Friday, March 26, 2010

Logistics - Warehouse Management (Part I)

In the ongoing session we will learn about Logistics Management Concepts.

Logistics Management is that part of Supply Chain Management that plans, implement and controls the efficient and effective flow (transport or movement) and storage of goods, services and related information between the point of origin (Suppliers of raw material / Manufactures) and the point of consumption (Distributors /Retailers/End Consumers) in order to meet the customer’s requirements.

Logistics Management encompass activities like Warehouse Management (storage of goods), Inventory Management, Transport Management(flow of goods), Distribution or Customer Order Management and Import/ Export procedures.

Hence I intend to cover the following Logistics Management concepts one by one in my SCM Blog with more practical industrial examples.

- Warehouse Management
- Inventory Management
- Transport Management
- Distribution / Customer Order Management
- Channel Management &
- Import & Export Procedure

Please note that the industrial examples given in the blog are fictitious. Currently we will focus our attention to Warehouse Management with focus on Facility Location, Layout Design, Material Handling.

Warehouse Management

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 manufactures, wholesalers, retailers to store the goods.

Does it means Warehouse is only a Storage Facility ?

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 warehouse is getting focused from storage-dominance to transaction dominance.

General Functions / Roles of Warehouses

The warehousing functionality today is much more than the traditional function of storage. The following are main function that warehousing serves today:

• Receiving goods – receive and accept responsibility by updating records

• Identifying goods – place, label, color code (Normal stocks, Promotional stocks, Special customer stocks like CSD, Price changes, 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

• Marshaling 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 (Saving cost) and Service benefits as per details given below.

Economic and service benefits of Warehouses

Economic benefits (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. The schematic representation is given below.

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 labeled for the particular only on receipt of the order.

For e.g. Asian Paints has 1000s of SKUs and its literally impossible to store all the SKUs in all of their retail stores. Basically, Asian Paints postpones the “coloring” part to last stage and hence any dealer/retailer when they order a color, can receive the paint within a days time

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. 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. An example is mango pulp processing. On the other hand, certain products like woolens are required seasonally, but are produced throughout the year, and thus need to be stockpiled as such.

Service benefits :

Spot stocking: stocking of products in strategically located warehouses during demand sensitive period is called spot stocking. Agricultural implements are spot stocked during the growing season.

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.

In the next few sessions we will focus our attention to various aspects of Warehouse Management System i.e., Types of Warehouse, Facility Location Decision, Warehouse Layout Designing, Storage Plan, Material Handling equipments etc.



  2. I like your article and it really gives an outstanding idea that is very helpful for all the people on web.

  3. It was great reading your very comprehensive and well-presented article on warehouse management. The efficient management of a warehouse is essential in the smooth movement of goods from production facilities to consumers. Businesses would do well to carefully manage their warehousing and material handling operations.

  4. Thanks warehouse management system software for extensive supply chain knowledge and their change management skills, we were successful in defining a new concept.

  5. Well explained Krish. It’s true that warehouse management system has become a very significant factor on the whole supply chain management process these days. This would be very helpful to the netizens. Thanks for sharing.

  6. Warehouse Management monitors the progress of products through the warehouse. It involves the physical warehouse infrastructure, tracking systems, and communication between product stations.

  7. Thanks a lot Krish.

  8. It helps me a lot

    Thanks Krish

  9. That's really great blog, thanks for sharing this post

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  10. Thankyou for helps me a lot Krish.

  11. thx for sharing this information.... :-)

  12. Thanks for great information you write it very clean. I am very lucky to get this tips from you

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  13. I am doing a Level 4 Warehousing and Logistcs course and am delighted to have found your blog ,thanks for posting .

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  15. I love to read about your experiences! You write beautifully about this. changeparts !!! I have enjoyed reading your articles. They are very well written. It looks like you spend a large amount of time and effort in writing the blog. I am appreciating your effort.

    1. Hi Megh Balika,

      Sorry for delay in replying and thanks for your encouraging comments. I am not spending large amount of time in writing this articles. Experiences makes me to write article in ease. However you are right in one way that I need to put some effort in collecting the ideas coherently and present it in a digestible format to the users.

  16. Hi Kirsh, this article is really helpful for me. I hope you right more like this! Good job, Cheers!

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  17. Very Nice information, but I am still not cleared with the difference in consolidation and cross looking similar functions.

    1. Hi,
      Let me explain the difference between Consolidation and cross docking.

      Cross Docking (Wikipeida definition) - Cross-docking is a practice in the logistics of unloading materials from an incoming semi-trailer truck and loading these materials directly into outbound trucks, trailers, or rail cars, with little or no storage in between. Here you need to note that incoming materials are transferred to outgoing vehicle within stipulated time and hence no materials are stored in the transit point.

      For example you are having catering contract business in Delhi and got a contract from a multi national company in Delhi to supply lunch on daily basis to 100 staff at company premises at 1 PM sharp. The company give you day wise order quantities of each items one week in advance, which includes Pizza, Burger, Idly, Dosa, Vada and Chappati . Since you do not have catering unit you made arrangement to get Pizza from Domino, burger from KFC, Idly, Vada and Dosa from Hotel Saravana Bhavan and Chappati from local dhabba and advise them to deliver the ordered quantities at your door step in their vehicles on daily basis at 11 AM in the morning without fail. As you are aware of exact items and quantities required by the company on daily basis in advance, you do not have problem in placing the exact items and quantities to these restaurants like KFC, Hotel Saravana Bhavan and Domino. Once these food items reached your door steps on time, you need to check the quantities and transfer these items to your own vehicle and deliver it to company premises. In this case you are storing any food items in your premises. You are using your premises as transit point to switch or shift the food items from one vehicle to your own vehicle. This is cross docking.

      Consolidation : For example Gillette company manufacturing Blade in Pune, Shaving Cream in Punjab, After shave lotion in Hyderabad and Body Spray in Kolkatta. When a distributor / stockist place order all 4 items to company, it is difficult to supply each item (small quantity) from different manufacturing unit to the same customer due to higher transportation cost. The customer also spend lot of time on receiving 4 materials on different date.

      Instead the company decided to have one warehouse or godown where all products from different manufacturing units of the same are stored in bulk quantities and send it to the customer all items as per their requirement in single dispatch. The customer would be happy to receive all 4 items in single dispatch.

      I trust the above example will clarify your query.

  18. Now I know the real meaning of warehouse management! Thank you so much for this info! Do you know small warehouse for rent in Manila?

  19. Nice post, thanks for share this nice post on logistics - warehouse management.

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  25. This is really great stuff about logistic. I appreciate your work. thank you very much for share this information.Logistics Companies in India | Logistics Service Providers

  26. Yeah, I agree with this, Usually warehouse seems the place as the storage facility. I think most of the people think of warehouse as the facility.
    And Beautiful post on the roles of the warehouse in logistics way.
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  27. Thank you for bringing this information about this article. Keep on more posting.
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  28. This was quite informative and easy to absorb due to the incorporation of diagrams to better understand what was being discussed. There are plenty warehousing services in the Philippines but may I suggest Metro Combined to cater your warehousing needs. They truly provide you with what you need.

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