Warehouse Management

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.

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 Benefits of Warehousing

Consolidation
 Shipment consolidation is an economic benefit of
warehousing.
 With this arrangement, the consolidating warehouse receives
and consolidates materials from a number of manufacturing
plants destined to a specific customer on a single
transportation shipment.
 The benefits are the realization of the lowest possible
transportation rate and reduced congestion at a customer's
receiving dock.

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 Consolidation Warehouses

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 Consolidation Warehouses…

 The primary benefit of consolidation is that it combines the

logistical flow of several small shipments to a specific
market area.

 Consolidation warehousing may be used by a single firm, or

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

 Through the use of such a program, each individua1

manufacturer or shipper can enjoy lower total distribution
cost than could be realized on a direct shipment basis
individually.

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 Break bulk warehouses

 Break bulk warehouse operations are similar to

consolidation except that no storage is performed.
 A break bulk operation receives combined customer orders
from manufacturers and ships them to individual customers.
 The break bulk warehouse sorts or splits individual orders
and arranges for local delivery.
 Because the long-distance transportation movement is a
large shipment, transport costs are lower and there is less
difficulty in tracking.

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 Break bulk warehouses…

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 Processing/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.

 For example, vegetables can be processed and canned in

"brights" at the manufacturer.

 Brights are cans with no pre-attached labels.

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 Processing/Postponement…

 The use of brights for a private label product

means that the item does not have to be committed
to a specific customer or package configuration at
the manufacturer's plant.

 Once a specific customer order is received, the

warehouse can complete final processing by
adding the label and finalizing the packaging.

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 Processing/Postponement…

 Processing and postponement provide two economic

benefits:

 First, risk is minimized because final packaging is not

completed until an order for a specific label and package has
been received.

 Second, the required level of total inventory can be reduced

by using the basic product (brights) for a variety of labeling
and packaging configurations.

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 Stockpiling

 The economic benefit of stockpiling comes from the need of

seasonal storage.
 For example, lawn furniture and toys are produced year-
round and primarily sold during a very short marketing
period.
 In contrast, agricultural products are harvested at specific
times with subsequent consumption occurring throughout
the year.
 Both situations require warehouse stockpiling to support
marketing efforts.
 Stockpiling provides an inventory buffer, which allows
production efficiencies within the constraints imposed by
material sources and the customer.

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 Service Benefits

 Five basic service benefits are achieved through

warehousing:
 spot stock,
 assortment,
 mixing,
 production support, and
 market presence.

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 Spot Stock

 Under spot stocking, a selected amount of a firm's product

line is placed or "spot stocked" in a warehouse to fill
customer orders during a critical marketing period.
 In particular, manufacturers with limited or highly seasonal
product lines are partial to this service.

 Rather than placing inventories in warehouse facilities on a

year-round basis or shipping directly from manufacturing
plants, delivery time can be substantially reduced by
advanced inventory commitment to strategic markets.

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 Spot Stock…

 Utilizing warehouse facilities for stock spotting allows

inventories to be placed in a variety of markets adjacent to
key customers just prior to a maximum period of seasonal
sales.

 Suppliers of agricultural products to farmers often use spot

stocking to position their products closer to a service-
sensitive market during the growing season.

 Following the sales season, the remaining inventory is

withdrawn to a central warehouse.

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 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.

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 Assortment vs. Spot Stock

 The differential between stock spotting and complete line

assortment is the degree and duration of warehouse
utilization.
 A firm following a stock spotting would typically
warehouse a narrow product assortment and place stocks in a
large number of small warehouses dedicated to specific
markets for a limited time period.
 Distribution assortment warehouse usually has a broad
product line, is limited to a few strategic locations, and is
functional year-round.
 The combined assortments also allow larger shipment
quantities, which in turn reduce transportation cost.

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 Mixing

 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.

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 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.

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 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.

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 Warehouse Operating Principles

 Once it has been determined to use a warehouse,

the next step is designing it.
 Whether the warehouse is a small manual
operation or a large automated facility, the
following three principles are relevant:
 Design criteria,
 Handling technology, and
 Storage plan.

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 Design Criteria

 Warehouse design criteria address physical facility

characteristics and product movement.
 Three factors to be considered in the design
process are:
 the number of stories in the facility,
 height utilization, and
 product flow.

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 Number of stories in the facility

 The ideal warehouse design is limited to a single story so

that product does not have to be moved up and down.
 The use of elevators to move product from one floor to the
next requires time and energy.
 The elevator is also often a bottleneck in product flow since
many material handlers are usually competing for a limited
number of elevators.
 While it is not always possible, particularly in central
business districts where land is restricted or expensive,
warehouses should be limited to a single story.

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 Height utilization

 Regardless of facility size, the design should maximize the

usage of the available cubic space by allowing for the
greatest use of height on each floor.
 Most warehouses have 20- to 30-foot ceilings (1 foot =
12 inch; 1 inch = 2.54 cm), although modern automated and
high-rise facilities can effectively use ceiling heights up to
100 feet.
 Through the use of racking or other hardware, it should be
possible to store products up to the building's ceiling.
 Maximum effective warehouse height is limited by the safe
lifting capabilities of material-handling equipment, such as
forklifts.

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 Product flow

 Warehouse design should also allow for straight product

flow through the facility whether items are stored or not.

 In general, this means that product should be received at one

end of the building, stored in the middle, and then shipped
from the other end.

 Straight-line product flow minimizes congestion and

confusion.

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 Handling technology

 The second principle focuses on the effectiveness

and efficiency of material-handling technology.

 The elements of this principle concern:

 movement continuity and
 movement scale economies.

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 Movement continuity

 Movement continuity means that it is better for a material

handler or piece of handling equipment to make a longer
move than to have a number of handlers make numerous,
individual, short segments of the same move.

 Exchanging the product between handlers or moving it from

one piece of equipment to another wastes time and increases
the potential for damage.

 Thus, as a general rule, fewer longer movements in the

warehouse are preferred.

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 Movement scale economies

 Movement scale economies imply that all warehouse

activities should handle or move the largest quantities
possible.
 Instead of moving individual cases, warehouse activities
should be designed to move groups of cases such as pallets
or containers.
 This grouping or batching might mean that multiple products
or orders must be moved or selected at the same time.
 While this might increase the complexity of an individual's
activities since multiple products or orders must be
considered, the principle reduces the number of activities
and the resulting cost.

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 Storage Plan

 According to the third principle, a warehouse design should

consider product characteristics, particularly those pertaining
to volume, weight, and storage.
 Product volume is the major concern when defining a
warehouse storage plan.
 High-volume sales or throughput product should be stored in
a location that minimizes the distance it is moved, such as
near primary aisles and in low storage racks.
 Such a location minimizes travel distance and the need for
extended lifting.
 Conversely, low-volume product can be assigned locations
that are distant from primary aisles or higher up in storage
racks.

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 A Sample Storage Area

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 Storage Plan…

 Similarly, the plan should include a specific strategy for

products dependent on weight and storage characteristics.
 Relatively heavy items should be assigned to locations low
to the ground to minimize the effort and risk of heavy lifting.
 Bulky or low-density products require extensive storage
volume, so open floor space or high-level racks can be used
for them.
 On the other hand, smaller items may require storage shelves
or drawers.
 The integrated storage plan must consider and address the
specific characteristics of each product.

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 Alternative Warehouse
Strategies

 Warehouse alternatives include:

 (1) Private warehouses,
 (2) Public warehouses, and
 (3) Contract warehouses.
 A private warehouse facility is owned and managed by the
same enterprise that owns the merchandise handled and
stored at the facility.
 A public warehouse, in contrast, is operated as an
independent business offering a range of services -such as
storage, handling, and transportation- on the basis of a fixed
or variable fee.
 Public warehouse operators generally offer relatively
standardized services to all clients.

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 Alternative Warehouse
Strategies...

 Contract warehousing, which is evolving from the public

warehouse segment, provides benefits of both the private and
public alternatives.

 Contract warehousing is a long term, mutually beneficial

arrangement which provides unique and specially tailored
warehousing and logistics services exclusively to one client,
where the vendor and client share the risks associated with
the operation.

 Important dimensions that differentiate contract warehousing

operators from public warehouse operators are the extended
time frame of the service relationship, tailored services,
exclusivity, and shared risk.

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 Private Warehouses

 A private warehouse is operated by the firm owning the

product.

 The actual facility, however, may be owned or leased.

 The decision as to which strategy best fits an individual firm

is essentially financial.

 Often it is not possible to find a warehouse for lease that fits

the exact requirements of a firm.

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 Private Warehouses…

 The major benefits of private warehousing include control,

flexibility, cost, and other intangible benefits.

 Private warehouses provide more control since the enterprise

has absolute decision-making authority over all activities and
priorities in the facility.

 This control facilitates the ability to integrate warehouse

operations with the rest of the firm's internal logistics
process.

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 Private Warehouses…

 Private warehousing is usually considered less costly than

public warehousing because private facility costs do not
have a profit markup.
 This perceived benefit, however, may be misleading since
public warehouses often are more efficient or may operate at
lower wage scales.
 Private warehousing has also some intangible benefits,
particularly with respect to market presence.
 A private warehouse with a firm's name on it may produce
customer perceptions of responsiveness and stability.
 This perception sometimes provides a firm with a marketing
advantage over other enterprises.

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 Public Warehouses

 On the basis of the range of specialized operations

performed, public warehouses are classified as

 (1) general merchandise,

 (2) refrigerated,
 (3) special commodity,
 (4) bonded, and
 (5) household goods and furniture.

 Each warehouse type differs in its material handling and

storage technology as a result of the product and
environmental characteristics.

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 Public Warehouses…

 General merchandise warehouses are designed to handIe

general package commodities such as paper, small
appliances, and household supplies.

 Refrigerated warehouses (either frozen or chilled) handle

and maintain food, medical items, and chemical products
with special temperature requirements.

 Commodity warehouses are designed to handle bulk

material or items with special handling considerations, such
as tires or clothing.

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 Public Warehouses…

 Bonded warehouses are licensed by the government to

store goods prior to payment of taxes or duties.
 They exert very tight control over all movements in and out
of the facility since government documents must be filed
with each move.

 For example, cigarettes are often stored in bonded

warehouses prior to having the tax stamp applied.
 This tactic saves the firm money by delaying tax payments;
it also reduces inventory value substantially.

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 Public Warehouses…

 Finally, a household goods or furniture

warehouse is designed to handle and store large,
bulky items such as appliances and furniture.

 Of course, many public warehouses offer

combinations of these operations.

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 Public Warehouses…

 From a financial perspective, public warehousing may have

a lower variable cost than comparable privately operated
facilities.
 The lower variable cost may be the result of lower pay
scales, better productivity, or economy of scale.
 Public warehouses certainly result in lower capital costs.
 When management performance is judged according to
return on investment (ROI), the use of public warehousing
can substantially increase enterprise return.

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 Public Warehouses…

 Public warehousing offers flexibility in that it is easy to

change the location, size, and number of facilities, allowing
a firm to quickly respond to supplier, customer, and seasonal
demands.
 Private warehouses are relatively fixed and difficult to
change because buildings have to be constructed or sold.
 Public warehousing can also offer significant scale
economies since the volume for each customer is leveraged
with that of other users.
 This results in high-volume operations that can spread fixed
costs and justify more efficient handling equipment.

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 Public Warehouses…

 A public warehouse can also leverage

transportation by providing delivery of loads that
represent many public warehouse customers.

 For example, rather than have vendor A and

vendor B each deliver to a retail store from their
own warehouse, a public warehouse serving both
vendors could deliver a single combined load
more efficiently.

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 Public Warehouses…

 A public warehouse charges clients a basic fee for handling

and storage.
 In the case of handling, the charge is based on the number
of cases or pounds handled.
 For storage, the charge is assessed on the number of cases
or weight in storage during the month.
 Such charges normally exceed the cost of private
warehousing if adequate private facility volume exists.
 However, when economies of scale are not possible in a
private facility, public warehousing may be a low-cost
alternative.

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 Contract Warehouses

 Contract warehousing combines the best characteristics of

both private and public operations.

 The long-term relationship and shared risk result in lower

cost than typical public warehouse arrangements.

 Contract warehouse operations can provide benefits of

expertise, flexibility, and economies of scale by sharing
management, labor, equipment, and information resources
across a number of clients.

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 Contract Warehouses…

 Although it is common for contract warehouse operators to

share resources across clients in the same industry such as
grocery products, it is not common that direct competitors
will want to share resources.

 Contract warehouse operators are also expanding the scope

of their services to include other logistics activities such as
transportation, inventory control, order processing, customer
service, and returns processing.

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 Contract Warehouses…

 For example, Rich Products, a frozen food manufacturer in

Buffalo, New York, has increasingly utilized contract
warehousing.

 Since 1992, Rich has had a long term commitment with a

refrigerated warehousing and distribution company,
Christian Salvesen, for storage, handling, and distribution
services at its facilities in New York.

 The nature of the arrangement benefits both parties and

allows Rich to expand its distribution network without
incurring any fixed facility cost.

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 Contract Warehouses…

 Rich is assured that there will always be storage space for its
products.

 Christian Salvesen doesn't have to be concerned with filling

space in its warehouses and can focus on providing service.

 Moreover, the longer Rich Products utilizes Christian

Salvesen's services, the better the contract warehousing firm
will be able to understand Rich's business needs and provide
customized services.

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 Warehousing Strategy

 Many firms utilize a combination of private, public, and

contract facilities.
 A private or contract facility may be used to cover basic year
round requirements, while public facilities are used to handle
peak seasons.
 In other situations, central warehouses may be private, while
market area or field warehouses are public facilities.

 Each use of warehouse combinations will be discussed now.

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 Warehousing Strategy…

 Full warehouse utilization throughout a year is a remote

possibility.
 As a planning rule, a warehouse designed for full-capacity
utilization will 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 situations, it may be more efficient to build private
facilities to cover the 75 percent requirement and use public
facilities to accommodate peak demand.

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 Warehousing Strategy…

It may be more efficient to build private facilities to cover the 75

percent requirement and use public facilities to accommodate
peak demand.
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 Warehousing Strategy…

 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 basis 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 warehouse strategies most
economically meets customer service objectives.

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 Warehousing Strategy…

 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 a 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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 Warehousing Strategy…

Other qualitative factors that should be considered include:

(1) presence synergies,

(2) industry synergies,
(3) operating flexibility,
(4) location flexibility, and
(5) scale economies.

Each consideration and its rationale will be discussed.

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 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 firm's
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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 Industry synergies

 Industry synergies refer to the operating benefits of

collocating with other firms 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 the same public warehouse allows frequent delivery
of consolidated loads from multiple suppliers.
 Public and contract warehousing increase the potential for
industry synergy.

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 Operating flexibility

 Operating flexibility refers to the ability to adjust internal

policies and procedures 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
policies and procedures that are consistent across its clients
to minimize operating confusion.
 There are many public and contract warehouse operations
that have demonstrated substantial flexibility and
responsiveness.

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 Location flexibility

 Location flexibility refers to the ability to quickly adjust

warehouse location and number in accordance with seasonal
or permanent demand changes.

 For example, in-season demand for agricultural chemicals

requires that warehouses 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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 Scale economies
 Scale economies refer to the ability to reduce material-handling and
storage through application of advanced technologies.

 High-volume warehouses generally have greater opportunity to achieve

these benefits because they can spread technology's fixed cost over
larger volumes.
 In addition, capital investment in automated equipment 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.

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 Qualitative Decision Factors

Presence synergy and Operating flexibility is higher in Private

Warehouses.
Other factors are higher in Public Warehouses.
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 Planning the Distribution Warehouse

 The initial decisions of warehousing are related to planning.

 A master plan of the layout, space requirements, and

material-handling design should be developed first and a
specific site for the warehouse selected.

 These decisions establish the character of the warehouse,

which, in turn determines the degree of attainable handling
efficiency.

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 Site Selection

 Location analysis techniques are available to assist in

selecting a general area for warehouse location.
 Once location analysis is completed, a specific building site
must be selected.
 Three areas in a community may be considered for location:
 1) commercial zones, 2) outlying areas served by motor truck
only, and 3) central or downtown areas.
 The primary factors in site selection are the availability of
services and cost.
 The cost of procurement is the most important factor
governing site selection.

11/04/09 10:15 PM 61
 Site Selection…

 A warehouse need not be located in a major industrial area.

 In many cities, one observes warehouses among industrial

plants and in areas zoned for light or heavy industry.

 Interestingly, this is not a legal necessity because most

warehouses can operate under the restrictions placed on
commercial property.

11/04/09 10:15 PM 62
 Site Selection…

 Beyond procurement cost, setup and operating expenses

such as rail sidings, utility expenses, taxes, insurance rates,
and highway access require evaluation.
 These expenses vary between sites.

 For example, a food distribution firm recently rejected what

otherwise appeared to be a totally satisfactory site because of
insurance rates.

 The site was located near the end of a water main.

11/04/09 10:15 PM 63
 Site Selection…

 During most of the day, adequate water supplies were

available to handle operational and emergency requirements.
 The only possible water problem occurred during two short
periods each day.
 From 6:30 to 8:30 in the morning and from 5 to 7 in the
evening, the demand for water along the line was so great
that a sufficient supply was not available to handle
emergencies.
 Because of this deficiency, abnormally high insurance rates
were required and the site was rejected.

11/04/09 10:15 PM 64
 Site Selection…

 Several other requirements must be satisfied

before a site is purchased.
 The location must offer adequate room for
expansion.
 Necessary utilities must be available.
 The soil must be capable of supporting the
structure, and the site must be sufficiently high to
afford proper drainage (su akışına izin verme).

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 Product-Mix Considerations

 The design and operation of a warehouse are related directly

to the character of the product mix.

 Each product should be analyzed in terms of annual sales,

stability of demand, weight, and packaging.

 It is also desirable to determine the total size and weight of

the average order processed through the warehouse.

 These data provide necessary information for determining

requirements in warehouse space, design and layout,
material-handling equipment operating procedures, and
controls.

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 Expansion

 Future expansion is often neglected when an enterprise

consider initial establishment of its warehouse facilities.
 Inclusion of a warehouse into the logistical system should be
based partially on estimated requirements for future
operations.
 Well-managed organizations often establish five- to ten-year
expansion plans.
 Such expansion considerations may require purchase or
option of a site three to five times the size of the initial
structure.

11/04/09 10:15 PM 67
 Expansion…

 Special construction is often considered to ease

expansion without seriously affecting normal
operations.

 Some walls may be constructed of semi-permanent

materials to allow easy removal.

 Floor areas, designed to support heavy

movements, are extended to these walls in a
manner that facilitates expansion.

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 Selection of Material-Handling
System

 A material-handling system is one of the initial

considerations of warehouse planning.

 Movement is the main function within a warehouse.

 Consequently, the warehouse is viewed as a structure

designed to facilitate maximum product flow.

 It is important to stress that the material-handling system

should be selected early in the warehouse design stage.

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 Warehouse Layout

 Layout of a warehouse depends on the proposed material

handling system and requires development of a floor plan to
facilitate product flow.

 It is difficult to generalize about warehouse layouts since

they must be refined to fit specific needs.

 If pallets are to be utilized, the first step is to determine the

pallet size.
 A pallet of nonstandard size may be desirable for specialized
products, but whenever possible, standardized pallets should
be used because of their lower cost.

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 Warehouse Layout…

 The most common sizes are 40 by 48 inches and 32 by 40

inches.

 In general, the larger the pallet load, the lower the cost of
movement per package over a given distance.

 The packages to be placed on the pallet and the related

patterns will determine, to a certain extent, the size of pallet
best suited to the operation.

 Regardless of the size finally selected, management should

adopt one size for the total operation.

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 Warehouse Layout…

 The second step in planning a layout involves the pallet

positioning.

 The basic method of positioning pallets in a mechanized

warehouse is a ninety-degree, or square, placement.

 Square placement means that the pallet is positioned

perpendicular to the aisle.

 The square method is widely used because of layout ease.

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 Pilferage Protection
 Protection against theft of merchandise has become a major factor in
warehouse operations.
 Such protection is required as a result of the increased vulnerability of
firms to riots and civil disturbances.
 All normal precautions employed throughout the enterprise should be
strictly enforced at each warehouse.

 Security begins at the fence.

 As standard procedure, only authorized personnel should be permitted
into the facility and surrounding grounds and entry to the warehouse
yard should be controlled through a single gate.

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 Pilferage Protection…

 Without exception, no private automobile-regardless of

management rank or customer status-should be allowed to
penetrate the yard adjacent to the warehouse.

 To illustrate the importance of the stated guidelines, the

following actual experience may be helpful.
 A particular firm enforced the rule that no private vehicles
should be permitted in the warehouse yard.
 Exceptions were made for two handicapped office
employees.

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 Pilferage Protection…

 One night after work, one of these employees accidentally

discovered a bundle taped under one fender of his car.

 Subsequent checking revealed that the car was literally a

delivery truck.
 The matter was promptly reported to security, which
informed the employee not to alter any packages taped to the
car and to continue parking inside the yard.
 Over the next several days, the situation was fully
uncovered, with the ultimate arrest and conviction of several
warehouse employees who confessed to stealing over
$100,000 of company merchandise.

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 Pilferage Protection…

 The firm would have been better off purchasing a small

vehicle to provide transportation for the handicapped
employees from the regular parking lots to the office.

 Shortages are always a major consideration in warehouse

operations.
 Many are honest mistakes in order selection and shipment,
but the purpose of security is to restrict theft from all angles.

 The majority of thefts occur during normal working hours.

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 Pilferage Protection…

 Computerized inventory control and order processing

systems help protect merchandise from being carried out of
the warehouse doors.

 No items should be released from the warehouse unless

accompanied by a computer release document.

 If samples are authorized for use by salespersons, the

merchandise should be separate from other inventory.

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 Pilferage Protection…

 Not all pilferage occurs on an individual basis.

 Numerous instances have been discovered where organized

efforts between warehouse personnel and truck drivers
resulted in deliberate over-picking or high-for-low-value
product substitution in order to move unauthorized
merchandise out of the warehouse.

 Employee rotation, total case counts, and occasional

complete line-item checks can reduce vulnerability to such
collaboration.

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 Product Deterioration

 Within the warehouse, a number of factors can reduce a

product or material to a non-usable or non-marketable state.

 The most obvious form of product deterioration is damage

from careless transfer or storage.

 Another major form of deterioration is non-compatibility of

products stored in the same facility.

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 Product Deterioration…

 The primary concern is deterioration that results from

improper warehouse work procedures.

 A constant concern is the carelessness of warehouse

employees.

 In this respect, the forklift truck may well be management's

worst enemy.

 Regardless of how often operators are warned against

carrying overloads, some still attempt such shortcuts when
not properly supervised.

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 Product Deterioration…

 In one situation, a stack of four pallets was dropped off a

forklift truck at the receiving dock of a food warehouse.
 Standard procedure was to move two pallets per load.
 The value of the damaged merchandise exceeded the average
daily profit of two supermarkets.

 Product deterioration from careless handling within the

warehouse is a form of loss that cannot be insured against
and constitutes a 100 percent cost with no compensating
revenue.

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 Thanks

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