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Acknowledgement
On the very outset of this report, we would like to extend my sincere & heartfelt
obligation towards all the personages who have helped us in this endeavour.
Without their active guidance, help, cooperation & encouragement, we would not
have made headway in the project.
We are extremely thankful and pay our gratitude to our faculty Mrs Richa Agarwal
for her valuable guidance and support on completion of this project in its
presently.
At last but not least gratitude goes to all of our friends who directly or indirectly
helped us to complete this project report. Any omission in this brief
acknowledgement does not mean lack of gratitude.
Sr.No. Particulars
Pg. no.
4,5
Warehouse benefits
6,7
Warehouse functions
8-10
Types of warehouses
11-13
14
15-17
Decision model
17-20
Costing
21
Warehouse strategies
22-23
10
Performance Parameters
24
11
Warehousing in india
25-32
12
Conclusion
33
13
Referencing
34
14
Appendix
33-45
Storing product to fulfill customer demand and protect against uncertainities in demand
and lead time
Achieving low total cost and improved lead time through consolidating multiple orders
Sequencing materials and components from multiple third party logistics providers for
time based delivery to factory production lines
Tracking delivery times or order fulfillment processes could identify potential bottlenecks
that may create delays in other areas if not addressed.
Data warehouse and other tools can provide insight that allows merchants to
minimize the risk of delays.
4
Most important, warehouses impact the receiving customer in many critical ways. Frontline
warehouse personnel may be the final customer service defense in ensuring product
accuracy,quantity ,timing of shipment and delivery all of which impact total cost and perception
of customer about the brand.
6.Financing:
Warehouses provide a receipt to the owner of goods for the goods kept in the warehouse. The
owner can borrow money against the security of goods by making an endorsement on the
warehouse receipt. In some countries, warehouse authorities advance money against the goods
deposited in the warehouse. By keeping the imported goods in a bonded warehouse, a
businessman can pay customs duty in installments.
Functions of Warehousing:
Following important functions are performed by warehouses:
c) Break Bulk : here the material arriving in bulk is divided into small shipments for
delivering it to the end customer. For eg cargo of fertilizers,oil,chemicals etc..
d) Cross docking : Cross docking is a logistics procedure where products from a supplier or
manufacturing plant are distributed directly to a customer or retail chain with marginal to
no handling or storage time. The stay of material is not more than 48 hours.
Goods inwards
Goods outwards
Excess stocks
Invoicing
Expenses
Consignment tracking
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Types of Warehouses
Warehouses can be classified into four groups viz:
(a) Private warehouses
(b) Public warehouses
(c) Bonded warehouses
(d) other type of warehouses
(a) Private Warehouses:
Private warehouses are constructed and owned by the business enterprises in order to store the
products produced by them. These are exclusively owned and used by the producers themselves
and are not meant for other manufacturing or business units.
On account of heavy cost of construction and maintenance of these warehouses, there number is
quite small. Only big business houses can afford to have such type of warehouses.
(b) Public Warehouses:
These are also known as duty paid warehouses. A public warehouse or duty paid warehouse is
one which is open for public at large. Most of the business organisations, especially small and
medium scale, who cant afford to have their own warehouses on account of large financial
investment in their construction and maintenance.
They make use of these types of warehouses, which may be owned by an individual or some
agency whose main object is to provide storage facilities to people for certain fees or charges.
These warehouses operate within rules and regulations formed by the government.
Public warehouses ensure greater security and handling of goods on account of latest mechanical
devices used in handling and preserving the goods.
(C) Bonded Warehouses:
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Bonded warehouses are used for imported goods which are not granted clearance on account of
non-payment of custom duty by the importer of these goods. Such warehouses are situated near
the ports. Goods cant be removed from these warehouses until the custom duties are paid.
Bonded warehouses may be run by the government or private agencies (when granted licenses to
operate such warehouses). In both the cases there is a strict control and supervision imposed by
custom authorities on their operation and functioning.
Importer of the goods has some control over his goods and he can inspect and check the goods as
and when he wants. After making part payment of the custom duty, goods can be proportionately
withdrawn from these warehouses.
Goods kept in these warehouses can be branded, packed, graded, labeled and canned in the
warehouse itself. Bank loans can be raised with the help of receipt issued by these warehouses by
giving that receipt as collateral security.
Other type of Warehouses:
(a) Special Commodity Warehouses.
(b) Cold Storages or Refrigerated Warehouses.
(c) Institutional Warehouses.
(A) Special Commodity Warehouses:
These warehouses are constituted for storing a particular type of commodity, e.g., tobacco,
cotton, wheat etc. Mature of commodity is important in selecting the type of warehouse. For
storing petrol, storage tanks are needed and for storing agricultural products, godowns are
needed.
(B) Cold Storage or Refrigerated Warehouses:
These are the warehouses which are used for storing perishable commodities like eggs, butter,
fruits, vegetables, fish, fresh meat etc. Goods stored in cold storages can be held for longer time.
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Infact, cold storages have made possible the regular supply of certain commodities throughout
the year.
For example, fruits and vegetables of all types can be made available to the people throughout
the year. Refrigerated warehouses have greatly improved the modern way of life.
(C) Institutional Warehouses:
Different institutions and bodies have their own warehouses on account of the nature of their
operations. For example, Banks, Railways, Food Corporation of India etc. has their own
warehouses for conducting their activities. Banks keep the stock of the parties in these
warehouses as security against the loans advanced.
Railways maintain warehouses to store large quantity of goods. Goods to be dispatched to
different parts of the country are kept in warehouses before they are sent. Similarly, goods
received for the purpose of delivery are kept till they are disbursed to the claimant.
Various transport agencies also maintain warehouses for storing the goods which are to be
dispatched and received. Food Corporation of India has built many big warehouses throughout
the country for storing agricultural products.
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5. Availablity : the availability of warehouses in urban area might cost higher then in area
beyond city limits where space is available at cheaper rate.
6. Product : the type of product will have a profound effect on the number of warehouses
and their locations.
7. Regulations :For certain type of products which can cause damage to human life ,the site
selection is guided by government regulations.
Multiple depot Network :
The cost of warehousing per unit of inventory is directly proportional to the number of
warehouses in the give marketing territory while he transportation costs goes down with an
increase in warehouse numbers.
For planning the chain of warehouse the management will have to do a cost benefit analysis.
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Layout options
There are two main layout options the 'U' flow the 'Through' flow. Figure 1 shows the U flow
arrangement.
Goods receipt and dispatch are located on the same side of the building and products are taken
into stock in accordance with their ABC designation, with the highest demand items nearest the
loading bays.
Advantages of 'U' flow:
Good utilization of dock resources because the receiving and shipping processes can
share dock doors.
16
Facilitates cross-docking because the receiving and despatch areas are next to one another
and can operate together.
Excellent lift truck utilization because put away and retrieval trips are easily combined
and storage locations closest to the receiving and dispatch docks are natural locations to
house fast moving A-rated items.
Provides excellent security because only one side of the building is used for entry and
exit.
Allows
scope
for
expansion
in
three
directions.
A disadvantage of the U flow arrangement is that congestion can occur if there is heavy
17
Goods receipt and dispatch are located on opposite sides of the building. High demand items are
stored along the central axis. The advantage of this arrangement is that there is little risk of
congestion at the loading docks. However, security is an increased problem because of the twosided arrangement. This is likely to require two security gates with access roads on both sides of
the building. In addition, the potential for expansion is limited to two directions only.
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Product The nature of the product will decide the type of warehouse required for the storage of
goods. For example, perishable products will require a temperature controlled facility while
hazardous or explosive product will call for extra safety and handling requirements during
storage, as per regulations. The location of such facilities will be subject to the approval of
government authorities. Warehouses for pharmaceutical products attract Food and Drug
Administration (FDA) approval.
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Characteristics Value density (unit price per unit weight or volume of the product) and
logistical leach will influence investment decisions on warehouse facilities for different products.
For example, investment in a storage facility is justified for products like computers, jewelery,
and luxury goods, where the unit price is very high, the logistic reach is wide, and distribution
centers are limited in number. Due to high margins and shorter payback periods, heavy
investments are justified.
Objectives For selection amongst various warehouse options, the objectives have to be clearly
defined. Volume will justify private warehouses while seasonality will justify public or contract
storage places. For customer satisfaction through reliable delivery, investment in material
handling and information processing systems is justified.
Strategic decisions Strategic decision on layout material handling systems, and storage schemes
are solely dependent on the objectives, available financial resources, return on investment and
payback period. These decisions will have a long-term effect and help in developing competitive
advantage.
Tactical decisions Tactical decisions will have an effect on warehouse performance parameters
such as reduction in order processing cycle, efficiency in material handling, packaging to reduce
product damages, increase in warehouse productivity, reduced misnomer complaints, and
entranced customer satisfaction levels.
Operational decisions Operational decisions will bring efficiency to warehouse operations and
will help in reducing operation costs.
Number of warehouses This decision will have to be taken in the light of financial resources
available, managerial skill to manage product varieties and volumes, and expected market
coverage.
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Warehouse options The choice between options depends on financial resources, market
coverage, and degree of control on tie operation. For customized arrangements and scale
economics. a private warehouse is the best option. For generalized bulk goods public warehouses
will reduce storage costs. The latter option is also more storage flexible when shifting storage
site.
21
Warehouse costing
The main costs of warehousing are transportation, storage and administration costs.
The cost can be further broken down into fixed and variable costs.
Fixed costs are rent, capital cost, wages while the variable costs includes repair and maintenance,
material handling, packaging. Generally the ratio of fixed cost is around 25 to 45 percent of the
total cost.
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Warehouse strategies
The warehouse plays a major role in the success of the distribution of the products which could
otherwise go haywire. These are some strategies used by varied businesses to maximize the
efficiency and reduce the cost.
Capacity switching: For a given market there will be a monthly demand pattern for each
product. This demand may greatly fluctuate in certain months due to seasonality in the
consumption of the product. Under such circumstances warehouse capacity may be planned on
the basis of average de-mand per month over the year, and for additional space requirement (to
take care of the seasonal requirement), a public or contract warehouse may be used for a short
period during the season. This may reduce the quantum of investment in private warehousing, if
planned on the basis of peak demand.
HUB networking: To reduce the level of inventory and exercise better control over distribution.
warehousing hubs are planned at a few strategic locations to serve the entire market, spread over
a vast geographical area. This is practiced more in FMCG, pharmaceutical and white goods
industries, wherein the distribution network consists of a large number of dealers, stockists and
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retailers. In the Indian situation most leading firms have their warehousing hubs located near or
around the four metros (Mumbai, Kolkata, Chennai, and Delhi) catering to the demand of the
four regions (West, East, South, and North) in the country. The hubs will be responsible for
secondary distribution to dealers, stockists, or wholesalers in the region. The regional hub will
cater to the needs of several states covered under the respective regions. The hubs will eliminate
the need for having distribution Centres located in each state, which is the practice followed by
many firms. The advantages of hub strategy are:
Reduction in operating costs
Minimization of transportation cost
Better control on inventory
Improved customer service
Cobbling: This strategy works well with players who are not competitors but cater to the needs
of similar groups of users or customers and have a similar distribution channel. For example,
FMCG products manufactured by companies like HLL. J and J. and Nestle can be cobbled
together to reduce wasteful practices in storage and transportation. The operating cost will
considerably be reduced, benefiting all cobbling partners. Some 3PL operators in India are
offering these services to leading companies in the FMCG sector. Here the benefits are cost
reduction through scale economy and speedy customer service because of users segment
synergy.
Outsourcing: Most firms (manufacturing and marketing) do not have expertise in warehousing
operations. Moreover, it is not the core activity in their business process. Hence this area of
operation remains neglected in investment decisions resulting in a bottleneck in the overall
system productivity, efficiency, and effectiveness. For gaining logistical competitiveness,
leading firms are outsourcing entire warehousing operations to 3PL providers who bridge these
gaps through their expertise, technology. and infrastructure.
\
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Performance parameters
These are some aspects on which the efficiency of the warehouse is judged.
Stock turnover ratio This is the ratio of value of sales volume in a given Period to the value of
stocks within that time. For example, the sale value of goods supplied from a warehouse is rs 100
lakh last year and the average inventory level in the warehouse at any point of time during the
last year was 10 lakh. Then this ratio works out to be 10. The more you turn out the stocks better
efficiency and effective utilization of warehouse space. In Japan auto giants have achieved a
stock turnover of 60, while in India it is trailing between 20-30.
Warehouse cost to sales ratio This ratio is directly linked to warehouse throughput or goods
handled. The higher the volume. the lower the fixed cost of operations that is distributed over the
number of units dispatched. A lower ratio indicates the efficiency of the warehouse.
Warehouse cost per unit handled this ratio indicated the total warehouse cost incurred divided
by the number of pallets handled during the period. A higher ratio indicates lower material
handling efficiency.
Occupancy rate of warehouse space This ratio indicates the actual space used as a percentage
of warehouse storage space available throughout the year. the average
Of the ratios taken periodically throughout the year will speak about the occupancy rate.
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Warehousing in India
Apart from conventional storing services, warehouses in India now provide value-added services
like consolidation and breaking up of cargo, packaging, labelling, bar coding, reverse logistics,
etc.
The growth in warehousing in India is primarily being driven by the following factors:
Introduction
The existing provider landscape is largely compromised and hence unable to create the desired
integrated scaled proposition due to several factors, as listed:
Low capital and operating efficiencies (i.e., lower utilization and poor throughput/unit
space)
Limited value addition specific to the user industry, which stems from a weak
understanding of the users supply chain
26
Inappropriate measurement of total logistics costs by end users, creating an illusion that
value can only be driven by cutting piecemeal logistics (warehousing, transport,
handling) costs
27
1.Industry/retail warehousing
Industrial/Retail warehousing has a market size of ~INR310 billion in FY13 and it has been
growing at a CAGR of 10%12% over the last few years. Demand for industrial warehousing
space is estimated to have grown from around 420 million sq. ft. in FY11 to 475 million sq. ft. in
FY13, at a CAGR of 6%.
Significant growth drivers:
GST implementation
Key players:
DHL, Safexpress, Continental Warehousing, Indo Arya, MJ Logistics, Allcargo, Nippon
Express, etc. are the major players in industrial warehousing.
2. Liquid storage
The terms liquid storage mainly refers to the storage of liquid bulk such as crude, petroleum
products, chemical and edible oil. Liquid bulk cargo handled at ports has been growing at a
CAGR of 5%6% between FY10 and FY13.
Demand for liquid storage space is increasing in India amid increasing traffic and limited
existing capacities. Currently, the utilization of commercial tank farms in India is between 75%
and 80% in FY13.
Significant growth drivers:
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Key players:
Major players in the commercial segment include IMC Ltd., Vopak India, Kesar Terminal,
Ganesh Benzoplast, Indian Oil Tanking, Aegis Logistics, Sealord
3.Agri-warehousing
Agri warehousing accounts for ~15% of the warehousing market in India, or ~INR8085 billion,
in FY13. It has been growing at a 10%12% rate over the last 3 years. Agri warehousing
capacity in India is 110120 million metric ton (MT), and it has been growing at a CAGR of
8%10% over the last 5 years.
Significant growth drivers:
Subsidy schemes
Tax incentives
Key players:
Key public sector players include Food Corporation of India (FCI), Central Warehousing
Corporation (CWC) and 17 State Warehousing Corporations (SWCs). The remaining 30% of the
capacity is primarily held by unorganized small godown players.
The Government has set up three agencies which are engaged in building large scale
storage/warehousing capacity : Food Corporation of India (FCI)
It was established with the objective of fair distribution of food grains and to bring about stability
in the prices in the country. It has the provision of scientific storage for the millions of tonnes of
foodgrains procured by it. In order to provide easy physical access in remote and inaccessible
areas, the FCI has a network of storage depots strategically located all over India. FCI, thus
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maintains the health of the large stock of the tonnes of food grains in storage through its
excellent storage management.
A few large national-level players have emerged in this field over the last decade owing to the
available capital subsidy. These include National Bulk Handling Corporation Ltd., National
30
Collateral Management Services Ltd., Adani Agri Logistics, Star Agriwarehousing & Collateral
Mangement Ltd., Shree Shubham Logistics Ltd., Ruchi Infrastructure Ltd., Guru Warehousing
Corporation, Paras Warehousing and LTC Commercial.
4.Cold stores
Cold stores account for ~16% of the total warehousing industry and it estimated to worth a
~INR90 billion industry. The cold storage industry is expected to grow at ~15% per annum on a
sustained basis over the next 5 years, with the organized market growing at a faster pace of
~20%.
Significant growth drivers:
Growing GDP
Increasing population
Government incentives
Key players:
Snowman, Gati Kausar, Cold Star, ColdEx, Kelvin cold chain, RadhaKrishna Foodland, MJ
Logistics, Dev Bhumi Cold Chain, Fresh and Healthy Enterprise, etc., are the major organized
players in the industry.
The growth of organized industry sectors such as retail, automotive, manufacturing, pharma and
agriculture in India is expected to give rise to more integrated supply chains.
5.Container handling and storage
CFS/ICD accounts for ~14% of total warehousing market in India and is estimated at around
~Rs.75-80 bn in FY13 in India and has grown with a CAGR of 10-15% over last 3 years.
Significant growth drivers:
Government incentives
Key players:
The government run Container Corporation of India (CONCOR) continues to be the largest
player operating 48 terminals which handle EXIM cargo, while 14 others handle domestic traffic
only.
Refer appendix 1
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Conclusion
Regardless of their industry, business leaders know that much of their organizations' success
depends on having effective and comprehensive logistics management strategies.
When sales are up, companies need the ability to quickly move products or materials to
capitalize on the activity, and when revenue drops, organizations require additional efficiency to
keep costs down while still providing flexibility to pursue new opportunities. Increasingly, the
ability to maintain supply chains is centered on warehouse management systems. These networks
connect stores, factories, warehouses and even trucks into a centralized database that provides
decision makers with information about the movement of goods. Also from Indias perpective
we infer that :
From a mere combination of transportation and storage services, logistics is fast emerging as
a strategic function that involves end-to-end solutions that improve efficiencies.
The growth of organized industry sectors such as retail, automotive, manufacturing, pharma
and agriculture in India is expected to give rise to more integrated supply chains.
The roll-out of GST by the Indian Government will play a major role in the growth of the
logistics industry and its warehousing business.
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Harvard Referencing
Itl lecture-07 to 10 (warehousing- a role beyond storage). 2016. Itl lecture-07 to 10
(warehousing- a role beyond storage). [ONLINE] Available at: http://www.slideshare.net/amit_kesu/itllecture07-to-10-warehousing-a-role-beyond-storage. [Accessed 06 February 2016].
Todays Warehouse Plays a New Role - Inbound Logistics. 2016. Todays Warehouse Plays a
New Role - Inbound Logistics. [ONLINE] Available
at: http://www.inboundlogistics.com/cms/article/todays-warehouse-plays-a-new-role/. [Accessed 07
February 2016].
Todays Warehouse Plays a New Role - Inbound Logistics. 2016. Todays Warehouse Plays a
New Role - Inbound Logistics. [ONLINE] Available
at: http://www.inboundlogistics.com/cms/article/todays-warehouse-plays-a-new-role/. [Accessed 09
February 2016].
Amway Installs a New Automated Material Handling System Capable of Managing 30,000
Cartons a Day - Supply Chain 24/7 . 2016. Amway Installs a New Automated Material Handling
System Capable of Managing 30,000 Cartons a Day - Supply Chain 24/7 . [ONLINE] Available
at:http://www.supplychain247.com/article/amway_installs_a_new_automated_material_handling_system
_capable_of_managing. [Accessed 09 February 2016].
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Appendix 1
35
36
37
38
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Appendix 2
As a leading direct selling company, Amway manufactures more than 450 products in nutrition,
beauty, personal care and home care.
The company recently opened an order fulfillment center in Santa Fe Springs, Calif., which
supports 17% of the companys sales totalling nearly $121 million annually.
To improve order accuracy and customer service, Amway wanted to update an aging system that
relied on manual processes and did not provide an easy method to track packages.
Amway worked with Bastian Solutions who build and integrated an automated system that can
handle more than 30,000 cartons a day, and features energy-efficient conveyors, a warehouse
control and management system, voice-and light-directed picking technologies, and a unique
carton lidding system.
The new WCS has helped us improve customer service, increase productivity, and decrease
customer wait times Lindsay Rappold, Regional Manager of Distribution, Amway
The new 155,000-square-foot California Regional Service Center features a Warehouse Control
System (WCS) that enables Amway to achieve its goal of better customer service by providing
increased picking efficiency and accuracy, as well as the visibility necessary to monitor and track
all cartons in the system.
Such visibility is extremely beneficial for the companys pickup business, where customers come
to the facility to pick up an order in person.
The new WCS has helped us improve customer service, increase productivity, and decrease
customer wait times, says Lindsay Rappold, regional manager of distribution at Amway.
40
Amways warehouse management system (WMS) groups orders into waves and downloads the
order information to the WCS, which routes them throughout the picking zones.
The conveyor system provides execution of the routing instructions provided by the WCS eliminating the need to manually move product through the system.
Although the system is primarily an each-pick solution, certain containers are first diverted to a
full-case picking area.
Heavier, bulkier items can be placed at the bottom of an empty picking container before the
container heads back to the primary pick-to-light area.
There, the fastest moving products are stored in pallet- and carton-flow shelving with a pick-andpass methodology, which saves time by eliminating the need for each operator to scan an order.
Slower moving products are stored in a static shelving area directly after the pick-to-light area
and are processed in batches with voice picking.
Source:
http://www.supplychain247.com/article/amway_installs_a_new_automated_material_handling_s
ystem_capable_of_managing
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Appendix 3
Hitech Green Cold Storage
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