CHAPTER 12 – WAREHOUSING

AND MATERIAL HANDLING

 Purpose of warehouses
 Activities within a warehouse
 Options for ownership
 Layout of facilities
 Material handling
 Packaging
 LEARNING OBJECTIVES
 Understand the need for warehouses and the role they play
in supply chains
 Describe the different activities within warehouses
 Compare the benefits of private and public warehousing
 Appreciate the importance of good warehouse layout
 Discuss the factors that affect warehouse layout and
operations
 Review the different types of equipment used in
warehouses
 Discuss the use of packaging and the different forms it
takes
 PURPOSE OF WAREHOUSES
 Stock is traditionally kept in a warehouse
 A warehouse is any location where stocks of material
are held on their journey through supply chains.
 Warehouses take many forms and do other activities
in addition to storage
 There are two main types of warehouse:
 Those linked to upstream suppliers and dealing with the raw
materials
 Those linked to downstream customers and dealing with
finished goods
Managers can do associated analyses
 For instance, open a finished goods warehouse when

Cost of direct deliveries to customers >

cost of deliveries to finished goods warehouse + cost
of running warehouse +
cost of deliveries from warehouse to customers

 A problem with such analyses is getting reliable costs

 Warehouse operations directly
depend on the logistics strategy
Managers should:
 analyse the logistics strategy – setting the context and finding what the warehouse has
to achieve
 examine current operations – to see the failings and how these can be overcome
 design an outline supply chain structure – defining the best number and locations for
warehouses
 make detailed plans – finding the size of facilities, stock holdings, material handling
equipment, systems to develop, people to employ, transport needs, etc.
 getting final approval – with senior managers agreeing the plans and funds
 finalise building design – purchasing land, choosing contractors and building
 finalise equipment design – choosing equipment, suppliers and purchasing
 finalise systems design – designing the ordering, inventory control, billing, goods
location, monitoring, and all other systems needed
 fitting out – installing all equipment, systems, staff and testing
 open and receive stock – to test all systems, finish training and begin operations
 sort out teething problems – to get things running smoothly
 monitor and control – ensuring that everything works as planned, measuring
performance, revising incentive schemes, etc
 Activities within warehouses
 providing safe and secure storage at key points in a supply chain,
keeping keep materials in good condition and with minimal
damage
 efficiently doing the associated handling, moving, sorting and
checking of materials
 keeping accurate records, processing information and
transferring this as required by suppliers and customers
 adding value by doing other tasks that may be best performed in
the warehouse, such as packing of finishing for postponement
 being flexible enough to deal with uncertainty, variations,
special requirements, etc
 Then specific tasks include
 Meeting delivery vehicles from upstream suppliers and directing them to arrival bays
 identifying the materials delivered and matching them to orders
 unloading materials from vehicles, and checking their condition, quantity and quality
 sorting goods and forming convenient units for storage
 labelling storage units so they can be identified (generally with bar codes, magnetic strips or RFIDs)
 moving storage units to a bulk storage area
 holding them in stock until needed
 when necessary, removing storage units from bulk storage, breaking them into smaller parts and
transferring them to a picking store
 when requested by customer orders, picking materials from this store, checking them and
consolidating them into orders
 moving the orders to marshalling or consolidation areas
 checking, packing and packaging the orders
 moving the orders to departure bays, loading them onto delivery vehicles and dispatching them to
customers
 controlling all communications and related systems, such as inventory control and accounting.
 Moving beyond storage
 Organisations are increasingly trying to move materials
quickly though supply chains, without interrupting the
flow or having them sit in stock
 So the focus of warehouses has changed, moving away
from long-term storage and towards giving convenient
locations for a range of associated activities, such as:
 Consolidating loads
 Break bulk
 Cross docking
 Finishing for postponement
 etc
 Options for ownership
 Private warehouses have benefits
 greater control over a central part of the supply chain
 closer integration of logistics activities
 facilities tailored to the organisation’s needs, being in the
right location, right size, fitting in with customer service,
etc
 easier communications with integrated systems throughout
the organisation
 lower costs, without the profit needed by another
organisation
 possible tax advantages and development grants
 enhanced corporate image, giving an impression of
reliability and long term dependability.
 Public warehouses
also have benefits
 flexible capacity to deal with changing demand, perhaps due to
seasonality
 avoids large capital investment, giving lower fixed costs and
higher return on investment
 has costs that are directly related to the level of use
 provides skills and experience that firms do not have internally
 gives access to the latest technology, systems, equipment and
practices
 allows easy access to new markets and a wider geographical area
 allows short-term tests to assess new methods and areas
 uses economies of scale to reduce unit transaction costs
 consolidates work with other organisations to reduce unit costs
 guarantees a high quality and efficient service
The best choice depends on

 Operating costs
 Capital costs
 Customer service
 Control
 Flexibility
 Management skills
 Recruitment and training

 In practice the best solution is often a

combination of the two
 Layout of facilities
 Layout describes the physical arrangement of storage racks, loading and
unloading areas, equipment, offices, rooms, and all other facilities in a
warehouse
 Some guidelines include:
 put everything on the same floor
 only use mezzanine floors for administration or some sorting
 separate arrival areas and departure areas
 plan the layout to give a smooth and easy flow of materials into, through and
out of the warehouse
 simplify movements, eliminating or combining separate movements where
possible
 make movements in straight lines
 use efficient and appropriate materials handling equipment
 make storage as dense as possible, with the minimise space used for aisles
 have high level storage to reduce the area, using all the height of the building
 have offices outside the main storage area, as space above them is wasted
 The fie basic elements of a
warehouse are
1. Arrival bays
2. Storage area
3. Departure bays
4. Material handling system
5. Information system

 There are many variations on this basic

pattern
 Key questions concern
 The type of racking
 Layout of racks
 Location of materials in racks
 Turnaround time

 One approach to answering these:

 estimates demand for materials over the next few years
 translates this into forecast movements of materials
 considers equipment for storing and handling these movements, and
choose the best
 finds the space needed for storing and moving each item
 sees which materials should be in special areas and which should be far
apart
 designs a general layout for racking that combines all these spaces and
handling areas
 adds details to give final plans
 Material handling
 is concerned with the movement of materials for short
distances generally within a warehouse, or between
storage areas and transport
 a reasonable set of aims for materials handling
includes:
 to move materials around a warehouse as required
 move materials quickly, reducing the number and length of
movements
 increasing storage density, by reducing the amount of wasted
space
 reducing costs, by using efficient operations
 making few mistakes, with efficient material management
systems
A key choice determines the level of
technology
 Manual warehouses
 Where movements are done by hand
 Mechanised warehouses
 Where people control fork-lift trucks, reach trucks,
cranes, etc
 Automated warehouses
 Where computers control the movements of
AGVs, transfer equipment, etc
 The choice of best depends on

 Throughput
 Physical characteristics of loads – size, weight, etc
 Number of loads to be moved – from receipts,
internal movements for sorting, and then deliveries
 Distance to be moved – from the size of the
warehouse
 Speed of movement required – how quickly the
warehouse has to respond to demands, etc.
 Packaging
 Most materials are put into unitised loads for
movement
 This means that they need packing and
packaging
 The most common standards are:
 Pallets
 Containers

 Two types of packaging are

 Industrial packaging to ease movement
 Consumer packaging that appeals to customers
 Purpose of packaging
 Provides containers for moving items (such as tanks
for liquids)
 Gives conveniently sized load for movement – either
combining small items or breaking-up large ones
 Identifies the products contained and gives
information about it
 Protects items while they are being moved through
the supply chain
 Gives unit loads to make handling easier
 Assists in marketing, promoting the product,
advertising and giving information to customers
 The main options for packaging
 Glass is easy to clean, reuse and recycle, but is fragile,
relatively expensive and difficult to make
 Plastic is light, strong and easy to clean, but can be
expensive and difficult to make or reuse
 Cardboard is light, cheap and can be recycled, but has
little strength and poor durability
 Wood is strong, durable, easy to use and can be reused,
but it is heavy, bulky and difficult to clean
 Metal is strong and durable, but it is heavy and
expensive
 Most organisations (at least in
principle) are trying to ‘reduce,
reuse and recycle’ packaging
 Reduce the total amount of packaging to a minimum
 Use lighter materials to reduce transport costs
 More environmentally friendly packaging to reduce
its impact, save money and improve the
organisation’s image
 Replace disposable containers by reusable ones, as
these reduce the amount of waste and save money
 Plan package sizes carefully to give better utilisation
of warehousing and transport
 Use enough protective packaging to minimise
damage and consequent waste
 CHAPTER REVIEW

 A warehouse is the general term for any place where materials are stored
 Warehouses are needed for a variety of reasons, primarily reducing the
overall costs while improving customer service
 The traditional function of a warehouse is to store materials, and this
involves a series of related activities
 Their role as long term stores is declining, and they are increasingly seen
as a convenient location for other jobs, such as consolidating loads and
postponement
 An important consideration is the ownership of warehouses, with a choice
between private and public warehouses
 Good layout ensures a fast and efficient flow of materials, and there are
guidelines for this
 Storage and material handling equipment can be classified as manual,
mechanised or automated
 Packaging is an important aspect of materials handling, as it serves several
purposes including protection, easing movement and passing on product
information.