WAREHOUSE MANAGEMENT

Is it only a Storage Facility?

• A warehouse is typically viewed as a place to
store inventory.

• However, in many logistical system designs,

the role of the warehouse is more properly
viewed as a switching facility as contrasted to
a storage facility.
 Warehouse Management
• Make maximum use of space
–capital cost of space is very high
• Make effective use of labor and
equipment
–material handling equipment is the
second largest capital cost
–need best mix of equipment and labor
–all SKU’s (stock keeping unit) should be
easy to find
–move goods efficiently
 Warehouse Management
• Manage inventory, space, material
handling equipment, labor, and
transportation resources in real time
to assure timely, error-free fulfillment,
delivery, and visibility of order status
throughout the supply chain
• Matching material and information
flow
 Warehouse Activities
• Receive goods
• Identify goods
• Dispatch goods to storage
• Hold goods
• Pick goods
• Marshal the shipment
• Dispatch the shipment
• Operate an information system
 WAREHOUSING SYSTEM
 Storage Functions
 Accumulation of Inventory Over Time
 Depending on Purpose of Storage & Different Lengths of
Time a Product Required to Remain in the Warehouse
 Different Locations in the Warehouse Chosen for
Storing Product Based on Purpose of Storage

 Material Handling Functions

 Loading & Unloading Activities
 Moving Products To and From Various Locations Within
the Warehouse
 Order Picking

Identification of Major System Activities Promotes

Understanding of the System as a Whole & Helps
To Provide a Basis for Generating Design Alternatives
 STORAGE FUNCTIONS
 Holding (Providing Protection & Orderly Holding of Inventory)
 Holding Time/Storage Requirement Drives Store Configuration/ Layout
• Long-Term Specialized Storage (Ageing Liquors/ Wines)
• General-Purpose Merchandise Storage (Seasonal Goods)
• Temporary Holding of Goods (Truck Terminal)

 Consolidation
 Transportation Rate Structure/Breaks Influences Use of Storage Facilities
• Collection Point (Warehouse/ Freight Terminal) Used for Small
Shipment-Consolidation To Avail More Economical TL Rates

 Bulk-Breaking (Opposite of Consolidation)

 TL Supplies Received from Long Distance Factory Broken into
LTL Loads (Order) & Sent To Short-Distance Retail Outlets
 Distribution/ Terminal Warehouses Used to Break-Bulk

 Mixing
 Products From Different Suppliers Mixed to Assemble Retailer’s Orders
For Delivering to Different Short-Distance Retail Outlets
 MATERIALS HANDLING FUNCTIONS
 Loading & Unloading

 On Arrival at Warehouse Goods Are Unloaded from Trucks

 Packed Goods are Loaded on Outgoing Trucks
 Often Special Equipment are Required for these Operations
 Involves Various Activities of Checking Order Contents/ Order
Sequencing etc.

 Movement Within Warehouse

 From Unloading Point to Storing Area
 Storing Area to Picking Area
 Picking to Staging Area
 Staging to Packing Area
 Packing to Docking Area

 Order Filling/ Picking

 Selection of Stocks From Storage Areas To Build Customer Order
 Order Selection May Take Place Directly From Semi-Permanent/
Bulk Storage Area (Order Picking Areas)
 Often the Most Critical Material Handling Activity due to Small-
Volume Orders
 Benefits of Warehousing
Consolidation
• Shipment consolidation is an economic benefit
of warehousing.
• With this arrangement, the consolidating
warehouse receives and consolidated
materials from a number of manufacturing
plants destined to a specific customer on a
single transportation shipment.
• The benefits are the realization of the lowest
possible transportation rate and reduced
congestion at a customer's receiving dock.
Consolidation Warehouses
 Processing/Postponement
• Warehouses can also be used to postpone, or
delay, production by performing processing and
light manufacturing activities.
• A warehouse with packaging or labeling
capability allows postponement of final
production until actual demand is known.
• For example, vegetables can be processed and
canned in "brights" at the manufacturer.
• Brights are cans with no pre-attached labels.
 Processing/Postponement
• The use of brights for a private label product
means that the item does not have to be
committed to a specific customer or package
configuration at the manufacturer's plant.

• Once a specific customer order is received,

the warehouse can complete final processing
by adding the label and finalizing the
packaging.
 Processing/Postponement
• Processing and postponement provide two
economic benefits:
• First, risk is minimized because final packaging
is not completed until an order for a specific
label and package has been received.
• Second, the required level of total inventory can
be reduced by using the basic product (brights)
for a variety of labeling and packaging
configurations.
 Stockpiling
• The economic benefit of stockpiling comes from
the need of seasonal storage.
• For example, lawn furniture and toys are
produced year-round and primarily sold during
a very short marketing period.
• In contrast, agricultural products are harvested
at specific times with subsequent consumption
occurring throughout the year.
• Both situations require warehouse stockpiling to
support marketing efforts.
• Stockpiling provides an inventory buffer, which
allows production efficiencies within the
constraints imposed by material sources and
the customer.
 Service Benefits
Five basic service benefits are
achieved through warehousing:
–spot stock,
–assortment,
–mixing,
–production support, and
–market presence.
 Spot Stock
• Under spot stocking, a selected amount of a
firm's product line is placed or "spot stocked"
in a warehouse to fill customer orders during a
critical marketing period.
• In particular, manufacturers with limited or
highly seasonal product lines are partial to this
service.
• Rather than placing inventories in warehouse
facilities on a year-round basis or shipping
directly from manufacturing plants, delivery time
can be substantially reduced by advanced
inventory commitment to strategic markets
WAREHOUSE OPERATING PRINCIPLES
• Once it has been determined to use a
warehouse, the next step is designing it.
• Whether the warehouse is a small manual
operation or a large automated facility, the
following three principles are relevant:
– Design criteria,
– Handling technology, and
– Storage plan.
DESIGN CONSIDERATION
PRINCIPLES OF WAREHOUSE LAYOUT DESIGN
Use one-story
facilities
Move goods in a
straight line
Use efficient
materials-handling
equipment
Use an effective
storage plan
Minimize aisle space
Use maximum height
of the building
 DESIGN CRITERIA
• Warehouse design criteria address physical
facility characteristics and product movement.
• Three factors to be considered in the design
process are:
– the number of storey's in the facility,
– height utilization, and
– product flow.
 Number of storey in the facility
• The ideal warehouse design is limited to a
single storey so that product does not have to
be moved up and down.
• The use of elevators to move product from one
floor to the next requires time and energy.
• The elevator is also often a bottleneck in
product flow since many material handlers are
usually competing for a limited number of
elevators.
• While it is not always possible, particularly in
central business districts where land is
restricted or expensive, warehouses should be
limited to a single story.
 Height utilization
• Regardless of facility size, the design should
maximize the usage of the available cubic
space by allowing for the greatest use of height
on each floor.
• Most warehouses have 20- to 30-feet ceilings
(1 foot = 12 inch; 1 inch = 2.54 cm), although
modern automated and high-rise facilities can
effectively use ceiling heights up to 100 feet.
• Through the use of racking or other hardware, it
should be possible to store products up to the
building's ceiling.
• Maximum effective warehouse height is limited
by the safe lifting capabilities of material-
handling equipment, such as forklifts.
 Product flow
• Warehouse design should also allow for
straight product flow through the facility
whether items are stored or not.
• In general, this means that product should be
received at one end of the building, stored in
the middle, and then shipped from the other
end.
• Straight-line product flow minimizes congestion
and confusion.
 HANDLING TECHNOLOGY
• The second principle focuses on the
effectiveness and efficiency of material-
handling technology.

• The elements of this principle concern:

– movement continuity and
– movement scale economies.
 Movement Continuity
• Movement continuity means that it is better for
a material handler or piece of handling
equipment to make a longer move than to
have a number of handlers make numerous,
individual, short segments of the same move.

• Exchanging the product between handlers or

moving it from one piece of equipment to
another wastes time and increases the
potential for damage.
• Thus, as a general rule, fewer longer
movements in the warehouse are preferred.
 Movement scale economies
• Movement scale economies imply that all
warehouse activities should handle or move the
largest quantities possible.
• Instead of moving individual cases, warehouse
activities should be designed to move groups
of cases such as pallets or containers.
• This grouping or batching might mean that
multiple products or orders must be moved or
selected at the same time.
• While this might increase the complexity of an
individual's activities since multiple products or
orders must be considered, the principle
reduces the number of activities and the
resulting cost.
 Storage Plan
• According to the third principle, a warehouse
design should consider product characteristics,
particularly those pertaining to volume, weight,
and storage.
• Product volume is the major concern when
defining a warehouse storage plan.
• High-volume sales or throughput product
should be stored in a location that minimizes
the distance it is moved, such as near primary
aisles and in low storage racks.
• Such a location minimizes travel distance and
the need for extended lifting.
• Conversely, low-volume product can be
assigned locations that are distant from primary
aisles or higher up in storage racks.
• Similarly, the plan should include a specific
strategy for products dependent on weight and
storage characteristics.
• Relatively heavy items should be assigned to
locations low to the ground to minimize the
effort and risk of heavy lifting.
• Bulky or low-density products require extensive
storage volume, so open floor space or high-
level racks can be used for them.
• On the other hand, smaller items may require
storage shelves or drawers.
• The integrated storage plan must consider and
address the specific characteristics of each
product
A Sample Storage Area
Alternative Warehouse Strategies
• Warehouse alternatives include:
– (1) Private warehouses,
– (2) Public warehouses, and
– (3) Contract warehouses.
• A private warehouse facility is owned and managed
by the same enterprise that owns the merchandise
handled and stored at the facility.
• A public warehouse, in contrast, is operated as an
independent business offering a range of services -
such as storage, handling, and transportation- on the
basis of a fixed or variable fee.
• Contract warehousing, which is evolving from the
public warehouse segment, provides benefits of both
the private and public alternatives.
 Private Warehouses
• A private warehouse is operated by the firm
owning the product.

• The actual facility, however, may be owned or

leased.

• The decision as to which strategy best fits an

individual firm is essentially financial.

• Often it is not possible to find a warehouse for

lease that fits the exact requirements of a firm.
 Public Warehouses
• On the basis of the range of specialized operations
performed, public warehouses are classified as

– (1) general merchandise,

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

• Each warehouse type differs in its material handling

and storage technology as a result of the product and
environmental characteristics.
 Public Warehouses
• General merchandise warehouses are
designed to handIe general package
commodities such as paper, small appliances,
and household supplies.
• Refrigerated warehouses (either frozen or
chilled) handle and maintain food, medical
items, and chemical products with special
temperature requirements.
• Commodity warehouses are designed to
handle bulk material or items with special
handling considerations, such as tires or
clothing.
 Public Warehouses
• Finally, a household goods or furniture
warehouse is designed to handle and
store large, bulky items such as
appliances and furniture.

• Of course, many public warehouses offer

combinations of these operations.
 Contract Warehouses
• Contract warehousing combines the best
characteristics of both private and public
operations.
• The long-term relationship and shared risk
result in lower cost than typical public
warehouse arrangements.
• Contract warehouse operations can provide
benefits of expertise, flexibility, and economies
of scale by sharing management, labor,
equipment, and information resources across a
number of clients
 Planning the Distribution Warehouse
• The initial decisions of warehousing are
related to planning.
• A master plan of the layout, space
requirements, and material-handling design
should be developed first and a specific site
for the warehouse selected.
• These decisions establish the character of the
warehouse, which, in turn determines the
degree of attainable handling efficiency.
 Site Selection
• Location analysis techniques are available to assist in
selecting a general area for warehouse location.
• Once location analysis is completed, a specific
building site must be selected.
• Three areas in a community may be considered for
location:
– 1) commercial zones, 2) outlying areas served by
motor truck only, and 3) central or downtown areas.
• The primary factors in site selection are the
availability of services and cost.
• The cost of procurement is the most important factor
governing site selection.
 Site Selection
• A warehouse need not be located in a major
industrial area.

• In many cities, one observes warehouses

among industrial plants and in areas zoned for
light or heavy industry.

• Interestingly, this is not a legal necessity

because most warehouses can operate under
the restrictions placed on commercial property.
 Site Selection
• Beyond procurement cost, setup and operating
expenses such as rail sidings, utility expenses,
taxes, insurance rates, and highway access
require evaluation.
• These expenses vary between sites.
• For example, a food distribution firm recently
rejected what otherwise appeared to be a totally
satisfactory site because of insurance rates.
• The site was located near the end of a water
main.
 Site Selection
• During most of the day, adequate water
supplies were available to handle operational
and emergency requirements.
• The only possible water problem occurred
during two short periods each day.
• From 6:30 to 8:30 in the morning and from 5 to
7 in the evening, the demand for water along
the line was so great that a sufficient supply
was not available to handle emergencies.
• Because of this deficiency, abnormally high
insurance rates were required and the site was
rejected.
 Site Selection
• Several other requirements must be satisfied
before a site is purchased.
• The location must offer adequate room for
expansion.
• Necessary utilities must be available.
• The soil must be capable of supporting the
structure, and the site must be sufficiently
high to afford proper drainage (su akışına izin
verme).
 Warehouse Layout
• Layout of a warehouse depends on the
proposed material handling system and
requires development of a floor plan to facilitate
product flow.
• It is difficult to generalize about warehouse
layouts since they must be refined to fit specific
needs.
• If pallets are to be utilized, the first step is to
determine the pallet size.
• A pallet of nonstandard size may be desirable
for specialized products, but whenever
possible, standardized pallets should be used
because of their lower cost.
Cube utilization and accessibility
 Pallet Spacing

6 x 42” / 12 = 21 feet required to store 16 pallets

stacked 3 high
 Pallet Positions - Example Problem

A company wants to store an SKU consisting of 13,000

cartons on pallets each containing 30 cartons. How many
pallet positions are needed if the pallets are stored three
high?

Number of pallets required = 13,000 / 30 = 434 pallets

Number of pallet positions = 434 / 3 = 144.67 or 145

Note one pallet position will contain only 2 pallets

 Warehouse Layout…
• The most common sizes are 40 by 48 inches
and 32 by 40 inches.
• In general, the larger the pallet load, the lower
the cost of movement per package over a
given distance.
• The packages to be placed on the pallet and
the related patterns will determine, to a certain
extent, the size of pallet best suited to the
operation.
• Regardless of the size finally selected,
management should adopt one size for the
total operation.
 Warehouse Layout…
• The second step in planning a layout involves
the pallet positioning.

• The basic method of positioning pallets in a

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

• Square placement means that the pallet is

positioned perpendicular to the aisle.

• The square method is widely used because of

layout ease.
 Product Deterioration
• Within the warehouse, a number of factors can
reduce a product or material to a non-usable or
non-marketable state.

• The most obvious form of product deterioration

is damage from careless transfer or storage.

• Another major form of deterioration is non-

compatibility of products stored in the same
facility.
 Product Deterioration
• The primary concern is deterioration that results
from improper warehouse work procedures.
• A constant concern is the carelessness of
warehouse employees.
• In this respect, the forklift truck may well be
management's worst enemy.
• Regardless of how often operators are warned
against carrying overloads, some still attempt
such shortcuts when not properly supervised.
 Product Deterioration
• In one situation, a stack of four pallets was
dropped off a forklift truck at the receiving dock
of a food warehouse.
• Standard procedure was to move two pallets
per load.
• The value of the damaged merchandise
exceeded the average daily profit of two
supermarkets.
• Product deterioration from careless handling
within the warehouse is a form of loss that
cannot be insured against and constitutes a
100 percent cost with no compensating
revenue.