Tuesday, April 13, 2010

Logistics - Warehouse Management - Part III

As stated in our earlier blog we will focus our attention warehouse operation involved in FMCG industry (Amul) and Consumer Durable company – APC (UPS & Inverter). The example given below is hypothetical and not actual process followed in the respective companies. Let us understand the nature of the products handled by the each company and their distribution strategy to enable us to plan for warehouse or facility layout design and equipment used strategy.

Amul : FMCG company manufacture of Milk related Products. In the Health Drink segment they have Amul Sakthi and Nutramul. In the milk segment they are having Amul Milk in sachet/pouch, Amul Tazza Toned milk in Tetra pack. In the powder milk segment they have Amulya Dairy whitener, Amul Instant Full cream Milk powder. Amul Butter, Amul Kool café, Flavoured Milk , Amul Chocolate etc. We will first understand the products nature, type and distribution pattern.

Each Amul products are having their own life cycle. The products like packed Milk and flavoured milk are perishable by nature due to short span life cycle (may be a week), cannot be stored for long period and need to be consumed immediately. Also these items are need to be refrigerated during that short product life cycle from the production stage till distributed to end customer. Packed milk / flavoured milk (30 or 40 units) are kept in plastic crates and stored in cold storage facility and distributed to all retailers. Each plastic crate with packed / flavoured milk weight 20 – 25 Kgs and can be handled by labourers and it does not require any mechanized equipment for storage, retrieval, loading and unloading. Each packed milk cost Rs. 10 and hence the crate with packed milk cost may not exceed Rs 600. Since the stocks can be stored vertically (i.e., 6 to 8 crates on each other) the area usage is minimized resulting less storage cost. One need not require any pallet or steel rack to store products vertically. The plastic crate can be stored on each other so that maximum height should be reachable by the worker without difficulty.

Since milk and butter are consumed by all (basic necessity commodity) they should be made available to consumer on demand at convenience due to severe competition. If a consumer could not find Amul milk packet from nearby retail shop, he can take milk packet of other brand or ask local milk vendor (doodhwala) to supply the milk to his house. Hence it is Amul company responsibility to arrange these products available at all retailers, in a particular market with proper storage (refrigeration) facility. Due to wide distribution nature, the milk packets are placed in small plastic crates which can be unloaded by workers with ease at different retailer points. The empty crates are returned (termed as Reverse Logistics) to Amul company warehouse for future milk packet dispatch. Hence the warehouse and storage operations are manual and simple which require no modern equipments in this operation. In case of packed milk and butter, the cost related to cold storage warehouse and transportation through container having cold storage facility will be on the higher side.

Health drink products like Amul Sakthi, Nutramul are having life cycle for a period of one year or so. In case of Nutramul and Amul Sakthi the health drink products and chocolate which does not required any cold storage facility. 12 or 24 units of Amul Sakthi or Nutramul (according to pack size of 500g or 1Kg) are stored in corrugated carton box and distributed to retailers. Products are also stacked vertically in the warehouse. The warehouse and distribution operations are similar to packed milk except the refrigeration or cold storage.

Hence in FMCG industry (e.g., Glaxo Smithkline, Nestle, Britannia, Heinz, Unilever etc) the warehouse and distribution operations are quiet simple and hence it may not require sophisticated equipment like fork lift to perform their routine task.

APC : Manufacture of UPS, inverter (consumer durable electronic items). UPS and Inverters are durables (not perishable) and hence can be stored for quiet long period till technology changes. Each unit of UPS and inverters are small in size but weight more. Cost of each unit of UPS and Inverter are high. Hence each unit has to be handled (loading and unloading, stacking operation) with utmost care. The electronic retail shops in any given market is relatively small as compared to FMCG products. For example you can find more number of retail shops in any market for FMCG products as compared to Electronic retail shops. Hence the distribution operation related to Electronic items are relatively easy.

For example APC Home Appliance & Lighting UPS 800VA each packed unit is approximately 15 Kgs weight. Five units of UPS are bundled in a pallet and kept in a pallet rack (vertical) in the warehouse. Each pallet now weight approximately 75 Kgs and hence it require fork lift to move the pallet from warehouse to docking area to load the consignment. Since the APC company warehouse uses vertical pallet rack, they require electrically operated fork lift to pick the stocks from the rack. Once the stocks reaches the retailer shop they will use the manual labourers to move the pallet stocks to retailer godown. Since the retailers use manual labour they will keep the pallet using less height pallet rack for easy retrieval.

APC power Inverter 800VA with Tubular Battery. Each packed unit weight approximately 100 Kgs. This item should be stored Horizontally due to weight and Acid used in the battery. At APC company warehouse the movement of Inverter with Battery is done through Fork lift.

While comparing the product nature and distribution pattern between the FMCG products and consumer durable the warehouse design and operations are different. In case of consumer durable the warehouse require pallets, pallet rack, electrically operated forklift etc for efficient storage and retrieval and efficient handling, which involves more cost as compared to FMCG products. Generally, FMCG Warehouse focuses on velocity of transaction (transaction dominance) due to simple operation i.e., inflow and outflow of huge volume of products, by using manual labours with less mechanized equipment.

The above analogy will give users the rough idea about how the product nature will impact on the warehouse design layout and selection of equipments.

In the next session we will take Amul products (Amul Sakthi, Nutramul and Amul chocolate) as example to compute the warehouse storage space requirements.


  1. It was really helpful kish thank you again please couninue your great service.

    Prasanna from Sri Lanka

  2. Very informative post on warehouse management! The types of goods that are being stored and delivered greatly affect warehouse and materials handling operations.

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