CHAPTER 1

OBJECTIVE

The main objective of this project of Warehousing was to understand the

various concepts in relation to an organisation

The objective of the project is how warehousing works, identify areas of

excellence and areas needing improvement; and provide suggestions for such
improvement.

Warehousing is a topic which has various sections and areas of excellence

this project makes a platform for studying, analyse their working and
performance, and highlight what they are doing well

The functioning and growth of warehousing

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CHAPTER 2

EXECUTIVE SUMMARY

The aim of the project is to study the various factors warehousing by the
methods used and to identify areas of excellence and areas needing
improvement; and provide suggestions for such improvement &, analyse their
working and performance, and highlight what they are doing well, while
providing suggestions and recommendations for improvement.

This project also shows the need of warehousing to a business organisation

Warehousing is an essential constituent of the product life cycle. It is the
warehouse that preserves and takes care of the product after it is manufactured
and dispatched and before it reaches its customers.

Hence, special attention should be paid to warehousing activities. A lot of

consideration goes into selecting a warehouse that will house your products.
There are a great many things for which warehouses can be put into use. For a
lot of people these warehouses may have only seasonal use.

This is when the concept of contract warehousing comes into play. These
warehouses are available near production units in most places around the world.
They not only store goods but also provide a lot of additional services. For
instance, a Contract Warehouse stores goods as well as provides various
fulfilment services.

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CHAPTER 3

INTRODUCTION
The practice of storage and warehousing is as old as civilisation. Only the
methods, quantity, and safety factors have improved in the modern times.
Undoubtly it is one of the important marketing functions that involves holding
and preserving goods from the point of time they are produced until they are
needed for consumption. Storage is an exercise of human foresight by means of
which commodities are protected from deterioration, and surplus supplies in times
of plenty are carried over to the season of scarcity. The storage function,
therefore, adds the time utility to products. Agriculture, particularly in India, is
characterized

by

relatively

large

and

irregular

seasonal

and

year-to-year

fluctuations in production. The consumption of most farm products, on the other

hand, is relatively stable. These conflicting behaviours of demand and supply
make it necessary that large quantities of farm produce need to be stored for a
considerable period of time.

1. MEANING OF WAREHOUSE
Warehouse is scientific storage structure especially constructed for the protection
of the quantity and quality of stored products. Warehousing may be defined as
the assumption of responsibility for the storage of goods. It may be called the
protector of national wealth, for the produce stored in warehouses is preserved
and protected against rodents, insects and pests, and against the ill-effect of
moisture and dampness.

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2. NEED OF WAREHOUSE

1. Seasonal Production :
You know that agricultural commodities are harvested during certain
season, 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.

2. Seasonal Demand :
There are certain goods, which are demanded seasonally, like woollen
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.

3. 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.

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4. Continuous Production :
Continuous production of goods in factories requires adequate supply
raw materials. So there is a need to keep sufficient quantity of stock
of raw materials in the warehouse to ensure continuous production .

5. 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 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 lead to
price stabilization.

6. Large-scale Production :
In case of manufactured goods, now-a-days 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.

3. ADVANTAGES OF WAREHOUSE

1. Storage services provide opportunity to expand :

A business products may be selling well, but the buying cycle could
possibly be stymied by lack of room for mass production. Expansion is
inhibited

and

revenue

cannot

reach

full

potential

due

to

lack

of

warehousing. Outsourcing solves this problem.

A popular product could be produced in full force and stored in public

warehousing. Your supply can now meet the demand of your customers.

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2. Warehousing distribution gives you a chance to focus on your

business :
Businesses need other services. This fact leads the company to make a
decision to either build an extension in-house or to outsource for their
desired service. Larger companies have the advantage of building in-house
more easily; they often have the human resources and the money readily
available. It is not so easy for smaller businesses.

If smaller companies start to turn their focus to peripheral subjects, they

begin to lose focus on their core business matters. Distractions can impede
the growth of a smaller business and give their competitors time to surpass
them.

Outsourcing for warehouse services (as with other services) affords the
smaller business time to remain focused on their main objectives.

3. Storage services can save you money on shipping :

Public warehousing vendors are located all over the country. It may be
easiest to choose a warehouse located around your largest customer base.
Many businesses select a contract warehouse in the middle of the country.
This saves money on shipping coast to coast and from southern and
northern poles of the country.
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4. Public warehousing does a lot more than store your goods:

Warehouses conduct a variety of tasks. They address ancillary tasks such as
picking, packing, shipping etc. You can devote less concern about the
particularities of your business. Imagine a warehouse receiving your goods,
taking your orders, packing it for shipment, and then shipping it out to the
customer! The sundry details of your business will be handled by
professionals with experience.

5. Simplicity :
Centralized warehouses simplify inventory management. Customers will
know how long orders take to ship regardless of what they order.
Company-wide inventory is also easier to track, with a single facility to
examine rather than multiple inventory reports that you must compile,
compounding the chance for error. Finally, you'll be able to implement new
inventory

management

policies

at

the

centralized

warehouse

without

coordinating efforts throughout multiple warehouses in your supply chain.

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CHAPTER 4
WAREHOUSE FUNTIONS AND TYPES
1. FUNCTIONS OF WAREHOUSE
The warehousing scheme in India is an integrated scheme of scientific storage,
rural credit, price stabilization, and market intelligence and is intended to
supplement the efforts of co-operative institutions. The important functions of
warehouses are:

1. Price stabilisation :
Storing in a warehouse assures food availability safety to the public and
better storage for farmers. Farmers are protected from low price due to
glut in the market. They can sell later on whenever the price is favourable
to them and till then their commodity is safe. By releasing goods in
instalments in a staggered manner, the goods prices are kept in a range
without much fluctuation.

2. Scientific storage :
The system followed in large size warehouses is unique. Here, a large
bulk of agricultural commodities may be stored. The product is protected
against quantitative and qualitative losses by the use of such methods of
preservation as are necessary.
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3. Market intelligence :
The warehouse offices keep informing the stock holder about prices of
various items on a weekly basis. This enables the farmer to know when to
sell the goods. By this possibility of discount, sale is avoided. Since there
is no risk in keeping goods in warehouses and as bank advance is
received, the farmer can afford to wait and sell his produce at an
appropriate time.

4. Financing :
Warehouses meet the financial needs of the person who stores the product.
Nationalised banks advance credit on the security of the warehouse receipt
issued for the stored products to the extent of 70 to 80 per cent of their
value.

5. Receiving Goods :
The warehouse should receive and accept responsibility of the goods that
are delivered to it.

6. Identifying

Goods :

The goods that are received should be identified as per place, label, colour
code.
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7. Sorting Goods :
Sort out the received goods for appropriate storage area. The goods that
are going to be used mostly be sorted out to store at the place through
where it is easily available.

8. Holding Goods :
The goods that are received should be given security against pilferage and
reduction in value, it must stored in such a place that it does not get
damaged.

2. TYPES OF WAREHOUSES

Warehouses may be classified into different category on the following

basis:

TYPES OF WAREHOUSE

Public Warehouse
On the basis of
ownership

Private Warehouse
Bonded Warehouse
Warehouse for special
commodity

On the basis of types of

commodities stored

Refrigerated
Warehouse
General Warehouse

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I. On the basis of ownership

1. Public warehouses :
These are government owned warehouses where the public or farmers can store
their produce. The space-wise, bag-wise storage rates are fixed and levied
accordingly. Co-operative warehouses are also working in a similar way but the
storage offer is open to its members only. These are common storage places and
very commonly used by the rural people.

ADVANTAGES OF PUBLIC WAREHOUSE

1. Flexibility:
One of the primary advantages of a public warehouse lies in the
flexibility of the resources it offers, including space labour and
equipment. The public has a constant need for variable space, labour
and equipment, depending on the business cycle. Public warehouses
allow your business to take up more or less space as needed.
Manufacturers also have the flexibility of adding or decreasing space,
equipment and human resources requirements.

2. Cost-Effective :
Because you only pay for the space you need, you save capital. You're
renting space in a public warehouse instead of acquiring and operating
a distribution centre that requires a building fitted with expensive
features and technology to manage your chain supply and distribution.
You can redirect the money you save toward other areas that can boost
your

company's

profitability,

including

research

and

development,

marketing and human resource development.

3. Proximity to the Customers :

Public

warehouses

are

regionally

based.

Renting

storage

in

the

customer's locality lowers the time allotted for delivery, resulting in

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improved customer service and, in turn, customer loyalty. Most suppliers

have multiple distribution networks to accommodate a diversity of
requirements for various customer groups. Using public warehouses,
which are regionally based, allows you to deploy a strategy that
combines company- and public-operated storage facilities near the
locations of the customers.

4. Dedicated Resources :
The business of a public warehouses is wholly based on providing
logistical services. Thus, all the resources are entirely dedicated to
providing the best possible services to the client. Many warehouses are
constantly evolving by investing in latest technology and training staff
to keep up with latest trends in supply chain management and attract
more customers.

2. Private warehouses :
These are owned by individuals, large business houses or wholesalers for the
storage of their own stocks. They also store the products of others.

ADVANTANGES OF PRIVATE WAREHOUSE

1. Degree of control :

From

inventory

equipment,

control,

optimum

internal material

flow,

space

utilization,

handling routines,

maintenance

and

supervision,

and

associated cost control, the firm has a direct control and clear visibility for
the product until the customer takes possession or delivery. Thus, this will
allow the firm to integrate the warehousing function more easily into its
total logistics system.

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2. Flexibility :

With more control, there is greater flexibility of designing and operating

the w/h to suit the needs of its customers and the characteristics of the
products. This means that companies who have specialized handling for its
products will not find public warehousing viable. In addition, the w/h can
also be modified through expansion or renovation to facilitate product
changes, which is not possible on a public warehouse.

3. Less costly in the Long term :

Operating cost can be 15 to 25% lower if the company achieves sufficient

throughout or utilization. This is possible if the firm achieves at least 75%
utilization, if not, it would be best to use public warehousing.

4. Better use of Human resources :

There is greater care in handling and storage when the firms own
workforce operate the warehouse. This means that the company can utilize
the expertise of its technical specialists.

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5. Tax benefits :

There are depreciation allowances on buildings and equipment reduce

tax payable

6. Intangible benefits :

When a firm distributes its products through a private w/h, it gives the
customer a sense of permanence and continuity of business operations.
The customer perceives the company as a stable, dependable, and
lasting supplier of products.

3. Bonded warehouses :

This is commonly referred to as dealing in import clearance at seaports

and airports. This facility is provided by the government since all are not
in a position immediately pay the customs duty and clear the imported
goods. Until they clear the duty, the provision to store is made in bonded
warehouses. This also enables the buyer to clear in lots if finance is
constraint to clear full goods at a time. The license is issued to the
warehouse by the customs office that the goods will be cleared only after
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collecting the customs duty. The rules and procedures are to be followed
strictly for taking out the goods. However, the warehouse officials have to
face queries and questions of the customs officials every day. The
following services are rendered by the bonded warehouses :

The importer of goods is saved from the botheration of paying customs

duty all at one time because he can take delivery of the goods in
parts.
The importer has the choice to delay the collection and also to collect
in small quantities.
Through

this

process,

re-export

of

goods

becomes

possible.

The

importer may take delivery of the goods without paying the customs
duty if they are to be re-exported.
He is thus, saved from the botheration of first making the payment of
customs duties on imported goods and then getting a refund on re-exported
goods.

II. On the basis of types of commodities stored

Warehouse for special commodities :

Some items are so special that it is impracticable to combine the storage

with others. They need special protection from fire like cotton bales,
tobacco, oil products, woollen, and cotton materials. Warehousing has to be
protected from fire and there should be no scope to spread fire.

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 Refrigerated warehouse :

These are the kinds of warehouses where temperature is maintained as per

requirements and are meant for such perishable commodities as vegetables,
fruits, fish, eggs, and meat. The temperature in these warehouses is
maintained below 30 to 50F or even less, so that the product may not
get spoiled by high atmospheric temperature.

General warehouses :
These are ordinary warehouses used for storage of most of food grains,
and fertilizers etc. in constructing such warehouses no commodity-specific
requirement is kept in view.

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CHAPTER 5

WAREHOUSE OPERATIONS
A warehouse reorganizes and repackages product. Product typically arrives packaged
on a larger scale and leaves packaged on a smaller scale. In other words, an
important function of this warehouse is to break down large chunks of product and
redistribute it in smaller quantities. For example, some stock keeping units may arrive
from the vendor or manufacturer in pallet quantities but be shipped out to customers
in case quantities; other stock keeping units may arrive as cases but be shipped out
as eaches; and some very fast moving stock keeping units may arrive as pallets and
be shipped out as eaches. In such an environment the downstream warehouse
operations are generally more labour-intensive. This is still more true when product is
handled as eaches. In general, the smaller the handling unit, the greater the handling
cost. It can require much labour to move 10,000 boxes of paper clips if each box
must be handled separately, as they may when, for example, stocking retail stores.
Much less labour is required to handle those 10,000 boxes if they are packaged into
cases of 48 boxes; and still less labour if those cases are stacked 24 to a pallet.

Even though warehouses can serve quite different ends, most share the same general
pattern of material flow. Essentially, they receive bulk shipments, stage them for
quick retrieval; then, in response to customer requests, retrieve and sort skus, and
ship them out to customers.

The reorganization of product takes place through the following physical

processes
1. Receiving
2. Put-away
3. Outbound processes
4. Order-picking
5. Checking, packing, shipping

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Receive
Put Away

Ship

Pick
Pack

Storage

Order-picking is the most labour-intensive activity in most warehouses.

A general rule is that product should, as much as possible, flow continuously through
this sequence of processes. Each time it is put down means that it must be picked
up again sometime later, which is double-handling. When such double-handling is
summed over all the tens-of-thousands of skus and hundreds-of-thousands of pieces
and/or cases in a warehouse, the cost can be considerable. Another rule is that
product should be scanned at all key decision points to give total visibility of
assets, which enables quick and accurate response to customer demand.

1. Receiving :

Receiving may begin with advance notification of the arrival of goods. This
allows the

warehouse

to

schedule

receipt

and

unloading

to

co-ordinate

efficiently with other activities within the warehouse. It is not unusual for
warehouses to schedule trucks to within 30-minute time windows.

Once the product has arrived, it is unloaded and possibly staged for put away.
It is likely to be scanned to register its arrival so that ownership is assumed,
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payments dispatched, and so that it is known to be available to fulfil customer

demand. Product will be inspected and any exceptions noted, such as damage,
incorrect counts, wrong descriptions, and so on. Product typically arrives in
larger units, such as pallets, from upstream and so labor requirements are not
usually great. (However, mixed pallets may need to be broken out into
separate cartons; and loose cartons may need to be palletized for storage.) Allin-all, receiving accounts for only about 10% of operating costs in a typical
distribution centre and RFID is expected to further reduce this

2. Put-away :

Before product can be put away, an appropriate storage location must be

determined. This is very important because where you store the product
determines to a large extent how quickly and at what cost you later retrieve it
for a customer. This requires managing a second inventory, not of product, but
of storage locations. You must know at all times what storage locations are
available, how large they are, how much weight they can bear, and so on.

When product is put away, the storage location should also be scanned to
record where the product has been placed. This information will subsequently
be used to construct efficient pick-lists to guide the order-pickers in retrieving
the product for customers.

Put-away can require a fair amount of labor because product may need to be
moved considerable distance to its storage location. Put-away typically accounts
for about 15% of warehouse operating expenses

3. Order Picking :

On receipt of a customer order the warehouse must perform checks such as

verifying that inventory is available to ship. Then the warehouse must produce
pick lists to guide the order-picking. Finally, it must produce any necessary
shipping documentation and schedule the order-picking and shipping. These
activities are typically accomplished by a warehouse management system, a
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large software system that co-ordinates the activities of the warehouse. This is
all part of the support to expedite the sending of the product to the customer.
Order-picking typically accounts for about 55% of warehouse operating costs;
and order-picking itself may be further broken like this

Activity %

Order-picking time

Traveling

55%

Searching

15%

Extracting

10%

Paperwork and other activities

20%

Notice that traveling comprises the greatest part of the expense of orderpicking, which is itself the most expensive part of warehouse operating
expenses. Much of the design of the order-picking process is directed to
reducing this unproductive time.

The outbound processes of the warehouse are initiated by receipt of a

customer order, which may be thought of as a shopping list. Each entry on
the list is referred to as an order-line and typically consists of the item and
quantity requested. The warehouse management system (WMS) then checks the
order against available inventory and identifies any shortages. In addition, the
WMS may reorganize the list to match the layout and operations of the
warehouse for greater efficiency. For example, if a customer has ordered 15 of
a particular item, the warehouse management system (WMS) may check to see
how the item is packaged. If 12 of the item comprise a carton, the WMS may
convert the order-line for 15 eaches to two pick-lines, one for 1 carton and
the other for 3 eaches. In many warehouses, each-picking and carton-picking
are separate processes, and the pick-lines are diverted appropriately.

4. Checking and packing :

Packing can be labor-intensive because each piece of a customer order must be

handled; but there is little walking. And because each piece will be handled,
this is a convenient time to check that the customer order is complete and
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accurate. Order accuracy is a key measure of service to the customer, which

is, in turn, that on which most businesses compete.

5. Shipping :

Shipping generally handles larger units than picking, because packing has
consolidated the items into fewer containers (cases, pallets). Consequently, there
is still less labor here. There may be some walking if product is staged before
being loaded into freight carriers.

Product is likely to be staged if it must be loaded in reverse order of delivery

or if shipping long distances, when one must work hard to completely fill each
trailer. Staging freight creates more work because staged freight must be
double-handled. The trailer is likely to be scanned here to register its departure
from the warehouse. In addition, an inventory update may be sent to the
customer.

LOCATION CONSIDERATIONS :
While deciding the location following factors are to be considered keeping potential
locations in mind.

1. Cost of distribution from warehouse to market area.

2. Availability of transportation & 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. Restrictions associated with warehouses. In some areas some type of products
are not permitted to be stored
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12. Future expansion. Whether the location is able to match organisations plan to
expand in future as per their strategy.
13. Cost of land.
14. Topography and soil condition: if the warehouse needs special and heavy
equipment for material handling and if the incoming loads are heavy then frim
soil and flat topography are ideal. If these conditions are not available, large
amount of money is required to be invested.
15. Possibility of title change to the land: Are the title change formalities straight
forward? E.g. In some situations this is complex, like title to MIDC land.

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CHAPTER 6

WAREHOUSE MANAGEMENT SYSTEM

A large modern distribution centre might extend over 600,000 square feet (60,000
square meters), contain a hundred thousand SKUs, and have hundreds of people
working to gather and consolidate thousands of customer orders in time to meet daily
shipping schedules.

How can such coordination be achieved?

A Warehouse Management System (WMS) is a complex software package that helps
manage inventory, storage locations, and the workforce, to ensure that customer orders
are picked quickly, packed, and shipped. A typical WMS knows about every item in
the warehouse, its physical dimensions, how it is packed by the vendor, all the
storage locations in the warehouse, and their addresses and physical dimensions. With
this knowledge, the WMS orchestrates the flow of people, machines, and product. The
WMS receives customer orders and transforms them to pick lists organized for easy
retrieval: In customer orders items appear in arbitrary sequence, just like the grocery
shopping list one might casually prepare during the week. When it is time to shop, it
may be worthwhile to reorganize entries for convenience (all the dairy items together,
all the fresh fruits and vegetables, and so on).

Finally, the WMS tracks the assembly of each customer order. The scope of WMS is
growing, as it acquires new responsibilities, such inducting newly arrived product and
allocating available locations, coordinating the assembly of customer orders to meet
shipping schedules, tracking productivity of workers, and so on. It may even talk to
other specialized

software such

as

Yard Management

Systems

(YMS),

which

coordinates the movement of full and empty trailers in the yard (a sort of warehouse
of trailers). Finally, the WMS may provide summary data to an even larger Supply
Chain Management System (SCMS) that plans and coordinates inventory levels and
transportation from manufacturer to customer. It is thanks to the control afforded by
software systems such as WMS that the pace of the supply chain has accelerated so
much during the last 20 years. Not so very long ago any customer order was
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accompanied by the warning Please allow six to eight weeks for delivery. No one
would put up with such service today. Precisely controlled product moves faster,
which means that customers get better service, and with less inventory in the system.

1. Receiving and shipping :

The most fundamental capability of a WMS is to record receipt of inventory
into the warehouse and to register its shipment out. This is fundamental
because it drives essential financial transactions: receipt drives the paying of
bills to suppliers upstream; and shipping drives the sending of invoices
downstream to the consignee. This is the base from which modern, complex
WMSs have grown

2. Stock locator system :

The next significant increase in functionality is to add a stock locator system.

This is essentially the ability to manage an inventory of storage locations in
addition to an inventory of product. With this capability a software system can
do more than trigger financial transactions but can finally support warehouse
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operations by directing warehouse activities to/from storage locations. In

addition, a WMS should also track the inventory of storage locations in the
warehouse. A good WMS will track every place that product can be, down to
and including the forks of individual forklift trucks. The ability to manage the
inventory of storage locations makes possible the most fundamental capability
of a WMS, which is the stock locator system, which supports directed putaway and directed picking. To track warehouse activities in real-time, the
database must support transaction processing, which means that the database
can maintain its integrity even though being updated simultaneously from
multiple sources (purchasing, receiving, picking, shipping, etc.).

3. Supply Chain Execution Systems :

Warehouse Management Systems are extending their functionality out along the
supply chain, both upstream and downstream, to include features that support
collaboration. In this they are increasingly competing with enterprise systems,
which are trying to build specialization in warehouse management. WMSs
have an advantage in that they are already connected to financial systems and
already hold information that is important to supply chain visibility and
execution systems. The enterprise systems have advantages where they can
grow out of a manufacturing enterprise, especially if the manufactured product
is an important, high-value item. As WMSs grow out along the supply chain
it is natural that the WMS providers become global, pulled by the supply
chains they hope to manage. The global WMS providers have a big advantage
when selling to multinational companies, who can then standardize their WMS
operations around the world. At the time of this writing, there are hundreds if
not thousands of WMS vendors in the world but only a few companies with
significant global presence.

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CHAPTER 7

STORAGE AND HANDLING EQUIPMENT

There are many types of special equipment that have been designed to reduce labor
costs and/or increase space utilization. Storage and retrieval equipment can reduce
labor costs by

Allowing many skus to be on the pick face, which increases pick density and
so reduces travel per pick, which means more picks per person-hour

Facilitating efcient picking and/or restocking by making the product easier to

handle (for example, by presenting it at a convenient height and orientation).

Moving product from receiving to storage; or from storage to shipping. Storage

equipment can increase space utilization by

Partitioning space into sub regions (bays, shelves) that can be loaded with
similarly- sized skus. This enables denser packing and helps make materialhandling processes uniform.

Making it possible to store product high, where, up to about 30 feet (10

meters), space is relatively inexpensive. (Above this height, the building
requires additional structural elements.)

1. Storage equipment :
By storage mode we mean a region of storage or a piece of equipment for
which the costs to pick from any location are all approximately equal and the
costs to restock any location are all approximately equal. Common storage
modes include pallet rack for bulk storage, carton ow rack for high-volume
picking, and (static) shelving for slower, lower-volume picking.

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Stringer length

Deckboard length

Most prevalent in

1219 x 1016 mm

(48:00 _ 40:00 in) North America

1000 x 1200 mm

(39:37 _ 47:24 in) Europe, Asia

1165 x 1165 mm

(44:88 _ 44:88 in) Australia

1067 x 1067 mm

(42:00 _ 42:00 in)

1100 x 1100 mm

(43:30 _ 43:30 in) Asia

800 x 1200 mm

(31:50 _ 47:24 in)

North America, Europe, Asia

Europe

Figure 1

The six standard sizes of pallet, from ISO Standard 6780: Flat pallets for
intercontinental materials handling Principal dimensions and tolerances. (The
stringers are the supports underneath that are spanned by the Deckboards.)

PALLET STORAGE :
Within the warehouse the

largest standardized material-handling unit is

generally the pallet, which is just a rigid base on which cartons can be
stacked. Most are made of wood, but some are made of durable plastic.
Pallets are available in a range of qualities and prices. In general order of
quality and price, they include string pallets, block pallets, and perimeter base
pallets. Any pallet expected to be handled by automation will generally have
to be of high quality. As supply chains get longer, there is an incentive to use
higher quality pallets. There are several standards, the most important of which
Of these, the most common pallet in North America is the 1219 X 1016 mm
(48 X 40 inch) pallet, also known as the Grocery Manufacturers Association or
GMA pallet. (The 1000 X 1200 mm pallet is generally interchangeable with
the GMA pallet.)

Some pallets are designed with special uses in mind. For example, the
Australian pallet was designed to be space efcient in Australian railroad cars;
and the EURO pallet was designed to t through doorways. Neither is very
space efcient in ISO standard shipping containers, while the GMA pallet ts
well.

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A 2-way pallet allows forks from a standard forklift or pallet jack to be

inserted on either of the 40 inch sides. A 4-way pallet also has slots on the
48 inch sides by which it can be lifted by fork lift. The 4-way pallets are
slightly more expensive, but the extra exibility in handling can save both
time and space. Less manoeuvring is required to pick up such a pallet, and it
can be oriented in either direction even in conned space.
There is no standard height to which a pallet may be loaded.

The simplest way of storing palletized product is oor storage, which is

typically arranged in lanes. The depth of a lane is the number of pallets
stored back-to-back away from the pick aisle. The height of a lane is normally
measured as the maximum number of pallets that can be stacked one on top
of each other, which is determined by pallet weight, fragility, number of
cartons per pallet, and so on. Note that the entire footprint of a lane is
reserved for a skus if any part of the lane is currently storing a pallet. This
rule is almost always applied, since if more than one skus was stored in a
lane, some pallets may be double-handled during retrieval, which could offset
any space savings. Also, it becomes harder to keep track of where product is
stored. For similar reasons, each column is devoted to a single skus.

This loss of space is called honey-combing.

Pallet rack is used for bulk storage and to support full-case picking. Pallet
length and width are reasonably uniform and pallet rack provides appropriately
sized slots. The height of slots can be adjusted, however, as pallet loads can
vary in height.

The advantage of rack storage is that each level of the rack is independently
supported, thus providing much greater access to the loads, and possibly
permitting greater stack height that might be possible in oor storage.

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The most common types of rack storage are:

1. Selective rack or single-deep rack :

Selective rack or single-deep rack

stores pallets one deep, as in Figure 1. Due

to rack supports each pallet is independently accessible, and so any skus can
be retrieved from any pallet location at any level of the rack. This gives
complete freedom to retrieve any individual pallet but requires relatively more
aisle space to access the pallets.

2. Double-deep rack :
Double-deep rack essentially consists of two single-deep racks placed one
behind the other, and so pallets are stored two deep. Due to rack supports
each 2-deep lane is independently accessible, and so any skus can be stored in
any lane at any level of the rack. To avoid double-handling, it is usual that
each lane be lled with a single skus, which means that some pallet locations
will be unoccupied whenever some skus is present in an odd number of
pallets. Another disadvantage of deep lanes is that slightly more work is
required to store and retrieve product. However, deep lanes have the advantage
of requiring fewer aisles to access the pallets, which means that the warehouse
can hold more product. A special truck is required to reach past the rst
pallet position.

3. Push-back rack :
This may be imagined to be an extension of double deep rack to 35 pallet
positions, but to make the interior positions accessible, the rack in each lane
pulls out like a drawer. This means that each lane (at any level) is
independently accessible. Drive-In or drive-through rack allows a lift truck to
drive within the rack frame to access the interior loads; but, again to avoid
double-handling, all the levels of each lane must be devoted to a single skus.
With drive-in rack the put-away and retrieval functions are performed from the
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same aisle. With drive-through rack the pallets enter from one end of the lane
and leave from the other, so that product can be moved according to a policy
of First-In-First-Out (FIFO). Drive in/through rack may be thought of as oorstorage for product that is not otherwise stackable. It does not enable the
exibility of access that other types of pallet rack achieve. In addition, there
are some concerns; for example, in this rack each pallet is supported only by
the edges, which requires that the pallets be strong. In addition, it requires a
more skilled forklift driver to navigate within the lane, and such a person will
be more expensive.

4. Pallet ow rack :
Pallet ow rack

is deep lane rack in which the shelving is slanted and lines

with rollers, so that when a pallet is removed, gravity pulls the remainder to
the front. This enables pallets to be put-away at one side and retrieved from
the other, which prevents storage and retrieval operations from interfering with
each other

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 CONVEYORS
Main points:

1.

Conveyors change the economics of travel: Storage locations close to the

conveyor are, in terms of labor, close to shipping.

2.

Conveyors partition the warehouse into zones. The track restricts movement of
workers and product because it is hard to cross; and so create problems of
balancing work among zones. To alleviate this, conveyors are run up high
whenever possible.

3.

Issues: How many products are conveyable? What is capacity, especially surge
capacity, of conveyor?

4.

Guidelines for layout: Store conveyable product far from shipping because it
can travel for free. Reserve locations that are physically close to shipping
for non-conveyable because they will have to be carried (for example, fork
lift).

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 SORTATION EQUIPMENT
Sortation equipment is an expensive form of automation that is typically
integrated with a conveyor system and installed downstream from picking. It is
used mostly when picking cartons, because they tend to be fairly uniform in
dimension and weight.

A sortation system enables pick lists to be constructed purely for efciency.

For example, if twenty customers all want skus A, it might make sense to
send one order

picker to pick all the requested skus A in one trip and rely

on the sortation system to separate it all out for the customers.

Naturally this requires scanning technologies (bar codes or RFID) and

signicant IT support for real-time control.

There are many different types of sorters, depending on required speeds and
types of material to be handled. One common sorter is a push sorter, which
simply pushes a passing carton off the main conveyor and onto an alternative
path, such as onto a spur at which an order collects. A tilt-tray sorter is used
for material that cannot be easily pushed but can slide, such as apparel. Also,
a tilt-tray sorter does not need to know the orientation of the item it carries,
while a push sorter typically must know the size and orientation.

Tilt trays serve as both conveyor and sorter; but they must circulate and so
must be built as loop. In contrast, a belt conveyor can be run from one point
to another and so can be cheaper.

It is a challenge to design an effective sortation system because it must handle

a range of sizes, shapes, and textures; and it must have sufcient capacity as
well as the ability to handle surges. Another important design issue is to
decide how many spurs are required, because this limits the number of orders
that can be picked at a time. There are also challenges in deciding how orders

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should be assigned to spurs and how recirculation should be managed (exit the
system? Recirculate? divert into a separate recirculation lane?).

As with all automation, there is an element of risk: A broken sorter can idle
the entire warehouse.

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CHAPTER 8
WAREHOUSING STRATEGY

As would be expected, many firms utilize a combination of private, public, and

contract facilities. A private or contract facility may be used to cover basic yearround requirements, while public facilities are used to handle peak seasons. In
other situations, central warehouses maybe private, while market area or field
warehouses are public facilities. A contract facility could be used in either case.
Full warehouse utilization throughout a year is a remote possibility. As a planning
rule, a warehouse designed for full capacity utilization will be in fact be fully
utilized between 75 and 85 percent of the time. Thus from 15 to 25 percent of
the time, the space needed to meet peak requirements is not utilized. In such
situation, it may be more efficient to build private facilities to cover the 75%
requirement and use public facilities to accommodate peak demand.
The second form of combined public warehousing may result from market
requirements. A firm may find that private warehousing is justified at specific
locations on the basic of distribution volume. In other markets, public facilities
may be the least cost option. In logistical system design the objective is to
determine whatever combination of warehouses strategies most economically meets
customer service objectives.
An integrated warehouse strategy focuses on two questions. The first concerns
how many warehouses should be employed. The second question concerns which
warehouse types should be used to meet market requirements. For many firms,
the answer is the combination that can be differentiated by customer and product.
Specifically, some customer groups may be served best from a private warehouse,
while a public warehouse may be appropriate for others.

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Private

Contract

Public

Present synergies

Industry synergies

Operating flexibility

Location flexibility

Scale of economies

1. QUALITATIVE DECISION FACTORS :

The figure presents a strategy continuum ranging from private to contract to
public. Qualitative considerations, listed on the vertical dimensions, are (1)
presence synergies, (2) industry synergies, (3) operating flexibility (4) location
flexibility and, (5) Scale economies. Each consideration and its rationale are
discussed.
1. Presence synergies:

Presence synergies refer to the marketing benefits of having inventory located

nearby in a building that is clearly affiliated with the enterprise (e.g., the
building has the firms name on the door). It is widely thought that customers
are more comfortable when suppliers maintain inventory in nearby locations.
Products and customers that benefit from local presence should be served from
private or contract facilities.

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2. Industry synergies :

Industry synergies refer to the operating benefits of collocating with another

firm serving the same industry. For example, firms in the grocery business
often receive substantial benefits when they share public warehouse facilities
with other suppliers serving the same industry. Reduced transportation cost is
the major benefit since joint use of same public warehouse allows frequent
delivery of consolidated loads from multiple suppliers. Public and contract
warehousing increases the potential for industry synergy.

3. Operating flexibility:

Operating flexibility refers to the ability to adjust internal policies and

procedure to meet product and customer needs. Since private warehouses
operate under the complete control of the enterprise, they are usually perceived
to demonstrate more operating flexibility. On the other hand, a public
warehouse often employs policy and procedures that are consistent across its
client to minimize operating confusion. While conventional wisdom would
suggest that private warehouses can offer more operating flexibility, there are
many public

and contract warehouse operations that have demonstrated

substantial flexibility and responsiveness.

4. Location flexibly:

Location flexibly refers to the ability to quick adjust warehouse location and
number in accordance with seasonal or permanent demand changes. For
example, in-season demand for agricultural chemicals requires that warehouses
to be located near markets that allow customer pickup. Outside the growing
season, however, these local warehouses are unnecessary. Thus, the desirable
strategy is to be able to open and close local facilities seasonally. Public and
contract

warehouses

offer

the

location

flexibility

to

accomplish

such

requirements.
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5. Scale economies:

Scale economies refer to the ability to reduce material handling and storage
cost through application of advanced technologies. High volume warehouse
generally have a greater opportunity to achieve these benefits because they can
spread technologys fixed cost over larger volumes. In addition, capital
investment in mechanized or automated equipment and information technology
can reduce direct variable cost. Public and contract warehouses are generally
perceived to offer better scale economies since they are able to design
operations and facilities to meet higher volumes of multiple clients.

2. INVENTORY AT MULTIPLE LOCATIONS THE SQUARE

ROOT LAW (SRL) :
Currently popular approach is to consolidate inventories into fewer stoking
locations in order to reduce aggregate inventories in their associated costs. The
Square Root Law helps to determine the extent to which inventories may
reduce through such a strategy assuming that 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
locations. In general, grater the number of stocking locations, grater is the
amount 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 the application of the Square Root Law.

The inventory level is normally proportional to the number of the number of

warehouses. The square root law states that the total safety stock in a future
number of facilities can be approximated by multiplying the total amount of
inventory at existing facilities by the square root of the numbers of future
facilities divided by the number of existing facilities.
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X2 = (X1)

N2
N1

Where,
N1 = Number of existing facilities
N2 =Number of future facilities
X1 =Total inventory in existing facilities
X2 = Total inventory in future facilities

Example: Consider a company that presently distributes 40,000 units of product its
customers from a total of eight facilities located throughout the country. The
company is evaluating an opportunity to consolidate its operations into two
facilities. Using the square root law, the total amount of inventory in two facilities
is computed as follows:

INVENTORY AT 2 FACILITIES WOULD BE (X2) = (40,000)

2
8

= (40,000) (0.5)
= 20,000 UNITS
Thus the two future facilities would carry a total inventory of 20,000 units. If the
company designed them to be of equal size, and if market demand was equal for
the geographic areas, each of these distributions would carry one-half of this total,
or 10,000 units.

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Conversely, if for some reason the company considered increasing the number of
distribution centres from 8 to 32, total inventory needs would double from 40,000
to 80,000 units.

ASSUMPTIONS :
Although the square root formula is simply stated, the model is based
on reasonable assumptions:

Inventory transfers between stocking locations at same level are

not common practice;

Lead times do not vary, thus inventory centralization is not

affected by supply uncertainties;

Customer service levels as measured by inventory availability, is

constant regardless of the number of stocking locations;

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Demand at each location is normally distributed.

Page 39

CHAPTER 9

WAREHOUSE DESIGN

WHY DO WE NEED LAYOUT DESIGN?

The goal of warehouse layout design is to optimize your warehousing functions and
achieve maximum efficiency and space utilization.

A warehouse is typically divided into areas to support your everyday processes. These
areas include: reserve storage, forward pick, cross docking, shipping, receiving,
assembly/special handling lines, and quality/inspection area.

Designing a new facility starts with analysing your current and projected data on the
activities in each of these areas, including the receiving, shipping and inventory
levels. This data should be supported by other considerations such as process flows,
material handling equipment, type and styles of racking equipment, special handling
requirements, and personnel.

When considering the layout and operation of any warehouse system, there are
fundamental principles that embody a general philosophy of good practice. The principles
are:
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1) Using the most suitable unit load

2) Making the best use of space
3) Minimizing movement
4) Controlling movement and location
5) Providing safe, secure and environmentally sound

conditions

6) Maintaining at minimum overall operating cost

Successful warehouse layouts must adhere to the principles, regardless of material

being stored to:

1. Maximize the use of space

2. Maximize the use of equipment
3. Maximize the use of labor
4. Maximize accessibility to all items
5. Maximize protection of all items
Although the objectives of warehouse layout and operation are easily recognized,
warehouse layout problems are often complicated by large varieties of products
needing storage, varying areas of required storage space and drastic fluctuations in
product demand.

Therefore, an effective layout design of the warehouse is required to address these

problems and accomplish the objectives.

SPACE REQUIREMENTS PLANNING

The first step in laying out a warehouse is to determine the overall space
requirements for all warehouse processes. The space requirements for each process
should be computed and summarized to estimate the overall building requirements.
Effective space utilization makes good use of total building volume and not merely the floor
area.

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For example, when calculating the space required for the receiving and shipping
staging area, the number of receiving and shipping dock doors and the turnaround
time for each dock would be considered. A common practice is to allocate enough
staging space behind each dock door to accommodate a truckloads worth of material.
Some other processes that would be considered in the space requirement planning
include case picking, pallet storage, broken case picking, packing and unitizing,
customizing, cross docking and more.

Warehouses should also be designed based on current and future needs to:

Facilitate changes in business/agency growth, and size/population of office and

warehouse spaces within the building. Warehouse space should be easily
adapted to new functions such as office (on ground or upper levels), computer
centres, or light industrial/fabrication.

Accommodate need for future loading docks, truck space, and car parking
spaces if space configuration changes through effective site design.

Address material handling technologies and business practice, such as "just-intime" storage, which have fundamentally changed operation of warehouses and
distribution centres, and will continue to do so.

Include roof design with built-in extra structural capacity to handle addition of
future rooftop equipment.

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Be designed with fire protection capacity to accommodate storage of materials

with a greater fire hazard, especially needed with high plastic product content
or packaging, and plastic shrink-wrapped pallets.

It should also be able to maximize utilization of space while providing

adequate circulation paths for personnel and material handling equipment such
as forklift trucks. We should also use higher bays to take advantage of height
allowances in the space.

Alternative material handling methods will determine other building aspects,

such as aisle widths, lighting design, need for mezzanine space, fire protection,
and egress design. Businesses will often use different methods of storage
handling simultaneously for different products.

FACTORS AFFECTING WAREHOUSE LAYOUT & PLANNING

Outside Factors :

Various external factors influence the design and layout of a warehouse operation.
These factors have to be taken into considerations to achieve an optimum overall
system.

Size & configuration of site:

Must be adequate to accommodate the required equipments

Site access:
Must be adequate for the types of vehicle and volume of traffic using that
particular site

Local authority plans:

The proposed warehouse can be greatly affected by the government
development plan

Site details:
Characteristics of the facilities found in the site such as drainage and ground.

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Financial considerations:
Consider about the rents, costs of ownership, investments grants

Building factors:
Existing building to be used as a warehouse.

Inside Factors

These factors has a dominant influence on how effectively a warehouse can be

operated.

Flow of goods in the warehouse: U flow or through flow

Movement of people and equipments

Access to stock and minimize congestion

Identification of stock and codes

Stock location, rotation( FIFO)

Stock checking requirements

Stock replenishment

Handling of goods in and out of the warehouse

Supervision, safety, stock security

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Warehouse aisles and gangways need to be properly design in order to achieve one
of the warehouse objectives, which is maximizing effective use of space. The widths
in between should be adequate enough for movement of people and equipment. It is
ideal to have separate doors for people on foot and for forklift trucks.
Some areas should also be set aside for other warehouse activities. These include:

Areas for loading and unloading vehicle

Staging or temporary storage areas

Office space, washroom and lunch rooms

Area for repacking, labelling, marking

Area for equipment storage and maintenance hazardous or high-value items

USEFULNESS AND CONSTRAINTS OF LAYOUT DESIGN

Usefulness of Layout Design

1. An effective warehouse layout design can help to optimize the efficiency and
space utilization.

With the 5 main areas of operations, goods can move in swiftly from the
unloading area, into the main storage; picker can also pick goods from the
picking area. Congestions are minimized and these help to increase the
efficiency of the different tasks in the warehouse.

By storing goods with a plan to locate them neatly; more space can be
utilized; either horizontally or vertically.

2. There would also be higher labor efficiency and lesser errors.

A layout plan would minimize the movement of the employees and the time
used for moving can be used to do other operations or work; thus increasing
labor efficiency.

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A neatly planned warehouse would have lesser errors such as picking the
wrong item or storing the wrong goods in wrong place.

3. Safety and security of a warehouse would most likely be enhanced through an

effective layout because employees would know where the walking spaces are
and no goods would be left lying around.

Constraints of layout design

Space Constraint :

It is very important that when you plan the design layout of the warehouse,
you need to think how to make it that the use of space is at the optimum
level. It is because that by making the best use of space, you will be able to
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have a higher amount of inventory storage. Making the best use of space does
not only mean the floor areas which is horizontally but also vertically. By
maximising the use of space can also help to reduce the total cost of the
warehouse therefore it important to take note of the usage of space when
designing the warehouse layout.

Constraint of the 5 main areas :

Besides making best use of the space, when we design the layout, we should
also consider where are we going to locate the different areas of the
warehouse. (Goods in, Main storage, order picking, marshalling, goods out) It
is because by considering this factors, you will be able to minimize the
movement and congestion in the warehouse and therefore, the rate of accident
in the warehouse would also decrease. One example is the separation of the
main storage and the order picking area.

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CHAPTER 10

BENEFITS OF WAREHOUSE

BENEFITS OF
WAREHOUSING
ECONOMIC
BENEFIT

SERVICE
BENEFIT

A Warehouse should not be included in a logistical system unless it is fully justified

on a cost benefit basis.

1. ECONOMIC BENEFITS :
Economic Benefits result when overall logistical costs are reduced by utilizing
by one or more facilities. It is not difficult to quantify the return on
investment of an economic benefit because it is reflected in a direct cost to
cost trade-offs. There are five types of benefits
1. Consolidation
2. Break Bulk
3. Cross Dock
4. Postponement
5. Stock Pilling

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ECONOMIC BENEFITS

CONSOLIDATION
BREAK BULK
CROSS DOCK
POSTPONEMENT
STOCK PILLING

(A) CONSOLIDATION :
Here the consolidation warehouse receives and consolidates materials
from a number of manufacturing plants destined to specific customer on
a single transportation shipment.

CONSOLIDATION
PLANT A
CUSTOMERS
PLANT B
PLANT C

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CONSOLIDATION

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Page 49

FEATURES :

Allows both inbound movement from manufacturer to the warehouse

and outbound movement from warehouse to the customer to be
consolidated into longer shipments.

Combines logistical flow of several small shipments to a specific market

area.

Lower distribution cost for manufacturer or distributor as number of

firms may join together and use for-hire consolidation service.

BENEFITS :

Realization of lowest possible transportation rate.

Reduced congestion at customer receiving deck.

(B) BREAK BULK :

It is similar to consolidation except that no storage is performed.

FEATURES :

In break bulk operations combined customer orders are received from

manufacturers and are arrange for local customers.

They split individual order arrange for local delivery.

BENEFITS :

As there are long distance transportations from Manufacturing Plant to

Break Bulk Warehouse which cover large shipments, the transportation
cost per unit is lowers.

There is less difficult in tracking.

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BREAK BULK WAREHOUSE

CUSTOMER X

PLANT A

BREAK BULK

CUSTOMER Y

WAREHOUSE

CUSTOMER Z

(C) CROSS DOCK

In a cross-docking concept warehouses serve primarily as distribution
mixing centre. Product arrives in bulk and is immediately broken down
and is mixed in the proper range and quantity of products for customer
shipment. In essence, the product never enters the warehouse.
Cross-docking is becoming is becoming popular among retailers, who can
order TL, then remix and immediately ship to individual store locations.
Products usually come boxed for individual stores from the suppliers
location.
Cross-docking should be considered as an option by firms meeting following
criteria:

Inventory destination is known when received.

The Customer is ready to receive inventory immediately.

The Shipments are for fewer locations.

The Large quantities of individual items can be

Inventory arrives at firms docks pre-labelled.

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received by firm.

Page 51

Some inventory is time sensitive.

Firms distribution centre is near capacity

Some of the inventory is pre-priced

FEATURES:

Full trail loads of product arrive from multiple manufactures.

After receiving, it is sorted by and allocated to customers.

Product is then moved across the dock to be loaded into trailer destined
for appropriate customer.

The trailer is then released for transportation after it has been filled
with mixed products from multiple manufacturers.

BENEFITS :

Full trailer movements from manufactures to cross-dock warehouse and

then to retailers.

Reduced handling cost since the product is not stored.

More effective use of dock facilities because all vehicles are fully
loaded, thus maximizing loading dock utilization.

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COMPANY A
OR
CUSTOMER X

PLANT A

COMPANY B
OR

DISTRIBUTION

CUSTOMER Y

CENTRE

PLANT B

COMPANY C

CUSTOMER Z

OR
PLANT C

(D)

PROCESSING/POSTPONEMENT :
Warehousing can also be used to postpone or delay production by performing
processing and light manufacturing activities. A warehouse with packaging or
labelling capability allows postponement of final production until final demand
is known, e.g. vegetable processing. Vegetables can be processed and canned
at the manufactures end without pre attached labels. No pre attached labels
mean the product does not have to be committed to a specific customer.

BENEFITS:

Risk is minimized because final packaging is not complete until an order for a
specific label and package has been recycled.

The required level of total inventory can be reduced by using basic products
for a variety of labelling and configurations.

Combination of lower risk and inventory level often reduces total system cost
even if cost of packaging at the warehouse is more expensive than it would
be at the manufacturing facility.

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(E) STOCK PILLING :

It provides an inventory buffer which allows production efficiencies within
the constraints imposed by material sources and the customer. It is required
to support marketing efforts of either seasonal goods manufacturing e.g.
Agricultural products which are harvested at specific times with subsequent
consumption occurring throughout the year or goods manufactured year
round but sold seasonally, e.g. Blankets are sold in winter period.

2. SERVICE BENEFITS:
It may or may not reduce the cost. A warehouse justified on service basis
allows improvement in the time and place capability of overall logistical
system. It is difficult to quantify the return on investment of such a benefit
because it involves cost-to-cost trade-offs. Such a facility would be added only
if the net effect would be profit-justified.

FIVE

BASIC

SERVICE

BENEFITS

ACHIEVED

THROUGH

WAREHOUSING
1. Spot Stock
2. Assortment
3. Mixing
4. Production Support
5. Market Presence

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SERVICE BENEFITS
1.

SPOT STOCK
ASSORTMENT
MIXING
PRODUCTION
SUPPORT
MARKET
PRESENCE

SPOT STOCK:
Manufacturers with limited or highly seasonal product lines use stock
spotting most often in physical distribution of the products. Under this
concept a selected amount of a firms product line placed or spot stocked
in a warehouse to fill customer orders during a critical marketing period. It
allows inventories to be placed in a variety of markets adjacent to key
customers just prior to a maximum period of seasonal sales.

SPOT STOCK WH. A

CENTRAL WAREHOUSE

SPOT STOCK WH. B

SPOT STOCK WH. C

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2.

ASSORTMENT:
An assortment warehouse which may be utilized by a manufacturer,
wholesaler or retailer stocks product combinations in anticipation of
customer orders. The assortments may represent multiple products from
different manufacturers or special assortments as specified by customers.
BENEFITS:

Improved service by reducing the number of suppliers

that a

customer must deal with.

Combined assortments allow large shipments that reduce transport cost

per unit.

SPOT STOCK V/S ASSORTMENT

SPOT STOCKING

COMPLETE LINE
ASSORTMENT

A narrow product
Assortment
Functional for limited
time period.
Large number of small
warehouse, dedicated to
specific markets.

WAREHOUSING

A broad product
line.
Functional year
round.

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3.

MIXING :
It is similar to break except that it involves many different manufactures
shipments. Truckloads of products are shipped to the mixing warehouse
where the desired combination of products for each customer or market is
selected.

CUSTOMER W
PLANT A

PLANT B

WAREHOUSE
TRANSIT MIXING
POINT

PLANT C

CUSTOMER X

CUSTOMER Y

CUSTOMER Z

BENEFITS:

Reducing the overall product storage in a logistical

Inventory is stored to precise customer specifications.

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system.

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4.

PRODUCTION SUPPORT:

It provides a steady supply of components and materials to assembly

plants. Safely stocks on items purchased from outside vendors may be
justified because of long lead or signified variations in usage.
BENEFITS :

It allows supplying or feeding processed materials, components and sub-

assemblies into the assembly plant in an economic and timely manner.

VENDOR A

VENDOR B

MANUFACTURING
WAREHOUSE

ASSEMBLY
PLANT

VENDOR C

5.

MARKET PRESENCE:
Market presence benefits are basically from the local warehouses, which
are more responsive to customer needs and offer quicker delivery than
more distant warehouses.

BENEFITS:

It can enhance market share and potentially increase profitability. However, a

little solid research exists to confirm its actually benefit impact.

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CHAPTER - 11

WAREHOUSING IN INDIA

In pre-independence era, the warehousing concept was in the form of

large storages controlled by the rich farmers or 'Zamindars'. They
were having facilities and resources to take care of large scale
storage, hoarding and then selling at their convenience. The British
rulers did not contribute in such development activities as they were
mainly spending time in governance and curbing of the independence
movement. It is only after independence that the Indian government
through its five year plans gave priority to agriculture and related
activities. The first elected independent Indian government set up an
expert committee in 1951 to suggest methods to give rural credit for
agro-based activities. The committee gave its recommendations in the
year 1954. Based on these recommendations the government of India
enacted the Agricultural Produce Corporation Act, 1956. This Act in
turn has promulgated the following corporations.

National Co-operative Development and Warehousing Boarding

1956;

Central Warehousing Corporation in 1957; and

State Warehousing Corporation in various States in 1957-58.

The original APC Act 1956 was split in 1962 as (a) the National Cooperative Development Corporation Act 1962 and (b) The Warehousing
Corporation Act, 1962. This was done due to growing importance of
each activity and the need to develop both the areas in tune with

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increasing need to develop both the areas in tune with increasing need
of food grains in terms of quality and quantity.

1. NATIONAL

CO-OPERATIVE

DEVELOPMENT

AND

WAREHOUSING BOARD :

This was set up on 1st September 1956 to perform the

following functions:

(a) To advance loans and grants to state governments for

financing
processing

co-operative
or

stage

societies
of

engaged

agricultural

in

the

marketing

produce,

including

contributions to the share capital of these institutions.

(b) To provide funds to warehousing corporations and the state

governments for financing co-operative societies for the purchase
of agricultural produce on behalf of the central government.

(c) To subscribe to the share capital of the central warehousing

corporation and advance loans to state warehousing corporations
and the central warehousing corporations.

(d)

To plan

and

promote

programmes

through

co-operative

societies for the supply of inputs for the development of

agriculture and

(e) To administer the National Warehousing Development Fund.

In March 1963, the Board was converted into the Nationals-

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operative Development Corporation and its functions were limited

to co-operative development.

2. CENTRAL WAREHOUSING CORPORATION :

This corporation was established as a statutory body in New

Delhi on 2nd March, 1957. Under the new Act, the Central
Warehousing Corporation was formally re-established on March
18, 1963.this Corporation which made a modest start with seven
warehouses with 7,000 tonnes capacity, in December 1957, had
set up 458 warehouses in different places in the country, with a
total storage capacity of 65.92 lakh tonnes at the end of March,
1991. Of this, the present utilization is nearly 85 per cent of
the total available capacity. The central warehousing corporation
provides

safe

and

reliable

storage

facilities

for

about

120

agricultural and industrial commodities. The area of operations of

these

central

warehouses

includes

centres

warehousing

corporations are:

(a) To acquire and build godowns and warehouses at suitable

places in India

(b) To run warehouses for the storage of agricultural produce,

seeds, fertilizers and notified commodities for individuals, cooperatives and other institutions;

(c) To act as an agent of the government for the purchase, sale,

storage and distribution of the above commodities;

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(d) To arrange facilities for the transport of above commodities;

(e) To subscribe to the share capital of state warehousing

corporations; and

(f) To carry out such other functions as may be prescribed

under the Act. While food grains, sugar and fertilizers occupy
78 per cent of the total utilized storage capacity, in the
remaining 22 per cent are stored cement, chemicals and other
commodities. Warehouses of the corporation are fairly full all
through the year. Besides the conventional storage godowns, the
central

warehousing

corporation

is

running

air-conditioned

godowns at Calcutta, Bombay and Delhi, and provides cold

storage facilities at Hyderabad. Special storage facilities have
been provided by the Central warehousing corporation for the
preservation

of

hygroscopic

and

fragile

commodities.

The

corporation has been able to evolve a technique for a proper

and scientific preservation of jaggery during the hot and rainy
seasons by selective aeration and controlled conditions. It has set
up special warehouses at some centres for the storage of
jaggery. The jaggery stored in warehouses fetches a premium
price in the market.

The corporation has also evolved techniques for the storage of

species, coffee, seeds and other commodities. The corporation is
operating a number of customs bonded warehouses at important
centres

in

Ahmedabad,

Delhi,

Amritsar,

Baroda,

Surat,

Ludhiana,

Bhopal,

Calcutta,

Cochin,

Kandla,

Ernakulum

and

Bombay to enable exporters/importers to keep their commodities

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in a good condition particularly pending at the time of their

shipment. It has also undertaken the storage and handling of
export and import cargo at the international air-port at Palam,
New

Delhi.

At

this

complex,

all

the

facilities,

including

inspection and clearance by customs, the payment of duty into

the bank, and space for clearing agents, have been provided by
the corporation. It has put up a similar air cargo complex at
Amritsar for the export/import of goods. It has been expanding
its capacity at the port towns to serve the industry and cooperative bodies. It has already established a sizeable capacity at
Bombay,

Calcutta,

Cochin,

Chennai,

Mangalore,

Paradeep,

Kandla, Halide and Vizag. The corporation has introduced a

scheme, called the Farmers Extension Service at selected centres
to educate farmers in the benefits of a scientific storage and use
of public warehouses. The central warehousing corporation also
provides a package of services, such as handling and transport,
safety

and

security

of

goods,

insurance,

standardization,

documentation, and other connected services and facilities.

3. STATE WAREHOUSING CORPORATIONS (SWCS)

Separate warehousing corporation were also set up in different

state of the Indian union. The first warehouse was set up in the
State

of

Bihar

1956.

At

the

end

of

March,

1994,

state

warehousing corporation were operating 1364 warehouses with a

total capacity of over 98 lakh tonnes. The areas of operation of
the

state

warehousing

corporations

are

centres

of

district

importance. The total share capital of the state warehousing

corporations
WAREHOUSING

is

contributed

equally

by

the

concerned

state
Page 63

governments and the central warehousing corporation. The SWCs

are under the dual control of the state Government and the
central warehousing corporation.

4. GROWTH OF WAREHOUSES

There has been steady growth in India in the number of

warehouses and consequently the total capacity of storage has
increased. The main contributors to capacity rise are CWC,
SWC, FCI ad very few private agencies. The godowns have
come up in most of the cities, towns and few rural areas. There
is equi-distribution of godowns thus ensuring to take care of
price stability. Table 1(a) shows the number and capacity growth
in four decades.
TABLE 1(a): GROWTH OF WAREHOUSES
YEAR

NUMBER
CWC

1957-58

SWC

CAPACITY IN LAKH TONES

TOTAL

CWC

0.07

SWC

TOTAL
0.07

1960-61

40

266

306

0.79

2.28

3.57

1970-71

102

601

703

8.36

18.11

26.47

1980-81

330

1050

1380

37.89

50.00

87.89

1990-91

495

1331

1826

66.48

93.04

160.02

1992-93

465

1350

1815

64.41

90.74

155.15

1993-94

458

1364

1822

63.73

95.58

159.38

1994-95

457

1370

1827

64.31

101.72

166.03

1995-96

458

1371

1829

69.24

114.71

183.95

Source: Government of India, Ministry of Agriculture.

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The growth in numbers and capacity shows that the farmers

confidence has grown for use of warehouses. Moreover, food
grains are national wealth. It is responsibility of one and all to
protect them, consume them and sell them so that losses are
avoided or minimal. It will be unfair treatment to farmers if
their produce are not protected by the officials connected with
agricultural and warehouses departments.

5. WAREHOUSING IMPROVEMENT SUGGESTIONS

The utilisation of existing warehouses (CIWC and SIWC) and

FCI godowns is nearly satisfied. Now the issue is that food
grains and other rural produce will continue to grow and with
this the need to have more storage capacity increases. The next
arrangements would have to be made taking care of the remarks
made

on

arrangement,

existing
the

facilities.
Union

In

order

Government

to
has

look

into

sought

the
the

recommendations of a team of working group on warehousing.

The working group studied all possible details and the same are
given here under

Personnel to manage the storage, the panchayat should be

recruited by CWC or SWC. This will ensure better care of
the stores and commodities;

These should be facility to farmers to draw smaller quantities

whenever they want. On the backside of the receipt, up
gradation of quantities should be done for convenience of the
farmers;

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Banks should give loan against the godowns receipts and

based on market value of the goods; and

There must be half yearly ending of the stores working and

this subject should be discussed on panchayat meetings for
clarity and transparency.

6. WAREHOUSES CAPACITY UTILISATION

Though the central and state warehousing godowns are mainly

built for use by farmers, these are being mainly used by traders,
wholesalers

and

for

government

procurement.

Since

their

inception warehouses have gradually become popular and are in

continuous usage. In the beginning stages of 1955-60, the
utilisation was around 50% and gradually it touched to 95%.
The purpose is served and hence investment is proved worthy.
The only thing to improve is that farmers are not making best
use of it. Some of the reasons for non-use by farmers are as
follows:

(i)

The farmers' community may find the distance of warehouse

location as far for them;

(ii)

Many farmers are ignorant about this facility;

(iii) They are not accustomed to do paper work and hence avoid
government warehouses; and
(iv)

They want quick money in needy time and hence prefer to

pledge with traders and village chief rather than try and wait
for bank loans.

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7. REASONS FOR WAREHOUSES UNDER UTILISATION

Since the warehousing storage is on rental basis, many farmers

store their produce in their homes than in warehouses. They fail
to realise the safety and care being taken at the warehouses.
Since many farmers are small, they want to have facilities to
sell

goods

whenever

they

want

without

formality

hassles.

Farmers are not aware of difference haphazard storing at their

premixes and scientific storage in warehouses. They are yet to
learn that losses due to insects, pests, moistures and pilferage at
their premises will be much more than the rent they would have
paid at warehouse godowns. With improved cultivation, the
output of agricultural production is increasing year, after year.
This has led to price stability and very less difference in season
and off season rates for food grains. Hence farmers storing
goods at their places for better prices may not always be
beneficial. The recent example of excess wheat production in
Punjab-Haryana agricultural belts is a case in point. Due to
surplus production not only was there no place in godowns,
even there was shortage of goods wagons to move the produce
to

different

parts

of

the

country.

Thus,

the

reason

for

underutilisation can be summarised as follows:

Farmers will have to do grading for warehouse storage. Many

farmers did not do the same due to lack of awareness.

Small farmers feel that whatever little surplus is available

should be stored in their premises. This gives them some
kind of security. They are not accustomed to the formalities
of government departments.

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Most of the warehouses are in towns and cities. Farmers find

it cost-prohibitive. Hence traders use these facilities and not
much appreciated by farmers. Thus farmer's interests are
indirectly protected through the traders.

Due to uncertainties of rains and output quantum, farmers

want to retain the produce for their production.

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CHAPTER 12

CONCLUSION
Although all warehouses are unique, owing to the unique circumstances of each,
the types of problems faced in planning and managing warehouses are not
unique. Consequently, a definite methodology can be followed to address these
similar problems in all warehouses regardless of their location, size, and type of
product stored, and the like. This science of warehousing is the subject of the
remainder of this course. A special emphasis is placed throughout the course on
managing and controlling various components of the warehouse.

The entire area of facilities development that is size and number of warehouses,
location analysis, warehouse layout and design is an important factor yet complex,
part of warehouse management. In recent years, computers have played a more
significant role as logistics executives attempt to optimize warehouse operations. Thus
a warehouse plays a multi-faceted role in the integrated logistic system.

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CHAPTER 13

BIBLIOGRAPHY

Reference Book :
Warehouse & Distribution Science by J. Bartholdi and S. Hackman

Website Address :
http://www.vendorseek.com/know-the-advantage-of-warehousing-facilities.asp
The Advantages of a Centralized Warehouse | eHow.com
http://www.ehow.com/info_7743401_advantages-centralizedwarehouse.html#ixzz2ElHCOsXB

http://www.ehow.com/info_8539493_public-warehouse-advantages.html
http://www.scribd.com/doc/44156308/Warehousing
http://www.warehouse-science.com/

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