ROLE OF WAREHOUSING IN

LOGISTICS & SUPPLY CHAIN

 What is Logistics?
The American Council of Logistics Management defines Logistics as –

“The process of planning, implementing & controlling the efficient, cost effective flow & storage
of raw materials, in-process inventory, finished goods and related information from point of
origin to point of consumption for the purpose of conforming to customers' requirements”.
Logistics Management-
Is that part of supply chain management that plans, implements, and controls the efficient,
effective, forward, and reverse flow and storage of goods, services, and related information
between the point of origin and the point of consumption in order to meet customers’
requirements.
 Logistics Functions
Logistics is the process of movement of materials & goods across the supply chain of the
company. This process consists of various functions. Each of the functions have to be properly
managed to bring about effectiveness & efficiency in the supply chain
• Major Logistics functions are
– Order Processing
– Inventory Management
– Warehousing
– Transportation
– Material Handling & Storage
– Logistical Packaging
– Information
 Warehousing

• Warehouses are usually large plain buildings used for commercial purposes for storage
of goods and are commonly used by exporters, importers, wholesalers, manufacturers
etc.
• Warehouses are crucial components of most modern supply chains and are likely to be
involved in various stages of the sourcing, production and distribution of goods, from
the handling of raw materials and work-in-progress through to finished products
• As the dispatch point serving the next customer in the chain, they are critical to the
provision of high customer service levels.
 Warehousing

• Warehousing is an integral part of every logistics system, that:

• Stores products (raw materials, parts, goods in process, finished goods at and between
point of origin and point of consumption
• Provides information to management on the status, condition and the disposition of
product being stored

Warehousing is used for carrying inventories in every stage of logistics process.

 Why companies hold inventories?
• Buffering supply and demand fluctuations

• Achieve transportation economies (accumulating small quantities into full loads, receipt
of full loads instead of small quantities)

• Achieve production economies (stable production rate)

• Take advantage of quantity purchase discounts

• Support the firm customer service policies (e.g. fulfilling all received orders within 24
hours)

• Overcome the time and space differentials that exist between producers and consumers
 Contd…

• Support just in time programmes of suppliers and customers

• Accumulation of inventories for a season

• Holding safety stock against supply problems or having extraordinary inventories for
extraordinary cases
• Accumulation of wide range of materials procured from different suppliers in different time

• Provide temporary storage of materials to be disposed of or recycled (reverse logistics).

 History of Warehousing

• In early days man used to store excess food and keeping animals for emergency surplus.

• The root of the warehousing concept goes back to the creation of granaries to store food, which
was historically available for purchase in the conditions of emergency such as famine, drought,
etc.
• As the European explorers began to discover new shipping trade routes all over the world, the
importance of warehouses grew for the storage of products and commodities, which were
brought from far way places.
• The ports were the main locations of the warehouses, since majority of the trade between the
countries was carried by ships.
 History of Warehousing

• Warehousing in America: In the late 1800s in the United States, the railroad industry provided the
most responsive transportation by connecting port cities to inland cities. Freight cars began to be
used as warehouses on wheels especially during the grain harvest seasons. But due to freight car
shortages induced the railroad companies to separate the transportation and warehousing function.
• Mass production: When mass production first began, goods were typically produced according to
a sales forecast. The finished goods and raw materials that were necessary to meet the forecast were
usually placed in the factory warehouse. When the distribution patterns start developing, the
companies started moving their warehouses close to their target market areas. With the use of
public and private warehousing services, both close to the factories and in market place, customer
service levels increased
 Warehouse Management

• Warehouse management is concerned with ensuring that all the activities involved in
warehousing are carried out efficiently and effectively by seeking to eliminate waste from
activities that add cost to the supply chain, while maximizing those areas that add value.
• In the context of warehousing, the basic functions of management could be broadly broken
down into four major areas which allow for it to handle the strategic, tactical and operational
decisions for the organization.
• The four functions or types of activities of warehouse management are: planning, organizing,
leading and controlling.
 Warehousing Redefined..

The functions performed by a warehouse are-

• Receiving goods from a source.
• Storing the goods until they are required.
• Picking the goods when they are required.
• Shipping the goods to the appropriate user.
Difference between raw material warehouse and finished goods warehouse.
 Challenges in Warehousing

• Warehouse has become a core competency and strategic weapon, that many companies are using
to enhance their competitive position. At the same time warehousing is undergoing unbelievable
changes that make warehouse excellence harder to achieve. The main challenges are-

• Larger Number of SKUs

• Increased customer Service

• Pressure to reduce inventory

• Demands of increasing warehouse efficiency and space utilization

 Challenges in Warehousing

• Demand of increased product customization.

• The need for increased integration of warehouse within the total logistics
system. Logistics is a system concept.

• Increased demands for responsiveness, to address quick response. Cross docking,

just in time, VMI, and efficient consumer response efforts.

• The changes in logistics philosophies from push environment to pull

environment.
 Contd….

• The reduction in the number of levels in the logistics network and the corresponding changes in
order profiles resulting from more direct to customer orders.

• The availability of reliable, responsive, efficient and effective third party warehouse providers and
the question as to when best to utilize them.

• A significant increase in the number of equipment and system options to be considered in

planning a warehouse operation.

• The demand of integrated upline and downline communication and the challenges of EDI,
automatic identification and compatible information system.
 Operative reasons for using
warehouses

• Enabling order picking and shipment preparation.

• Enabling packing and repacking.
• Enabling sorting
• Enabling small-scale assembling operations for creating specific product
versions (postponement, kitting).
The Value of Warehouse in the Economy
• Traditional school of Thought -Cost Centre, Does not add Value
• Warehouse can be compared as the refrigerator of house.
• The true value of warehousing lies in having the right product at right place at the right
time. Thus warehousing provides the time and place utility necessary for an enterprise to
prosper.
 Major Trade offs
Logistics is very much about trade offs. Major trade –offs include
 . Public or Private
 Cost Versus Service
 Cost of Inventory and Service levels
 Centralised and Decentralised
 Storage Capacity versus speed of put-away and retrivals.
 Speed versus accuracy
 Lower inventory versus stock availability
 Volume purchases versus storage cost and availability
 Transportation cost versus storage costs

These trade-offs appear both within the warehouse itself and also between the warehouses operation and other
 Warehouse/
Logistics Manager Challenges

• Improving efficiency and productivity while reducing cost.

• Improving quality and accuracy
• The challenge of reduced lead times from customers.
• Technological advancements
• Workforce availability and management.
• Health& Safety and
• Effects on the environment.
 Warehousing Requirements of Success
The Warehousing requirements of success are-
• Professionalism: Warehousing should be seen as competitive strength and not necessary evil.
• Customer Awareness: Successful warehouse should understand customer requirements and
should consistently meet this requirement.
• Measurement: Warehousing standard should be developed, performance should be measured
against these standards.
• Operation Planning: Systems and procedures should be put in place which help a warehouse
manager to proactively plan the operation opposed to reactively respond to external
circumstances.
• Logistics Network: Warehouse should not be viewed as independent operation but as an
element of well planned logistics system.
 Contd…

• Third Party: Their expertise is useful in various challenges like short life cycle, need of
reducing lead time and higher inventory turnover.
• Pace: Short life cycle, need of reducing lead time and higher inventory turnover have increased
the pace of the warehouse
• Variety: More SKUs and more special customer requirement result in more variety of tasks at
Warehouses.
• Flexibility: Due to increase in pace and variety of tasks all warehouse system, people and
equipment need to be flexible.
• Uncertainty: All uncertainties are required to be minimized and discipline should be increased.
 Contd…
• Integration: Activities within the warehouse should be integrated and warehouse should
be integrated well within logistics system.
• Inventory Management: Real time Warehouse management should maintain more than
99% inventory accuracy through cycle counting.
• Space Utilization: Space should be effectively and efficiently utilized.
• House Keeping: It should be a priority and a source of employee pride.
• Order Picking: The criticality of order picking should be understood and the layout
should be designed in such a way to maximize the order picking efficiency..
 Contd…
• Team Based Continuous Improvement: The power of people should be unleashed via
a methodical team based process.
• Continuous Flow: There should be a clear focus on continuous flow of material and not
on building of inventories.
• Warehouse Management Systems: A real time bar code based RF communication
WMS is required to meet the challenges of present warehousing.
• Total Cost of Logistics: The goal should be to minimize total life cycle costs from order
submission to product delivery with excellent customer service.
 Warehouse Operation Assessment
An operation assessment is a process that evaluates ten categories of performance in the warehouse. These
ten categories are-
• Customer System
• Control Systems
• Inventory Accuracy
• Space Utilisation
• Labor Productivity
• Facility Layout
• Equipment Methods
• Equipment Utilisation
• Building Facilities
• Housekeeping & Safety
THANK YOU