Chirag Jani

P15027

General concept of warehousing

A) Deciding warehousing
B) Its environment
Basic Warehouse Operations
Warehouse Layout and Design
Materials Handling

Why we need warehousing:

Warehousing

provides time and place utility for

raw materials, industrial goods, and finished
products, allowing firms to use customer service
as a dynamic value-adding competitive tool.
The

total supply of U.S. warehousing space in

1999 was 6.1 billion square feet, an increase
from 1990 of 700 million square feet of space.

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

The role of warehousing in:

1. Transportation
Inbound Versus outbound logistics

2. Supply and product mixing

Product mix Versus Supply mix

1. Ownership

1a Public versus 1b contract versus 1c private

2. Centralized or Decentralized
Warehousing
How many
Location
Size
Layout
What products where

1a. Public
warehousing costs
mostly all variable.
1c. Private
warehousing costs
have a higher fixed
cost component.
Thus private
warehousing
virtually requires a
high and constant
volume.
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Other Factors to consider for 1a or 1c:

Throughput volume
Stability of demand
Density of market area to be served
Security and control needs
Customer service needs
Multiple use needs of the firm.

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Rationale for Public Warehousing

Limited capital investment
Flexibility

Public Warehousing Services

Bonded warehousing(tax/tariffs deferment
pay only when ready to sell)
Field warehouses (company uses inventory as
a form of collateral for a loan)

its regulations & rate based requirement.

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Public warehousing
regulation:
Liability
Receipts

Public warehousing
rates are based upon:
Value
Fragility
Potential damage
to other goods
Volume and
regularity
Weight density
Services required

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Compensation for seasonality in products.

Increased geographical coverage.
Ability to test new markets.
Managerial expertise and dedicated resources.
Less strain on the balance sheet.
Possible reduction of transportation costs.

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Their decision features include:

1.
2.
3.
4.
5.
6.

Substitutability alternative choices

Product Value capital cost
Purchase Size dimensional of goods
Special Warehousing special facility
Product Line special equipment?
Customer Service % of customer satisfaction

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Factor

Centralized

Decentralize
d

Substitutability

Low

High

Product Value

High

Low

Purchase Size

Large

Small

Special
Warehousing

Yes

No

Product Line

Diverse

Limited

Customer Service

Low

High
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Their decision features include:

1.
2.
3.
4.
5.
6.

Inventory costs
Warehousing costs
Transportation costs
Cost of lost sales
Maintenance of customer service levels
Service small quantity buyers

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Factors Affecting the

Number of
Warehouses
Inventory costs
Warehousing costs
Transportation costs
Cost of lost sales
Maintenance of
customer service
levels
Service small
quantity buyers
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Full warehouse utilization throughout a year is a

remote possibility.
As a planning rule, a warehouse designed for fullcapacity utilization will in fact be fully utilized
between 75 to 85 % of the time.
Thus from 15 to 25 % of the time, the space needed to
meet peak requirements is not utilized.
In such situations, it may be more efficient to build
private facilities to cover the 75% requirement and use
public facilities to accommodate peak demand.

Other qualitative factors that should be considered include:

1) presence synergies: Inventory located nearby in a building
that is clearly affiliated with the enterprise.
2) industry synergies: Refer to the operating benefits of
collocating with other firms serving the same industry.
3) operating flexibility: Refers to the ability to adjust internal
policies and procedures to meet product and customer needs.
4) location flexibility: Refers to the ability to quickly adjust
warehouse location and number in accordance with seasonal
or permanent demand changes.
5) scale economies: Refers to the ability to reduce materialhandling and storage through application of advanced
technologies.

1) Market positioned:
a) Order Cycle time
b) Transportation cost
c) Sensitivity of the product
d) Order sizes
2) Product positioned:
a) Perishability of the raw materials
b) Number of products in the product mix
c) Assortments ordered by the customers from the product mix
d) Transportation consolidation rates
3) Intermediately positioned

Location of the major markets.

Nature of the products being distributed.

Quality & Variety of carriers serving the proposed site.

Quality & Quantity of labour available.

Cost of industrial land.

Potential for expansion.

Local tax structures.

Cost of construction.

Cost & availability of utilities .

Any local govt. tax concessions or incentives.

Layout of a warehouse depends on the proposed material

handling system and requires development of a floor plan to
facilitate product flow.
If pallets are to be utilized, the first step is to determine the
pallet size.

Pilferage Protection:

Protection against theft of merchandise has become a major

factor in warehouse operation

As standard procedure, only authorized personnel should be

permitted into the facility and surrounding grounds.

The most obvious form of product deterioration is damage

from careless transfer or storage.

Another major form of deterioration is non-compatibility of

products stored in the same facility.

Product deterioration from careless handling within the

warehouse is a form of loss that cannot be insured against
and constitutes a 100 percent cost with no compensating
revenue.

Transport involves
Equipment
People
Decisions

When deciding the transport mode for a given product there are
several things to consider:
Mode price
Transit time and variability (reliability)
Potential for loss or damage.

Air
Rapidly growing segment of transportation industry
Lightweight, small items
Quick, reliable, expensive

Rail
Low cost, high-volume
Improving flexibility
intermodal service

Road :
Company has flexibility of deciding the drop points .
The operation can be 24 x 7
The risk of Industrial action is minimized.
Insurance, Claims on truckers are quite streamlined.

Ropeways:

Only for solid.

Can work in long and deep valleys..
Suitable for ropeways buckets.

Water

Low-cost, high-volume, slow

Bulky, heavy and/or large items
Combined with trucking & rail for complete systems
International trade

Pipeline

Primarily for oil & refined oil products

Slurry lines carry coal or kaolin
High capital investment
Low operating costs
Low product losses

Fixed costs:
Transport equipment
Carrier administration
Roadway acquisition and maintenance

Variable costs:
Fuel
Labor
Equipment maintenance
Handling, pickup & delivery, taxes

Transport rate related variables.

Ability to track the consignment.

Customer service capabilities in terms of door-to-door transit time

and reliability.

Consistency of pick up and delivery.

Right handling equipment.

Simplicity of the documentation.

Handling of complaints and the processing of claims.

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