WAREHOUSE MANAGEMENT

WAREHOUSE MANAGEMENT

By: Cosmas Teo

Warehouse Management

Page 1

WAREHOUSE MANAGEMENT

This page is intentionally left blank

Warehouse Management

Page 2

WAREHOUSE MANAGEMENT

Table of Contents
Assignment Questions Introduction 1. Functions of Warehouse 1.1. Receiving 4 5 5 5 5 6 6 6 6 6 6 6 7 8 8 10 10 13 13

1.2. Storages 1.2.1. Pallet rack 1.2.2. Mezzanine 1.2.3. Cantilever rack 1.2.4. Shelving 1.2.5. Automated Storages & Retrieval System 1.3. Distribution 1.4. Other Packing & Repacking 2. Planning & SWOT Analysis to Set-up Warehouse 3. Warehouse Facilities Development 3.1. Size and Number 3.2. Location 3.3. Design & Layout 3.4. Transportation 4. Conclusions

Warehouse Management

Page 3

WAREHOUSE MANAGEMENT

Assignment Questions

The answers to the above two questions should be written in one assignment.

1. Describe briefly the main three functions of warehousing.

2. Discuss, with suitable illustrations, the factors that warehouse management should take into consideration in warehouse facility development. Your answer should include, among others, the following main elements in warehouse facility development: a. Size and number of warehouses, b. Location of warehouses and c. Design and layout of warehouses.

Warehouse Management

Page 4

WAREHOUSE MANAGEMENT

1. Introduction - In every industry neither in manufacturing, importer, exporter, wholesaler, transport business, or even customs, a warehouse is consider a must. Warehouse can be generally a large plain building located in industrial area, town, city, port, airport, etc, where good are temporally store before going for delivery or distribution. Warehouse usually has a loading and unloading bay to receiving and distribution of goods directly from seaports, airports or railways. In the warehouse normally equipped with forklift or crane for moving goods from one place to another. Goods usually placed on ISO standard pallet. Good stored in warehouse can be raw materials, components or finished goods for agriculture, manufacturing, or commerce. Function of warehouse can be neither internal nor external. It also serves as purpose or specialization for customer focus.

2. Among the functions of warehouse include; Receiving, Storage, Distribution, and other functions can be included packing & repacking, order accumulation and record keeping. 2.1.Receiving When goods arrive either at seaport, airport, train stations, goods will normally store temporally at warehouse before distribution to next locations. Or even in the factory or manufacturing goods, raw material where receive from outsider will store at warehouse before being used in producing final goods or product. Same for finish products/goods, it will also store at warehouse before being distribute to other locations. 2.2.Storage Warehouse can be also function as storage. Raw materials, components or finished goods / products can be store at warehouse before distribution. There are different storage systems for different type of goods / materials/ products being used for storage. The common storage systems can be either; 2.2.1. Pallet rack, - the goods or material are place on pallets or skid. Each pallet or skid is place on rack neither in horizontal row with multiple levels.

Warehouse Management

Page 5

WAREHOUSE MANAGEMENT

2.2.2. Mezzanine, - is an intermediate floor between main floors of a building, and therefore is not counted the overall floors of a building1. Normally mezzanine type is common if the warehouse buildings is tall, and have an extra space to build a certain level for storage. 2.2.3. Cantilever Rack, - is warehouse storage system consisting of the vertical column, the base, the arms, and the horizontal and/or cross bracing. These components are fabricated from both roll formed and structural steel. The horizontal and/or cross bracing are used to connect two or more columns together. They are commonly found in lumber yards, woodworking shops, and plumbing supply warehouses2. 2.2.4. Shelving, - a type of storage metal, steel, nor catwalk type. 2.2.5. Automated Storage and Retrieval System (ASRS) Most modern type of storage system in warehouse. It consist variety of computer system or latest technologies method of placing and retrieving loads from specific location in the warehouse. 2.3.Distribution All goods either raw materials or finish goods will surely not going to keep forever in the warehouse. Once the goods are ready, it will distribute out from the warehouse to destination where it will be utilized or use. The goods will distribute out will either use the method of FIFO (First in First out) or FILO (First in Last Out). 2.4. Other - Packing and Repacking Warehouse can also be a place for packing and repacking. Sometime goods are delivery to warehouse in big quantity and need to repacking into small or packages before delivery from warehouse. Finish goods sometime deliver in big amount or volume in order to save shipping cost, and it will delivery to warehouse first before distribute to final destination. And in the warehouse,
1 2

http://en.wikipedia.org/wiki/Mezzanine_(architecture) http://en.wikipedia.org/wiki/Cantilever

Warehouse Management

Page 6

WAREHOUSE MANAGEMENT

it wills either packing or repacking accordingly. Order accumulation Warehouse also can function as temporally storage order accumulation before distribute out. Sometime, goods coming in will not meet up to the customer demand in quantity. So the goods will temporally store at the warehouse while waiting for the balance of the goods to arrive and meet the final demand before distribute out. Warehouse also can be function as record keeping like stock counting. 3. Any warehouse before set-up, it need a planning and SWOT Analysis to be study up. SWOT analysis is a strategic planning method used to evaluate the Strengths, Weakness, Opportunities and Threat involve before a warehouse being set-up. What is the purpose and objective of warehouse facilities being set up? Any natural of business neither in manufacturing, automobile, factories, or import & export, it required a warehouse. Before a warehouse needs to set up, management usually need a proper planning like where the warehouse will be built. Neither near the seaport if the goods are coming in thru seaport? Or near the factory, if the goods if direct coming thru the factory. It also needs to gather all relevant data such like shipment data or arrangement with end user or manufacturer. Such data can be crucial information. With the data gather, it can be use for analysis in setting up warehouse. That is why the SWOT Analysis is used for planning a warehouse in either internal or external factor, which is also will look into the warehouse facility development. What is the strength of the warehouse being set-up? Either in location, size, nor design etc. it must able to give advantages in internal or external. Such as if a warehouse being set-up near the seaport, will it able to give advantages. Then if the warehouse is set-up far away, will it give any weakness to the supplier or customers? Weakness is a characteristic that will bring disadvantages if the warehouse being set-up either in term of size, location, or design. Opportunities can be external changes to make in accommodate more than what a current warehouse is. It can be an opportunities for

Warehouse Management

Page 7

WAREHOUSE MANAGEMENT

other purpose of the current warehouse. Like to diversify to others functions of warehousing. There is a threat that can cause a problem or trouble when the warehouse is built. It can be either a threat in size, location, design or layout, transportation or software & IT. After the analysis is complete, it needs to put in paper or blue print. Whatever been planning, it needs to be put into model to see the effect of it and can be functioning according to what it been planning. And from there, it needs to be implemented. How to implement the plan is also important. It needs to set a target when to start the implementation of the plan. Only after the implementation, it needs to analysis it. It called the Post Implementation. By analysis it, we can know what when wrong or not according to what been plan early. By this way, we can try to minimize the mistake or to add the strength and opportunities. 4. Facilities development needs to include Internal and External factor. Internal factor is within the facilities its self. While the external factor, we look as overall of the whole facilities. Taken for example, in Oil and Gas industry, a management will not only consider just 1 warehouse to store all the cargoes or items, but will consider different sections of warehouse like Open storage Warehouse, Close storage warehouse, aircondition type warehouse or even chemical warehouse according to its needs and facilities. 4.1. Size and Number of warehouses is according to business or operation needs. Some type of business or operation may need just one warehouse, while other may need more than one warehouse to cater all the needs. Some business may need a small size warehouse while other may need larger size warehouse. Take for example in Labuan. Labuan is duty free island and main industry in oil and gas sector. In oil and gas industry most of the oil and gas companies required different sizes of warehouse for storages. Some need to be in open yard warehouse, some need to be in air-conditional

Warehouse Management

Page 8

WAREHOUSE MANAGEMENT

warehouse type, and close warehouse. Like all major oil & gas companies, Murphy Oil Corporation is also required warehouse for storage the items or cargo before ship out to offshore, or return from offshore, and coming in and out Labuan. Refer to the map 1 below. Map 1 Murphy Oil Corporation operates within the area of Asian Supply Base (ASB)

Labuan. ASB is a one-stop logistic support centre for oil and gas industry. ASB is also a port where general cargoes can be imported, exported and/or transhipped through and/or from its warehouse and open vast yards. Because of the nature of operation, it required different size and number of warehouses for its operation. In map 1 we can see inside the ASB, there are 4 warehouses with different sizes. Warehouse 1(Red colour outer line) is a closed warehouse type. It normally for storages of small items needs special or delicate care like drill bit, bolt and nut, electrical equipments, etc. Warehouse 2 & 3 (blue & yellow) is open yard storage. Open yard storage normally for putting a large or big size items or equipments, or something is not practically put inside the closed warehouse, example like casing pipe, riser, shipping container, etc. Warehouse 4 (Pink) is a chemical warehouse. Chemical

Warehouse Management

Page 9

WAREHOUSE MANAGEMENT

warehouse is for chemical products and it related product because it need special care and attention. This is also because of safety & health issue that chemical cannot store in normal warehouse or open yard warehouse. For the map, we can see the sizes of each warehouse according to its needs and number of warehouses required in this type of operations. 4.2. Location is also important for establishing warehouse. Warehouse management will look into the consideration to set up warehouse neither to focus on clients or supply. Warehouse must be located in the correct location to efficiently meet clients and customers delivery requirements. In focus of clients or supply requirements, warehouse maybe built near the client business premise or easy for access to supply to other locations. Location is important because 1) save cost, 2) transportation, 3) raw material, 4) import & export facilities example seaport or airport, 5) Labour catchment. One of the reason Murphy Oil set up warehouse within the ASB is because the location. It near to the jetty or port for vessel or supply boat to berth. Labuan is hub for oil and gas to offshore. At offshore, there are very limited storage for equipment and cargo. And the flow of the equipments and items is fast. And it need to constantly supply from the base where more items or cargo is being keep at the warehouse. In order to save time, transportation and easy access to jetty, it best way to have warehouse near the location. When the cargo being ship back to base, it will also easy to delivery to warehouse, especially big size or odd size cargo. 4.3. Design & layout of warehouse. An effective warehouse design must take into account a wide range of factors from all areas of the operation. The design of a warehouse can have an impact on your overall operations. In turn, this will affect inventory control, process flows and space utilisation. The scope of a warehouse design plan should encompass inventory levels, cycle and variance in inventory

Warehouse Management

Page 10

WAREHOUSE MANAGEMENT

throughout the business year, cost of space, warehouse operational management, cost of inventory transport and flexibility for future change adjustments in product or demand3. In Murphy Oil warehouse is consider an important to it operations in oil & gas sector. It functions as 1) Product storage, 2) Inbound operation, 3) Outbound Operation and 4) value-added processes. Most of the part, equipments are very crucial and important especially when need for replacement or changes in fast. If equipment or tool need urgency replacement, it cannot effort to wait for spare part to arrive in 1 or 2 weeks time especially order from overseas. Because any shut down, it will cost a million or thousand losses in operation. Because of this, warehouse is a place for product storage and advance order or replacement stored at warehouse, so that it can fast delivery to offshore. For some products, like chemical it will stored at Chemical warehouse, where specific handling for chemical and must follow the Safety and Health policy. In open yard warehouse, because of large hectares/yard normally it will required a special material handling equipment such like heavy lift crane, or 10 tons forklift or trailer to move any big or odd size items. In everyday, there will be an inward and outward of cargo to offshore and back from offshore. For example in warehouse 1 (Closed warehouse) the design of the warehouse is almost similar to the left photo. It is equipped with aisle on pallet on storage rack. One reason why it on pallet is because for easy movement and pick-up by 3 ton forklift, and stored on storage rack is to save on space and in order according to stock / items. The loading bay for loading and offloading is all at one place at the end of the warehouse. Refer to illustration 1. It because, all items coming in and out need to check and receiving by

http://www.supplychainlogistics-consulting.co.uk/warehouse.html

Warehouse Management

Page 11

WAREHOUSE MANAGEMENT

warehouse personnel for checking like need to be key in to inventory system, comply with company Health, Safety & Environment policy. All the cargo going for

outbound will also be labelling and re-labelling last destination of each cargo, and also MSDS for chemical. This value-added process is done in warehouse 1 to ensure all cargo is correctly label and accordingly. The layouts for warehouse is look simple and organize according to its sector. Each sector like Production, Drilling Sabah Water & Drilling Sarawak Water if place accordingly and not mix up. By doing it simple and more flexible, it can create a cost efficiency, flexibility, easy handling and more specific. The warehouse is also meet the specifications that can affect the storage and material handling like type of racks used, height of racks, lighting, equipment movement like forklift, loading and unloading bay etc..

RACK (Production) LOADING / UNLOADING BAY

RACK (Drilling - Sabah Water)

RACK (Drilling - Sabah Water)

OFFICE

RACK (Drilling Sarawak Water)

RACK (Drilling Sarawak Water)

Illustration 1

Warehouse Management

Page 12

WAREHOUSE MANAGEMENT

4.4 Transportation also plays an important role in goods movement. As the operation is mostly to offshore and require supply vessel for transportation, surely the warehouse needs to be set-up near the seaport. By setting up warehouse inside the ASB and near the ASB port / jetty it will provide easy 24 hours operation. ASB is operating 24 hours operation with its own facilities and infrastructure such like fuel & water bunker for vessel, security, material equipment handling, Temporary storage for discharging cargo, etc.

5. Conclusion Warehouse is important to its business needs either for clients or supply. Function of warehouse can be either for receiving, storages, distribution, or packing and repacking, and others that can contribute to its warehouse functions base on what the warehouse management need and want. Before to set-up a warehouse, it need proper planning and SWOT analysis to ensure it according to what the warehouse objective to be neither in business or operation. Among its planning, we need to look into warehouse facilities development like size and number of warehouses to be, location to set up, design & layout of warehouse based on its operation or business, and other like transportation facilities, that can contribute to proper warehouse planning and management.

Warehouse Management

Page 13

WAREHOUSE MANAGEMENT

BIBLIOGRAPHY 1. 2. 3. 4.
http://en.wikipedia.org/wiki/Mezzanine_(architecture) http://en.wikipedia.org/wiki/Cantilever http://www.supplychainlogistics-consulting.co.uk/warehouse.html http://en.wikipedia.org/wiki/Warehouse

Warehouse Management

Page 14