12.

WAREHOUSING

Learning objectives:
1. Understand the basic functions of warehousing – traditional and contemporary users of
warehousing
2. Functions of warehousing to facilitate-volume transport, supply mixing, product mixing,
and cross-docking
3. Learn also other value added services provided by warehousing
4. Understand the major considerations in warehousing decisions-market product stability,
type of goods to be handled, type of facility, inventory decision, level of technology, and
unit loads
5. Warehousing facility decisions- number, size, and location
6. Learn about the basic activities in warehousing – material movement (receiving, put-away,
order picking / order assembly, shipping), and material storage (stock location, warehouse
management)
7. Understand the basics of warehouse management systems (WMS)
8. Implications of just-in-time (JIT) operations on warehousing; also known the cost
considerations in warehousing

Traditionally, warehouses have been used as a long-term storage place for materials. Warehouses
have been used for storing raw materials and finished goods for further consumption in or
distribution through the supply chain.

Douglas M. Lambert et al have defined warehousing as given below:

“Warehousing is that part of a firms logistics system that stores products (raw materials, parts,
goods-in-process, finished goods) at and between point of origin and point of consumption, and
provides information on the status, condition, and disposition of items being stored.”

However the functionality of warehouses has undergone a dramatic change. Warehousing

provides time and place utility for raw materials, industrial products, and finished goods. The
warehouse may be defined as a facility in the Supply Chain where the goods and materials are
held temporarily for further transportation and distribution. Logistics system design views
warehouse as a switching facility than as a storage facility for inventory. Warehouses apart from
serving the function as a storage place, it is used for other functions such as receiving, break-bulk,
repackaging, etc.
Functions of warehousing: the following are the major functions that the warehouse is used for
while serving the purpose of storage as well.
1. Volume transport Raw material (inbound)
Finished goods (outbound)
2. Supply mixing
3. Product mixing
4. Cross-docking

Volume transport: could be put into effect both in the inbound logistics system as well in the
outbound logistics system.

In the inbound logistics system, raw material / parts supply from many suppliers collected using
trucks / vans of smaller capacity and are pooled together and transported to the manufacturing unit
using heavy load trailers. This process is many a times referred to as ‘consolidation’ in the supply
side of the network.

Fig.12.1 warehouse facilitates - inbound and outbound volume transport

In the out bound logistics volume transport is carried out by transporting finished goods in bulk
using heavy trucks / trailers to warehouses located in the distribution network. The finished goods
that have been transported in bulk are broken into smaller consignments based on customer orders
and dispatched to the retailers / customers in smaller capacity trucks / vans. Break bulk operation
involves practically no storage in the warehouse like cross-dock operations which is being
discussed subsequently.

Supply mixing: Materials required by a manufacturing plant may be provided by many suppliers
as LTL consignments or van loads. Such material receipts are received, consolidated as one
shipping unit and sent by a truck to the plant. This process is also referred to as ‘consolidation’ of
materials on the supplier network.

Fig.12.2 Warehouse facilitates – supply mixing

Product mixing: A warehouse receives materials / goods from different manufacturing plants and
the materials / goods meant for a particular customer is / are identified and sent in a single
transportation shipment to him or her. The customer may give an order for items that are
manufactured in more than one plant. In such circumstances product mixing concept comes
handy. In fact, an extension of this concept is that a customer order may have many items – one
part of customer order may be received from the manufacturing plant; the second part may be
shipped directly by the supplier; the third part of the same customer order may be in stock at the
ware house; in such situations, all the three parts are merged as a unified order at the warehouse or
mostly the distribution center and delivered to customer as a single integrated customer order.
This concept is called ‘in-transit mixing’ or ‘merge-in-transit’.
 Fig.12.3 Warehouse facilitates – product mixing

Cross-docking: Cross docking aims to take a finished good from the manufacturing plant and
deliver it directly to the customer with little or no handling in between. Cross docking reduces
handling and storage of inventory. The stockpiling of a warehouse with inventory before shipping
it out is virtually eliminated. The cross-docking station receives goods at one door and ships them
out through the other door almost immediately without putting them in storage. Cross docking
shift the focus from "supply chain" to "demand chain". For example stock coming into cross
docking center has already been pre-allocated against a replenishment order generated by a
retailer in the supply chain. Cross docking streamlines the supply chain from point of origin to
point of sale. Cross-docking reduces operating costs, increase throughput, and reduces inventory
levels. Cross docking helps reduce direct cost associated with excess inventory by eliminating
unnecessary handling and storage of product. This helps in reducing product damages due to less
or no storage, and also reduces product obsolescence. Cross docking also encourages electronic
communications between retailers and their suppliers. This creates further opportunities for gains
in efficiency.

Cross docking actually aims at reducing the warehouse requirements. The warehouse, in
providing this service, will facilitate transfer of goods / products from one transport vehicle into
another vehicle meant for the destination of the goods / products. A consignment of 10 metric
tonnes of wheat from Ghaziabad near New Delhi meant for, say, Kanyakumari in Tamil Nadu
could possibly transported from Ghaziabad to Nagpur by a truck operating between Ghazibad and
Nagpur. This consignment gets transferred, at the cross docking station, to another truck at
Nagpur which is meant for Kanyakumari. The consignment ultimately reaches Kanyakumari. This
process is called cross-docking. Not all the trucks will have permit to travel all the states in India.
There will also be difference in transportation charges between different locations. Cross-docking
helps solve the problem permit restrictions and also used many times to take advantage of the
freight charge differences in different operating regions.

More of producers are deciding to close regional or central warehouses, and to ship their products
direct from the production plant to their customers. The objective of this process is cost reduction
through closure of regional/national warehouses, while maintaining short delivery times. A
centrally located distribution center, with a blanket coverage distribution system, helps in carrying
out the cross-docking process effectively. The centrally located distribution center is called cross-
docking station.

The other functions of warehouse are given below along with some of the value added services
that are provided through the warehousing facility:
• Service
• Protection against contingencies
• Smoothing
• Break-bulk
• Repackaging

Value added services: Certain value added services are also provided in the warehousing process
like product packaging and labeling as per customers’ specific requirements.. Certain companies’
product are packed to the requirements of customers and labeled at the warehouse meeting the
customer requirements more efficiently. As has already been mentioned, the role of warehousing
is changing from that of storing to that of facilitating inventory flow through the supply chain. In
this respect, a value added function for which warehousing could be put into use is product
customization.

Protection against contingencies: Warehouse is sometimes used for storing finished goods and
materials for protection against contingencies. This mainly happens with food grains stored by the
government for any emergency requirement. Another example is storage of ammunition and other
materials stored for use by military.
Smoothing: An important function of warehouse is to smoothen the fluctuations in demand
requirements. For example, fertilizers are produced and stored in warehouses throughout the year.
However, the consumption of fertilizer is seasonal based on the two crop seasons of the year.
Similarly, woolen production is carried out throughout the year and stored in warehouses for
consumption during winter. On the other hand, the agricultural products are produced seasonally
and arrive at particular interval of time in a year. However, the consumption of these agricultural
produces uniformly during the year is enabled by storage in warehouses. Thus, in both cases
mentioned above, warehouse acts as a buffer to smoothen uneven production and consumption
patterns.

Break-bulk: is similar to the volume transport function explained already except that the break
bulk operation like ‘cross-docking’ involves practically no storage in the warehouse. The material
meant for break-bulk is unloaded from the incoming truck which brings in the material in bulk
quantities, into designated locations in the warehouse. The bulk consignment generally holds
products meant for many customers. The consignment is broken into smaller consignments
customer wise and shipped with no loss of time at the warehouse.

Customer A

Break bulk Customer B

Plant A
warehouse

Customer C

Fig.12.4 Break bulk operation in a warehouse

Repackaging: is one of the value-added activities that are being carried out in a warehouse. The
finished product may be transported in larger consignments. The customers generally require
products in smaller packets. For example, coffee powder may be transported using intermediate
bulk container (IBC). But customers want coffee in 5 kg packs, 1 kg packs, and 500 gm package.
This requires repackaging at the warehouse. A simple packaging machine installed at the
warehouse along with the labour available in the warehouse should be able to take care of such
value added services.
Types of storage: The type of storage in warehouses could be classified into the following
categories based on the method of storing the goods, and they are:
a) Stock keeping units (SKU) storage
b) Job lot storage

Stock keeping unit (SKU) storage: This is a conventional method of storing materials and goods
in a warehouse. In this method all the materials of one type is put in one place. For example, the
warehouse might have allocated bay1 for rice and paddy, bay2 for wheat, bay3 for fertilizers,
bay4 for cement. Sugar may be stored in a separate bay with higher amount of protection from
rodents , rain water, etc.

Job lot storage: In this method of storing, the materials required for a particular job (or) materials
and goods meant for a particular customer are kept in one place. This type of storage requires
more space. However, this method of storing facilitates picking and packing.

Warehousing facilities are provided by Central Warehousing Corporation (CWC) and state
warehousing corporations. These facilities are mainly used for fertilizers and food grains because
they were mainly developed for agricultural sector.

CWC with its corporate office at New Delhi and 17 Regional offices, provides scientific storage
facilities for more than 200 commodities with its network of 475 warehouses in India. CWC
provides Import/Export warehousing facilities at 32 Container Freight Stations (CFS) in ports and
inland stations.

Major organizations use their own privately owned warehouses. Apart from the government
operated warehouses, the third party logistics operators provide warehousing facility as an
additional value added service. The main problem with these private warehouses is inadequate
facility for storage and handling. Manpower is the main source of material handling. Level of
material handling equipment usage in these warehouses is pretty low which contributes to
wastage. The wastage occurs not only due to material handling at the warehouse but occurs at
almost all the stages through the Supply Chain. It is estimated that 14 percent of goods gets
wasted in transit along the supply chain. This wastage figure incase of agricultural commodities is
estimated to be around 30 percent.
MAJOR CONSIDERATIONS IN WAREHOUSING
Warehousing: the successful performance of any supply chain requires all its activities to be
carried out effectively as individual elements, and as an integrated system. This requires good
performance on the part of warehousing as well in order to have the supply chain perform well as
a whole.

Major considerations in warehousing are discussed below in order to have the thorough analysis
before making a facility decision like putting a warehouse in the supply chain. Like in most
logistics decision situations, the tradeoff is between the cost and service (since the quality and
time factors are considered to exist as an essential requirement). The major considerations are:

Market and the product stability: long-term market expectations and growth will influence the
size, location, and ownership of warehousing.

Type of goods to be handled: the materials handled by the warehousing operation could include
raw materials, work in process, MRO items required for the firms’ operations, finished goods, and
packaging materials. The type of storage, and handling requirements could differ widely between
materials. The unique requirements of materials stored in the warehouse will have an impact on
the warehousing decisions.

Type of facility: the decisions involved with respect to the type of facility are location, size, and
position in the supply chain. Decision will have to be made with respect to the positioning of the
warehousing facility as to whether it’s being planned in the inbound logistics or outbound
logistics. Decision ownership of the warehousing facility will involve questions like whether to
build firms’ own warehouse or use a public warehousing facility (rent./ lease). The other
considerations to be taken into account with respect to facility ownership decision or safety level
required, operational flexibility expected, etc.

Inventory decisions: the passions that are to be answered with respect to the inventory to be held
in the warehouse are: what materials to store, in how much quantity, and in which location. The
warehouse may be located to serve your particular a market or product range. The warehouse may
also be catering to a particular geographic area or region, in case of fast moving products. The
firm also may decide a warehouse at national or state level, in case of slow moving items.
Level of technology: that has been harnessed into the warehousing operation range from the
simple manual system to use of sophisticated automatic equipments like AGVS and Robots.
Computerized warehouse management system (WMS) could be put into use in case of large
facilities.

Unit loads: the choice of unit loads, the basic form in which the materials are stored and handled,
could be: palletized loads, materials in intermediate bulk containers (IBC), tote containers, etc.
The unit load is the concept of footing the product into appropriate standard modules which
enable storage, handling, movement, loading and unloading. Unit load concept enables use of
standard equipment in handling, storage, and movement irrespective of the material/product that
constitutes the unit load.

DECISION ON NUMBER, SIZE, LOCATION AND LAYOUT OF WAREHOUSES

Logistics manager should make decisions with respect to warehousing on the following aspects:
• Number of warehouses
• Physical location (region, specific location, etc.)
• Warehouse size (in sq. metres of built area and other space requirements)
• Warehouse Layout
• What products and materials to store.

Number of warehouses: Decision on the number of warehouses has to be made keeping in mind
the following factors:
 inventory costs
 warehousing costs (both variable as well as fixed)
 transport costs
 Cost of lost sales
 Customer service level required

Warehouse design and layout: the main aspects based on which the design and layout have to be
made are:
• Make a demand forecast
 • Find out the storage requirements in number of units for each product item to be stored
• Convert the no. of units storage requirement of each product item into storage volume
requirements in cu. metres
• Provide for aisles, material handling requirements
• Make provisions for future growth requirements
• Make provisions for transport (inbound / outbound) interfaces
• Make provisions for order picking / order assembly requirements
• Provide for office space, retirement / rest rooms, etc.

Fig.12.5 A typical warehouse layout

Warehouse layout and design principles: the basic principle that are to be added to while making
the design / layout of warehouses are:
 Always use one storey for storage
 Material movement should preferably be straight lines
 Make use of full building height (remember that there are three dimensions in a
warehouse; not only width and breadth, but also height)
 Minimize aisle space requirements
 Make use of efficient material handling equipments
The main objectives of warehouse design / layout are to:
 Achieve maximum cubic space capacity utilization
 Efficient use of various facilities / resources of the warehouse
 Higher productivity warehousing
 Higher level of automation in areas of material handling, information system, etc.
 Provide necessary security / safety for material and resources

PUBLIC WAREHOUSE VS PRIVATE WAREHOUSE

The ownership decision of warehouses is yet another critical decision in making the supply chain
configuration. The supply chain manager should make a decision whether to build a firm’s own
warehousing facility or to use public and / or rented warehouses. There are pros and cons attached
to the different warehousing ownership decisions.

The cost of using public warehouse is variable in nature and generally directly proportional to the
quantity of material/good stored and the time duration for which the storage facility is used.
Private warehouse involves a high component of fixed cost. Hence, the volume of storage
requirement should be sufficiently high enough to necessitate private warehouse.

The factors to be considered really making a decision for warehouse ownership are:
 Quantity of Materials / products to be stored
 Variations in material storage requirements
 Service area to be covered by the warehouse / distribution center
 Security control requirements
 Customer service level
 Value added services that could be provided by warehousing

Fertilizer companies like EID Parry, and FACT have their own warehouses in the Cauvery river
delta regions covered by Trichy and Tanjore districts of Tamil Nadu(India). This is due to the
high demand for fertilizers from farmers in these districts. It is obvious that the demand
conditions of the market area to be served by the warehouse has to be kept in mind while making
any warehousing decision.

The break-even concept could be used for deciding on whether a company needs a private
warehouse or it should use a public warehouse. The figure shown above clearly indicates that a
company should use public warehouse until point ‘A’. It can decide to go in for private

It should be noted that the public warehousing costs are mostly variable. Private warehousing
costs have a higher component of fixed costs. This automatically requires higher and constant
storage volume requirements for justifying private warehouse facilities.

Total cost
G

P C

Fixed cost

Volume of
Public A Private material storage
warehouse warehouse
Fig. 12.6 Public vc private warehouse - cost comparison

Basic warehousing functions could be grouped into two basic categories viz. material movement,
material storage. The activities that constitute the two categories of warehousing functions are
given below:
1. Material movement:
 Receiving
 Put-away
 Order picking / order assembly
 Shipping
2. Material storage:
  Stock location
 Warehouse management

MATERIAL MOVEMENT
Receiving: includes activities like the physical unloading of incoming consignments in trucks /
trailers, checking, and recording of receipts into warehouse records / database, and deciding
where the received goods are to be put away in the warehouse. This could also include activities
like unpacking and repackaging, quality checks and temporary quarantine storage for goods
awaiting clearance by quality control.

Put-away: in simple terms is to place in a specified location. In logistics parlance, it is placing the
received goods into storage locations of the warehouse. The put-away operation is carried out by
using equipments like fork-lifts, tow lines, tow tractors, crane, conveyors, etc. The process of put
away involves movement of the products received from the receiving dock to storage locations.
There are many criteria like customer for whom the product is meant, product line, storage area
availability, etc. The different aspects of identifying the storage location for the products are being
presented in a few paragraphs later in this section.

Order picking and assembly. involves picking of stock from the warehouse in the required
quantities and at the required time to meet customer orders. It may involve break bulk operations
when goods are received in bulk (for transportation economies) from the manufacturing plant.
Bulk transportation could be in containers, intermediate bulk containers (IBC), and pallets. The
products in such large units are broken down into separate smaller consignments having products
meant for a particular customer (as per the customer order). Efficient order picking and effective
utilization of warehouse resources (labour and equipment) results in higher warehouse
performance and better customer satisfaction.

After picking, the products meant for a particular customer are brought together and consolidated
as completed orders made ready for dispatch to customers. This could involve packing the
products into unit loads by palletization or stretch and shrink wrapping.
Latest logistics practices have moved some of the assembly operations down into the distribution
channel. Such activities are carried out in either the warehouse or distribution centers. The
products are shipped into the warehouse or distribution center in generic form for assembly at the
warehouse or distribution center based on customer orders. This permits higher level of
customization of products as per customer’s requirements. This is also referred to as
postponement. .When such activity is carried out on a large scale using the power of information
technology to coordinate synchronized material flow, it is called as ‘mass customization’.

Shipping. involves moving of the products that have been picked, collated, packed and assembled
for dispatch. Such consignments which are ready for shipping are moved into the shipping bay /
area of the warehouse / distribution center for transportation to customer by outbound vehicles.

MATERIAL STORAGE
There are two aspects that is being covered under ‘Material Storage’ and they are: stock location,
and warehouse management. Stock location deals with the criteria used for stock location within
the storage area available. The second aspect which deals with warehouse management covers the
various aspects to be managed efficiently in order to ensure safe warehousing operations ensuring
higher service level at the lowest cost. Aspects like environment protection is also covered.

Stock location: The stock location in the warehouse is decided based on criteria like: popularity,
and unit size and cube. The popularity criterion operates by locating more frequently ordered
‘popular’ items near the shipping area and ‘less popular’ (less frequently ordered) items farther
from the shipping area. This method ensures less time for order pickers to travel for picking a
popular item ordered.

The unit size or cube criteria operates based on the principle of locating smaller and less volume
items near the shipping area and larger items which occupy more volume at the father location
with respect to the shipping area period. This principle ensures more number of smaller items
being stored near the shipping area. The is to reduce order pickers’ travel distance and order
picking time.
Warehouse management: The broad objectives of warehouse / distribution center management
are to ensure: effective planning and control, and optimum use of resources. The specific
objectives could be:
 Meeting required customer service level
 Ensure cost effective operation
 Optimum use of resources (warehouse building space, material handling equipment, and
labor including overtime)
 Ensure safety of operations and staff
 Maintain stock integrity
 Ensure proper control and information system
 Environment protection

Customer service level: there is always a trade off between cost and service level. Higher the
service level to be maintained then higher is the associated cost of providing it. The service level
and cost aspects and associated performance measures are provided in the following paragraphs
under the topic ‘Ensuring proper control & information system’.

Resources utilization & cost effective operation: optimum utilization of the resources in the
purview of warehousing will ensure cost effective operation.
The resources that are generally deployed into warehousing operations are building space, staff,
material handling equipments, etc.

Safety of operation and staff: it is the responsibility of warehouse management to ensure proper
safety in operations and also put in place necessary systems to ensure safety of the staff personnel.
Necessary training may be provided to staff to improve safe practices in the warehouse. Holding
of explosive and inflammable material in the warehouse requires special precautions to be taken.

Maintain stock integrity: is to minimize damage, loss, or deterioration of the products under
storage in the warehouse. It is also essential to take care of stock rotation and product life
requirements. Stock rotation may be ensured by ensuring first-in first-out (FIFO) inventory
policy. Use of storage equipment like gravity flow racks with backside loading may ensure stock
rotation automatically. In such systems, the latest material is loaded at the back end of the gravity
flow racking system and always the oldest stock is removed for shipping from the front end. The
product life of the stocks in storage needs to be monitored properly. Computerized database
system could come in handy for such requirements in raising a message alarm in advance (proper
time setting may have to be done) of product life expiry so that proper action could be taken.

Ensuring proper control & information system: Performance monitoring continuous monitoring
of warehouse/distribution center performance is very sensual in order to achieve the objectives of
the distribution network (part of the supply chain). The performance could be monitored with
respect to service level and cost.

Service level: the following are the measures with respect to service level that needs to be focused
in order to ensure proper warehousing operations performance:
 Stock availability
 Order lead-time
 Percentage of orders completed on time
 Accuracy of order fulfillment
 Number for outstanding back orders
 Damaged stock
 Customer complaints

Cost effectiveness: performance monitoring on the cost effectiveness of warehouse operations

could be done with respect to:
 Staff utilization and overtime
 Cost of building and site
 Maintenance
 Material handling equipment utilization and maintenance
 Packaging material and consumables used
 Cost of other services availed.

Information system: is an essential part of supply chain management. Information is required with
respect to stock availability, order processing, stock location, stock rotation, product life, etc. The
management also requires information with respect to the utilization of the various resources like
space, handling equipment, and labour. The information system could either be manual or
computerized. A computerized information system provides better data collection, data storage,
and data retrieval; and also allows quicker report generation on performance level and resources
utilization. It is covered slightly more in detail under ‘Warehouse Management System (WMS)’
presented later.

Environment protection: as part of warehouse management it is very essential to ensure that the
warehouse is not causing any environmental damage and / or pollution. It is also necessary to
meet any legal requirement w.r.t warehousing location and operation. The material storage
procedure should ensure safety standards in case of hazardous materials like chemicals and
petroleum products, etc..

WAREHOUSE MANAGEMENT SYSTEMS (WMS)

Warehouse Management Systems (WMS) enables the successful performance and operational
efficiencies of the warehousing system. Its primary objective is to control the movement and
storage of product within the warehouse and also control the related operations like receiving, put-
away, picking, and shipping. The WMS also attempts to optimize the equipment, labour usage,
and the storage capacity utilization. It may also be configured to take into account other
constraints like customer wise stacking, product line wise stacking, and other aspects like cold
storage requirements, etc.

Warehouse management systems make use of barcode scanners, RFID, mobile computers,
wireless LANs to efficiently monitor the flow of products within the warehouse. The data
collected on material receipt, order picking, collating, assembly, and shipping is updated into the
database of the warehouse management system. The data updating may be done either in batch or
real-time depending upon the system configuration. The database could be made use of for
generation of status reports on the products stored and other warehousing activities performance.

Enterprise Resource Planning (ERP) solutions such as JD Edwards, SSA Global, and others
provide a separate module for warehouse management system. The objective of a warehouse
management system is to provide an integrated solution that will automatically take care of
functions like receipt of material, put away, stock location, order picking and assembly, and
shipping.
WAREHOUSING AND JUST-IN-TIME (JIT)
Most of the organizations have implemented Just in time (JIT) in their operations. When, just in
time (JIT) practices are extended for the total supply chain, the warehousing requirements and
functions also undergoes phenomenal changes. The major considerations in warehousing in just in
time (JIT) environment are:
Small lot sizes - in line with the best practices of just in time (JIT) requirements.
Quality performance - in every activity carried out by the warehouse personnel with respect to
inbound / outbound activities in order to meet and / or excel customer service level requirements
Rapid throughput - in warehousing operations: in line with JIT philosophy which aims at zero
inventory at all levels of supply chain. Warehousing operations should also aim at keeping
minimum inventory levels. Hence, the focus of warehousing should be more towards value added
activities such as material / product mixing, product assembly, consolidation, and cross docking.
There should be a thrust towards minimum material storage.
Eliminate non-value added activities - Just in time (JIT) philosophy implementation in
warehousing should also focus on eliminating non-value added activities thereby achieving
improved efficiency in operations and higher productivity.

COST CONSIDERATIONS
The economic benefit of warehousing is to achieve a reduction in overall costs. For example,
addition of a warehouse could reduce the logistics cost by an amount more than the variable and
fixed cost of warehousing and then the addition of warehouse is economically justified.

According to Phil Croucher (2000), the cost of warehousing, as a percentage of sales turnover, is
about 2 per cent and as a percentage of the total cost of distribution the warehousing element
ranges between about 30 and 40 per cent. This represents a considerable cost component in the
logistics cost and expense to industry. The general cost components of warehousing operations
are: staff , building (rent or equivalent), building services (maintenance, services, and insurance),
and equipment.

The major cost components are: staff (mainly used for order picking), and building cost (rent or
equivalent). This necessitates warehousing designers and mangers should give particular emphasis
on building space utilization and proper warehouse layout design and also ensure proper
management of order picking systems.
Summary
The warehouse may be defined as a facility in the supply chain where the goods and materials are
held temporarily for further transportation and distribution. Traditionally, warehouses have been
used as a long-term storage place for materials. Warehouses have been used for storing raw
materials and finished goods for further consumption in or distribution through the supply chain.
However the functionality of warehouses has undergone a dramatic change.

Warehousing provides time and place utility for raw materials, industrial products, and finished
goods. Logistics system design views warehouse as a switching facility than as a storage facility
for inventory.

Major functions that the warehouse that the warehouses are put in to use while serving the
purpose of storage are: Volume transport: Raw material (inbound) and Finished goods
(outbound); Supply mixing; Product mixing; Cross-docking. Certain value added services are also
provided in the warehousing process like product repackaging and labeling.

Major considerations to be kept in mind while planning for a warehousing facility are: market and
the product stability, type of goods to be handled, type of facility, inventory decisions, level of
technology, and unit loads.

Logistics manager should make warehousing decisions with respect to: number of warehouses,
physical location (region, specific location, etc.), warehouse size (in sq. metres of built area and
other space requirements), warehouse layout, and what products and materials to store. Another
important decision is whether the firm should have its own warehouse or use public warehouses.

Basic warehousing functions could be grouped into two basic categories viz. material movement,
material storage. The activities that constitute the two categories of warehousing functions are
given below:
1. Material movement: Receiving, Put-away, Order picking / order assembly, Shipping.
2. Material storage: Stock location, and Warehouse management .

While effective planning and control, and optimum use of resources are objectives of
warehousing management, the specific objectives of warehouse / distribution center management
are: meet required customer service level, ensure cost effective operation, optimum use of
resources, ensure safety of operations and staff, maintain stock integrity, proper control and
information system, and ensure environment protection.

Warehouse Management Systems (WMS) enables the successful performance and operational
efficiencies of the warehousing system; and its primary objective is to control the movement and
storage of product within the warehouse and also control the related operations like receiving, put-
away, picking, and shipping. It attempts to optimize the equipment, labour, and the storage
capacity utilization. Warehouse management systems make use of barcode scanners, RFID,
mobile computers, wireless LANs to efficiently monitor the flow of products within the
warehouse.

The other important aspects in warehousing are: just-in-time operations; and cost considerations
in warehousing.
Questions

1. Define warehousing, as per Lambert?

2. What are the value added services provided through a warehousing facility?
3. How does warehousing helps in protecting against contingencies in demand?
4. Explain the smoothing function of warehousing.
5. Explain the concept of break-bulk.
6. What do you understand by repackaging?
7. List and explain the different types storages followed in warehousing.
8. Compare the advantages and disadvantages of using privately owned and public
warehouses.
9. List the aspects that the logistics manager should focus on while making warehousing
decisions.
10. What are the factors to be considered while deciding on the number of warehouses?
11. What aspects are to be considered while making the layout design for the warehouse?
12. What are the basic principles to be kept in mind while designing the layout for
warehouses?
13. What are the main objectives of warehousing design and layout?
14. What are the factors that influence the ownership decision with respect to warehousing?
15. Draw up a comparative breakeven analysis graph between private and public warehousing
options.
16. What are the operational considerations with respect to warehousing?
17. What are the performance measures with respect to warehousing?
18. How could performance monitoring on the cost effectiveness of warehousing operation be
implemented?
19. Explain the role of information system in warehousing.
20. What are the aspects to be considered in the warehousing activity with respect to
environment protection?
21. Explain in detail warehousing management Systems (WMS).
22. List and explain the considerations in warehousing in a JIT environment.
23. What are the major cost components in warehousing?

Essay questions

1. What are the major functions of warehousing? Explain in detail.

2. What are the major considerations to be taken into account while carrying out
warehousing decisions?
3. List and explain the two categories of warehousing activities.