Warehouse Management

A warehouse is a commercial building for the storage of goods. It is used by manufacturers, exporters, wholesalers, retailers, transport businesses, customs (exporters, Importers), and so forth. The warehouse is usually a large plain building, equipped with loading docks to load and unload consignment from trucks. Based on 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, the warehouse is a facility where the supply chain holds or stores goods until they are needed by the customers. Warehouses can be owned by manufacturers, wholesalers, and 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.

 

Functions of the Warehouses

  • 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, and so forth).
  • Sorting goods – sort out the received goods based on identification for appropriate storage area. For example, Special customer goods, revised price goods, and Promotional goods should be sorted out separately.
  • Dispatching – put away the sorted goods in an 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 the right transport.
  • Preparing records and advice – on stocks and replenishment requirements.

 

Management Categories in a Warehouse

Goods in

  • Receiving.
  • Inspection.
  • Put away.

Storage

  • Housekeeping.
  • Picking.
  • Replenishment.

Despatch

  • Order assembly.
  • Packing.
  • Checking.
  • Marshalling.

 

Warehouse Process

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 the warehouse is getting focused on from storage dominance to transaction dominance. The warehousing functionality today is much more than the traditional function of storage.

 

Figure 4.2: The warehouse process.

A. Warehouse process and operations:

The design, goods and time pressures vary from facility to facility. The following process is inherent in all facilities:

1)    Stock purchasing.

2)    In-bond transport arrival and identification of loads.

3)    Receiving bay.

4)    Transfer of stock into storage.

5)    Pick face replenishment and let down the stock.

6)    Order processing.

7)    Stock picking.

8)    Dispatch assembly area or assembly of the goods to create a transport load.

9)    Delivery of goods and obtaining proof of delivery (POD).

10)  POD and billing.

11)  Return of unwanted goods.

12)  Stock write-off.

13)  Stock count.

14)  Delivery transport operations.

 

Stock Management


Figure 4.3: Stock management.

A.  Stock purchasing:

The facility must carry the correct stock to provide cost-effective and cost-efficient means to customers. This process is achieved through the replenishment of the inventory. The aim is to alter the buying quantity or frequency so that there is a continuous flow of products moved in the facility to match the uncertainty in the inbound supply channel while matching orders received from customers. Placing an order leads to the arrival of inbound transport to the facility, hence if the process is managed and coordinated well the transport will be efficient.


B.  Transport arrival and identification of loads:

Transport must be scheduled. The arrival of transport must be planned so that the facility can provide staff to handle the unloading, the equipment to move the goods and the capacity to handle any discrepancies between the stock ordered and delivered. The recommended steps to handle transport.

  • The supplier books the transport load to be delivered to the facility.
  • The load details are confirmed with the facility.
  • Transport arrives at the facility within the scheduled arrival period and the check is merely a confirmation of the load.
  • The order number is checked.
  • The door where the truck should be discharged can now be allocated.
  • The truck waits for the door to become available; it is then discharged quickly and efficiently.


C.  Receiving bay:

  • Once the receipt of transport is arranged, orders can be unloaded.
  • The facility must transfer the goods to storage.
  • The facility will incur financial responsibility for the purchased goods.
  • The receiving bay process involves checking the quantity and quality of the goods.
  • The packaging must be in good condition and suitable for storage and sale.
  • The unloading must be efficient and cost-effective for all parties yet allow checking of quality and quantity.
    The best method.
    • Allocate the receiving bay for the goods.
    • Choose a door that minimises the distance the product must travel to its storage location.
    • Load the goods from the truck and place them on the floor, starting as far from the ruck as possible in the first of demarcated (marked) arrows.


D.  Transfer of stock into storage:

Goods must be moved into a designated storage space. The move must be confirmed with the warehouse management system (WMS), if not done the WMS will assume that the goods are still in transit between the receiving bay and stock location, and the clear marking of the storage location leads to accuracy. The error of the product in the wrong location is a major problem because it means that the product is not available. The code number is allocated for each slot, which is used to confirm that the process has been completed correctly. Racks are often identified by designating three alphabetical characters to each space. E.g., A05E may refer to a location in the row of racks marked “A” in the “05” column of spaces in the row (two characters are used in this group as the number of columns may exceed ten) and space marked “E”, which is the fifth space vertically in this column.


E.  Replenishment and let-down of stock to pick face:

Full pallets are stored in the upper levels so that the easily accessible levels are left for pick faces. The process of moving pallets from these upper storage levels –either to the pick face or the dispatch area is called Let-down. Pick face replenishment – a place where the selection or pick of a product for dispatch occurs. It is usually near the floor or walkway level, where the goods can be accessed easily. As the stock is picked from a pick face it needs to be replenished. Pick-face replenishment must be done as the highest priority activity in the pick cycle because if it is not done in time it may result in a stock shortage at the pick face, delaying the picking process. Let-down for full pallet stock pick – when an order of more goods is received than held on one pallet, it is better to allocate a full pallet first to replenish an order and the remaining part of the order is then picked from the pick-face.

F.  Order Processing:

Once a customer submits an order, it must be processed to check if the products requested fall within the supplier’s range, and availability and if it is feasible to ship the products. The order is mailed to the warehouse where the products will be shipped, and the products are picked or selected for dispatch.

Two ways of operation:

  • A customer is promised the delivery, e.g., an internet-based selling organisation, and stock is reserved as a customer places an order. The reserved products are removed from the stock available to subsequent customers.
  • Multiple customers are belonging to a single organization, the customers may be treated equally as a block. If there is insufficient stock available, and the available product is allocated to the customers prorate to the original.


G.  Stock Picking or picking goods from storage:

Instruction to pick a certain quantity of a particular product comes from the WMS in the form of a pick note. A pick note contains information regarding the order and the location of the pick face where the product is stored.

  • It also contains other information such as the full description of the product, to assist the picker.
  • It is in a printed form, or a wireless terminal carried by the picker.
  • The recent method is a wireless voice-activated picking method (voice picking).

It is difficult to detect errors in picks. The consequences of incorrect picks are physical stock and information records that do not match and customers who receive the wrong goods or even no goods. The stock in the pick face must be reconciled with what has been picked to discover the extent of the errors.


H.  Dispatch assembly area or assembly of goods to create a transport load:

All goods from the sections or PPCs in the facility are accumulated into suitable loads for transport. It must be done very systematically as goods should be loaded within the shortest possible time and in the most effective way to minimise transport costs. Goods should be recorded as received in this area so that outstanding goods are easy to identify. The best way to accumulate loads is to allocate a lane for each customer. Loading products into vehicles must be recorded to ensure that the correct product is loaded. The driver of the transport must be held accountable for the product and loading process, as the driver is responsible for the product once the vehicle leaves the loading dock. Delivery of goods and obtaining proof of delivery.

There must be a positive means of confirming the transfer of goods to the customer. Ownership and risks pass to the customer on the handover of the goods and there should be no confusion over when this happens and how. Some firms use company stamps in addition to the signature of a senior employee authorized to receive the goods. A POD document signed under the agreed procedure is a prerequisite for transferring goods to the customer. Its records the completion of the facility’s task. Without the POD, the seller will not get paid and may be held liable for the loss of the goods.


I.  Delivery of goods and obtaining Proof of Delivery (POD):

Goods are loaded onto the transport from the dispatch area. Transport is released to leave. Deliveries are done and the POD is received from the clients. Rejections are retained by the transporter to return to the warehouse.


J.  Proof of delivery and billing:

POD authorises a facility to bill for the service it renders. Customers are bound to query some of the deliveries. POD can be imaged onto a computer system and sorted according to the reference number on the POD so that when a customer queries delivery, the POD image can be found very quickly and faxed to the customer for confirmation of delivery. The customer may also read the bar-code information of the goods in their system. The system will print a receipt and send the facility a copy of the information received from the scanned bar codes.


K.  Return of unwanted goods:

Goods must be returned to the facility because the stock was delivered in error, overordered or damaged. Stock delivered in error – the stock was not delivered to the correct customer. Stock damaged in transit should be returned to the facility and the customer is credited for not having received the damaged goods. Stock that the facility agrees to accept back from the customer should be recorded as returned stock. Goods returned to the facility must be credited to the appropriate customer at the charge by the facility. Damaged goods should be stored in a separate area.

L.  Stock write-off:

Stock to be written-off is recorded in the WMS as delivered to stock write-off at reduced or zero value. Stock is disposed of outside of the warehouse.


M.  Stock Counting.

Stock counting is done to eliminate the errors causing a mismatch between the WMS and the physical stock. Full stock count, conducted by two independent teams, which verify each other’s results. This is often done to confirm stock for financial auditors. If the teams agree on the numbers, these are inserted into the WMS as correct stock quantities. If there is a discrepancy between the results of the two teams, a third team is introduced to recount the stock. The process is repeated until two of the teams agree. The agreed figure is inserted into the WMS. The process relies on the controlled counting of the stock and figures obtained from counting the physical goods override the WMS figures. Cycle Counts reconcile small sections of the facility continuously. The pick faces are counted every morning when all picks are completed and recorded in the WMS. The stock count and the WMS are reconciled immediately. The storage areas are also checked continuously. The stock is categorized for cycle counting. High-value stock – is counted more frequently than medium-value stock while medium-value stock – is counted more often than slow-moving stock.


N.  Delivery transport operations:

The transport usually accounts for a substantial portion of the supply cost, when capital charges are correctly included, the transport must be used efficiently. Transport efficiency is achieved by packing full loads and utilising the transport for as long as possible each day. The operation of transport must allow for trucks to be loaded to the maximum volume or mass, without compromising the standards of service required by the customers. The loads must be build-up from goods picked from the various sections of the facility. Transport should be regarded as one fleet serving all customers. The loads must be accumulated in a dispatch assembly area in the facility. Trucks can complete a limited number of deliveries in a trip, i.e., as they must travel between stops, discharge the goods and then complete documentation before moving to the next stop.

 

Economic Benefits of Warehouses

  • 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.
  • Break-bulk: receiving bulk shipments through economical long-distance transportation from the plant and breaking these into small shipments for local delivery to various customers.
  • Cross-dock: This type of facility enables receipt of full shipments from several 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 onward shipments to the respective customers at these facilities.
  • Processing or Postponement: This functionality of warehousing enables the postponement of the commitment of products to the customer until orders are received from them. This is utilized by manufacturers or distributors for storing products ready up to the packaging stage. These products are packaged and labelled for the particular only on receipt of the order.
  • Stockpiling (seasonal storage): This function of warehousing is related to seasonal manufacturing or demand. A supply stored for future use, usually carefully maintained.
  • Reverse logistics processing: physical work related to reverse logistics is performed at warehouses. These activities include returns management, remanufacturing and repair, remarketing, recycling, and disposal.


A.  Service benefits of warehouses:

  • Spot stocking: stocking products in strategically located warehouses during demand-sensitive periods is called spot stocking. Agricultural implements are spot stocked during the growing season.
  • Safety Stocking: To meet contingencies like stock-outs, transportation delays, receipt of defective or damaged goods, and strikes, safety stocks must be maintained. This ensures that on the inbound site production stoppages do not occur, and, on the outbound side, customers are fulfilled on time.
  • Errors in Operation

The purpose of any warehouse is to be able to manage the stock in storage, the stock received and the stock dispatched in such a way that the warehouse can supply the right stock at the right time and place. If the wrong item is delivered, it implies that there is an operational error. The same applies to 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. Accuracy is a top priority since each activity has its specialist considerations.

 

Efficiency in Warehouse Operation

A. Purpose of an efficient warehouse is to achieve the following:

  • 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.


B.  Principles of efficiency in a warehouse operation:

There are three principles which reflect the criteria against which all operations must be measured for the efficiency 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 always known. 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. Proper, formal training is the best way of preventing errors.

 

Stock (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:

  • Each pick and delivery of stock must be completed accurately and recorded accurately as completed.
  • Each receipt of stock must be completed accurately and recorded accurately as completed.
  • Stock must be audited continually.

 

Types of Warehouses and Facilities

  • There are many different types of facilities.
  • These range from a terminal in a harbour that receives products from a production facility inland and loads them into a ship for export to a large Distribution Centre (DC).
  • 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.
Input procurement, purchasing and stock control