DEFINING THE CONCEPTS OF WAREHOUSE

A warehouse is a planned space for the efficient storage and handling of goods and materials. That is, a
warehouse is a place where goods are kept until they are demanded use. Warehousing is the process of
storing goods which are either produced or purchased in a planned space until they are needed. A
warehouse is used by manufacturers, importers, exporters, wholesalers, transport business, customs etc.

NEED FOR WAREHOUSING

(i) Seasonal Production- Agricultural commodities are harvested during certain seasons, but their
consumption or use takes place throughout the year. Therefore, there is a need for proper storage or
warehousing for these commodities, from where they can be supplied as and when required.

(ii) Seasonal Demand- There are certain goods, which are demanded seasonally, like woolen garments
in winters or umbrellas in the rainy season. The production of these goods takes place throughout the
year to meet the seasonal demand. So there is a need to store these goods in a warehouse to make them
available at the time of need.

(iii) Large-scale Production - In case of manufactured goods, now-a-days production takes place to
meet the existing as well as future demand of the products. Manufacturers also produce goods in huge
quantity to enjoy the benefits of large-scale production, which is more economical. So the finished
products, which are produced on a large scale, need to be stored properly till they are cleared by sales.
(iv) Quick Supply - Both industrial as well as agricultural goods are produced at some specific places
but consumed throughout the country. Therefore, it is essential to stock these goods near the place of
consumption, so that without making any delay these goods are made available to the consumers at the
time of their need.

(v) Continuous Production- Continuous production of goods in factories requires adequate supply of
raw materials. So there is a need to keep sufficient quantity of stock of raw material in the warehouse to
ensure continuous production.

(vi) Price Stabilization- To maintain a reasonable level of the price of the goods in the market there is a
need to keep sufficient stock in the warehouses. Scarcity in supply of goods may increase their price in
the market. Again, excess production and supply may also lead to fall in prices of the product. By
maintaining a balance of supply of goods, warehousing leads to price stabilization
FEATURES OF AN IDEAL WAREHOUSE

(i) Proper Location For effective movement of goods and cost saving, warehouses should be
established at places, which are convenient to both the buyer and the seller. These warehouses should be
set up near railway stations, major highways, seaports and airports, where goods can be loaded and
unloaded conveniently. It is also recommended to have go-downs in open places so that the vehicles can
move around easily.

(ii) Use of Mechanical Appliances In the warehouses, mechanical appliances should be used to load
and unload the goods. It not only results in safety of men and material but also reduces wastages in
handling goods and overall handling costs.

(iii) Sufficient Space For an ideal warehouse, adequate space should be covered for maximum
storage and to keep the goods in proper order. Each trader (big or small) would want that all of his
merchandise should be accommodated in one warehouse so that he needs not travel to different places to
manage the loading and unloading of his goods.

(iv) Proximity to the Market The warehouses should be established at a place where market for raw
materials and for selling finished goods is as close as possible. This is the reason that big warehouses are
close to commercial places or bus stands.

(v) Parking Facility Parking along road, public places in the urban/suburban areas continue to be a
harrowing experience for the traders who visit from outstations. Hence, in warehouses, proper
arrangements should be made inside the premises to assist quick loading, unloading and safe parking.

(vi) Safety Measures A warehouse, which basically is used to store eatables or perishable goods like
bread, butter, fruits, eggs and vegetables should be equipped with proper cold storage, moisture
resistance etc. facilities. Further, efforts should be made to secure the warehouse against possibilities of
theft and damage from heat, rainwater, insects, pests and fire. The use of fire extinguishers, safety
alarms, budgets and round the clock security arrangements should be there to secure warehouses from
unforeseen mis-happenings.

(vii) Economical The warehouse location, layout, construction and maintenance should be done in
such a way that ensures maximum storage of goods at minimum expense.
(viii) Proper Management If warehouses are not managed properly, all the money spent will go
waste. Mismanagement may lead to theft, loss, errors and omissions of goods stored by various traders.
Hence, a strict control over the warehouse is essential on permanent basis. A permanent officer should
be appointed for proper arrangements of incoming and outgoing goods.

ACTIVITIES OF A WAREHOUSE

1) Receiving of Goods: warehouse allows the person operating the warehouse to receive goods
against a purchase order.

2) Identification of Goods: The identification of goods is done through the use of code number or
tag. This will make ease, the differentiation of the goods produced by different firms.

3) Holding of Goods: That is goods are kept in good condition until they are needed.

4) Operate an Information System: Warehouse keeper takes record of each item in the
warehouse. That is the quantity at hand, quantity received, quantity issued and location of goods in the
warehouse.

5) Marshall the Shipments: By ensuring that goods which make up single order are packaged
together. It checks omission errors and updates order records.

6) Dispatch the Shipment: Warehouse allows the package of orders, preparation of shipping
documents and loading of goods into the right vehicle for delivery.

7) Pick Goods: Warehouse helps in the selection of goods out of the storage areas.

8) Dispatch the Goods to Storage: warehouse carries out the activity of dispatching the goods to
the storage after proper identification has been given to the goods.

TYPES OF WAREHOUSES

PRIVATE WAREHOUSES
The warehouses which are owned and managed by the manufacturers or traders to store, exclusively,
their own stock of goods.
ADVANTAGES OF PRIVATE WAREHOUSE
a) Degree of control: From inventory control, optimum space utilization, maintenance and equipment,
internal material flow, handling routines, supervision, and associated cost control, the firm has a direct
control and clear visibility for the product until the customer takes possession or delivery.

b) Flexibility: With more control, there is greater flexibility of designing and operating the warehouse to
suit the needs of its customers and the characteristics of the products. This means that companies who
have specialized handling for its products will not find public warehousing viable. In addition, the
warehouse can also be modified through expansion or renovation to facilitate product changes, which is
not possible on a public warehouse.

c) Less costly in the Long term: Operating cost can be 15 to 25% lower if the company achieves
sufficient throughout or utilization. This is possible if the firm achieves at least 75% utilization, if not, it
would be best to use public warehousing.

d) Better use of Human resources: There is greater care in handling and storage when the firm’s
own workforce operates the warehouse. This means that the company can utilize the expertise of its
technical specialists.

e) Tax benefits: There are depreciation allowances on buildings and equipment reduce tax payable.

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

DISADVANTAGES OF PRIVATE WAREHOUSE

a) Lack of flexibility: The major drawback is it is too costly, because of its fixed size and costs. This
means that in the short run, the private facility cannot expand or contract to meet increases or decreases
in demand. Thus, when demand is low, the firm still assumed the fixed costs as well as the lower
productivity linked to unused warehouse space. However, the disadvantages can be minimized if the
firm is able to rent out part of its space. Moreover, it loses flexibility in its strategic location options.
They can’t change quickly to rapid changes in market size, location and preferences, and this may mean
that they will lose an excellent business opportunity.
b) High opportunity cost (high risk) Return of investments on other investments may be greater if
funds are channeled into other profit-generating opportunities. Besides, there is also a potential
probability of not being able to sell the w/h in the later period due to its customized design.

c) Low Rate of return: Since the rate of return is about the same as the firm’s other investments, most
companies find it advantageous to use a combination of public and private warehousing. It is best to use
private warehousing to handle the basic inventory levels required for the least cost logistics in markets
where the volume justifies ownership. On the other hand, any extra volume can be stored in the public
warehouse during peak periods where private warehouse is full.

d) High start-up cost: Firms have to generate enough capital to build or buy a warehouse. A warehouse
is often a long, risky investment. Moreover, there is cost of hiring and training of employees, and the
purchase of material handling equipment. The high cost involved may force the company to seriously
consider public warehousing as a better option.

PUBLIC WAREHOUSES
The warehouses which are run to store goods of the general public are known as public warehouses.
Anyone can store his goods in these warehouses on payment of rent. An individual, a partnership firm or
a company may own these warehouses. To start such warehouses a license from the government is
required. The government also regulates the functions and operations of these warehouses. Mostly these
warehouses are used by manufacturers, wholesalers, exporters, importers, government agencies, etc.

THE ADVANTAGES OF PUBLIC WAREHOUSE

a) Zero capital investment in Warehousing: A major advantage is there is no capital investment (eg.
Leasing of building, material handling equipment and startup cost of operations hiring and training
personnel) from the user to do one’s own warehousing. The cost of public warehousing is a variable cost
component.
b) Provides Capability to Expand Market: For companies that are expanding, public warehousing
provides economical and practical means to reach out to new markets.
c) Adjusts for seasonality: If firm’s operations has seasonality, then having public w/h allows the user
to rent as much of w/h space during peak season, since there is no commitment of $$ as compared to
public w/h. Moreover, there is this distinct advantage of allowing storage costs to vary directly with
volume.
d) Reduced Risk (Low opportunity cost): Since there is no commitment of funds in public w/h, the
user firm can switch to another facility in a short period of time, often within 30 days. Moreover, if there
is another attractive location, which may have a lower rent, the user firm can easily switch warehouse.

e) Permit freight to move at lower rates: This is a major advantage to justify perhaps half of all public
warehousing today. It is possible since they handle the requirements of a number of firms; their volume
allows them to pay consolidated freight rates but not the much higher freight costs that result from
shipping small quantities at premium rates.

f) Gain Access to Special Features and Services: Most can offer specialized services (eg. Broken-case
handling, packaging services for manufacturer products for shipping, break bulk services, freight
consolidation services). They are resulted from the consolidation of small shipments with those of non-
competitors who use the same public warehouse. Most public warehouses have special features, which
makes them unique.

g) Greater flexibility: Owing a long-term lease on a warehouse is a huge liability and there is a huge
opportunity cost on changing the warehouse if business conditions make it necessary for the change.
Thus, public w/h is better since there is only a short-term contract, and thus, short-term commitments.

h) Tax advantages: Since it doesn’t own property, it is not subjected to taxes, which is quite substantial.

i) Specific knowledge of costs for storage and handling: When a company uses a public w/h, it knows
how much exactly is spent on storage and handling costs since the monthly bill displays all necessary
information. This allows the user to forecast costs for each different levels of activity. On the other hand,
firms that operate their facilities often find it difficult to determine the fixed and variable cost exactly.

THE DISADVANTAGES OF PUBLIC WAREHOUSE

a) Communication problem: There is a potential problem of incompatible computer terminals and

systems. They may not have another terminal just to suit the needs of just one customer. Thus, the lack
of standardization in contractual agreements makes communication regarding contractual obligations
difficult.
b) Lack of specialized services: Spaces or specialized services needed may not always be available in a
specific location. Most public warehouse facilities provide local services which may not be useful for
the big MNC who requires more specialized services.

c) Space may not be available: Public warehousing space may not be available when a firms wants it.
Shortage of space can happen in some places especially during peak season, and this may affect the firm
adversely.

GOVERNMWNT WAREHOUSES

These warehouses are owned, managed and controlled by central or state governments or public
corporations or local authorities. Both government and private enterprises may use these warehouses to
store their goods. Central Warehousing Corporation of India, State Warehousing Corporation and Food
Corporation of India are examples of agencies maintaining government warehouses.

BONDED WAREHOUSE
These warehouses are owned, managed and controlled by government as well as private agencies.
Private bonded warehouses have to obtain license from the government. Bonded warehouses are used to
store imported goods for which import duty is yet to be paid. In case of imported goods the importers are
not allowed to take away the goods from the ports till such duty is paid. These warehouses are generally
owned by dock authorities and found near the ports.

CO-OPERATIVE WAREHOUSE
These warehouses are owned, managed and controlled by co-operative societies. They provide
warehousing facilities at the most economical rates to the members of their society.

DISTRIBUTION CENTER

There are some warehouses where product storage is considered a very temporary activity. These
warehouses serve as points in the distribution system at which products are received from many
suppliers and quickly shipped out to many customers. In some cases, such as with distribution centers
handling perishable food (e.g., produce), most of the product enters in the early morning and is
distributed by the end of the day.
WHOLESALE WAREHOUSE

This form of the warehouse is owned and controlled by the wholesaler for storing goods after purchase
from the producers until they are sold to retailers or directly to the final consumers. The wholesaler buys
in bulk from the producers and sells in small units to the retailer, therefore, the wholesaler break the bulk
of goods purchased and kept them in the warehouse until they bought.

ADVANTAGES/BENEFITS OF WAREHOUSES

Warehousing offers many advantages to the business community. Whether it is industry or trade, it
provides a number of benefits which are listed below.

i. Protection and Preservation of goods - Warehouse provides necessary facilities to the

businessmen for storing their goods when they are not required for sale. It provides protection to
the stocks ensures their safety and prevents wastage. It minimizes losses from breakage,
deterioration in quality, spoilage etc. Warehouses usually adopt latest technologies to avoid
losses, as far as possible
ii. Continuity in production- Warehouse enables the manufacturers to carry on production
continuously without bothering about the storage of raw materials. It helps to provide seasonal
raw material without any break, for production of finished goods.
iii. Convenient location- Warehouses are generally located at convenient places near road, rail or
waterways to facilitate movement of goods. Convenient location reduces the cost of
transportation.
iv. Easy handling- Modern warehouses are generally fitted with mechanical appliances to handle
the goods. Heavy and bulky goods can be loaded and unloaded by using modern machines,
which reduces cost of handling such goods. Mechanical handling also minimizes wastage during
loading and unloading.
v. Useful for small businessmen- Construction of own warehouse requires heavy capital
investment, which small businessmen cannot afford. In this situation, by paying a nominal
amount as rent, they can preserve their raw materials as well as finished products in public
warehouses.
vi. Creation of employment - Warehouses create employment opportunities both for skilled and
unskilled workers in every part of the country. It is a source of income for the people, to
improve their standards of living.
vii. Facilitates sale of goods- Various steps necessary for sale of goods such as inspection of goods
by the prospective buyers, grading, branding, packaging and labeling can be carried on by the
warehouses. Ownership of goods can be easily transferred to the buyer by transferring the
warehouse keeper’s warrant.
viii. Time utility
A warehouse creates time utility by bringing the time gap between the production and
consumption of goods. It helps in making available the goods whenever required or demanded
by the customers. Some goods are produced throughout the year but demanded only during
particular seasons, e.g., wool, raincoat, umbrella, heater, etc. on the other hand, some products
are demanded throughout the year but they are produced in certain region, e.g., wheat, rice,
potatoes, etc. Goods like rice, tobacco, liquor and jiggery become more valuable with the
passage of time.
ix. Store of surplus goods
Basically, a warehouse acts as a store of surplus goods which are not needed immediately.
Goods are often produced in anticipation of demand and need to be preserved properly until they
are demanded by the customers.
Goods which are not required immediately can be stored in a warehouse to meet the demand in
future.
x. Price stabilization
Warehouses ensure a regular supply of goods in the market this is achieved by storing goods
when their supply exceeds demand and by releasing them when the demand is more than
immediate productions. This matching of supply with demand helps to stabilize prices.
xi. Minimization of risk
Warehouses provide for the safe custody of goods. Perishable products can be preserved in cold
storage. By keeping their goods in warehouses, businessmen can minimize the loss from
damage, fire, theft etc. The goods kept in the warehouse are generally insured. In case of loss or
damage to the goods, the owner of goods can get full compensation from the insurance
company.
xii. Packing and grading
Certain products have to be conditioned or processed to make them fit for human use, e.g.
coffee, tobacco, etc. A modern warehouse provides facilities for processing, packing, blending,
grading etc., of the goods for the purpose of sale. The prospective buyers can inspect the goods
kept in a warehouse.
xiii. Financing
Warehouses provide a receipt to the owner of goods for the goods kept in the warehouse. The
owner can borrow money against the security of goods by making an endorsement on the
warehouse receipt. In some countries, warehouse authorities advance money against the goods
deposited in the warehouse. By keeping the imported goods in a bonded warehouse, a
businessman can pay customs duty in installments.

DISADVANTAGES OF WAREHOUSES
Some of the disadvantages of the warehouse are;

a) Administrative problems
b) High initial costs
c) Warehouse cause high prices of goods due to rent charges by owners of the warehouse etc.
DEFINING THE CONCEPTS

Material handling is the art and science involving the movement, handling and storage of materials
during different stages of manufacturing. Material handling is the movement, protection, storage and
control of materials and products throughout manufacturing, warehousing, distribution, consumption
and disposal. A company’s material handling system and processes are put in place to improve customer
service, reduce inventory, shorten delivery time, and lower overall handling costs in manufacturing,
distribution and transportation. As a process, material handling incorporates a wide range of manual,
semi-automated and automated equipment and systems that support logistics and make the supply chain
work. Their application helps with:

a) Forecasting
b) Resource allocation
c) Production planning
d) Flow and process management
e) Inventory management and control
f) Customer delivery
g) After-sales support and service

TYPES OF HANDLING SYSTEMS

1) Equipment Oriented systems a) Convey or Systems
b) Tractor transfer system
c) Fork lifts truck
d) Industrial truck system
e) Underground system

2) Material Oriented Systems a) Unit handling system

b) Bulk handling system
c) Liquid handling system

3) Methods Oriented system a) Manual systems

b) Automated systems
c) Job shop handling system
d) Mass production system

4) Function Oriented system a) Transportation systems

b) Conveying systems
 c) Transferring systems
d) Elevating systems

CRITERIA/ PRINCIPLES OF MATERIAL HANDLING

1) Planning principle: All handling activities should be planned.

2) Systems principle: Plan a system integrating as many handling activities as possible and
coordinating the full scope of operations (receiving, storage, production, inspection, packing,
warehousing, supply and transportation).
3) Space utilization principle: Make optimum use of cubic space.
4) Unit load principle: Increase quantity, size, weight of load handled.
5) Gravity principle: Utilize gravity to move a material wherever practicable.
6) Material flow principle Plan an operation sequence and equipment arrangement to optimize
material flow.
7) Simplification principle: Reduce combine or eliminate unnecessary movement and/or
equipment.
8) Safety principle: Provide for safe handling methods and equipment.
9) Mechanization principle: Use mechanical or automated material handling equipment.
10) Standardization principle: Standardize method, types, size of material handling equipment.
11) Flexibility principle: Use methods and equipment that can perform a variety of task and
applications.
12) Equipment selection principle: Consider all aspect of material, move and method to be utilized.
13) Dead weight principle: Reduce the ratio of dead weight to pay load in mobile equipment.
14) Motion principle: Equipment designed to transport material should be kept in motion.
15) Idle time principle: Reduce idle time/unproductive time of both MH equipment and man power.
16) Maintenance principle: Plan for preventive maintenance or scheduled repair of all handling
equipment.
17) Obsolescence principle: Replace obsolete handling methods/equipment when more efficient
method/equipment will improve operation.
18) Capacity principle: Use handling equipment to help achieve its full capacity.
19) Control principle: Use material handling equipment to improve production control, inventory
control and other handling.
 20) Performance principle: Determine efficiency of handling performance in terms of cost per unit
handled which is the primary criterion.

EVALUATION OF MATERIAL HANDLING SYSTEM

The cost factors include investment cost, labour cost, and anticipated service hours per year, utilization,
and unit load carrying ability, loading and unloading characteristics, operating costs and the size
requirements are the factors for evolution of material handling equipment. Other factors to be considered
are source of power, conditions where the equipment has to operate and such other technical aspects.
Therefore, choices of equipment in organization will improve the material handling system through
work study techniques. They usually result in improving the ratio of operating time to loading time
through palletizing, avoiding duplicative movements, etc.

Obsolete handling systems can be replaced with more efficient equipment. The effectiveness of the
material handling system can be measured in terms of the ratio of the time spent in the handling to the
total time spent in production. This will cover the time element. The cost effectiveness can be measured
by the expenses incurred per unit weight handled. It can be safely said that very few organizations try to
collate the expenses and time in this manner so as to objectively view the performance and to take
remedial measures. Some of the other indices which can be used for evaluating the performance of
handling systems are listed below:

EQUIPMENT UTILISATION RATIO

Equipment utilization ratio is an important indicator for judging the materials handling system. This
ratio can be computed and compared with similar firms or in the same over a period of time. In order to
know the total effort needed for moving materials, it may be necessary to compute Materials Handling
Labour (MHL) ratio. This ratio is calculated as below:

MHL = Personnel assigned to materials handling

Total operating work force

In order to ascertain whether is the handling system delivers materials work centers with maximum
efficiency; it is desirable to compute direct labour handling loss ratio. This ratio is calculated as below

DLHL = Materials handling time Lost of labour

Total direct labour time

The movement’s operations ratio which is calculated after dividing total number of moves by total
number of productive operations indicates whether the workers are going through too many motions
because of poor routing. It should, however, be emphasized that the efficiency of materials handling
mainly depends on the following factors:
(i) Efficiency of handling methods employed for handling a unit weight through a unit distance,
(ii) Efficiency of the layout which determines the distance through which the materials have to
be handled,
(iii) Utilization of the handling facilities, and Efficiency of the speed of handling.

SELECTION OF MATERIAL HANDLING EQUIPMENTS

The following factors are to be taken into account while selecting material handling equipment.

1. PROPERTIES OF THE MATERIAL

Whether it is solid, liquid or gas, and in what size, shape and weight it is to be moved, are
important considerations and can already lead to a preliminary elimination from the range of
available equipment under review. Similarly, if a material is fragile, corrosive or toxic this will
imply that certain handling methods and containers will be preferable to others.
2. LAYOUT AND CHARACTERISTICS OF THE BUILDING
Another restricting factor is the availability of space for handling. Low-level ceiling may
preclude the use of hoists or cranes, and the presence of supporting columns in awkward places
can limit the size of the material-handling equipment. If the building is multi-storied, chutes or
ramps for industrial trucks may be used. Layout itself will indicate the type of production
operation (continuous, intermittent, fixed position or group) and can indicate some items of
equipment that will be more suitable than others. Floor capacity also helps in selecting the best
material handling equipment.
3. PRODUCTION FLOW
If the flow is fairly constant between two fixed positions that are not likely to change, fixed
equipment such as conveyors or chutes can be successfully used. If, on the other hand, the flow
is not constant and the direction changes occasionally from one point to another because several
products are being produced simultaneously, moving equipment such as trucks would be
preferable.
4. COST CONSIDERATIONS
Initial investment and operating and maintenance costs are the major cost to be considered. By
calculating and comparing the total cost for each of the items of equipment under consideration,
a more rational decision can be reached on the most appropriate choice.
5. NATURE OF OPERATIONS
Selection of equipment also depends on nature of operations like whether handling is temporary
or permanent, whether the flow is continuous or intermittent and material flow pattern-vertical or
horizontal.
6. ENGINEERING FACTORS
Selection of equipment also depends on engineering factors like door and ceiling dimensions,
floor space, floor conditions and structural strength.
7. EQUIPMENT RELIABILITY
Reliability of the equipment and supplier reputation and the after sale service also plays an
important role in selecting material handling equipment.
SECTION B: INVENTORY MANAGEMENT

Definition: Inventory management involves supervising non-capitalized assets, or inventory, and stock
items that is the flow of goods from manufacturers to warehouses and from these facilities to point of
sale.

Inventory Management Best Practices

Companies that continue to rely on manual inventory tracking with spreadsheets run the risk of data
entry errors, shipping mistakes, and lack of inventory knowledge. Thus, implementing inventory
management best practices is important for business success and the bottom line:

A. Determine whether a continuous review system or periodic review system is the best type of
inventory management system for your business
B. Implement a cycle counting program after considering counting frequency, counting strategy,
and cycle count management. Optimize inventory levels to boost efficiency and meet customer
demands
C. Manage your inventory by knowing the inventory levels that are most beneficial to the flow of
your business; track data to make better inventory management decisions
D. Implement quality control procedures so that all employees can work toward the same goals
E. Prepare for growth and implement inventory management best practices that will support your
business goals

TYPES OF TECHNOLOGY IN THE INVENTORY MANAGEMENT

1) Electronic Data Interchange (EDI) Electronic Data Interchange technology is used by supply chain
partners for transactions and exchange of information for the effective running of their business. EDI
provides timely information about the customer‘s sales which is highly accurate and very efficient. It has
many uses such as bills of lading, sending invoices and dispatch confirmation. Main benefit of EDI is to
enter only informative needs on the computer system once and then it enables the speed of transaction
and reduces cost as well as error rates. Some other benefits are quick process, good customer service,
paperless technology and high productivity.

2) Barcoding and Scanner Barcodes are representation of codes in machine compatible language. Bar
codes are used to track goods at all levels of supply chain process. Barcodes can be in horizontal or in
vertical orientation, named as ladder and picket fence orientation respectively. Bar code specifies name
of product and its manufacturer. Inventory management systems using barcode technology are more
accurate and efficient than those using manual processes. The benefits of using barcoding in the
inventory management processes include

 Accurate records of all inventory transactions by eliminating manual data entry mistakes
 Ease and speed of scanning
 Updates on-hand inventory automatically and Streamline documentation and reporting
 Record transaction histories and easily determine minimum levels and reorder quantities
 Facilitate the movement of inventory within warehouses and between multiple locations and
from receiving to picking, packing, and shipping

3) Enterprise Resource Planning (ERP) These are integrated systems used for automating all
functions of business. Several transactions are used to run this system. SAP is one of the ERP systems
used by many organizations to run their business. It is single source of information for all elements of
supply chain. To implement ERP system, organizations have to pay huge cost. And it requires
synchronization with hardware, operating systems and other telecommunication components.

4) Radio Frequency Identification (RFID) RFID To read RFID radio frequency signals are used.
RFID is automatic identification system which is used to enable data to be transmitted through portable
device named as Tag. Tag is read by RFID reader. Tag may contain various information such as color,
date of manufacturing, location etc. Tag is microchip which is connected with small antenna.

5) Decision Support Systems Decision support system This is a system which supports organizations
in decision making activities. This system helps decision makers to compile useful information from
documents, raw data or business models to solve problem and to take decision. This system may gather
information like current information assets, comparative figure of sales of consecutive weeks, projected
figures of sales as per assumptions etc. DSS integrates various areas like inventory management, sales
analysis, and logistics

6) Web Services; Web services are application interfaces accessible via Internet standards are used to
support business-to-customer models hence the birth of Electronic Commerce. Electronic commerce
refers to the wide range of tools and techniques used to run business in a paperless environment.
Electronic commerce includes electronic data interchange, electronic fund transfers, e-mail, electronic
publishing, electronic bulletin boards, image processing, shared databases and magnetic/optical data
capture. Companies are able to automate the process of moving documents electronically between
suppliers and customers. This automated system provides access to customers all over the world and
eliminates geographical limitations. Some of the Ecommerce applications with applications in Business
to Consumer (B2C) and Business to Business (B2B) space that are changing the dynamics of Supply
Chain Management include: E-tailing: using the internet for selling goods over the internet. The
standard e-tailing application is that of a bookseller such as Amazon. The company is renowned for the
fact that it only sells books over the internet.

ROLE OF TECHNOLOGY IN THE INVENTORY MANAGEMENT

1) Real-Time Product Updates the advancement of technology in the inventory management allows;

order items, real-time updates enable you to accurately manage warehouse product levels and keep your
ecommerce site up-to-date. Additionally, you’ll be able to better forecast when and how much of a
particular product needs to be reordered, avoiding over or under stocking items.

2) Easy Accessibility Inventory management technology doesn’t mean you have to be tied to a desktop
computer running numbers. A robust solution provides easy accessibility, allowing you and warehouse
personnel to check on inventory levels from a laptop, tablet or other mobile device.

3) Scalability Your E-commerce business might be small now, but you’ll continue to grow, and you
need an inventory management system that can handle that growth. It’s important to choose a solution
that is scalable to support larger levels of inventory. Selecting a system that can growth with your brand
prevents you from having to switch technologies every few years.

4) In-Depth Reporting and subsequent decision making – Technologically driven inventory

management allows the collection and analysis of data in a big way. This is then used to the business’s
benefit. Insights in to particular products, and their demand and supply, make for more efficient sales
decisions. These product by product insights are likely to be setting the bar for how big data is used in
the coming years. However, managing big data, and gaining the valuable insights, requires new and
different skillsets. Technologically driven inventory management is more complex, and without the right
skills it can hinder rather than help. Only when it is used expertly and appropriately does it actually aid
the business.

5) Diversification Technological advances have gained momentum, there is such a range available to us
that we can select the right technology for our business needs. Your inventory management technology
can be as unique as your business is, and custom built without being prohibitively costly. This also
means that they can grow as you do, being scaled according to need. This likely means that new
business models will emerge as a result of technological advances.

6) The Difference between Retail and fulfillment is Narrowing Ecommerce has been made possible
through technological advances, and the ecommerce boom is an only sustainable thanks to technological
advances in inventory management. In reality, this means that the difference between retail and
fulfillment is becoming less clear cut. Whereas in the early days of ecommerce we still saw a distinct
difference between the online retailers such as Amazon, and the physical high street store, now there is a
hybrid in between – the physical store that has an ecommerce arm. This is only possible when you have
an integrated inventory management system that holistically tracks inventory across all the different
channels of retail

7) Enhanced GPS Accuracy The advanced accuracy of GPS allows for increased productivity and
satisfied customers, by tracking trucks’ locations and improving hauls through access to updated traffic
data.

8) Electronic Records In the event that the user would like to do a manual count of inventory in order
to verify the levels, the point of sale system is capable of printing out inventory counts. That way the
supervisor can compare the electronic records with the actual inventory levels to ensure that they are on
the same level. Massive savings are realized with such a system because any problems with the
inventory are noted very early on and the risk of a rush order, which can often be pricey, is averted.

9) Information Flow Integration The enhancements to communication that technology offers have
impacted information flow in amazing ways. From the moment an order is received and throughout the
product distribution process to shipment, information can be seamlessly integrated across all
departments. While improved team communication tools provide the opportunity for immediate contact
anywhere in the world (with a wifi connection), specialized programs can now convert sales into orders
automatically in real-time, moving them directly into the supply chain for fulfillment. With modern
equipment and technology, the product distribution process essentially becomes a constantly moving
mechanism of almost fully automated operation supported by human labor and management.

10) Product Demand and Inventory Management With technology automatically transforming sales
into orders, and systematizing the order fulfillment process, orders enter the supply chain and proceed
toward fulfillment with minimal human intervention. Information about inventory levels, product
demand, and partner offerings can be transmitted as needed to facilitate more efficient inventory
management. These immediate notifications allow for far more accurate projections about order
volumes and more efficient inventory management to reduce costs, mistakes, and delays in product
distribution. Technology and technical systems improve flexibility and timeliness, while reducing waste
in the product distribution process.

11) Warehouse Workflow Optimization Modern warehouses can be smaller with more efficient
inventory management and movement, since they are no longer limited by the access capabilities of
forklifts or restricted by aisle widths that must accommodate two forklifts operating at the same time.
Contemporary equipment such as conveyors, rails and elevators can be integrated with a centralized
computer network to improve efficiency while reducing errors. Pallets and units can be placed randomly
and then called up when needed without concern of misplacement because the centralized network is
more accurate at records than a human with a clipboard.

12) Distribution Process Efficiency Today’s product distribution traffic managers can optimize
distribution by using software that analyzes the best route for the lowest cost and/or fastest fulfillment.
With warehouse workflow optimized for best use of floor space and movement of goods from storage to
loading bays for shipment, the product distribution process can be made far more efficient. Technology
continues to advance with upgrades in accuracy, detail, capability, speed and more. As upgrades to
software and logistics technologies improve, distributors can continue to implement effective systems in
order to further reduce lead times and inventories as well as their associated costs.

13) Tracking software allows for improved communication & accuracy Development in
consignment tracking technology now gives businesses access to greater volumes of information at
much deeper levels than they used to – be that distribution information or stock data. With state-of-art
tracking systems, not only are organizations able to use this data for their own benefit but it’s becoming
increasingly popular to allow their own customers to access to certain information. With increased
international trade, many supply chains are growing and now feature more than just one or two
organizations. With tracking information available to all those involved, communication channels open
up and data can flow seamlessly between parties. This means less time is wasted chasing information
because it’s all there, logged in the tracking system, allowing planning to be carried out further in
advance and more accurately.

14) Real-time data allows for improved customer service & higher satisfaction levels An almost
instant feed of information from a third party logistics provider to their customer, and then direct to the
retailer or final consumer, has become a central part to many operations and is now a key part of many
contracts. With real-time data, data-sharing becomes easier as the user looking for specific information
already has access to it. Customer service levels have improved as it’s easier to effectively respond to
customer queries. With this level of access, it allows for complete transparency between third party
logistics provider and customer, forcing quality levels up and ultimately increasing customer
satisfaction.

15) System optimization with bar code scanning and progression toward RFID Bar code scanning
and RFID is about optimizing day-to-day activities and operations to enable a provider to offer a
superior service level to their customers. Once in place a system such as this can reduce amount of
labour required to carry out picking and analytical tasks as well as altering the skill set needed to
manage stock. Through a more data driven approach, operations can be fully optimized because of the
ability to forward-plan and lead times will be reduced due to picking becoming easier to facilitate.
Operations remain much the same in theory but processes become much more time sensitive and allow
for short product life cycles in the warehouse.

16) Route planning and in-cab technology improves driver safety and allows for optimized routes
Most logistics companies have adopted various forms of vehicle monitoring, from cameras to tracking
devices, due to the endless benefits that they can provide. From a safety point of view, having the ability
to know how your drivers are driving rather than just where they’re driving means logistics companies
are able to not only identify areas that may cause an issue, but turn these into a positive training
initiative. In addition, having the ability to know where your drivers are and that they’re safe allows
logistics companies to show a greater interest in their employees, meaning staff satisfaction should be
greater and staff turnover should be lower. From an efficiency stance, with data and real-time
information more readily available, not only can consignments be consolidated but routes can be
optimized due to an increased ability to plan in advance and to make changes at the click of a button.

17) Greater Efficiency and Transparency Since the start of the wireless era, many third-party logistics
providers (3PLs) and supply chain managers have turned to wireless technologies and cloud computing
to automate systems and improve accuracy. Not only are automated systems faster and more efficient
than their manual, fax-based predecessors, the mobile and automated methodologies also provide better
data-capture, which can, in and of themselves, improve processes and can also be stored and analyzed to
target areas for improvement. For example, handheld mobile devices can deliver wireless proof of
delivery and real time transportation monitoring, which can help managers discover and address
operational anomalies. 3PLs are also turning to technology to streamline their client supply chain
activity and improve client relations. The use of Customer Relationship Management (CRM) technology
continues to provide easy-access dashboard visibility of supply chain operations, helping leaders to
identify inefficiencies and bottlenecks in commercial operations.

 ADVANTAGES OF TECHNOLOGY IN THE INVENTORY MANAGEMENT

1) Automated Reordering and In-Stock Information Computerized inventory informs employees and
customers within seconds whether an item is in stock. Because the inventory is synced with sales, there
is a running tally of what is in stock and what isn't. This helps flag reordering needs and provides better
service to customers. As inventory drops below a specific threshold, new orders are placed with vendors
and tracked to let customers know when the new products will arrive.

2) Integration with Accounting Many of the computerized inventory platforms integrates with

accounting software to track cash flow. This makes the process of transferring inventory costs and assets
between programs seamless and reduces the need for additional bookkeeping costs. Financial statements
are more easily generated with shared data between inventory and bookkeeping.

3) Forecasting and Planning Inventory management software does more than track where inventory is
located and when to reorder it. A data collection system is used to create needed forecasting and
strategic planning reports. Business owners review trends regarding which products do well in certain
months or during specific cyclical seasons. Business owners use this data to plan for growth and order
inventory intelligently to best utilize cash flow resources.
4) Cost saving the use of these software help in cutting down the expenses greatly. It helps minimizing
the amount of unnecessary parts and products in storage and hence maintains appropriate stock on hand
to meet the demand.

5) Saves time any automated system saves on to the time as compared to the manual one. Once the
system gets automated then there is a great deal of time which is saved. And the saved time can in turn
be utilized for accomplishing other tasks.

6) Increased efficiency with the help of inventory management software, the tasks which are related to
inventory gets automated. This automation in turn helps in increasing the overall efficiency of the
organization. With the help of the software, many tasks are performed automatically like collection of
data, creation of records, conducting calculations etc.

7) Updated data yet another advantage of inventory management is the maintenance of updated data.
Due to the use of an inventory management system/software, an up-to-date and real-time data of the
levels of inventory can be successfully maintained. This advantage of the system further helps in making
well informed decisions as the data can be easily and successfully accessed through various devices like
laptops, mobiles etc.

8) Data security since the user rights for this system can be restricted, the authorized person manager
can grant suitable/limited rights to the other employees or the subordinates while accessing the data.
With the grant of the partial rights, there is no fear of data leakage or the data being misplaced.

9) Insight into trends with the use of the management system, the user can easily get an insight of the
trends currently being followed. It can be easily tracked where products are stocked, the suppliers of the
products, and the timing for which they are stored. All this helps in analyzing such data and controlling
the inventory levels which in turn leads to maximize the usage of the warehouse space. In addition, the
businesses get properly prepared for the upcoming demands in the market for the peak seasons. This
software also helps in generating various kinds of reports which can be utilized by the management in
their various studies and also helps in making many kinds of decisions.

10) Uninterrupted Production The system makes sure that there is no interruption in the production
process due to the shortage of raw materials. Required quantities of inventories are estimated and
maintained at all times within the organization. An adequate quantity of stock is maintained which leads
to smooth production procedure.
11) Optimization of inventories With the use of management system for inventory, the stocks can be
easily regulated and optimized. This system helps in facilitating the business with scheduling the
production; it helps in avoiding shortage of materials and also helps in keeping away the duplicate
ordering.

12) Minimizes losses In the case of obsolescence, damage, deterioration etc., the inventory management
system helps a great deal in minimizing the losses as the stock/ inventory which is maintained in the
stores is according to the requirement or the trend.

13) Economical When the inventory management software is used, it helps the business in saving on to
the expenses which may incur due to fluctuations in the prices as it induces the business into economic
lot buying and this happens generally when the prices are low.

DISADVANTAGES OF TECHNOLOGY IN THE INVENTORY MANAGEMENT

1) System Crash One of the biggest problems with any computerized system is the potential for a
system crash. A corrupt hard drive, power outages and other technical issues can result in the loss of
needed data. At the least, businesses are interrupted when they are unable to access data they need.
Business owners should back up data regularly to protect against data loss.

2) Malicious Hacks Hackers look for any way to get company or consumer information. An inventory
system connected to point-of-sale devices and accounting is a valuable resource to hack into in search of
potential financial information or personal details of owners, vendors or clients. Updating firewalls and
anti-virus software can mitigate this potential issue.

3) Reduced Physical Audits When everything is automated, it is easy to forego time-consuming

physical inventory audits. They may no longer seem necessary when the computers are doing their
work. However, it is important to continue to do regular audits to identify loss such as spoilage or
breakage. Audits also help business owners identify potential internal theft and manipulation of the
computerized inventory system.

4) Expensive extremely beneficial in many aspects, this management software is available in the market
at a high cost. Although the system provides such great features and makes the entire business a lot
better and efficient, but all this comes at a cost. Big time businesses are able to cover up the cost or the
one time investment in some time but in the case of small or medium-sized business, it is at times not
feasible to maintain such software.

5) Complexity although the use of an inventory management system makes handling the inventory quite
easy but learning how to operate it is quite a task. Special training sessions and manuals should be
adhered to, in order to successfully operate the system. Learning how to operate the system can be
lengthy, cumbersome as well as complex. But once successfully installed and training completed, it can
prove to be a blessing for the business and it helps a great deal in the smooth operation.

6) Limited elimination of business risk although the management system helps the business in
eliminating many kinds of risk, but even after using the system, the business is open to many other risks.
The system helps in controlling many risks but the fear of facing and encountering many other is still
open. Hence, with this system in use, many kinds of risks are restricted but it fails to make the entire
process risk proof.

7) Technology as a Distraction Everyone with a smartphone, laptop, tablet or desktop computer has
access to the incredible world of the internet. The internet can be a powerful distraction as well, as
employees are faced with the temptation of checking Facebook, Twitter or watching videos on Youtube.
By estimates, almost half of all office employees spend an hour or more per day on non-work-related
internet sites.

8) The Security Risks of High Technology Our online devices are a two-way street, giving you and
your staff access to the outside world, but also allowing outsiders into your place of business. Emails
routinely contain malware that can infect your computer systems. Personal devices such as USB drives
might get infected with a virus at an employee's home and then plugged in to an office machine,
transferring the virus to your systems. Important files can be stolen. Perhaps the eeriest sorts of
intrusions are computer viruses that take remote control of your operations. Malware has been known to
crash electric utilities, interfere with hospitals and police stations and even take control of computer-
operated, self-driving cars.

9) Technology as Expensive Obsolescence

Technological change advances very rapidly, which means that the technology you invest in today may
seem to be out-of-date almost the moment it is installed and up and running. Technological churn – new
phones, new laptops, the latest software – keeps your company current with the latest trends. But it's also
a sizable outlay of cash, not only for the technology itself, but for the revamping of related systems.
Employees need to be trained on new systems, IT staff needs to update its certifications and capabilities,
and security protocols have to be revised.

10) Technology as Creator and Destroyer of Social Boundaries the ability to communicate instantly
with just about anyone anywhere can sometimes interfere with the ordinary dynamics of face-to-face
communication. Technology may mean fewer employees show up in person to meetings. It may also
mean fewer people in your office, period, as employees take advantage of telecommuting options.
Although these capabilities can actually improve productivity in some cases, many people find they miss
the more social aspects of a traditional company where staff and clients showed up in person to do
business.

REMEDIES OF TECHNOLOGY USED IN INVENTORY MANAGEMENT

1. Use reorder points on inventory items to keep purchasing streamlined and inventory
manageable. Reorder points are the best method for making sure you has the right amount of inventory
in your warehouse at all times. If you have too little inventory you could lose out on sales, but if you
have too much your cash is tied up in inventory that will not be sold. A quick way to solve that from an
inventory standpoint is by making sure you have set the appropriate reorder points for your business.

2. Spend money on specialized training for mission-critical software. After spending so much money
on the development and purchasing of the inventory management software it is imperative to spend
extra on the specialized training needed to implement the software.

3. Rearrange the warehouse to set up for picking efficiencies. Proper arrangements of the warehouse
facilitate efficiencies in handling of material within the warehouse as well as promote time management
and safety within the warehouse

 4. Take time to get to know your technology so that you can use all the functionality.

Rarely will a company use all of the functionality their software provides. Most of the time there is more
that the software can do for you that you haven’t explored. Software companies always hear from their
customers about which features they want added to the software when a lot of the time the features are
already there. The more features that you use in the software the more effective you can be in managing
your inventory. You should either assign someone within the company to learn the software
functionality or pay someone to come in and teach it to you.

 5. Stop doing yearly physical inventories and move to a more regular, smaller cycle counting and
reconciling routine. Doing these checks in smaller, more regular cycles keeps a company from having
to shut down. We recommend picking one section each day to check your product levels against the
information from your inventory software.

6. Consider inventory optimization tools. These are typically stand-alone software tools that use data
from WMS and ERP systems which take into account demand variability, supply variability, and
replenishment parameters to determine how much inventory to hold in order to guard against that
variability.

7. Employ business solutions that use real-time analytics under one platform Powerful sales and
operations planning solutions are now using real-time analytics that take a unified data model of
demand, supply chain, and financial data, analyze them at any level of granularity, and instantly provide
responses. This allows you to have real-time inventory within that one model and even track who owns
that inventory.

8. Keep an eye on your suppliers There are suppliers that don’t necessarily stick to their schedule or
deliver on their commitments. Most systems track the inbound receipt of an item: There is a promise
date, an actual receipt date, quantity ordered, quantity received, and the condition in which it was
received. These are metrics that can be tracked and analyzed to determine a supplier’s reliability. “All of
that data is typically available in a WMS. After identifying unreliable suppliers, you can deal with them
and resolve any issues and work toward improving a supplier’s performance—or hold more of their
inventory to guard against their variability.

9. Leverage mobile devices Mobile technologies and mobile user interfaces are now ubiquitous for
capturing data on inventory. Mobile devices allow quick access to accurate information and data so that
managers can act quickly on their inventory decisions. It also eliminates the errors and delays associated
with a paper-based operation, improving accuracy, efficiency, and the general speed of your business.

10. Be smart about your slow moving and obsolete items While it makes sense to focus on your more
profitable fast movers, you can’t ignore your slower-moving merchandise. Every day that these items
are not used or sold, they occupy space, utilize labor and resources, run the risk of obsolescence, and in
many cases actually get in the way of your more popular items.