Warehousing

Packagin
g

A & B Items

Componen
ts

Warehousing

The Nature and

Importance of Warehousing
Warehousing provides time and place
utility (primarily time) for raw materials,
industrial goods, and finished products,
allowing firms to use customer service as
a dynamic value-adding competitive tool.

 The warehouse is
where the supply
chain holds or
stores goods.

Functions of
warehousing
include:
Transportation
consolidation
Product mixing
Cross-docking
Service
Protection
against
contingencies
Smoothing

WHAT is
Warehousing ?
Supply Chain Consists of Nodes & Links to Move
Material From Point of Origin To Point of Consumption
Warehouses Are Nodes & Transportation Systems are
Links in the Supply Chain
Warehouse Provides Space for Storage & Holding of
Raw Material/ Consumables
Work-in-Process
Finished Goods/ Merchandise

Warehousing Function Responsible for Managing

Storage/ Holding/ Preserving Material
Material Handling Within Warehouses

Storage & Handling Absorbs 20% of Distribution Costs

Why do we WAREHOUSE
To Reduce Production/ Transportation Costs
Producing Economic Batch Quantities Reduces Production Cost
Offsetting Higher Cost of Warehousing & Inventory
Reducing Transportation Cost Using TL by Combining Different
Customers Deliveries

To Coordinate Supply & Demand

Matching Highly Seasonal Product Supply (Fruits) To Meet
Round the Year Demand for Canned Fruit Juices

To Assist in the Production Process

Wine/ Liquors/ Cheese Production Includes Ageing in Storage
Storing Products in Bonded WH To Delay Paying Excise Tax
Value-Adding Activities - Special Packaging/ Private Labeling/
Custom Product Preparation Before Sending To Retail Outlet

To Assist in the Marketing Process

Storing Goods/ Merchandise Close to Market for Quick Delivery
Improved Customer Service Through Faster Delivery Helps
Increase Sales

WAREHOUSE FUNCTIONS
Secondary
Sorting
V
E
N
D
O
R

Goods
Receiving

Reserved
Storage

Replenishment

Sorting & Cross-Docking

Order
Picking

Collate/ Packing

Dispatch

C
U
S
T
O
M
E
R

ACTIVITES
Input

RECEIVING
Schedule Carrier For Unloading
Unload Vehicles
Inspect for Damage
Compare To Purchase Order

Put-Away
Identify Product
Identify Storage Location
Move Product
Update Records

Order Picking

Storage/ Binning

Information
Walk & Pick
Order Picking
Batch Picking
Automated Storage
& Retrieval Process (AS/R)

Material Handling Equipment

Stock Location
Fast Moving
Unit Size
Cube size

Collating
Packaging
Labeling
Staging

WAREHOUSING
PROCESSES

SHIPPING/DISPATCH
Schedule Carrier For Loading
Load Vehicles
Lorry Receipt (LR)/
Consignment Note (C/N)
Compare To Purchase Order

Output

Value Added Activities

Value-Adding Roles
Consolidation
Product Mixing
Service
Contingency Protection
Smooth Operations

Trade-Off Areas
Transportation
Order Filling
Lead Times
Stock Outs
Production

TRANSPORT CONSOLIDATION
Supplier
Supplier
Supplier

Distribution
Warehouse

Volume
Shipment

Supplier
LTL for
Short Distances

TL for
Larger Distances

Plant

TRANSPORT CONSOLIDATION
Plant
Plant

Physical Distribution System

Volume
Shipment

Plant
TL for
Larger Distances

Retailers

Distribution
Warehouse

Retailers

Distribution
Warehouse

Retailers

LTL for
Short Distances

DISTRIBUTION CENTRE (DC)

Product Mixing/ Bundling

Customer
1

Plant 1
Products
A&B
Plant 2
Products
B&C

Plant 4
Products
F&G

FG

AG

TL
(Large Trucks)

BC

Distribution
Warehouse

Plant 3
Products
D&E

SC
(Small Carriers)

Customer
2
Customer
3
Customer
4

Consolidation Warehouses

Consolidation Warehouses
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
The primary benefit of consolidation is that it
combines the logistical flow of several small
shipments to a specific market area.
Consolidation warehousing may be used by a
single firm, or a number of firms may join
together and use a for-hire consolidation service.
Through the use of such a program, each
individual manufacturer or shipper can enjoy
lower total distribution cost that could be realized
on a direct shipment basis individually.

Break bulk warehouses

Break bulk warehouse operations are similar to
consolidation except that no storage is
performed.
A break bulk operation receives combined
customer orders from manufacturers and ships
them to individual customers.
The break bulk warehouse sorts or splits
individual orders and arranges for local delivery.
Because the long-distance transportation
movement is a large shipment, transport costs
are lower and there is less difficulty in tracking.

Break bulk 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.

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 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.

CROSS-DOCKING DC
Plant
Plant

Inbound
Dock

Outbound
Dock

Cross Docking
(DC)

Retailer 1

DC
DC

Plant

Retailer 2

Retailer 3

Cross Docking Justified By Reduction in Transportation Costs & Time

for Product Mixing
Supplies Packed & Invoiced as Per Retailers Orders at Suppliers End
Supplies From Different Sources Combined as per Retailer-Orders at
Cross-Docking DC & Sent To Respective Retailer-DC in Shorter Time/ Cost
Goods Transferred Directly from Inbound to Outbound Docks
No Storing in Cross-Docking DC
Goods Along with Respective Invoices Leave DC Within 24 Hours