SUPPLY CHAIN

MANAGEMENT
MBA(MM)III SEM.
WAREHOUSING
 CONCEPT
 Need for storage arises both for raw
material as well as finished
products
 STORAGE involves proper management
for preserving goods from the time of their
production or purchase till actual use.
 When this storage is done on a large scale
and in a specified manner it is called
WAREHOUSING.
MEANING AND DEFINITION
 Place where goods are kept is called
WAREHOUSE
 The person in-charge of warehouse is
called WAREHOUSE-KEEPER
 A commercial building for storage of
goods
 Used by manufacturers, importers,
exporters, wholesalers, transport
business, customers etc.
 DEFINITION
 Warehousing refers to the activities involving
storage of goods on a large-scale in a systematic
and orderly manner and making them
available conveniently when needed.
 Means holding or preserving goods in huge
quantities from the time of their purchase or
production till their actual use or sale.
 Creates time utility by bridging the time gap
between production and consumption of
goods
BASIC FUNCTIONS PERFORMED

Movement function
Receipt of
products from Placement at Transferrin
Transfer into Regrouping
manufacturing designated g on
the warehouse products
plant place transport
vehicle

Storage function
Performed by storing products in the
warehouse till delivery to ultimate
NEED AND IMPORTANCE
 REGULAR SUPPLY
 QUALITY
 STOCK OF TRADE
 PRICE STABILISATION
 SEASONAL PRODUCTS
 PERISHABLE GOODS
 CONTINUOUS PRODUCTION
 SEASONAL DEMAND
 LARGE-SCALE PRODUCTION
 QUICK SUPPLY

 PROTECTION AND PRESERVATION

OF GOODS
 EASY HANDLING

 USEFUL FOR SMALL BUSINESSES

 CREATION OF EMPLOYMENT

 FACILITATES SALE OF GOODS

 AVAILABILITY OF FINANCE
BASIC REASONS FOR NEED OF
WAREHOUSE
RAW MATERIALS

WORK-IN-PROGRESS
COSUMABLE STORES
AND SPARES
READY-MADE
COMPONENTS
 CHARACTERISTICS OF IDEAL
WAREHOUSES
 CONVENIENT LOCATION
 AVAILABILITY OF MECHANICAL APPLIANCES
TO LOAD AND UNLOAD GOODS
 ADEQUATE SPACE

 COLD STORAGE FACILITIES

 PROPER ARRANGEMENT FOR PROTECTION

 SUFFICIENT PARKING SPACE

 ROUND THE CLOCK SECURITY

ARRANGEMENT
 LATEST FIRE FIGHTING EUIPMENTS
 FUNCTIONS
 STORAGE OF
GOODS
 PROTECTION OF
GOODS
 RISK BEARING
 IDENTIFICATIO
N OF GOODS
 FINANCING
 PROCESSING
TYPES OF WAREHOUSES
PRIVATE PUBLIC GOVERNMENT
WAREHOUSE WAREHOUSE WAREHUOSES
S S

CO-OPERATIVE BONDED
DISRIBUTION
WAREHOUSES WAREHOUSES
CENTERS OR
WAREHOUSE
S

COLD EXPORT CLIMATE –

STORAGE AND CONTROLLED
IMPORT

FIELD
AGRICULTURAL
WAREHOUS WAREHOUSES
E S
 1. PRIVATE HOUSES
 OPERATED by a company for shipping and storing its
own products
 OWNED AND MANAGED- manufacturers or traders
 CONSTRUCTION- Farmers near their fields,
Wholesalers and Retailers near their business centre's
and Manufacturers near their factories
 COMPANIES – Stable inventory levels and long run
expectations
 SUITABILITY- Firms that require special
handling and storage features and want to control
design and operation of the warehouse
 ADVANTAGES OF PRIVATE WAREHOUSES

 Better control over movement and storage

 Chances of errors and mistakes are less as
products are handled by its own employees
who have full knowledge
 Designing is done according to suitability of
owner
 Greater flexibility with respect to storage
and material handling needs
 2. PUBLIC WAREHOUSES
 Provide storage and physical distribution services on
rental basis
 Used by SMALL FIRMS and LARGE FIRMS
 Organizes to provide storage facilities to
traders, manufacturers, agriculturists in return for a
storage charge
 Licensed by Govt.
 In India OWNED and OPERATED – Central
Warehousing Corporation and State
Warehousing Corporation
 SUITABILTY – seasonal production or low volume storage
needs, companies with inventories maintained in many
locations, firms entering new markets
 OWNER –stands as an agent of goods
 ADVANTAGES OF PUBLIC WAREHOUSING

 More efficient and less expensive

 Cost easily and exactly ascertained
 Fixed cost distributed among many users
 Strategically located and immediately available
 Flexible to meet space requirements of different
users
 Companies have a wide choice of locations and
warehouse types
 3. GOVERNMENT WAREHOUSES
 OWNED, MANAGED AND CONTROLLED -
Central or State Governments or public
corporations or local authorities
 EXAMPLES- Central Warehousing Corporation of
India, State Warehousing Corporation and Food
Corporation of India
 If customer cannot pay rent within specified time
authority can recover rent disposing of goods
4. CO-OPERATIVE WAREHOUSES
• Owned, Managed and Controlled – Co-operative
societies
• Facilities at most economical rates to members
• Located-Punjab, Karnataka, Maharashtra and
Andhra
 5. BONDED WAREHOUSES
 Licensed to accept imported goods for storage before payment of
customs duty
 Imported merchandise is stored and released only after payment
of appropriate taxes
 Cigarettes, Liquor, Other products are stored

 Owned and Operated – PORT TRUSTS

 Acts in two capacities viz LANDLORD and BAILEE OF

GOODS
 As landlord provides storage facilities on rent

 As bailee of goods take reasonable care to handle and store goods

as it has lien on goods under care for charges of its services
 Owner can sell goods wholly or in part by endorsing a warrant

 Facilitate enterpot trade- importer need not pay the import duty
6. DISTRIBUTION CENTERS / WAREHOUSES
 Designed to move goods
 Large and highly automated
 Receive goods from various plants and suppliers,
take orders, fill them efficiently deliver to customers
quickly
 Located near the market owned or leased by
manufacturers
 Access to transport networks
7. COLD STORAGE
 Preserve perishability of goods against payment of a
storage charge
 Temperature variation is controlled to degree
necessary for certain sensitive items
8. EXPORT AND IMPORT WAREHOUSES
 LOCATION –near ports where international
trade is undertaken
 Storage facilities for goods awaiting onward
movements
 Facilities- packaging , inspection, marking
etc
9. CLIMATE-CONTROLLED
WAREHOUSE
 Handle storage of many products including
need special handling conditions
 Freezers for frozen products, humidity
10. FIELD WAREHOUSES
 MANAGED- Public Warehousing Agency in
the premises of a factory or company which
needs facility for borrowing from a bank
against certification of goods in storage or in
process by an independent professional
warehouse man.
11. AGRICULTURAL WAREHOUSES
 Store agricultural produce grown in a certain
area
 Location – Assembling or regulated markets
 Receive agricultural commodities either
directly from farmers or through their
commission agents or from wholesalers
WAREHOUSING STRATEGY
Depends on the Company’s
objectives in general and Logistics
objectives in particular like :-
a) Availability of goods to
consumers
b) Degree of customer service
offered
c) Minimum total distribution cost
INTEGRATED WAREHOUSE STRATEGY

 Focuses on two questions

i. How many warehouses should be
employed ?
ii. Which warehouse types should be used
to meet market requirements ?
 Firms utilize a combination of public
private contract facilities
 PRIVATE OR CONTRACT FACILITIES used to
cover basic year round requirements
 PUBLIC FACILITIES used to handle peak seasons
 FULL WAREHOUSE UTILIZATION throughout
the year is a remote possibility.
 It will be fully utilized between 75% to 85% of the
time
 15% to 25% of time to meet peak requirements is
not utilized
 In such situations, more efficient to build PRIVATE
FACILITIES to convert 75% requirements and
PUBLIC WAREHOUSES to accommodate peak
demand
 After Defining Corporate Logistical Objectives
Then Following Factors To Be Considered
Buying Behavior of Customers
Demand Pattern
Warehousing Strategies of Competitors
In case of stock out situation- reaction of
customers
OTHER FACTORS
 PRESENCE SYNERGY
 INDUSTRY SYNERGY
 OPERATING FLEXIBILTY
 LOCATION FLEXIBILTY
 SCALE ECONOMIES
 PRESENCE SYNERGY
Inventory located in a nearby building that is
clearly affiliated with enterprise .
 INDUSTRY SYNERGY
Operating benefits of coordinating with other
firms serving the same industry.
 OPERATING FLEXIBILTY
Ability to adjust internal policies and procedures
to meet product and customer needs.
 LOCATION FLEXIBILITY
Ability to quickly adjust warehouse location with
seasonal and permanent demand changes
 SCALE ECONOMIES
Ability to reduce material handling and storage
through application of advanced technologies
WAREHOUSE OPERATIONS

PRIVATE
PUBLIC LEASED CONTRACT
WAREHOUSE –
WAREHOUSING
Single WAREHOUSING WAREHOUSING –
- - Clients pay fees
Client paying fee manufacturer
Stable inventory
 Delivery of goods takes place either by truck,
rail, or boat on a dock or loading area
 Goods are received, processed, and then sent
into the warehouse for storage.
 Products are placed on pallets.
 INVENTORY CONTROL

Ability to locate and track a given product

within the warehouse to facilitate quick
selection and loading for order fulfillment.
 METHODS of tracking inventory
PERPETUAL, ANNUAL, PHYSICAL, CYCLE
COUNTING
 ORDER PICKING
Process of selecting products to fulfill an order

Types of DISCRETE BATCH OR

REVERSE
ORDER
picking OR PICK- PICK-BY- WAV (CROSS-
BY- ARTICLE E
ORDER DOCKING)
methods
 CROSS DOCKING: Direct flow of goods from receiving
to shipping with little if any storage
 PACKAGING AND LABELLING OF A PRODUCT

SELECTED
PRODUCT -FINAL
PROCESSING AND
SHIPMENT

TRANSPORTATION
LOA DING DOCK
AND SHIPPING

DISTRIBUTION CROSS DOCKING

AUTOMATION IN WAREHOUSES

 System where goods are placed into and

removed from store by remote control with
assistance of electronic data processing
equipment.
 Reasons due to which company opts are:

 Reduce total cost of distribution

 Raise customer service by prompt delivery

and accurate order filling
 More control distribution operations as a
whole
 MODERN TRENDS
 JUST IN TIME (JIT) system promotes product delivery
directly from suppliers to consumers without the use of
warehouse
 Retailing trends led to development of WAREHOUSE-
STYLE RETAIL STORES
 INTERNET BASED STORES do not require physical
retail space but still require warehouse to store goods
 Warehousing Companies are transforming into third-
party logistics providers or 3PLs .
 RADIO FREQUENCY IDENTIFICATION (RFID)
 TRANSPORTATION MANAGEMENT SYSTEMS
 PICK-TO-LIGHT TECHNOLOGY
 VOICE-ACTIVATED RECEIVING ANG
PACKAGING
 BENEFITS
 Maximum usage of available floor space and
building height
 Increase storage capacity by up to 400%
 Less land and smaller building
 High productivity
 Operate faster -24 hours a day, 7-days a week
 No delays
 Efficient flow of materials
 Provide buffer storage functions
 Need for drivers/operators eliminated
 Risk of injury minimized by safety fences
 Reduce stockholdings
 Inventory accurately tracked at all stages
 Ongoing operating costs eliminated
 MERITS AND DEMERITS
 Meet demand fluctuations  Poor market coverage
at short notice  Distant market demand
 No dangers of stock out not met in short notice
 Transport facilities  Transport cost maximum
optimally used unless in bulk quantity
 Bulk transportation  Increased material
cheaper handling cost
 Less warehousing costs  Possibility of bottlenecks

 Reduction in and resultant delays

requirement of personnel  Greater danger of loss by
 Reduction in administrative fire
cost  Delay in customer
service
 MERITS DEMERITS
AND
 Maximum market  Huge investment in
coverage inventory
 Increased sales  Chances of stock-out
 Maximisation of customer situation is high
services  Huge warehousing
 Moderate transportation developments costs
cost  Shortage of goods at one
 Better control warehouse from another
require additional
 Effect savings in freight
transportation costs
charges
 Maximum time utility