order.
5. Stock Piling This function of warehousing is related to seasonal manufacturing or demand. In the case of seasonal manufacturing, certain raw materials are available during short periods of the year. Hence, manufacturing is possible only during these periods of availability, while the demand is full year around. This requires stockpiling of the products manufactured from these raw materials. An example is mango pulp processing. On the other hand, certain products like woolens are required seasonally, but are produced throughout the year, and thus need to be stockpiled as such.
SERVICE BENEFITS
8. Assortment Assortment warehouse store a variety of products for satisfying the variety requirements of customers. For example, retailers may demand different brands of the same product in small quantities rather than larger quantities of the single brand.
4. Product Mixing Products of different types are received from different manufacturing plant or sources in full shipment sizes. These products are mixed at these warehouses into right combination for the relevant customers as per their warehouses and continuously provided for the product mixture shipments requiring these. SERVICE BENEFITS ASSORTMENT PRODUCT MIXING PRODUCTION SUPPORT MARKET PRESENCE
Production support Production support warehousing provides a continuous supply of spare parts and materials to assembly plants. It maintains a safety stock of items purchased from outside vendors. Production support warehousing is used to supply processed materials, components and subassemblies into assembly plant in an economic and timely manner.
Market presence As seen by marketing managers as an advantage of local warehouse. Local warehouses and hence local inventory can be more responsive to customers need and offer quicker delivery than distant warehouses. Local warehouse may increase market share and potentially increase the profitability.
Advantages of Warehousing Warehousing offers many advantages to the business community. Whether it is industry or trade, it provides a number of benefits which are listed below.
i. Protection and Preservation of goods - Warehouse provides necessary facilities to the businessmen for storing their goods when they are not required for sale. It provides protection to the stocks, ensures their safety and prevents wastage. It minimises losses from breakage, deterioration in quality, spoilage etc. Warehouses usually adopt latest technologies to avoid losses, as far as possible.
ii. Regular flow of goods- Many commodities like rice, wheat etc. are produced during a particular season but are consumed throughout the year. Warehousing ensures regular supply of such seasonal commodities throughout the year.
iii. Continuity in production- Warehouse enables the manufacturers to carry on production continuously without bothering about the storage of raw materials. It helps to provide seasonal raw material without any break, for production of finished goods.
iv. Convenient location- Warehouses are generally located at convenient places near road, rail or waterways to facilitate movement of goods. Convenient location reduces the cost of transportation.
v. Easy handling- Modern warehouses are generally fitted with mechanical appliances to handle the goods. Heavy and bulky goods can be loaded and unloaded by using modern machines, which reduces cost of handling such goods. Mechanical handling also minimizes wastage during loading and unloading.
vi. Useful for small businessmen- Construction of own warehouse requires heavy capital investment, which small businessmen cannot afford. In this situation, by paying a nominal amount as rent, they can preserve their raw materials as well as finished products in public warehouses.
vii. Creation of employment - Warehouses create employment opportunities both for skilled and unskilled workers in every part of the country. It is a source of income for the people, to improve their standards of living.
viii. Facilitates sale of goods- Various steps necessary for sale of goods such as inspection of goods by the prospective buyers, grading, branding, packaging and labelling can be carried on by the warehouses. Ownership of goods can be easily transferred to the buyer by transferring the warehouse keepers warrant.
ix. Availability of finance- Loans can be easily raised from banks and other financial institutions against the security of the warehouse-keepers warrant. In some cases warehouses also provide advance to the depositors of goods on keeping the goods as security.
x. Reduces risk of loss - Goods in warehouses are well guarded and preserved. The warehouses can economically employ security staff to avoid theft, use insecticides for preservation and provide cold storage facility for perishable items. They can install fire-fighting equipment to avoid fire. The goods stored can also be insured for compensation in case of loss.
TYPES OF WAREHOUSES 1. Private Warehousing 2. Public Warehousing 3. Contract Warehousing Private Warehouses - The warehouses which are owned and managed by the manufacturers or traders to store, exclusively, their own stock of goods are known as private warehouses. Generally these warehouses are constructed by the farmers near their fields, by wholesalers and retailers near their business centres and by manufacturersnear their factories. The design and the facilities provided therein are according to the nature of products to be stored. Advantages The advantages and disadvantages of private warehousing as against those of public warehousing are: a. Private warehousing offers better control over the movement and storage of products asrequired by the management from time to time. b. There is less likelihood of error in the case of private warehousing since the companys products are handled by its own employees who are able to identify the products of their own company better. b. If there is sufficient volume of goods to be warehoused, the costs of privatewarehousing compares favourably with that of public warehousing. But privatewarehouse may not be expected to be packed upto the brim all the while. Therefore thecosts of private warehousing per unit may actually be higher.
Public Warehouses - The warehouses which are run to store goods of the general public are known as public warehouses. Any one can store his goods in these warehouses on payment of rent. An individual, a partnership firm or a company mayown these warehouses. To start such warehouses a licence from the government is required. The government also regulates the functions and operations of these warehouses. Mostly these warehouses are used by manufacturers, wholesalers, exporters, importers, government agencies, etc.
Advantages a. It is generally less expensive and more efficient. b. Public warehouses are usually strategically located and immediately available. b. Public warehousing is sufficiently flexible to meet most space requirements, for several plans are available for the requirement of different users
d. Fixed costs of a warehouse are distributed among many users. Therefore the overallcost of warehousing per unit works out to a lower figure. e. Public warehousing facilities can be given up as soon as necessary without anyadditional liability on the part of the user. f. The costs of public warehousing can be easily and exactly ascertained, and the user pays only for the space and services he use. Contract Warehousing Contract warehousing is a specialized form of public warehousing. In addition to warehousing activities such warehousing provides a combination of integrated logistics services. Thus allowing the leasing firm to concentrate on its specialty. They provide customized services, eg. Value Added Services Bonded Warehouses - These warehouses are owned, managed and controlled bygovernment as well as private agencies. Private bonded warehouses have to obtainlicence from the government. Bonded warehouses are used to store imported goodsfor which import duty is yet to be paid. Incase of imported goods the importers arenot allowed to take away the goods from the ports till such duty is paid. Thesewarehouses are generally owned by dock authorities and found near the ports.
Warehouse Design Principles While designing a warehouse the following principles should be taken care of.
Design Criteria: There are basically three criteria for designing a warehouse Number of floors: Ideally there should be a single floor as more than one floor would result in movement of goods upward and downward from one floor to another. This would result in wastage of time and energy. But if land is a scarce and costly then more then one floor as storage would be justified in terms of cost. Height utilization: As far as possible ail space should be utilized even the vertical space as each space costs money. Height should be utilized as much as it is safe to lift and store the material. Product flows: Product flow should be straight. This means that goods should enter from one door and exit from another door ensuring that the path of entrance and exit dont cross each other.
2. Handling of material: Two principles govern material handling technology Movement continuity: This principle states that it is better for the material handler to make small number of larger movements than large number of smaller movements. For too much of exchange of material from one hander to another handler could lead to delay as well as spoilage of goods. Movement scale economics : The material handler should move or handle the largest quantity possible. This reduces per unit cost of handling of material.
3. Storage Plan: While designing the warehouse, product characteristics should be taken into consideration. Some of the product considerations are as follows Sales: Fast moving goods or the goods whose sales are high should travel the minimum distance and should be easily accessible. This will reduce travel distance and save time. Weight: Relatively heavier items should be stored near the ground level, whereas lighter items could be stored at a higher level. Volume: Bulky material may require a open space for storage, whereas smaller goods may require drawers or shelves.
THE NUMBER OF WAREHOUSES The number of warehouses is another decision parameter impacting anumber of cost variables and customer service If customer service is taken in cost terms as cost of customer dissatisfaction, the number of warehouses will affect transportation,inventory, warehousing and customer dissatisfaction costs. The increasing number of warehousing leads to increasing customer service levels, thus, decreasing customer dissatisfaction cost.
LOCATION CONSIDERATION While deciding the location following factors are to be considered keeping potential location in mind 1. Cost of distribution from warehouse to market area 2. Availability of transportation and infrastructure. 3. Cost of transportation. 4. Presence of competition. 5. Availability and cost of utilities (power, water, gas, sewerage, disposal 6. Availability and cost of labour. 7. Customers expectation of service level. 8. Any specific commitments made by the company to any A category customer. 9. Local taxation levied by the local authority in the area. 10. Local residents attitude towards business from outside. 11. Restriction associated with warehouse. In some areas some type of product are not permitted to be stored. 12. Future expansion. Whether the location is able te match organization plan to expand in future as per their strategy. 13. Cost of loan. 14. Topography and soil condition: if the warehouse needs special and heavy equipment for material handling and if the incoming loads are heavy them firm soil and flat topography are ideal. If these condition are not available , large amount of money is required to be invested. 15. Possibility of title changes to the land : Are the title change formalities straight forward? Eg In some situation this is complex like title to MIDC land. CONCLUSION In most warehouses, change is a constantespecially when you consider seasonal demand forecasts, supply exceptions, and inventory flows. Distribution centers (DCs) are critical sense-and- respond nodes within the supply chain. Warehouse management is about mediating variability so supply flows to demand as economically and efficiently as possible. In today's consumer economy, however, the warehousing function faces its own external changes. The e-commerce revolution has upended brick-and-mortar convention as companies explore better ways to pull product to consumersnot just retailersfaster. Retail and wholesale channels are converging. Technology has played a significant role, allowing companies of all sizes greater flexibility in how they manage unique "time-to- consumer" requirements. But companies and third-party logistics (3PL) providers are also reconsidering distribution strategy, infrastructure design, and warehouse processes as they lay new foundations for future fulfillment.
WAREHOUSE SRATEGIES There are five qualitative decision factors that are considered; 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 location. This is best served by private or contract facilities. Industry synergies: refers to the operating benefits of co-operation with other firms serving the same industry eg. Grocery business. Reduced transportation cost is the major benefits here, public or contract warehouse increases the potential of industrial synergy. 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 other hand a public warehouse often employs policies and procedures that are consistent across its clients to minimize operating confusion. Location flexibility: refers to the ability to adjust quickly to warehouse location and number in accordingly to seasonal or permanent demand changes. Eg. Demand for fertilizers. Public and contract warehouses offer locations flexibility to meet such requirements. Scale economics: 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 equipments can reduce direct variable cost thus achieving scale economies.