Warehousing

What do we need to know

1.
2.
3.
4.
5.
6.
7.
8.
9.

Meaning
Functions
Benefits
Principles of warehouse design
Alternative Warehouse strategies
Square root law
Distribution centers
Location considerations
Number of warehouses

1. Meaning
Traditionally viewed as
a place to hold or
store inventory
Contemporary view is
the warehouse
functions to mix
inventory assortments
to meet customer
requirements
Storage of products is
held to a minimum
Warehousing
contributes value in

Is it only a storage facility?

A warehouse is typically viewed as a
place to store inventory.
However, in many logistical system
designs, the role of the warehouse is
more properly viewed as a switching
facility as contrasted to a storage
facility.
4

2.Functions

Receiving goods
Identifying goods
Sorting goods
Dispatching goods to storage
Holding goods
Selecting, retrieving, packing
Marshaling goods
Dispatching goods
Preparing records and advises

3.Benefits

Econo
mic
Service

Consolidation
Break bulk
Cross-dock
Postponement
Stockpiling
Assortment
Mixing
Product support
Market presence

ECONOMIC BENEFITS

Consolidation
Consolidation occurs when a warehouse
receives materials from a number of
sources and combines them into exact
quantities for a specific destination
Plant A

Plant B

Plant C

Consolidating
Warehouse

Features/benefits
Decreases transportation cost
Decreases confusion at ports by
reducing shipments
Decreases distribution costs
Combines small shipments allowing
inbound and outbound movement
May be used by a single firm or a
group of firms

Break bulk
Break-bulk occurs when a
warehouse receives a single large
shipment and arranges for delivery
to multiple destinations
Plant A
Plant A

Break bulk
warehouse

Plant A

Plant A

Features/benefits
Facilitates large shipments
Reduces cost
Consignment broken into smaller
shipments which facilitates easy
transportation

Cross dock
Cross-docking combines inventory from
multiple origins into a prespecified assortment
for a specific customer

Features/benefits
Multiple suppliers and customers
Products are received, selected, repackaged, and
loaded for shipment w/o storage
Used with general merchandise & food
Enabled by conveyors & sortation equipment
Immediate distribution across the dock to the
designated trailer
Reduces handling cost
More effective use of dock facility

Postponement
Warehouses can also be used to postpone, or
delay, production by performing processing and
light manufacturing activities.
A warehouse with packaging or labeling
capability allows postponement of final
production until actual demand is known.
Once a specific customer order is received, the
warehouse can complete final processing by
adding the label and finalizing the packaging.

Feature/benefits
Risk is minimized because final
packaging is not completed until
order is received.
Inventory levels can be reduced
because of basic product with no pre
attached label.

Stockpiling
Maintaining stocks of products which are
generally seasonal in order to support
the selling efforts.
Provides excess inventory which makes
material available in off season.
Ex1 : blankets and woolens are produced
year round but sold only in winters.
Ex2: crops are harvested in particular
seasons but sold year long.

Service Benefits

Assortment
An assortment warehouse stocks product
combinations in anticipation of customer orders.
The assortments may represent multiple products
from different manufacturers or special
assortments as specified by customers.
In the first case, for example, an athletic
wholesaler would stock products from a number
of clothing suppliers so that customers can be
offered assortments.
In the second case, the wholesaler would create a
specific team uniform including shirt, pants, and
shoes.

Benefits
Improves customer service
Eliminates the need to go to different
warehouses to procure products of
different manufacturers

Mixing
Mixing combines inventory from multiple origins
(like cross-docking) but also adds items that are
regularly stocked at the mixing warehouse

Stock
Inventory

Benefits
In a typical mixing situation, truckloads of
products are shipped from manufacturing plants
to warehouses.
Each large shipment enjoys the lowest possible
transportation rate.
Upon arrival at the mixing warehouse, factory
shipments are unloaded and the desired
combination of each product for each customer
or market is selected.
When plants are geographically separated,
overall transportation charges and warehouse
requirements can be reduced by mixing.

Production Support
Production support warehousing provides a
steady supply of components and materials to
assembly plants.
Safety stocks on items purchased from outside
vendors may be justified because of long lead
times or significant variations in usage.
The operation of a production support warehouse
is to supply or "feed" processed materials,
components, and subassemblies into the
assembly plant in an economic and timely
manner.
22

Market Presence
While a market presence benefit may not be so
obvious, it is often cited by marketing managers
as a major advantage of local warehouses.
The market presence factor is based on the
perception or belief that local warehouses can be
more responsive to customer needs and offer
quicker delivery than more distant warehouses.
As a result, it is also thought that a local
warehouse will enhance market share and
potentially increase profitability.
23

4. Principles of Warehouse
design
1. Design criteria
Number of storeys
Height utilization
Product flow
2. Handling technology
Movement continuity
Movement of large quantities
3. Storage Plan
Volume
Weight
Storage

Alternative warehouse
Strategies
Strategi
es

Private

Public

Contrac
t