LOGISTICS

Chapter 04: Warehousing Management

Lecturer: Nguyen Dang Quang Huy (MSc.)

[email protected]
 Learning outcomes

• Understand the way a warehouse

operate.

• Understand the basic method of

warehouse management

• Have a thorough understanding of

running a warehouse efficiently

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 Contents
Warehousing Management

 Definition
 Difference between Warehouse & Distribution Center (DC)
 The importance of warehousing in Logistics system
 Types of warehouse
 Design considerations
 Factors influencing effective use of warehouses

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 Learning Materials

Paul R. Murphy, Jr., A. Michael

Knemeyer., (2018). Contemporary
Logistics (12th edition).
Global Edition. Pearson

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 Warehousing Management

• Warehousing management: Part

of the firm’s logistics system that
stores products (raw materials,
part, good-in process, finished
goods) at and between point of
origin and point of consumption.
• 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.

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 Inventory v/s Warehousing

Warehousing: Control the movement Inventory: show the availability and

and storage of the product quantity of stock on your hand

The management of the inventory within the warehouse depends upon the
use of warehouse management, which allows you to find specific locations
to place the inventory or even to retrieve it later. In short, warehouse
management gives you the specifics of inventory control, whereas
inventory management simply gives you the quantity.
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 Warehouse v/s Distribution Center (DC)

Warehouse: Distribution center: (DC)

 Storage of products and maximize storing • Rapid movement of products and focus on
spaces. throughput (product entering and leaving
quantity)

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 Warehouse v/s Distribution Center (DC)

Distribution Center: (DC)

Warehouse: (WH) • Apart from storing products, DC offers value-added
services like transport, product mixing, cross-docking,
 The role of warehouse: To store products packaging, labelling, order processing, etc…
• Stores products for relatively lesser periods than WH.
efficiently.
• The role of DC: customer-centric and is the bridge b/w a
 Stores products for relative longer periods supplier and its customer; efficiently meet customer
than DC. requirements.
• Operations at DC are much more complex than at WH
 Equipped with latest technology for order processing, WH
management, transport management, etc.

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 Warehouse v/s Distribution Center (DC)
Warehouse Distribution center
For extended stay purposes or pure For temporary storage of product
storage  provides nothing more that will remain for a short period
than storage. prior to shipment  stores product
but also fulfills orders.

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 The importance of Warehousing in Logistics system

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 The importance of Warehousing in Logistics system

Grading &
Storage
Packing

Warehousing

Price
Financing
Stabilization

Risk Bearing

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 The importance of Warehousing in Logistics system

1. Storage:
This is the basic function of warehousing. Surplus commodities which are not
needed immediately can be stored in warehouses. They can be supplied as and when
needed by the customers.
2. Price Stabilization:
Warehouses play an important role in the process of price stabilization. It is achieved
by the creation of time utility by warehousing. Fall in the prices of goods when their
supply is in abundance and rise in their prices during the slack season are avoided.
3. Risk bearing:
When the goods are stored in warehouses they are exposed to many risks in the form
of theft, deterioration, exploration, fire etc. Warehouses are constructed in such a
way as to minimize these risks. Contract of bailment operates when the goods are
stored in ware-houses.

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 The importance of Warehousing in Logistics system

4. Financing:
Loans can be raised from the warehouse keeper against the goods
stored by the owner. Goods act as security for the warehouse keeper.
Similarly, banks and other financial institutions also advance loans
against warehouse receipts. In this manner, warehousing acts as a
source of finance for the businessmen for meeting business
operations.

5. Grading and Packing:

Warehouses nowadays provide the facilities of packing, processing
and grading of goods. Goods can be packed in convenient sizes as per
the instructions of the owner.

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 The importance of Warehousing in Logistics system
Warehousing facilitates the regrouping function in a supply
chain – can take place in four forms:

1. Accumulating (bulk making)

 involves bringing together similar stocks from different sources
2. Allocating (bulk breaking)
 involves breaking larger quantities into smaller quantities
3. Assorting
 refers to building up a variety of different products for resale to
particular customers
4. Sorting out
 “separating products into grades and qualities desired by different
target markets”

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 The importance of Warehousing in Logistics system

Long haul TP

Short haul TP
Short haul TP

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 Types of warehousing

• Public Warehousing

• Private Warehousing

• Contract Warehousing

• Multi-client Warehousing

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 Types of warehousing

 Organizations must also decide the proper mix

in terms of warehouse ownership:
 Owning

• Private warehousing

 Renting

• Public warehousing

• Contract warehousing

• Multi-client warehousing

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 Types of warehousing

 Private Warehousing: owned by the firm storing

goods in the facility; generates high fixed costs and
should only be considered by companies dealing
with large volumes of inventory; feasible when
demand patterns are relatively stable.

• Advantages: offers control over storage needs and

product placement, increased flexibility.

• Disadvantages: high fixed cost of private storage

and the necessity of having high and steady demand
volumes; may reduce an organization’s flexibility in
responding to changes in the external environment.

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 Types of warehousing

 Public warehouses: Facility operated by a third

party that typically involves shorter contracts, less
customization and the facility simultaneously serves
multiple customers

• Advantages: Other parties have responsibilities for

personal decision and regulatory issues, may provide
specialized services that aren’t available from other
sources

• Disadvantages: potential lack of control by the user,

lack of specialization in terms of services available.

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 Types of warehousing

 Contract Warehousing: a long term, mutually beneficial

agreement which provides unique and specially tailored
warehousing and logistics services exclusively to one client,
where the vendor and client share the risks associated with
the operation

• Advantages: simultaneously mitigates the negative aspects

and accentuates the positive aspects of public and private
warehousing; allows a company to focus on its core
competencies, viewed as more flexible than private
warehousing but less so than public warehousing, both
vendor and client share the risks associated with the
warehousing, less costly than private warehousing and
more costly than public warehousing

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 Types of warehousing

Public Contract
warehousing warehousing
1. Month to month Contract 1 year + .1
2. Limited scope Scope as agreed .2
3. Space as available Guaranteed space .3
4. Pay by use Steady cost .4
5. Primarily variable cost Primarily fixed cost .5
6. High flexibility High stability .6
7. Not full service Completed service .7

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 Types of warehousing

• Multi-client Warehousing: mixes attributes of

contract and public warehousing; utilized by a
limited number of customers (at least two, but
generally no more than a dozen)

• Attractive to smaller organizations that don’t have

sufficient volumes to build their own storage
facilities or use traditional one client contract
warehousing services.

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 Principles of Warehouse Layout design

Use one-story facilities

Move goods in a straight

line

Use efficient materials-

handling equipment

Use an effective storage

plan

Minimize aisle space

Warehouse space general layout Use maximum height of

the building

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 PRINCIPLES OF WAREHOUSE LAYOUT DESIGN RECEIVING
INPUT •Schedule Carrier
•Unload Vehicle
•Inspect for damage

WAREHOUSE PROCESS
Storage
Put-away
•Equipment
•Identify Product
•Stock Location
•Identify Product Location
– Popularity
•Move Products
– Unit Size
•Update Records
– Cube

Shipping Preparation Order Picking

•Packing •Information
•Labeling •Walk & Pick
•Stacking •Batch Picking

Shipping
•Schedule Carrier
•Load Vehicle OUTPUT
•Bill of Loading
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 Design considerations in warehousing

Should be designed with a minimal amount

of storage space and truck doors on two or
more sides
Some designs include “H”, “I”, “T”, “U” and
“E” configurations

Faster delivery

Cross-docking
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 Cross-docking

Cross-docking:
receiving and shipping it
out in the same day to
reduce inventory
carrying costs and faster
delivery

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 Design considerations in warehousing

Trade-offs

Fixed vs variable Order-picking vs Build out vs

slot location stock-replenishing Build up

Two-dock Conventional,
versus single- narrow, or very
dock layout narrow aisles

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 Considerations for choosing the right Warehouse facility

1) Location

2) Type of warehouse

3) Size

4) Equipment and Services offered

5) Regulations

6) Proper inventory management system

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 Design considerations in warehousing

Trade-offs: Must be made among space, labor, and

mechanization with respect to warehouse design.
 Fixed versus variable slot locations for merchandise
 In fixed slot locations each SKU (Stock-keeping unit)
has one or more permanent slots assigned to it

SKU # UPC (Universal Product Code)

 Variable slot location involves empty storage slots
being assigned to incoming products based on space
availability.

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 Design considerations in warehousing
Build out (horizontal) versus build up (vertical)
 General rule of thumb is that it is cheaper to build up
Trade-offs

than build out.

 Illustrates the importance of understanding inter-

functional trade-offs when thinking about warehousing
design.

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 Design considerations in warehousing
 Order-picking versus stock-replenishing functions
 Organizations must decide whether workers who pick
outgoing orders and those who are restocking storage
facilities should work at the same time or in the same area.
Trade-offs

 Two-dock versus single-dock layout

 Generally has receiving docks on one side of a
facility and shipping docks on the other side, with
goods moving between them.
 In single-dock system, each and every dock can be
used for both shipping and receiving.

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 Design considerations in warehousing

 Conventional, narrow, or very narrow aisles

 As aisle space increases, storage space decreases

 Easier to operate mechanical equipment in wider aisles

Trade-offs

 Reduce the chances of accidents and product damage

with wider aisles

 Narrower aisles require specialized storage and handling

equipment (more expensive)

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 Design considerations in warehousing

 Degree of warehouse automation

 Refers to utilizing mechanical or electronic

devices to substitute for human labor.

 Examples include narrow aisle forklifts,
automated guided vehicles, automated storage
and retrieval systems, and radio frequency
identification, and others.

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 Design considerations in warehousing

 Degree of warehouse automation

https://www.youtube.com/watch?v=HYjc9h8oSsY

What are advantages and disadvantages for companies to

operate automation warehouse?

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 Typical equipment in Warehouse
Dock door

Pallets handling
Pallets
Shelf/Rack
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 Objectives of efficient warehousing operations

 Provide timely customer service.

 Keep track of items so they can be found readily

& correctly.

 Minimize the total physical effort & thus the cost

of moving goods into & out of storage.

 Provide communication links with customers

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 Warehousing operations

Warehousing
Safety
productivity
consideration
analysis

Cleanliness and
Warehousing
Sanitation
security
Issues

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 Warehousing operations
 Safety considerations
 Warehouses, distribution centers, and cross-
docking facilities can be dangerous workplaces
 Fatality rate in warehousing is higher than the
average rate for all industries.
 Warehouse safety can by influenced by
governmental regulations.

 Hazardous materials “hazmat”

 Examples include:
 Explosives
 Flammable liquids
 Flammable solids
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 Warehousing operations
 Warehousing security

 Example potential threats include:

 Theft
 Pilferage
 Heat and humidity
 Vandalism
 Fire
 Loss of electricity
 Focuses on protecting products and
preventing their theft

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 Warehousing operations

 Cleanliness and sanitation issues

 Particularly important in many industries,
such the foodservice industry.

 Can have a positive impact on employee

safety, morale, and productivity while also
reducing employee turnover.

 Requires common sense and due diligence.

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 End of chapter 04

LOGISTICS
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