UNIT 1 INTRODUCTION TO WAREHOUSING

Structure
1.1 Introduction
1.2 Need for Warehousing
1.2.1 Reasons for Storage
1.2.2 Situations Demanding Storage
1.3 Objectives of Warehousing
1.4 Principles of Warehousing
1.5 Key functions of Warehousing
1.6 Classification of Warehousing
1.7 Methods/Types of Warehousing
1.8 Warehouse Management System (WMS)
1.8.1 A Warehouse Management System
1.8.2 Features of WMS
1.8.3 Managerial Functions of WMS
1.8.4 Integrated WMS
1.9 Summary
1.10 Keywords
1.11 Further Readings

1.1 INTRODUCTION
Warehouse is a place where the stock is housed. Simply, it is the house of
materials or it is analogous to the rented accommodation or a guest house for
the material in their journey along the movement of its supply chain.
Obviously, the traveller as well as the transporter and materials manager would
be very happy if the there are no hurdle, no roadblocks, no bottle necks and no
burdens throughout the journey tenure. Therefore, it is important to know
issues and problems involved warehousing since it is the critical stage supply
chain.
Objectives
After studying this unit, you should be able to
 understand the need for warehousing
 Explain how to derive advantages by stocking
 Describe various classifications of warehousing
 illustrate the objectives and principles of warehousing
 Explain different methods of warehousing
 List out Features and activities in warehouse
 describe functions of Warehouse Management System (WMS) and its
integration

1.2 NEED FOR WAREHOUSING

Warehouses in the past were constantly referred to as cost centres and also
under the notion that they rarely add value. But there has seen a step change in
warehouse operations, owing to the movement of production into developing
countries where cost of production is low, and the growth of e-commerce and
at the same time increasing demands from consumers. Warehouses are now
articulated as a vital links within supply chains.
Materials flow is like blood of any organization, especially for a production
system. Warehouse may be considered as the heart of the organization for the
smooth running of the production line. A proper warehousing management
makes the organization healthy and thence wealthy, because about 60 to 70
percent of investment in the form of working capital is contributed by
materials in any industry.
Having minimum flow of materials constantly in the pipeline of the supply
chain is a rare of rarest event. It is most unfortunate that the society and
markets are not predictable most of the times and so the organizations need to
hold stock at various stages within their supply chains. Raising consumer
demands with widened ranges in customers’ choices has resulted in a
proliferation of product ranges and sizes leading to unprecedented demands on
storage capacity.
1.2.1 Reasons for Storage: Stocking is Advantageous
In addition to the above, there are several reasons to hold the stocks. So, let us
now have a look at the reasons for holding stock by which the companies can
derive some benefit the necessity for warehousing.
1. Uncertain and erratic demand patterns
The products such as ice cream, umbrellas often suffer erratic demand patterns
based on the changeability of the weather. To sustain under such most
uncertain and erratic demand patterns, holding stock of raw material can only
be the right alternative.
2. Transport and Shipping costs for Larger Shipments
It is common practice in the market that the business transactions of larger
quantities are associated with cost reduction. So, the ability to move product in
large quantities obviously tends to lower unit cost. Thus the trade-off here
counts on the cost of storing additional units against the higher cost of
transport for smaller deliveries. If the transport cost is quite attractive, then
additional storage space will be needed. Of course! There also has to be a
strong confidence that all the items purchased will be sold (in the case of retail
warehouse) or all the items stored will be consumed (in the case of production
warehouse).
3. Discounts on Bulk Purchase
The reduction of unit price by purchasing in larger quantities is always an
attractive proposition for buyers. So, this requires an additional warehousing
space/capacity. This bulk buying can, however, have overall negative impact if
the company fails to sell/consume all of the additional units bought or
constrained to sell at a loss to clear the warehouse. On the other hand, the
situation raises costs due to additional storage and handling, obsolescence,
damages, working capital interest, possible discounted sales and disposal. A
trade-off exists between lowered costs of purchase Vs. increased costs of
storage. In such situation it is important that the whole-life cost of the item is
computed before the taking decision to purchase extra quantities. Whatsoever
the decision taken, the materials require a good warehousing facility.
 4. Price Fluctuation (Raw Materials and Finished Goods)
In some cases, it may be for raw material or in other cases it could be for
finished product, whatsoever, for certain products price fluctuates significantly
and can also be affected by weather conditions. Companies therefore are
forced to purchase significant quantities when the price is advantageous or
when weather conditions dictate. This will necessitate additional storage
capacity. Hence ultimate need is warehouse facility.
5. Manufacturer’s Distance from Supplier and End User
In majority of the cases, the manufacturing unit will be either far away from
the raw materials or from outlets or from both. In any case the manufacturer
needs to store the materials, and thence requiring a warehousing facility. The
distance that the raw material or finished stock needs to travel is a factor to
determine the lead time, which in turn becomes deciding input for determining
warehousing and warehouse capacity at manufacturer’s location. The trade-off
here is between more expensive local suppliers and producers and increased
costs in transport and inventory holding costs.
6. Protection from Production Shutdowns
For example, on a given day suppose that you have planned to clean your
overhead tank. So, for the period of time during which water is not available,
you need to stock some water in advance. This creates the need for storage.
Similarly, many manufacturing companies inevitably shut down their
operations for vacations, machine maintenance, stock outs and stock counts.
As a result, retailers and wholesalers need to pile up stock prior to the
shutdown period to ensure stock availability for their customers.
Manufacturers will also pile up a stock of components to ensure that their
production lines are not brought to a standstill as a result of supplier shutdowns.
7. Ability to Increase Production Runs
Alterations or adjustments in production lines in order to accommodate
changes in models, colour, design features, etc and is often expensive. The
longer the production run is, the lower is the cost per unit to produce. Thus
production runs might go longer some times. This raises the need for storage to
safeguard the smooth flow in the supply chain during the elongated period in
the production run.
8. Manage Seasonal Production
Some items can be produced in certain season, while its consumption may be
continuous throughout the year, e.g. food grains, grocery items. Similarly
certain items are produced yearlong, but will have a huge demand in certain
season such as crackers, umbrellas, sweaters etc. In the first case, the storage is
required to use throughout the year, while in the second case, the stocks have
to be piled up to meet the demand. In either case, there is dire necessity to store
the material and balance the supply and demand.
1.2.2 Situations Demanding Storage: Stocking is Inevitable
The following are some more reasons for warehousing. These causes make the
stocking inevitable irrespective of the outcome of storage whether it is
advantage or disadvantage.
9. High Seasonality
Seasonality need not always be a period of time such as summer or winter, but
also may be a specific date in the calendar such as Valentine’s Day,
Independence Day, Diwali, Ramzan, or Christmas or a New Year day. The
stocks are built-up to meet the expected peak demand and so need the storage
space.
10. Spare Parts Storage or Maintenance Stores
To make sure of an uninterrupted production line, manufacturer needs stocking
the spares and maintenance items and so also in case an item becomes
defective. However these items are not reviewed regularly and but the
decisions is taken to stock them. The decision to stock the parts and in what
quantities could be generally managed by the supplier under a Vendor
Managed Inventory (VMI) agreement. The supplier lead time and machine
failure rate are also the factors to be considered.
11. Work-in-Process Storage
Many companies would part-build products in anticipation of orders. This
needs a storage space again. This enables them to complete the process at a
later date as and when needed.
12. Investment Stocks
A number of products can increase in value the longer they are held in storage.
For example, fine wines and spirits, cigars, precious metals and stones,
antiques and fine art. So these need storage.
13. Document Storage
Both public and private companies have an obligation to preserve the
documents for a period of time. These can include correspondence, invoices,
accounts, etc. by the virtue of the legal requirements. In some other cases, this
storage is demanded as evidence storage (in police stations, courts, insurance)
and patient records (in hospitals, pathological laboratories).
14. Maturation and Ripening
Certain products need longer-term storage to improve the quality or the
maturity or ripening of the product. Examples include fruits, certain meats and
cheeses.
15. Consignment Stock
Sometimes manufacturers will utilize their customers’ warehouses to store
their goods or vice-versa. This is called consignment stock, Here, the customer
only pays for the stock once it has been used or consumed. This takes pressure
off the supplier to hold more stock. Further, it ensures delivery on time while
the customer has available stock within the warehouse but has yet to pay for it,
thus increasing flexibility and improving cash flow.
SAQ 1
a) What is warehousing? What is the need of warehousing?
b) List out the Reasons for Storage.
c) How Stocking is an advantage? Explain.
d) List out the Situations Demanding Storage.
e) Why Stocking is Inevitable? Explain.
ACTIVITY 1.1
Visit a manufacturing company of your choice and observe warehouse system.
Summarize the key features of warehouse system
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1.3 OBJECTIVES OF WAREHOUSING

In a company’s supply chain, warehouse is one of the most important places. It
is the connecting junction point between the supplier and the company as well
as between the company and the customer in the market. Its connecting
activities are related to the correct storage, protection and conservation
of goods in an installation for the required period of time. It also involves the
management, monitoring, transportation, location, handling and conditioning
of this materials right from receipt to dispatch.
Thus the warehouse is the key area that enables the organization to regulate the
flow of goods between supply and demand. It is treated as the heart of
the company if the materials are comparable to blood, where this heart pumps
the materials to keep business live, while stores and handles materials to
respond to commercial and production needs.
The ultimate goal of warehouse is to minimize operating costs while
maintaining quality service. It aims to achieve the optimal blend of the
following actions. objectives:
 maximize the use of storage space.
 leverage handling equipment.
 preserve the integrity of the goods.
 ensure optimal organization of the workforce.
 guarantee access to goods as and when needed.
 maintain the security measures necessary.
Warehouse managers strive in every area of the warehouse and its logistics to
meet the aforesaid objectives.

1.4 PRINCIPLES OF WAREHOUSING

Warehouse management is commonly associated with six basic Principles.
These are
(i) Accuracy,
(ii) Cost control,
(iii) Efficiency,
(iv) Cleanliness,
(v) Safety and
(vi) Security
The underlying processes are complex and dynamic, presenting major
activities for warehouse managers across industries.
Warehousing Logistics: Areas of work
The first and foremost point of warehousing logistics is the installation. The
main activities carried out here are
 the receipt,
 storage,
 preparation and
 dispatch of goods
For all these operations to be performed effectively, each of the aspects
connected with the above activities need to be optimized.

1.5 KEY FUNCTIONS OF WAREHOUSING

Following are the key functions of a warehouse which are to be understood
and taken care of for efficient warehouse management.
(i) Warehouse layout design
At the outset, for designing an installation and thence, achieving optimal
warehouse logistics management, it should have a good layout. The strategy
for preparing a good layout depends on two decisive situations
1. whether creating a new facility or
2. whether reconfiguring an already running warehouse
This design will in turn to be conditioned by several major factors as listed
below:
 Volume to be stored.
 Characteristics of the products.
 In-warehouse stock turnover.
 Material flows.
 Storage space available
 Site limitations.
 Makeup, organization and qualifications of the work team.
 Corporate management system followed
 Features of warehouse management system.
In addition to the above, for renovating the current layout, we need to check
 The storage systems and
 The existing flow patterns
 Handling equipment already available
 Extent of possibility to automation and modernization
Without any iota of doubt, the layout design must always start with an
exhaustive analysis of the company’s needs. As a baseline for warehousing
logistics, the approach should have a vision with a long-term view,
anticipating possibilities for growth that the installation might have, layout of a
zoned warehouse with storage, picking and cantilever racking areas, scope for
automation and so forth.
(ii) Handling Equipment & Storage Systems
Materials management encompasses the set of operations involved in the
operations such as
 preparing,
 locating,
 moving and
 storing
The above functions form the essential part of warehouse management. Goods
storage and handling resulting from the interactions among operators,
machines, storage devices and working methods in moving, storing and
controlling materials become important aspects in warehouse management.
Thus, it is important to understand and manage two kinds of equipment and
their system
a) Storage equipment
b) Handling equipment
(a) Storage equipment
There’s a huge variety of industrial racks for warehouses available for both
pallets and boxes. The selection of storage system depends on the following
criteria:
 Type of product
 Unit load
 Target storage capacity
 Desired agility of operations
 Costs
 Finance available
Before the selection, it’s advisable to discuss the possibilities offered by each
option with the supplier. The suppliers’ Technical Warehouse Manuals can
provide the specifications and required knowledge for this selection. They may
even demonstrate too.
(b) Handling equipment
The amount and type of handling equipment determine the throughput of the
installation. It is also deciding factor for the number of operators needed for its
efficient functioning. Further, these machines may also influence the layout
and its distribution, for example, the height they reach or the width of the aisles
in which they operate.
Handling equipment is divided into:
 Manual equipment
These are operated and controlled by the operators manually or with human
operated motors and/or engines, e.g. traditional forklifts, order pickers and
pallet trucks.
 Automated equipment
These refer to automatic machines run by control software in direct
communication with warehouse management software, e.g. stacker
cranes, conveyors, electrified monorails and transfer cars
(iii) Picking and order preparation
Picking processes have a considerable impact on certain warehouse logistics
strategies. These include the movement and extraction of products from the
racks as well as order sorting, consolidation, packing and dispatch.
The organization of picking has significant role to play on the work and
working method in warehouse and its logistics. There are many several
methodologies, depending on the following factors.
 Height of the racks from which products are picked
Floor and its level (low, medium and/or high)
 Direction of goods movements
Whether the operator goes to the goods or
the goods are brought to the operator via automatic systems.
 Picking method used
Discrete (order-by-order), batch, zone, and/or pick-to-cart picking
To find the most effective picking method for the installation, it is required to
analyze in depth warehouse’s activity and the need in terms of handling costs
(number of orders processed per day per time unit).
(iv) Stock and inventory management
Within warehousing, stock management is yet another important area task with
regulating and optimizing stock levels in the installation. Now-a-days, this
activity is done by computers using computer programs that accurately track
inventory movements.
This is carried out with the following tools:
 Data reading and transmission devices: Radiofrequency terminals and
other systems, such as voice picking and pick-to-light, serve as the link
between the computer system and the physical world.
 Warehouse Management System: This software organizes all operations
in the installation, together with company’s ERP (Enterprise Resource
Planning), the common database housed in it. WMS can optimize location
assignments, picking operation arrangements, movements and so on. They
also guarantee real-time inventory and assist with all documentable
management tasks.
It’s possible to set up traceability feature also with the computer systems. This
can identify and locate the various stages a product undergoes throughout the
warehouse and, thence, provides with comprehensive control over material
flows.
(v) Warehouse safety and security
In the day to day management on an installation, both the logistics staff and
merchandise in stock are exposed to a series of risks. Hence, the aspect of
safety cannot be ignored in warehousing logistics. It should be addressed in
three dimensions.
a) Prevention of occupational risks for operators: Works in installations
often would have repetitive movements, manual load handling, long
periods of standing or holding etc. A weary operator tends to make
more mistakes and be less productive. So, it’s definitely advisable to
perform a job safety analysis (JSA) and provide workers with tools and
 automatic systems, which can help them in accomplishing their tasks
more comfortably, effectively and ergonomically.
b) Goods security systems: There is a potential for damage for goods as
well as harm to operators for the following two common reasons
 by the nature of the stock itself and/or
 by misuse of automatic systems or manual handling equipment.
Therefore, it’s advisable to post signage throughout the warehouse,
establish traffic rules and draw up good practices for operating
equipment.
c) Maintenance: For safety reasons, it’s essentially important to carry out
proper servicing and maintenance of the installations and devices. Thus,
a mandatory technical inspection of the racks must be planned and
conducted periodically, strictly with a definite predetermined schedule.
The management should understand the importance of preventive
maintenance. Technical inspections are essential for safe warehousing
logistics
SAQ 2
a) What are the objectives of warehousing?
b) List out the Principles of warehousing.
c) Explain the key functions of warehousing.
d) Explain how warehouse layout design plays an important role in
warehouse logistics management?
e) Discuss the importance of Handling Equipment & Storage Systems
in warehouse logistics management.
f) Explain the Picking and order preparation.
g) Describe the importance of Stock and inventory management in
warehouse logistics management.
h) What is the significance of Warehouse safety and security in
warehouse logistics management?
i) Explain Job Safety Analysis (JSA)
ACTIVITY 1.2
Visit any organization of your choice and Observe the warehouse layout
design, Handling Equipment and Storage Equipment. Present your
observations.
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1.6 CLASSIFICATION OF WAREHOUSING

There are many different roles for a warehouse to play in the supply chain.
Warehouses can be classified in several ways based on the role that they play.
a) Types of Warehouses Based on size and volume
Depending on the size and volume, warehouses may be classified as
  Warehouse,
 Go-down,
 Stock-home,
 Stock-yard,
 Stores, (Main stores, Sub-Stores and Mini-store)
 Storage dock yard
Note: Since these are self-explanatory, these not elaborated here.
b) Types of Warehouses Based on Materials Stored
The warehouses can be categorized based on the person who operates the
warehouse, such as
 Owner operated warehouse
 Subcontracted warehouse
 Third-party logistics providers
Note: These are also not elaborated here as they are self- explanatory.
c) Types of Warehouses Based on Materials Stored
Based on the place/stage and purpose of storage, the warehouses exist in the
following types.
(i) Raw Materials Storage
(ii) Temporary or Intermediary Storage
a) Intermediate storage
b) Customization materials
c) Sub-store within production line
d) Postponement storing
e) Sub-assembly facilities
(iii) Finished Goods Storage
(At Manufacturer/Wholesaler/Dealer/Stockist/Retailer)
(iv) Consolidation/Sequencing Centres and Transit Warehouses
(v) Trans-shipment or Break-Bulk Centres
(vi) Cross-Dock Centres
(vii) Sorting Centres
(viii) Fulfilment Centres
(ix) Reverse Logistics Centres
(x) Public Sector Warehousing
A detailed discussion about these warehouses is made below.
(i) Raw Materials Storage
Storage of raw materials is essential in order to ensure continuous production
flow. These warehouses of raw materials and components will be usually
situated either in the proximity of the point of extraction (supplier) or near to
the manufacturing point (user) or both. These materials include plastics, metals,
sand, aggregates and other food ingredients and so forth. Food grains are also
stocked in go-downs. They may also be purchased by some companies in
advance to guarantee supply in the event of poor weather conditions and
possible conflict. Storage facilities can include buildings, tanks, hoppers and
also open spaces.
(ii) Temporary or Intermediary Storage
These warehouses exist with any of the following objectives or intent purpose.
a) Intermediate storage
b) Customization materials
c) Sub-store within production line
d) Postponement storing
e) Sub-assembly facilities
These are used to store products temporarily at different stages in production.
In some cases, these centres are also maintained to customize products before
final delivery to the customer.
The sub-stores within the production line are very normal and regular practices
in the manufacturing units. These stores even function as the decoupling
inventory and safeguard the continuity of production during the events of
failures or breakdown or slowdowns of the machines.
Yet another reason for maintaining such intermediary stores is for
postponement and/or sub-assembly activities. The examples include:
 specific packaging or
 labeling being changed or added, e.g. for store-ready items or
 printing in different languages;
 computer assembly to include different graphics cards, memory chips,
software, etc;
 product bundling for promotional activity;
 country-specific items being added such as electrical plugs; and
 special messages being added, e.g. stenciling of greetings messages on
mobile phones
(iii) Finished Goods Storage
These warehouses store products that are ready for sale. They would be
generally managed by manufacturers, wholesalers and retailers. This
warehouse provides a buffer or safety stock for companies, enabling them to
build up stock in preparation for new product launches, expected increases in
demand and to deal with seasonality.
(iv) Consolidation/Sequencing Centres and Transit Warehouses
The consolidation centres, as name suggests receive products from different
sources and consolidate them for onward delivery to the customer or onto a
production line. This also includes just-in-time centres, like automotive parts
are delivered to a warehouse which are brought together and sequenced for
delivery onto the production line.
The consolidation may also be on retail stock. The items from different
suppliers are consolidated for onward delivery to the stores. These differ from
cross-dock centres where products can remain in the centre for a period of time
awaiting call-off from the final destination.
Most of the consolidation centres are operated by third parties.
(v) Trans-shipment or Break-Bulk Centres
Trans-shipment centres receive products in large quantities from suppliers and
break them down into manageable quantities for onward delivery to various
locations.
 (vi) Cross-Dock Centres
Cross-dock centres look at the future of warehousing. These are operated for
efficient and quick response toward customer within retail as a part of supply
chain. Datex Corporation identified four main cross docking situations used
most frequently:
 For the items with stable and strongly consistent demand: Such items
are scheduled cross docking for recurring fulfillment. This avoids the
need for surplus inventory to be stored to encounter stock out situations.
 For handling time-sensitive and perishable inventory: Due to the
reduced shelf life, it is essential that inventory should reach retailers
within a reasonable remaining shelf life. This situation demands cross-
docking and can provide the goods with a larger sales window.
 For specific inventory item having unexpected need: Since customers
cannot expect a specific item to be in stock, it is store manager’s
responsibility to use cross docking to quickly deliver shipments of such
inventory from suppliers’ chains. In this case, out-of-stock scenarios are
not a problem and no necessity of surplus stocking.
 For fulfilling orders for which customers are willing to wait:
In the case some high cost or bulky items such as appliances, apparels,
automobiles and furniture etc., customers would wait if there is an
expected a short period delivery. Instead of storing such large items in-
store or at a distribution centre, retailers can efficiently fulfill orders
from a single facility using cross-docking to help reduce the delivery
period.
Though companies are realizing the efficiency of cross docking, there are a
number of barriers to a successful implementation. The challenging issues
and problems are often associated with…
 warehouse management systems support,
 quality control systems,
 reliability of the product and logistics
 cooperation of suppliers and carriers,
 perish ability, shelf life and expiry date
 warehouse design and connectivity and
 uncertain demand
Cross-dock warehouses or transhipment centres are used in outlying and
connectivity among geographic areas to transfer products. This process may
occur either inside or outside the warehouse.
Cross docking items would most generally, remain in the warehouse for a short
time. More specifically, some perishable cross-dock products like fruits and
vegetables, flowers, meat and fish, etc. need to be moved as quickly as
possible through the supply chains.
Motorola’s recent study showed that in 2013, about 30% of companies using
cross docking while it increased to above 45% by 2018.
(vii) Sorting Centres
Sorting centres are found often with letter, parcel and pallet distribution
companies and so forth. Well packed goods or parcels are collected from all
parts of the country, delivered to sorting centres, where they are sorted by zip
code or postal code. After consolidation, they are delivered overnight to their
respective distribution areas for onward delivery. In present days, with the
growth in e-commerce, the online marketers are by and large practising these
sorting centres and the associated operations. Even today’s retailers are also
moving towards automated sorting centres.
(viii) Fulfilment Centres
The growth of e-retailing has seen an enormous increase in the recent past
particularly, in increasing the number of customer fulfilment centres. These
warehouses have been designed and equipped specifically to manage large
volumes of small orders. These centres can also double up as returns
processing centres, as e-commerce has a possibility of returns activities too.
(ix) Reverse Logistics Centres
The reverse logistics are associated with the returning product to stock or
disposing of it. In the recent days companies have been increasingly
recognizing importance of reverse logistics, since they have a positive impact
on the cash flows. This encouraged the establishing of several warehouses, to
deal with returned items. Most generally, the third-party contractors are
providing this service to retailers while the customers return unwanted or
defective items to the reverse logistic stores, where these items are
consolidated and sent to the returns centre. Then these are checked and either
repackaged, repaired, recycled or disposed of depending their conditions.
The growth of e-retailing and specific environmental legislation such as the
European Union’s Waste Electrical and Electronic Equipment (WEEE)
Directive (2007) has compelled companies to focus time and energy on reverse
logistics. Waste legislation has also resulted in large quantities of returned
packaging having to be disposed of in an environmentally friendly manner.
This includes sorting by type and use as fuel or recycled material. There are
case studies in the environmental section that go into more detail on this
subject.
(x) Public Sector Warehousing
Other than the commercial world, there are several places where warehouse
operations will be essentially important to achieving their main objectives.
These organizations include the public sector, charity organizations, armed/
air/ navy forces, schools, colleges, universities and various government offices
and so on. The preparedness, planning and mitigation for natural disasters such
as earthquakes, droughts and tsunamis require suitable warehouse operations
on strategic locations across the globe.
Public sector warehouses for local government facilities such as schools and
offices include stationery, uniforms, furniture, computer hardware and
software, etc. All the warehouse operations will be (either owned or leased)
usually under the control of head of the institution like principal (for a school
or college).
Other most common Public Warehouses found in the markets are operated by
third-party logistics providers. These are either dedicated operations on behalf
of a single customer or can be shared-user or public warehouses where a
number of different customers share resources. These users are accommodated
under one roof (the concept of malls/hyper markets).
Such public warehouses may be found in any of the following situations.
 companies with different products but with common customers such as
retailers or automotive manufacturers;
 companies with the same or similar products delivering to common
customers, e.g. tyre, bicycle manufacturers, pharmaceutical companies
and consumer goods companies;
  companies needing similar types of service, eg fulfilment or returns
processing; and
 companies requiring the same environmental conditions, eg hazardous
goods, explosives or temperature controlled
SAQ 3
a) List out various types of warehouses based on the role that they play.
b) List out different types of warehouses based on size and volume.
c) Enumerate different types of warehouses based on the person who
manages or operates.
d) Classify warehouses based on Materials Stored. Explain briefly.
e) What are the different Raw Materials and how they are stored?
f) What is Temporary or Intermediary Storage and what are its
objectives?
g) What are Consolidation/Sequencing Centres and Transit Warehouses?
h) Write short notes on Trans-shipment or Break-Bulk Centres.
i) Explain about Cross-Dock Centres.
j) What are the functions of Sorting Centres?
k) Write short notes on (a) Fulfillment Centres (b) Reverse Logistics
Centres.
l) How does the Public Sector Warehousing differ from other
Warehouses? Explain.
ACTIVITY 1.3
1.3 (a) Observe the key functions of warehouse system in a courier office and
discuss them in the below given paragraph.
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1.3 (b) Discuss few organizations where warehousing is based on size and
volume, on the person who operates it and on Materials Stored.
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1.7 METHODS OF WAREHOUSING

(Types of Warehouses based on Structure and Shelving Method)
 Figure 1.1: A typical warehouse
There is a wide range of warehouse storage systems available. Looking at the
future, warehouse storage systems are getting more lightweight, affordable,
and technologically-advanced. Therefore, it is not wise to run after a system
that doesn’t fit the organizations needs; instead, select one that possesses
enough flexibility to support its operation as it flourishes and grows. Then it is
important to know different kinds of warehousing.
Since, there are several different warehouse storage systems are available in
the market today, there are many storage options before being dispatched or
sold. It is always a good idea to be aware of various storage and shelving
options, which could become a good input for optimizing the store space.
To better expose to the big world of warehouse storage systems, there are Six
(6) most common types of warehousing based their shelving and structure.
These are listed below:
(i) Static Shelving
(ii) Mobile Shelving
(iii) Pallet Racking
(iv) Multi-tier Racking
(v) Mezzanine Flooring
(vi) Wire Partitions
(i) Static Shelving
As the name indicates, static shelves are storage mechanisms that are
stationary and are designed to stay in one place. Usually, they are intended to
hold inventory that is fairly lightweight, may be up to a few hundred kg per
shelf. This is commonly found in the warehouses storing inventory that needs
continuous replenishment.
Since, they are not compatible with forklifts, static shelving is often used for
the inventory that are manually picked and/or placed. There may be in two
categories of shelving as open racks or closed racks. For larger inventory, a
wide-span shelving system, has to be designed that can hold more weight and
can be used in higher-elevation configurations.
We can find this type of static shelving in libraries. Open racks are often used
for issuable books while closed racks with transparent glass frames may be
used for storing reference books.
(ii) Mobile Shelving
Mobile shelving is similar to static shelving but with a difference of mobility.
This is a completely adjustable shelving system that is meant to hold the
manually-picked items. With mobile shelving, shelves or cabinets are mounted
on carriage and rail systems, eliminating fixed aisles and increasing
productivity by making inventory more accessible, even when space is tight.
Thus, the advantage here is that many of these systems are designed to
hold more items in less space. Mobile shelving designs typically include level
tracks that can either be manual or mechanized. Further, they may be equipped
with locking systems to control access to inventory.
This type of mobile shelving may be noticed in lodge cum restaurants, or big
hotels etc.
(iii) Pallet Racking
For the busiest and largest warehouses, pallet racking systems are usually
treated as the centre piece of the operation. Typically, pallet racking systems
are made out of wood, metal, or plastic and hold inventory that is received in
large boxes. Depending on the height, the boxes are placed on the pallet
racking system with the help of a forklift or an automated mechanism.
There are a variety of sub-categories of pallet racking systems as listed below:
i. Carton-flow racking, ii. Cantilever racking, iii. Coil racking, iv. Pallet
live racking, v. Double-deep racking, vi. Drive-in racking, vii. Drive-through
racking, viii. Push back racking, ix. High-bay racking, x. Mobile racking, xi.
Narrow aisle racking, xii. Shuttle racking and xii. Vertical racking
Most often, warehouses will choose systems based on weight limits, flexibility,
and whether or not the system demands a change in infrastructure. These types
of pallet racking may found in shopping malls, super markets and automobile
industries.
(iv) Multi-Tier Racking
Multi-tier racking system is designed to capitalize on vertical space. Here, we
have a great choice for large stocks of items that have small unit sizes. When
no warehouse is one-size-fits-all, many multi-tier racking options are flexible,
with the ability to add or remove tiers depending on the current needs.
Mostly, multi-tier racking concerns relatively lightweight items that are picked
and organized manually. To get the most out of this warehouse storage system,
we need to organize each tier strategically and pack items as densely as
possible. At the same time paying attention is to be given to weight limits and
ceiling-to-rack height compliance guidelines.
These types of warehouses or stores are suitable for cloth stores, medical halls,
hospital stores etc.
(v) Mezzanine Flooring
If the budget permits and the strategic warehouse layout allows for
it, mezzanine flooring is an effective and space-saving storage option. Mostly
mezzanine flooring is a second (may be third and fourth also but rare) floor
that is constructed above the main warehouse floor.
Owing to the intrusive nature of the building, this could be one of the more
expensive options that a warehouse can choose, but it also has the most
potential for customized features, such as lighting, lift-systems, and conveyors.
Workshops, go downs, households and some shopping malls may use this type.
 Figure 1.2: Automated storing
(vi) Wire Partitions
While mezzanine flooring is one of the more high-tech options, wire partitions
are on the other end of the spectrum. Wire partitions are, effectively,
strategically-placed wire cages that are meant to be installed and torn down
quickly and easily.
Often, the inventory that is housed within wire partitions are the items that may
need special security. Some warehouses are even known to use wire partitions
to construct makeshift, temporary offices for managers who work on the floor.

1.8 WAREHOUSE MANAGEMENT SYSTEM (WMS)

One of the fundamental steps that must be taken in order to craft a warehouse
that’s functional and organized is to select the storage system (or systems).
Obviously, this is not a choice that can be taken lightly; warehouse storage
systems are a major capital investment that, depending on the design and the
way they fit into warehouse floor plan and processes, can either help or hurt
throughput. Thus a good optimized design and execution of its storage, in and
out flows of materials as well as hassle-free logistics are the essential
operations, which make the organization healthy.
1.8.1 A warehouse management system (WMS) is a software application
designed to support and to optimize warehouse facilities, functions and
distribution centre management. These systems facilitate management in
functioning with simplified automation technologies applied in daily activities
such as planning, organizing, staffing, directing, housekeeping and controlling.
It offers a great ease in the effective utilization of available resources, to move
and store materials inside, around and outside of a warehouse. It helps the staff
in performing of material movement and storage in and around a warehouse,
without causing any large scale disruption to business resources and logistics.
Warehouse management solutions are primarily tactical tools used by
businesses to satisfy the customer demand requirements of their supply chain(s)
and distribution channel(s), when the inventory and workload is larger than
what can be handled manually, with spreadsheets. Thus, depending on the size
and sophistication of the organization, warehouse management can be as
simple as handwritten lists or spreadsheets using software such as Microsoft
Excel or Microsoft Access, or exclusive WMS software system.
Summarily, Warehouse Management Systems (WMS) may be in one of the
following structures
 An exclusive or a standalone system, or
 A part of supply chain suites, or
  A module of an enterprise resource planning (ERP) system.
1.8.2 Features in WMS
A WMS uses database configured software to support warehouse operations,
containing detailed descriptions of standard warehouse elements as listed
below:
 Stock Keeping Units (SKUs): Individual stock keeping units (SKUs),
which are handled and stored, e.g., weight, dimensions, case pack,
automatic ID labels (bar codes, etc.), and inventory by location with
manufacture date, lot code, etc. SKUs may also include the details
such as basic materials, fabricated parts, assemblies, and industrial
and consumer finished goods, etc.;
 Warehouse storage locations: Storage conditions, locations and
handling instructions within the warehouse are specified e.g.,
individual location number, picking sequence, type of use (picking,
reserve storage, etc.), type of storage (each, case, pallet), location size
or capacity, storage restriction (flammable, hazardous, high value
materials, outdoor, etc.), etc.
 Dock doors: It uses the docking identification such as individual
number, or a code etc.
 Expected labour productivity: The rates by function or activity, like
cases picked per man-hour, etc. are described.
1.8.3 Managerial Functions of WMS
The general managerial functions viz. planning, organizing, staffing, directing
and controlling observed under the light of WMS would be as described below:
 Planning – includes finalizing the daily plan for receiving dock
activity, selecting the workload/orders to be processed in the day or
shift, (this may also be done by the business system), and calculating
an estimate of the labour and vehicles required to pick and ship the
orders to ensure the staffing is appropriate, and to notify carriers
regarding to load and depart to meet customer requirements.
 Organizing – includes sequencing the orders to be picked.
Organizing orders for picking can be accomplished in many ways, for
meeting the needs of the user. The primary objective is to be
intentional, and not to pick the orders in the sequence in which they
were received unless the company wants to pay a carrier make sense
for transportation and delivery. The initial way of organizing was
called wave planning or wave picking, with two objectives, a. to
minimize need for dock staging space, by having orders arrive at the
shipping dock in trailer load sequence, and b. to create an order of
flow that will support monitoring the progress through the day and
eliminate/reduce last minute requests for overtime or delay of carrier
departure, etc.
 Staffing – includes assign staff to work functions and areas, by wave,
to minimize staging.
 Directing – include ensuring the documented processes and
procedures are embedded in the WMS and are consistently applied,
used and appropriate for the nature of the work and service level
intentions of the company (e.g., International Standards Organization
9000 www.iso.org). This function may also be used to divide
 individual orders into logical work units and the ability to assign them
to separate individuals potentially for simultaneous performance,
consistent throughput requirements and physical layout, e.g.,
separating individual case picking from each unit picking, and
individual pallet load picking, to improve productivity and support
Control.
 Controlling – providing milestones for management to monitor
progress through the day, providing the opportunity to respond to
problems in a timely way, and report data for performance analysis.
1.8.4 Integrated WMS
Warehouse management system (WMS) enables warehouse staff in performing
the required processes to handle all major and several minor warehouse tasks
such as receiving, inspection and acceptance, put-away, internal replenishment
to picking positions, picking, packing, and value-added services, order
assembly on the shipping dock, documentation, and shipping (loading onto
carrier vehicles). A WMS also assists in directing and validating each step,
capturing and recording all material movement, and status changes to the data
file.
A warehouse management system generally stands as a representation of the
central unit in the software structure of a warehouse. The WMS receives orders
from the host system, mostly an ERP system, organized by these in a database
and, after appropriate optimization, supplies them to the connected conveyor
control systems.
This becomes clear when as we see in the processes necessary for e-commerce.
 When a customer places an order on a website the information is passed
to WMS via the business host computer (often an ERP system).
 All necessary steps for managing this order, pick the ordered items, and
so forth are then processed within the WMS.
 Then, information is sent back to the business host computer to support
financial transactions, advance shipping notifications to customers,
inventory management, etc.
A modern WMS will connect to a variety of communication technologies
(radio frequency), automatic ID technologies (barcode, RFID, etc.), mobile
computers, and occasionally automated material handling (conveyors and
sorters) and storage equipment (carousels, automatic storage and retrieval, etc.).
SAQ 4
a) What are the types of Warehouses based on Structure and Shelving
Method?
b) Explain Static shelving in warehouse storage systems.
c) Describe Mobile Shelving in warehouse storage systems.
d) Discuss Pallet Racking in warehouse storage systems.
e) Brief out Multi-tier Racking in warehouse storage systems.
f) With reference to warehouse storage systems, write short notes on (a)
Mezzanine Flooring (b) Wire Partitions
 g) Give a brief note on the Warehouse Management System (WMS).
What is Integrated WMS?
h) Explain the features of Warehouse Management System (WMS).
Discuss its Managerial Functions.
ACTIVITY 1.4
Review the Warehouse Management System (WMS) of any organization of
your choice.
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1.9 SUMMARY
Warehouse is a place where the stock is housed. Simply, it is the house of
materials or it is analogous to the rented accommodation or a guest house for
the material in their journey along the movement of its supply chain. Materials
flow is like blood of any organization, especially for a production system.
Warehouse may be considered as the heart of the organization for the smooth
running of the production line. Warehouse management is commonly
associated with six basic Principles such as Accuracy, Cost control, Efficiency,
Cleanliness, Safety and Security. Key functions of warehousing are
Warehouse layout design, Handling Equipment & Storage Systems, Picking
and order preparation, Stock and inventory management, Warehouse safety
and security. Classification of warehousing is based on size and volume, on the
person who operates it and on Materials Stored. Six (6) most common types of
warehousing based their shelving and structures are Static Shelving, Mobile
Shelving, Pallet Racking, Multi-tier Racking, Mezzanine Flooring and Wire
Partitions. A warehouse management system (WMS) is a software application
designed to support and to optimize warehouse facilities, functions and
distribution centre management. These systems facilitate management in
functioning with simplified automation technologies applied in daily activities
such as planning, organizing, staffing, directing, housekeeping and controlling.

1.10 KEYWORDS
Warehouse : a place where the stock is housed.
VMI : Vendor Managed Inventory
The consolidation centres : They receive products from different
sources and consolidate them for onward
delivery to the customer or onto a
production line.
Trans-shipment centres : They receive products in large quantities
from suppliers and break them down into
manageable quantities for onward
delivery to various locations.
Sorting centres : These are found often with letter, parcel
and pallet distribution companies and so
forth.
Fulfilment Centres : They are equipped specifically to manage
large volumes of small orders.
Reverse logistics : They are associated with the returning
product to stock or disposing of it.
Public Sector Warehousing : These organizations include the public
sector, charity organizations, armed/ air/
navy forces, schools, colleges,
universities and various government
offices and so on.
Static shelves : They are storage mechanisms that are
stationary and are designed to stay in one
place.
Mobile shelving : Shelves or cabinets are mounted on
carriage and rail systems, eliminating
fixed aisles and increasing productivity
by making inventory more accessible,
even when space is tight.
Pallet Racking : Pallet racking systems are made out of
wood, metal, or plastic and hold
inventory that is received in large boxes.
Multi-Tier Racking : When no warehouse is one-size-fits-all,
many multi-tier racking options are
flexible, with the ability to add or remove
tiers depending on the current needs.
Mezzanine Flooring : an effective and space-saving storage
option. It has the customized features,
such as lighting, lift-systems, and
conveyors. Workshops, go downs,
households and some shopping malls
may use this type.
Wire partitions : These are, effectively, strategically-
placed wire cages that are meant to be
installed and torn down quickly and
easily.
WMS : Warehouse Management System is a
software application designed to support
and to optimize warehouse facilities,
functions and distribution centre
management.

1.11 FURTHER READINGS

1. N.V.S.Raju (2018), Operations Research, Theory and Practice, BS
Publications, Hyderabad, India, and CRC Publication (A unit of
Taylor& Francis) ISBN: 978-93-5230-190-4
2. N.V.S.Raju (2013), Industrial Engineering and Management, Cengage
Learning India Pt. Ltd, New Delhi, ISBN-13: 978-81-315-1948-6
3. N.V.S.Raju (2013), Plant Maintenance and Reliability Engineering,
Cengage Learning India Pt. Ltd, New Delhi.