Physical inventory & warehouse layout planning

1. PHYSICAL INVENTORY &
WAREHOUSE LAYOUT
PLANNING By:-
Chinmaya Kumar Sahu
Aswini Kumar Nayak
INDIAN INSTITUTE OF TOURISM & TRAVEL MANAGEMENT

2. INVENTORY
DEFINITION
A stock of items held to meet future demand
Inventory is a list for goods and materials, or those
goods and materials themselves, held available in
stock by a business

3. Introduction
Constitute significant part of current assets
On an average approximately 60% of current assets
in Public Limited Companies in India
A considerable amount of fund is required
Improper inventory affects long term profitability
and may fail management ultimately
10 to 20% of inventory can be reduced without any
adverse effect on production and sales by using
simple inventory planning and control techniques

4. Types of Inventory
Work in
process
Work in
process
Work in
process
Finished
goods
Raw
Materials
Vendors Customer

5. Nature of Inventories
 Raw Materials – Basic inputs that are converted into finished
product through the manufacturing process.
 Work-in-progress – Semi-manufactured products need some more
works before they become finished goods for sale.
 Finished Goods – Completely manufactured products ready for
sale.
 Supplies – Office and plant cleaning materials not directly enter
production but are necessary for production process and do not
involve significant investment.

6. Reasons To Hold Inventory
 Meet variations in customer demand:
 Meet unexpected demand
 Smooth seasonal or cyclical demand
 Pricing related:
 Temporary price discounts
 Hedge against price increases
 Take advantage of quantity discounts
 Process & supply surprises
 Internal – upsets in parts of or our own processes
 External – delays in incoming goods

7. An optimum inventory level involves three types
of costs
Ordering costs:-
 Quotation or tendering
 Requisitioning
 Order placing
 Transportation
 Receiving, inspecting and storing
 Quality control
 Clerical and staff
Stock-out cost
 Loss of sale
 Failure to meet delivery commitments
Carrying costs:-
 Warehousing or storage
 Handling
 Clerical and staff
 Insurance
 Interest
 Deterioration, shrinkage,
evaporation and obsolescence
 Taxes
 Cost of capital

8. Dangers of Over investment
Unnecessary tie-up of firm’s fund and loss of profit
– involves opportunity cost
Excessive carrying cost
Risk of liquidity- difficult to convert into cash
Physical deterioration of inventories while in
storage due to mishandling and improper storage
facilities

9. Dangers of under-investment
Production hold-ups – loss of labor hours
Failure to meet delivery commitments
Customers may shift to competitors which will
amount to a permanent loss to the firm
May affect the goodwill and image of the firm

10. Functions of Inventory Management
-Track inventory
–How much to order
–When to order

11. FACTORS INFLUENCING EFFECTIVE USE OF
WAREHOUSES
• Cube utilization and accessibility
• Stock location
• Order picking and assembly
• Physical Control & Security - Elements

12. 12
Design Criteria
•Warehouse design criteria address physical facility
characteristics and product movement.
•Three factors to be considered in the design
process are:
•the number of store's in the facility,
•height utilization, and
•product flow.

13. 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
Use maximum height
of the building

14. DESIGN CONSIDERATION
Ideal Facility for Pure Supplier
Consolidation
(Full Pallet Movement)
Warehouse Space
Requirements

15. Cube utilization and accessibility
• Goods stored not just on the floor, but in the cubic
space of the warehouse; warehouse capacity
depends on how high goods can be stored
• Accessibility means being able to get at the goods
wanted with a minimum amount of work

16. Cube utilization and accessibility
continued…

17. 17
Height utilization
•Regardless of facility size, the design should maximize the
usage of the available cubic space by allowing for the greatest
use of height on each floor.
•Most warehouses have 20- to 30-feet ceilings (1 foot = 12
inch; 1 inch = 2.54 cm), although modern automated and high-
rise facilities can effectively use ceiling heights up to 100 feet.
•Through the use of racking or other hardware, it should be
possible to store products up to the building's ceiling.
•Maximum effective warehouse height is limited by the safe
lifting capabilities of material-handling equipment, such as
forklifts.

18. 18
Storage Plan
•According to the third principle, a warehouse design should
consider product characteristics, particularly those pertaining to
volume, weight, and storage.
•Product volume is the major concern when defining a
warehouse storage plan.
•High-volume sales or throughput product should be stored in a
location that minimizes the distance it is moved, such as near
primary aisles and in low storage racks.
•Such a location minimizes travel distance and the need for
extended lifting.

19. 19
A Sample StorageArea

20. ThankYou!!