Warehousing

Warehousing is the process of storing physical inventory for sale or distribution.

Warehouses are used by all different types of businesses which need to temporarily store products in
bulk before either shipping them to other locations or individually to end consumers.

For instance, many e-commerce businesses will purchase products in bulk from their suppliers, who ship
them to their warehouse for storage. When an end customer then places an order from the E-
Commerce site, the business—or its third party fulfillment provider—picks and packs the product from
the warehouse and ships it directly to the customer.

E-Commerce has driven rapid growth throughout the warehousing industry. In fact, the market has
doubled in the last decade as businesses around the world invest heavily in their supply chains to get
goods to consumers and businesses faster and more efficiently.

This isn’t only limited to E-Commerce businesses. Most physical retail businesses have limited space in
their stores to hold inventory but still need to keep up with demand. Having additional inventory
available in nearby warehouses helps ensure they are always able to restock their stores during high
volume times like the holidays, even if their suppliers are in other countries and are slow to produce and
ship new product.

 The Elements of Warehousing

While warehousing may seem simple since it mainly involves leaving products in storage, there are a
number of processes involved to ensure it’s done efficiently and inventory can be moved in and out
quickly, including:

Capacity planning

The key resource a warehouse has is its space. Therefore, when shipment of products is expected, staff
need to plan for where the products are going to be stored to make most efficient use of space.

Eg: Amazon’s method of storing the inventory wherever they find space to reduce the pick-up time
inside the warehouse.

IKEA uses uniform modular furniture parts so that more parts can be stored in lesser amount of space.

Receiving inbound shipments

When products arrive at the warehouse, staff will need to receive the items and carefully move them to
a staging area for processing. Eg: Also Automated Storage and Retrieval System(ASRS) used by Amazon
plays a key role in receiving and handling of shipments.

Tracking inventory

Gone are the days of using a clipboard and pen to track inventory. Companies now use warehouse
management softwares which are either embedded into the company’s ERP or hosted into the cloud or
are standalone softwares only for the purpose of managing inventory.
As items flow in and out of the warehouse, they need to be registered in the warehouse inventory
management system to ensure administrators can track what’s currently in inventory and plan for future
changes. Eg. DHL in 2020 has hopped onto a new platform called Luminate platform which uses
Microsoft Azure Cloud service for managing its inventory in warehouses all across the world and they
call it a “plug and play” system as robotic solutions from different vendors can be easily integrated into
this system.

Storing products

After products have been received and processed, they need to be stored. This can involve putting the
products in bins and pallets and then using moving equipment to transport them to their appropriate
storage space.

Controlling climate

Depending on the nature of the products, factors like temperature, humidity, or pressure, may need to
be kept constant. For example, frozen goods will need to be stored in areas where the temperature is
below freezing. These requirements will affect how and where products are stored within the facilities
to ensure proper quality.

Eg. One of the techniques to maintaining temperature and also reduce humidity is properly regulating
the airflow in the warehouse by focusing on how pallets and shelves are arranged and using sealing
strips around doors for maintaining the temperature.

Reorganizing

As new products are brought in, existing inventory may need to be moved to make sure the whole space
is being most efficiently utilized. Any changes need to be tracked and updated in the inventory
management systems.

Retrieving and outbound shipping

Finally, when products need to go out of the warehouse for shipment, staff needs to retrieve, process,
package, and load them, and then release them from inventory to allow space for new inbound
products.

 Warehouse KPIs:
 Receiving efficiency or productivity:
The volume of goods received per warehouse operator, per hour. Higher scores indicate greater
receiving efficiency, while lower scores indicate that there may be problems that should be
investigated.
 Picking accuracy: (accurate picking/total orders picked) * 100:
The number of orders accurately picked divided by the total number of orders picked (including
incorrect or short orders). The closer to 100% accuracy, the better.
 Order Lead time:
The average time it takes for an order to reach a customer once the order has been placed. For
the highest customer satisfaction, the shorter the lead time, the better.
  Rate of product return: (no. of items returned/no. of products sold):
The rate at which sold goods are returned by customers, calculated by dividing the number of
items returned by the number of items sold. To get a full picture of this KPI, it’s important to
consider why products are being returned—a customer accidentally ordering the wrong product
might not signify warehouse operation issues, but there is room for improvement if customers
often receive incorrect products or damaged goods.
 Inventory turnover: (total cost of goods sold/avg. cost of inventory during that period):
How much inventory is sold and replaced in a given period of time. It’s calculated by dividing the
total cost of goods sold during the period by the average cost of inventory during that period.
This KPI reflects how efficiently a warehouse manages inventory to meet demand. In general,
higher inventory turnover is better. If a warehouse overestimates demand, inventory turnover
may be low. Too much slow-selling inventory can be costly—especially for businesses dealing
with goods that have a predetermined shelf life.

 6 very different types of warehouses in use today.

Many people confuse a warehouse with a distribution center and use the terms interchangeably.
Whereas a warehouse might hold items for a long period of time, a distribution center holds products
for a short period of time and sees a much higher velocity of products coming in and going out.

Distribution centers are very customer-centric and are typically located close to where the end user is,
so they receive products quickly and in good shape. A distribution center may also offer value added
services, such as cross docking, pick and pack services, or simple product mixing or packaging. Because a
distribution center offers more services than a warehouse, they are also equipped with much more
advanced technology to facilitate the processes happening within.

 PICK, PACK, & SHIP WAREHOUSE

In a warehouse, pick, pack, and ship is the process that happens after an order is received, either from
an online store or a brick and mortar store. The warehouse receives a pick list of products, and people or
automated systems find the products within the warehouse. Then, they are packed for shipping,
labeled, and shipped to the customer. eg:Nykaa

 SMART WAREHOUSE

A smart warehouse uses automation systems and interconnected technologies to receive products, put
them away, pick them for orders, ship them, and keep an accurate inventory count. Smart warehouses
use technology to increase production, decrease errors, and minimize the number of humans needed to
run the warehouse.

 COLD STORAGE

Cold storage does exactly what its name implies: it stores temperature sensitive items at low
temperature. Cold storage warehouses allow medicine, perishable foods, plants, cosmetics, artwork,
and candles to have longer lives. Cold storage warehouses also use refrigerated shipping for inbound
and outbound shipping.
Eg. Snowman logistics is the largest cold chain logistic companies in India. It not only has its own cold
chain warehouses but also provides refrigerated transport services.

 ON-DEMAND STORAGE

A growing trend in warehousing is on-demand storage. On-demand warehousing connects businesses

 BONDED WAREHOUSE

Also called “customs” warehouses, a bonded warehouse is a building in which imported goods may be
stored, manipulated, or undergo manufacturing operations without payment of duty for five years from
date of acceptance. The duty on imported goods can be very high so the bonded warehouse allows the
products to be sold first, and then duty is paid from the proceeds of the sale.