SUPPLY CHAIN
MANAGEMENT
MBA(MM)III SEM.
WAREHOUSING
CONCEPT
Need for storage arises both for raw
material as well as finished
products
STORAGE involves proper management
for preserving goods from the time of their
production or purchase till actual use.
When this storage is done on a large scale
and in a specified manner it is called
WAREHOUSING.
MEANING AND DEFINITION
Place where goods are kept is called
WAREHOUSE
The person in-charge of warehouse is
called WAREHOUSE-KEEPER
A commercial building for storage of
goods
Used by manufacturers, importers,
exporters, wholesalers, transport
business, customers etc.
DEFINITION
Warehousing refers to the activities involving
storage of goods on a large-scale in a systematic
and orderly manner and making them
available conveniently when needed.
Means holding or preserving goods in huge
quantities from the time of their purchase or
production till their actual use or sale.
Creates time utility by bridging the time gap
between production and consumption of
goods
BASIC FUNCTIONS PERFORMED
Movement function
Receipt of
products from Placement at Transferrin
Transfer into Regrouping
manufacturing designated g on
the warehouse products
plant place transport
vehicle
Storage function
Performed by storing products in the
warehouse till delivery to ultimate
NEED AND IMPORTANCE
REGULAR SUPPLY
QUALITY
STOCK OF TRADE
PRICE STABILISATION
SEASONAL PRODUCTS
PERISHABLE GOODS
CONTINUOUS PRODUCTION
SEASONAL DEMAND
LARGE-SCALE PRODUCTION
QUICK SUPPLY
PROTECTION AND PRESERVATION
OF GOODS
EASY HANDLING
USEFUL FOR SMALL BUSINESSES
CREATION OF EMPLOYMENT
FACILITATES SALE OF GOODS
AVAILABILITY OF FINANCE
BASIC REASONS FOR NEED OF
WAREHOUSE
RAW MATERIALS
WORK-IN-PROGRESS
COSUMABLE STORES
AND SPARES
READY-MADE
COMPONENTS
CHARACTERISTICS OF IDEAL
WAREHOUSES
CONVENIENT LOCATION
AVAILABILITY OF MECHANICAL APPLIANCES
TO LOAD AND UNLOAD GOODS
ADEQUATE SPACE
COLD STORAGE FACILITIES
PROPER ARRANGEMENT FOR PROTECTION
SUFFICIENT PARKING SPACE
ROUND THE CLOCK SECURITY
ARRANGEMENT
LATEST FIRE FIGHTING EUIPMENTS
FUNCTIONS
STORAGE OF
GOODS
PROTECTION OF
GOODS
RISK BEARING
IDENTIFICATIO
N OF GOODS
FINANCING
PROCESSING
TYPES OF WAREHOUSES
PRIVATE PUBLIC GOVERNMENT
WAREHOUSE WAREHOUSE WAREHUOSES
S S
CO-OPERATIVE BONDED
DISRIBUTION
WAREHOUSES WAREHOUSES
CENTERS OR
WAREHOUSE
S
COLD EXPORT CLIMATE –
STORAGE AND CONTROLLED
IMPORT
FIELD
AGRICULTURAL
WAREHOUS WAREHOUSES
E S
1. PRIVATE HOUSES
OPERATED by a company for shipping and storing its
own products
OWNED AND MANAGED- manufacturers or traders
CONSTRUCTION- Farmers near their fields,
Wholesalers and Retailers near their business centre's
and Manufacturers near their factories
COMPANIES – Stable inventory levels and long run
expectations
SUITABILITY- Firms that require special
handling and storage features and want to control
design and operation of the warehouse
ADVANTAGES OF PRIVATE WAREHOUSES
Better control over movement and storage
Chances of errors and mistakes are less as
products are handled by its own employees
who have full knowledge
Designing is done according to suitability of
owner
Greater flexibility with respect to storage
and material handling needs
2. PUBLIC WAREHOUSES
Provide storage and physical distribution services on
rental basis
Used by SMALL FIRMS and LARGE FIRMS
Organizes to provide storage facilities to
traders, manufacturers, agriculturists in return for a
storage charge
Licensed by Govt.
In India OWNED and OPERATED – Central
Warehousing Corporation and State
Warehousing Corporation
SUITABILTY – seasonal production or low volume storage
needs, companies with inventories maintained in many
locations, firms entering new markets
OWNER –stands as an agent of goods
ADVANTAGES OF PUBLIC WAREHOUSING
More efficient and less expensive
Cost easily and exactly ascertained
Fixed cost distributed among many users
Strategically located and immediately available
Flexible to meet space requirements of different
users
Companies have a wide choice of locations and
warehouse types
3. GOVERNMENT WAREHOUSES
OWNED, MANAGED AND CONTROLLED -
Central or State Governments or public
corporations or local authorities
EXAMPLES- Central Warehousing Corporation of
India, State Warehousing Corporation and Food
Corporation of India
If customer cannot pay rent within specified time
authority can recover rent disposing of goods
4. CO-OPERATIVE WAREHOUSES
• Owned, Managed and Controlled – Co-operative
societies
• Facilities at most economical rates to members
• Located-Punjab, Karnataka, Maharashtra and
Andhra
5. BONDED WAREHOUSES
Licensed to accept imported goods for storage before payment of
customs duty
Imported merchandise is stored and released only after payment
of appropriate taxes
Cigarettes, Liquor, Other products are stored
Owned and Operated – PORT TRUSTS
Acts in two capacities viz LANDLORD and BAILEE OF
GOODS
As landlord provides storage facilities on rent
As bailee of goods take reasonable care to handle and store goods
as it has lien on goods under care for charges of its services
Owner can sell goods wholly or in part by endorsing a warrant
Facilitate enterpot trade- importer need not pay the import duty
6. DISTRIBUTION CENTERS / WAREHOUSES
Designed to move goods
Large and highly automated
Receive goods from various plants and suppliers,
take orders, fill them efficiently deliver to customers
quickly
Located near the market owned or leased by
manufacturers
Access to transport networks
7. COLD STORAGE
Preserve perishability of goods against payment of a
storage charge
Temperature variation is controlled to degree
necessary for certain sensitive items
8. EXPORT AND IMPORT WAREHOUSES
LOCATION –near ports where international
trade is undertaken
Storage facilities for goods awaiting onward
movements
Facilities- packaging , inspection, marking
etc
9. CLIMATE-CONTROLLED
WAREHOUSE
Handle storage of many products including
need special handling conditions
Freezers for frozen products, humidity
10. FIELD WAREHOUSES
MANAGED- Public Warehousing Agency in
the premises of a factory or company which
needs facility for borrowing from a bank
against certification of goods in storage or in
process by an independent professional
warehouse man.
11. AGRICULTURAL WAREHOUSES
Store agricultural produce grown in a certain
area
Location – Assembling or regulated markets
Receive agricultural commodities either
directly from farmers or through their
commission agents or from wholesalers
WAREHOUSING STRATEGY
Depends on the Company’s
objectives in general and Logistics
objectives in particular like :-
a) Availability of goods to
consumers
b) Degree of customer service
offered
c) Minimum total distribution cost
INTEGRATED WAREHOUSE STRATEGY
Focuses on two questions
i. How many warehouses should be
employed ?
ii. Which warehouse types should be used
to meet market requirements ?
Firms utilize a combination of public
private contract facilities
PRIVATE OR CONTRACT FACILITIES used to
cover basic year round requirements
PUBLIC FACILITIES used to handle peak seasons
FULL WAREHOUSE UTILIZATION throughout
the year is a remote possibility.
It will be fully utilized between 75% to 85% of the
time
15% to 25% of time to meet peak requirements is
not utilized
In such situations, more efficient to build PRIVATE
FACILITIES to convert 75% requirements and
PUBLIC WAREHOUSES to accommodate peak
demand
After Defining Corporate Logistical Objectives
Then Following Factors To Be Considered
Buying Behavior of Customers
Demand Pattern
Warehousing Strategies of Competitors
In case of stock out situation- reaction of
customers
OTHER FACTORS
PRESENCE SYNERGY
INDUSTRY SYNERGY
OPERATING FLEXIBILTY
LOCATION FLEXIBILTY
SCALE ECONOMIES
PRESENCE SYNERGY
Inventory located in a nearby building that is
clearly affiliated with enterprise .
INDUSTRY SYNERGY
Operating benefits of coordinating with other
firms serving the same industry.
OPERATING FLEXIBILTY
Ability to adjust internal policies and procedures
to meet product and customer needs.
LOCATION FLEXIBILITY
Ability to quickly adjust warehouse location with
seasonal and permanent demand changes
SCALE ECONOMIES
Ability to reduce material handling and storage
through application of advanced technologies
WAREHOUSE OPERATIONS
PRIVATE
PUBLIC LEASED CONTRACT
WAREHOUSE –
WAREHOUSING
Single WAREHOUSING WAREHOUSING –
- - Clients pay fees
Client paying fee manufacturer
Stable inventory
Delivery of goods takes place either by truck,
rail, or boat on a dock or loading area
Goods are received, processed, and then sent
into the warehouse for storage.
Products are placed on pallets.
INVENTORY CONTROL
Ability to locate and track a given product
within the warehouse to facilitate quick
selection and loading for order fulfillment.
METHODS of tracking inventory
PERPETUAL, ANNUAL, PHYSICAL, CYCLE
COUNTING
ORDER PICKING
Process of selecting products to fulfill an order
Types of DISCRETE BATCH OR
REVERSE
ORDER
picking OR PICK- PICK-BY- WAV (CROSS-
BY- ARTICLE E
ORDER DOCKING)
methods
CROSS DOCKING: Direct flow of goods from receiving
to shipping with little if any storage
PACKAGING AND LABELLING OF A PRODUCT
SELECTED
PRODUCT -FINAL
PROCESSING AND
SHIPMENT
TRANSPORTATION
LOA DING DOCK
AND SHIPPING
DISTRIBUTION CROSS DOCKING
AUTOMATION IN WAREHOUSES
System where goods are placed into and
removed from store by remote control with
assistance of electronic data processing
equipment.
Reasons due to which company opts are:
Reduce total cost of distribution
Raise customer service by prompt delivery
and accurate order filling
More control distribution operations as a
whole
MODERN TRENDS
JUST IN TIME (JIT) system promotes product delivery
directly from suppliers to consumers without the use of
warehouse
Retailing trends led to development of WAREHOUSE-
STYLE RETAIL STORES
INTERNET BASED STORES do not require physical
retail space but still require warehouse to store goods
Warehousing Companies are transforming into third-
party logistics providers or 3PLs .
RADIO FREQUENCY IDENTIFICATION (RFID)
TRANSPORTATION MANAGEMENT SYSTEMS
PICK-TO-LIGHT TECHNOLOGY
VOICE-ACTIVATED RECEIVING ANG
PACKAGING
BENEFITS
Maximum usage of available floor space and
building height
Increase storage capacity by up to 400%
Less land and smaller building
High productivity
Operate faster -24 hours a day, 7-days a week
No delays
Efficient flow of materials
Provide buffer storage functions
Need for drivers/operators eliminated
Risk of injury minimized by safety fences
Reduce stockholdings
Inventory accurately tracked at all stages
Ongoing operating costs eliminated
MERITS AND DEMERITS
Meet demand fluctuations Poor market coverage
at short notice Distant market demand
No dangers of stock out not met in short notice
Transport facilities Transport cost maximum
optimally used unless in bulk quantity
Bulk transportation Increased material
cheaper handling cost
Less warehousing costs Possibility of bottlenecks
Reduction in and resultant delays
requirement of personnel Greater danger of loss by
Reduction in administrative fire
cost Delay in customer
service
MERITS DEMERITS
AND
Maximum market Huge investment in
coverage inventory
Increased sales Chances of stock-out
Maximisation of customer situation is high
services Huge warehousing
Moderate transportation developments costs
cost Shortage of goods at one
Better control warehouse from another
require additional
Effect savings in freight
transportation costs
charges
Maximum time utility
