OPERATIONAL LOGISTICS MANAGEMENT

Class notes

Unit 4: Warehouse Procedures

1. INTRODUCTION
 A warehouse is a commercial building for storage of goods. Warehouses are used by
manufacturers, exporters, wholesalers, retailers, transport businesses, customs
(exporters, Importers), etc.

 They are usually large plain buildings, equipped with loading docks to load and
unload consignment from trucks.
 Based upon the size of the goods and volume of operation they also often have cranes
and forklifts for moving goods, which are usually placed on ISO standard pallets.
 In simple words, warehouse is a facility where the supply chain holds or stores goods,
until they are needed by the customers. Warehouse can be owned by manufacturers,
wholesalers, retailers to store the goods.
 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.

 The function of a warehouse is conceptually very simple: to receive goods into the
facility, to store these goods and, when required to dispatch the goods.

2. WAREHOUSE PROCESSES

 This looks at the processes that support the activities of receiving, storing and
dispatching.
 Each of these must be provided for and performed precisely.
 All the processes have a direct or indirect influence on the stock.
 The function of warehouse is getting focused from storage-dominance to transaction
dominance.
 The warehousing functionality today is much more than the traditional function of
storage.

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The following are main function that warehousing serves today:
 Receiving goods – receive and accept responsibility by updating records
 Identifying goods – place label, colour code (Normal stocks, Promotional stocks,
Special customer stocks, Price changed batch etc).
 Sorting goods- sort out the received goods based on identification for appropriate
storage area. For example Special customer goods,revised price goods, Promotional
goods should be sorted out separately.
 Dispatching put away the sorted goods to appropriate storage place- for temporary
storage with easy accessibility
 Holding goods- security against pilferage and deterioration
 Selecting, retrieving, packing - items are retrieved and grouped according to customer
order for dispatch
 Marshalling goods- check the items of a single order for completeness and order
records are updated.
 Dispatching goods- consolidated order is packaged and directed to right transport
 Preparing records and advices- of stocks and replenishment requirements

Apart from the above general roles /functions the warehouse perform following value added
roles / functions in terms of Economic benefits(saving cost) and Service benefits as per
details given below.

Economic benefits of warehouses (cost savings):

1. Consolidation: Reduction in transportation cost by consolidating movement. Several
plants supply their products for the same customer through a warehouse and from this
warehouse the products are sent in bulk shipment to the customer.

Instead of transporting the products as small shipments from different sources, it would be
more economical to have a consolidation warehouse.

2. Break-bulk: The warehouse in this case serves the purpose of receiving bulk shipments
through economical long distance transportation from plant and breaking of these into small
shipments for local delivery to various customers. This enables small shipments in place of
long distance small shipments.

3. Cross-dock: This type of facility enables receipt of full shipments from a number of
suppliers, generally manufacturers, and direct distribution to different customers without
storage. As soon as the shipments are received, these are allocated to the respective customers
and are moved across to the vehicle for the onwards shipments to the respective customers at
these facilities.

4. Processing/Postponement: This Functionality of warehousing enables postponement of

commitment of products to customer until orders are received from them. This is utilized by
manufacturers or distributors for storing products ready up to packaging stage. These
products are packaged and labelled for the particular only on receipt of the order.

5. Stock piling: This function of warehousing is related to seasonal manufacturing or

demand. In the case of seasonal manufacturing, certain raw materials are available during
short periods of the year.
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Hence, manufacturing is possible only during these periods of availability, while the demand
is full year around. This requires stockpiling of the products manufactured from these raw
materials.

Service benefits of warehouses

1. Spot stocking: stocking of products in strategically located warehouses during demand
sensitiveperiod is called spot stocking. Agricultural implements are spot stocked during the
growing season.
2.Safety Stocking : In order to meet contingencies like stock outs, transportation delays,
receipt of defective or damaged goods, and strikes, safety stocks have to be maintained. This
ensures that, on the inbound site production stoppages do not occur, and, on the outbound
side customers are fulfilled on time.

3. ERRORS IN OPERATION
 Errors can occur anywhere in warehouse operations.
 If the wrong item is delivered, it implies that there is an operational error.
 The same applies for late delivery, delivery of damaged items or failure to deliver.
 Any error needs to be detected and corrected first, and then the correct procedure
must be followed.
 Errors effectively quadruple the workload because, first, an incorrect process occurs;
next, the second step is to identify the error; the third step is to rectify the error; and
the last is to follow the correct process.
 Errors also place time constraints on operations.
Errors need to be monitored and minimized, as they result in stock losses or sale
losses. AND Accuracy is top priority since each activity has its own specialist
considerations

4. INVENTORY MANAGEMENT

 Stock is the central point of all the processes in the warehouse.

 Every process affects the stock and every process is affected by the stock.
 For these reasons, having the wrong stock in the facility, or having stock that cannot
be found immediately, is a big problem.

 Stock is managed by three control processes:

i) Each pick and delivery of stock must be completed accurately and recorded
accurately as completed.
ii) Each receipt of stock must be completed accurately and recorded accurately as
completed.
iii) Stock must be audited continually.

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5. TYPES OF WAREHOUSES AND FACILITIES

 There are many different types of facilities.

 These range from a terminal in a harbour that receives products.
 Some supply chains have a manufacturer’s warehouse, a third-party or a common-
user warehouse and a regional DC delivering to a retail store.
 All these operations have a receive and dispatch function and they all track stock and
final deliveries.
 The only exception is a cross-dock facility, in which the storage function is absent,
and the processes of storing and picking are combined into a sorting operation.
 A DC operation is very different from a manufacturing warehouse.
 Its aim (DC) is to be able to select stock and deliver it to customers in a short
timescale.

6. CROSS-DOCK OPERATIONS

 Is a particular type of facility in the supply chain where goods are received from
suppliers, sorted without storage of the goods, and then efficiently moved on to
downstream customers.
 Rather than a warehouse, a cross-dock is more like a continuous process of removing
goods from one inbound transport and sorting them directly into an outbound
transport.

The factors that determine whether utilization of a cross-dock is appropriate are

as follow:
i) Products have a continuous flow to all the stores (downstream customers).
ii) The suppliers are highly reliable.
iii) There are no unpredictable fluctuations in the sales.
iv) The products have uniform handling methods.

To enable the supply chain to operate with a cross-dock, the supply chain needs
to meet certain criteria; hence, it must have the following characteristics:
i) The supply chain must be integrated, including the systems.
ii) The vendors need to be reliable, accurate and offer high service levels.
iii) There must be frequent loads delivered.
iv) Multiple products must be married together.

Types of cross-dock

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  Cross-dock-managed load
 Joint-managed load
 Supplier-managed load

7. EFFICIENCY IN A WAREHOUSE

6.1 Purpose of Efficient Warehouse

 Professional attitude
 Customer awareness
 Establishing standard procedures
 Proactive operations
 Real-time, paperless control systems
 Flexible operations
 Automation
 Accurate inventory
 Priority to quality housekeeping
 Motivated workforce

6.2 Three principles underline the efficient operation of any facility.

 The operation encompasses not only the operation within the building, but also the
interaction with the transport.

Efficiency Principle 1:
 Goods at rest within the boundaries of a facility outside a designated storage
area reflect an inefficient operation.
 There are only two desired areas of storage in a facility: the long-term storage
areas (including the pick faces) and the dispatch assembly area, where goods
are accumulated to build a load.

Efficiency Principle 2:

 The location of goods within the boundaries of the facility must be known to
ensure an efficient operation.
 The processes of the warehouse require that the whereabouts of goods must be
known at all times.
 If not, the goods may NOT be available for efficient delivery.

Efficiency Principles 3:

 People will perform their operations efficiently only if they are trained to do
each job in the best way, and are given sufficient time to do the job without
errors.
 Time and effort are required to rectify errors.

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  Proper, formal training is the best way of preventing errors.

8. DELIVERY TRANSPORT OPERATIONS

 Transport usually accounts for a substantial portion of the supply chain cost, when
capital charges are correctly included, the transport must be used efficiently.
 Transport efficiency is achieved by packing full loads and utilizing the transport for as
long as possible each day.
 Trucks must be loaded to the maximum volume or mass.
 Transport should be regarded as one fleet serving all customers.
 Planning transport is a complex exercise.

9.BAR-CODING AND RADIO FREQUENCY IDENTIFICATION

(RFID)TECHNOLOGY

6.1 Bar Code Scanning

Codes or numbers are represented in a form suitable for reading by machines

6.2 A basic Radio Frequency Identification system consists of three components:

 An antenna or coil
 A transceiver (with decoder)
 A transponder (RF tag) electronically programmed with unique information
 The antenna emits radio signals to activate the tag and read and write data to it.
 Antennas are the conduits between the tag and the transceiver, which controls the
system's data acquisition and communication. 
 Antennas are available in a variety of shapes and sizes; they can be built into a door
frame to receive tag data from persons or things passing through the door, or mounted
on an interstate toll booth to monitor traffic passing by on a busy road.
 The electromagnetic field produced by an antenna can be constantly present when
multiple tags are expected continually. If constant interrogation is not required, the
field can be activated by a sensor device.
 Often the antenna is packaged with the transceiver and decoder to become a reader
(a.k.a. interrogator), which can be configured either as a handheld or a fixed-mount
device.

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  The reader emits radio waves in ranges of anywhere from one inch to 100 feet or
more, depending upon its power output and the used radio frequency.
 RFID tags come in a wide variety of shapes and sizes.
 Animal tracking tags, inserted beneath the skin, can be as small as a pencil lead in
diameter and one-half inch in length.
 Tags can be screw-shaped to identify trees or wooden items, or credit-card shaped for
use in access applications.
 The anti-theft hard plastic tags attached to merchandise in stores are RFID tags.

In conclusion:

 Scanning and bar codes reduce the delays associated with data capturing, increase the
accuracy of data capturing and provide more detailed information of the goods.
 RFID devices are relative newcomers to the world of logistics.
 The great advantages of RFID are that the receiver and transmitter do not have to be
in the line of sight in an area.

References
1. Hine, T. [Current Edition] Supply Chain Management: Customer Driven and Focused.
2. Waters, D. [2002] Logistics: An Introduction to Supply Chain Management.
3. Taylor, L. David [2005] Global Cases in Logistics and Supply Chain Management. Thomson
Learning
4. Coughlan, A, Anderson, E.; Stern, E.; El-Ansary, A. [2002] & L. W. [2000] Marketing
Channels, Prentice Hall.
5. Govil, M. & Proth, Jean-Marie [2002] Supply Chain Design and Management: Strategic and
Tactical Perspectives.
6. Martin Christopher (4th Edition) Logistics and Supply Chain Management
7. Martin Christopher (4th Edition) Logistics and Supply Chain Management
8. Ronald H. Ballon (4th edition) Business Logistics Management
9. Patrick Jonsson (2008) Logistics and Supply Chain Management
10. Vogt JJ, Pienaar WJ, De Wit PWC( 3rd edition).: Business Logistics Management: Theory and
Practice
11. Taylor, L. David: Global Cases in Logistics and Supply Chain Management. Thomson
Learning (2005)