Warehousing
Value is created by efficient warehousing management. Efficient warehousing management involves establishing and operating a system for holding inventories of goods and keeping them secure and in good condition until required, and also an efficient and economic system for receiving goods into the store and retrieving them when needed.
A warehouse is a commercial building for the storage of goods. Warehouses are operated by different types of business organization:
( a ) Manufacturers have warehouses for storing raw materials and components that have been purchased from suppliers, and for holding inventories of finished goods until they are sold and despatched to customers.
( b ) Importers use warehouses for holding goods that they have imported into the country, and exporters use warehouses for goods awaiting export to buyers in other countries.
( c ) The customs department of the government uses warehouses for holding imported goods that have not yet been given customs clearance for import into the country.
( d ) Wholesalers use warehouses to hold goods they have purchased from manufacturers before they are sold on to retailers.
Transport and distribution companies use warehouses for holding goods that they are in the process of transporting ( distributing ) on behalf of client businesses. Some warehouses specialize in the storage of particular types of goods. For example, refrigerated warehouses are used to hold goods such as meat products in cold storage, to prevent them from deterioration or decay while in-store. Items held in warehouses range from raw materials and components, to spare parts, finished goods, packaging materials, and agricultural produce.
Purpose of warehousing
The purpose of warehousing is to hold goods until they are required for use or sale. The main functions of warehousing are :
- To keep goods secure until they are needed for use or sale
- To hold goods in a place where they can be located and retrieved easily and quickly when required
- To minimize the costs of handling goods while in-store
It is difficult to organize operations in a supply chain so that goods are obtained at exactly the time they are needed for use, or at exactly the time they are needed for selling to a customer . If goods could be obtained at exactly the moment they are needed, there would be no requirement at all for storage and warehousing .
There is an approach to inventory management known as just - in - time ( JIT ) purchasing and production, which seeks to arrange for the purchase or production of goods at exactly the time they are needed, to reduce inventory levels as close to zero as possible. JIT is explained later, but JIT arrangements are difficult to achieve in practice :
- Suppliers are often unable to deliver goods at exactly the time that they are needed.
- Production management systems are often unable to produce goods quickly to meet new customer orders
Functionalities of a warehouse management system
Value is created in warehousing through efficient planning, operations, and control. These are needed in all the following areas of operations ( functions )
- Handling goods received from suppliers: confirming that the supplier has delivered goods as mentioned in the purchase order, in good condition; transferring the purchased items into the storage location
- Similarly, handling, recording and storing finished goods as they come out of production.
- Protection of items/goods during the time they are held in the store
- Efficient location of items within the store, so that physical movements of items are minimized - this speeds up the despatch process
- Despatching orders
- Monitoring and controlling inventory levels, to minimize stock-outs but also to avoid excessive levels of inventory by limiting costs of losses due to damaged and stolen inventory
Warehousing processes
Warehouse operations involve the recording of goods received into the warehouse and goods despatched. This is part of the inventory management process. The physical aspects of warehousing involve efficient systems for receiving holding and then despatching items held in store.
Receiving goods into store
Receiving goods into the store can be a time-consuming operation. The goods have to be unloaded and physically moved to their storage locations. This process does not add any value to the business, and any method of minimizing the cost of this process adds value by saving money. Some warehouses are located and constructed so that unloading and loading of goods are simplified. For example, some warehouses are located at rail terminals or airports or seaports, and goods received into the store are taken up to or into the warehouse before unloading The physical movement of goods within the store typically involves the use of forklift trucks or cranes.
Holding goods in-store until required
Efficient warehouse management involves making the best use of space within the warehouse. This involves not just making use of all the floor area to hold goods, but also to stack goods as high as possible.
Pallets are stored in pallet racks, which may go up to the ceiling, Pallets stored high in a pallet rack can be placed in-store and then retrieved using cranes. Pallets low down near the floor can be retrieved using forklift trucks. Since storing and retrieving goods is easier when the goods are held close to the ground, the most commonly - used goods should usually be located low down in a pallet rack.
Retrieving goods when required
When goods are required for use or despatch, the objective of warehouse management should be to locate and retrieve them as quickly as possible. Cranes and forklift trucks can be used to do this. In some warehousing operations, automated storage and retrieval systems speed up the process and reduce costs by removing much of the need for human intervention.
Automated systems may include automated cranes or conveyor belt systems. Conveyor belts can be used to move goods from their location in the warehouse to the place where they will be packaged and loaded for despatch.
Warehousing can be an expensive operation, but costs can be reduced employing efficient systems for accepting goods into the store, location and storage and retrieval for use or despatch.
Although JIT systems of operation seek to reduce the need for inventories and warehouses, warehousing and holding inventories is often a necessary requirement for the efficient functioning of the supply chain. The development of online selling - the direct selling of goods to consumers through the internet - is creating additional demands for warehousing to support the operations of the supply chain. Goods must be available in-store to meet the demand for online buying.
Warehousing cost management and performance controls
Management should monitor the efficiency and effectiveness of warehousing operations and should seek to keep warehousing costs under control. Inventory costs are discussed later. Other important aspects of warehousing are :
- Time to complete operations
- Security and safety of goods held in store
- Use of the facilities available ( capacity usage )
Standard times may be set for the time that it takes to :
- Receive goods into the store and place them in their storage location
- Retrieve goods from the store, from the time that a request for goods is received to the time they are despatched from the warehouse
Security and safety of goods may be monitored by measurements of:
- Losses due to damaged goods that have to be disposed of
- Unexplained losses, possibly due to theft
Some losses due to damage or theft are probably unavoidable, but these should be kept to a tolerable ( low ) level.
Capacity usage may be measured by the average amount of storage space actually used as a percentage of warehouse capacity. A low capacity usage ratio may indicate that the organization' s warehousing facilities are too large.
Below areas will be discussed in the coming posts series,
Warehouse management systems ( WMS )
Inventory management
Physical distribution and logistics systems
Supply chain information systems
Supply chain performance management
To be continued...
