2. WAREHOUSING AND STORAGE
“Warehousing and storage is an act of storing and assorting the
finished goods so as to create maximum time utility at minimum
• Need for storage arises both for raw material as well as finished
• 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.
Now a days, many private firms are turning to distribution centers
rather than constructing the warehouses.
3. The concept of distribution warehouse or a
distribution centre is vastly different from the
earlier concept of a godown for storage. The
godown is merely a dumping place. Godowns are
maintained merely for storage of surplus goods.
The establishment of warehouses is ensuring a
continuous and uninterrupted supply of goods.
CONCEPT OF WAREHOUSING
4. CONCEPT OF WAREHOUSING
A warehouse is a location with adequate facilities
where volume shipments are received from a
production Centre, broken down, reassembled into
combinations representing a particular order or
orders, and shipped to the customer’s location or
locations. The rationale for establishing a
warehouse in a distribution network is the creation
of a differential advantage for the firm. This
advantage accrues from achieving a lower overall
distribution cost and or obtaining service advantage
in a market area.
5. WAREHOUSE ALTERNATIVES
1. Private Warehouses
Owned or leased by the product owner
Control is fully with the product owner
Changes can be made to integrate the warehouse with
rest of the logistical system
Provides market presence to the product owner
There is no profit to be added to the cost
6. 2. Public Warehouses
Available to companies on hire
Overheads get distributed over a large customer base
As warehousing is their core business public warehouses
offer expertise in management
Flexibility of location
Significant scale economies, several users and resultant
volume, benefits in transportation costs
WAREHOUSE ALTERNATIVES Cont…
7. 3. Contract warehouses
Contract warehouse operators take over logistics
responsibility from manufacturing company
Long term relationship and customized service
Expertise of management
Shared resources with several clients
WAREHOUSE ALTERNATIVES Cont…
8. 4. Government Warehousing: These warehouses
are owned, managed and controlled by central or
state governments or public corporations or local
Food Corporation are examples of agencies
maintaining government warehouses.
WAREHOUSE ALTERNATIVES Cont…
9. PURPOSE OF WAREHOUSING
To provide desired level of customer service at
the lowest possible total cost
It is the part of the firm’s logistics system that
stores products (raw materials, packing
materials, WIP, FG) at and between point of
origin and point of consumption and provides
info to management on the status, condition and
disposition of items being stored.
Distribution Warehousing relates mainly to FG
10. REASONS FOR WAREHOUSING
• Maintain source of supply
• Support customer service
• Meet changing market
• Overcome time and space
• Provide customers with the
right mix of products at all
• Temporary storage of
materials to be disposed or re-
• Achieve production
• Achieve transportation
• Take advantage of quantity
purchase discounts and
• Least logistics cost of a
desired level of customer
11. FUNCTIONS OF WAREHOUSING
Receiving Goods: A warehouse accepts the merchandise
delivered by a transporter or an attached factory and then
accepts the responsibility for the merchandise.
Identifying Goods: The appropriate stock keeping units are
identified and a record made of the number of each item
Sorting Goods: The incoming goods are sorted out for
appropriate storage area in the warehouse.
Dispatching Goods to Storage: The goods are kept aside
when they can be found later, when needed.
Holding Goods: the goods are kept in storage under proper
protection until needed in the warehouse.
12. FUNCTIONS OF WAREHOUSING
Retrieving Selecting or Packing Goods: items ordered by
customers are taken out from storage and grouped in a manner
useful for the next step.
Marshalling Goods: The several items making up a single order are
brought together and checked for completeness and order records
are prepared or modified.
Dispatching Goods: The consolidated order is packaged suitably
and directed to the right transport vehicle. The necessary shipping
and accounting documents are also prepared.
Preparing Records and Advices: the number of orders received,
the items received and on hand etc., are recorded for
replenishment action and stock control, and the demand and
receipt data are forwarded to a control centre located elsewhere.
14. The primary objective of warehouse is movement of goods.
To maintain the flow of goods throughout the system, these goods may
be raw materials or finished products.
To set up a network of warehouses closest to the customer locations to
service markets better and minimize cost
• 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
OBJECTIVE OF WAREHOUSING
15. To ensure a continuous, uninterrupted supply of goods in the
market are for the following:
1. Ensure protection against delays and uncertainties in
transportation arising from a variety of factors;
2. Eliminating lack of sophistication in production control
and consequent uncertainties in the availability of
product at the desired time and place;
3. Providing for adjustment between the time of production
and the time of use because production and use can be
4. Serving as reservoir of goods, receiving surplus goods
when production exceeds demand and releasing them
when a scarcity is anticipated.
ROLE OF WAREHOUSING
17. PROCEDURES TO IMPROVE MATERIAL HANDLING
Flow chart of present operations should be prepared. This chart should
trace the flow to goods from the end of the production line, or from
another warehouse, to deliver to the customer,
For each movement, the volume of each product moved, the method of
movement, the unit handling cost, and the average distance moved must
be worked out and ascertained.
Combining new equipment in various ways, cutting or modifying existing
operations, revising arrangements for facilities and new alternative
methods may be worked out.
New methods must be evaluated by balancing benefits with costs.
Branch warehouses may be added to step up stock handling operations.
The warehouse concept is changing under the impact of automation,
structural modifications within the warehouse industry.
20. WAREHOUSING OPERATIONS – RECEIPT OF GOODS
The following operations are carried out before the acceptance of goods for
storage and issue of a warehouse receipt:
i. The user of the facility or depositor tenders the goods for storage
ii. Technical assistance to examine the goods visuals and worth storage
iii. The goods are stored in good conditions
iv. To clean the goods or commodities as per requirement
v. The goods sample checked on routine basis,
vi. The stocks are graded – moisture content, foreign matter, shriveled
grains, dirt etc.
vii. Packages or bags standardization as per norms,
viii. bags or packages are stacked on the wooden crates,
ix. Data base update and record keeping by the warehouse manager
21. One of the fundamental features of warehousing is scientific storage and
preservation of goods. A warehouseman is responsible for delivery of goods
in the same condition as regards quantity and quality as they were when
they were bought for storage in the warehouse. In order to ensure that the
quality remains the same and is well preserved, the following steps are
1. Samples obtained after the scientific sampling of the stocks is duly
sealed with a signed sample slip put inside the bag,
2. The warehouse demarcated into different sections for storage of
different commodities or items according to their nature.
3. crates or pallets are used where goods are to be stacked on the floor
4. Different stacking methods are adopted, depending on the size of
packages and the duration of storage
5. Quick moving goods are stored in separate section,
6. Operational spaces between stacks for re-stacking and turnover etc.
WAREHOUSING OPERATIONS – STORAGE IN
22. The delivery of goods is conditioned by the following factors:
1. The goods stored in the warehouse may be delivered in
one lot or in installments,
2. To examine the goods condition before the delivery of
3. Application for delivery of goods has to be tendered by
4. Work on the storage charges, insurance, delivery challan
5. Necessary entries made before the delivery of goods,
6. The stocks are delivered against the acknowledgement of
WAREHOUSING OPERATIONS – DELIVERY OF
23. Some of the factors contribute for cost differences in Warehouse;
1. Space utilization in warehouse,
2. Stacking and Non-stacking qualities of product,
3. Handling techniques
4. The size and weight of individual products or packages,
Balancing of Supply and demand
Manipulation in transit
Specialized services for particular commodities
Refrigeration or cold storage
Invoicing and Collection etc.
WAREHOUSING OPERATIONS – WAREHOUSING
Mix products from multiple facilities for
shipment to a single cutomer
Break – bulk
Used more as a ‘flow-thru’ point than as a
‘hoarding’ (Symbolic procedure only) point
25. I. Bonded Warehouses: Private and Public warehouses can be bonded
under the customs and Excise Act and Municipal Corporation
regulations, facilitating deferred payment of customs.
II. Field Warehouses: Field warehouses are those which are managed by
a public warehousing agency in the premises of a factory or company
which needs the facility for borrowing form a bank against the
certification of goods in storage or in process by an independent
III. Cold Storage: Cold storage facilities are provided for perishables
against payment of a storage charge for the space utilized by different
IV. Agricultural Warehouses: These warehouses are meant for storing
agricultural produce grown in a certain area and are located in
assembling or regulated markets.
TYPES OF WAREHOUSING
26. V. Distribution Warehouses: These warehouses are located close to the
manufacturing concerns or consuming areas and time taken for transit.
VI. Buffer (Safeguard) Storage Warehouses: these warehouses are built at
strategic locations with adequate transport and communication facilities.
They store food grains or fertilizers etc.
VII. Export and Import Warehouses: These warehouses are located near
the ports from where international trade is undertaken. They provide
transit storage facilities for break – bulk, packaging, inspection, marking
etc., are available at these warehouses.
TYPES OF WAREHOUSING cont…
27. The following considerations determine the location of a warehouse;
1. Market service area and cost of distribution from the warehouse to the
2. Satisfaction of transport requirements and facilities available in the
form of rail, link roads and road vehicles.
3. Transportation rates prevailing in the area and distribution costs per
4. Competition by rival companies and whether they have warehouses in
the same area.
5. Availability of power, water, gas, sewerage disposal and their cost.
6. Labour supply and labour costs in the area.
7. Industrial relations climate and labour productivity.
8. Pricing arrangements and level of service desired to be rendered in
terms of availability of the product to the customer.
9. Real estate, excise and government taxes assessed in the area.
28. 10. Attitude of local residents and government
toward establishments of the warehouse.
11. Restrictions associated with warehouses
12. Potential for the later expansion
13. Cost of land for the warehouse and other costs.
14. Possibility of change in the use of the facility at a
later date if the company so desires, and lease or
sale of the land and buildings.
WAREHOUSE LOCATION Cont…
29. LOCATION OF DEPOTS AND DISTRIBUTION
The location of depot or distribution warehouse with reference to a marketing
centre has considerable influence on not only the cost of distribution but also on
the level of service and psychological advantages over a competitor whose supply
point is far removed from the marketing centre.
There is a heavy fixed capital investment involved in locating a depot or warehouse
(A) Location of a Single Depot: A single depot serve a area in extreme situation, to
serve areas more than one depot is required. The methods adopted to select a
single depot location have been selected on the basis of ;
i. Location at Centre of Gravity of Area: this point is expected to be at the
minimum average distance from all the locations in the area.
ii. Location at Centre of Gravity of Load or Tonne – Centre: Location chooses based
on location of each customer to be served and weights hung on strings in
proportion to each customer annual purchases.
Location of Centre of Gravitiy of Tonne – Kilometres or Tonne – Kilometre Centre:
The depot may turn out to be in the middle of a lake or in a spot where no suitables
or buildings are available, or where the construction of the warehouse building is
not permitted by town and country planning, zoning rules etc.
30. B. Multi – Depot Networks:
Trying out a large number of feasible configurations of multiple areas in a
way which converges in each case on the best one, and repeating this for
one depot, two depots, three, four or five depots etc.
i. Number of Warehouses and Costs:
Warehouse costs include;
1. Revenue costs of the land and buildings used for storage, assembly and
loading (rent, rates, maintenance, heating, lighting etc.)
2. Interest on the capital value of the stocks,
3. Loss of, damages to, and depreciation of, stocks;
4. Direct costs of receiving goods into stock and assembling orders for
dispatch, including any idle time of order – pickers
5. Supervision and administration of delivery fleet and provision of
LOCATION OF DEPOTS AND DISTRIBUTION
31. WAREHOUSE BUILDING PLAN
A warehouse building has to be planned and designed bearing in mind the
kinds of goods that are likely to be stored, the type of handling equipment
that are likely to be used and the height up to which the stacks may be
built. Following are the constructional requirements of a warehouse:
vi. Floor and Walls
x. Drain Pipes
32. CAPACITY OF WAREHOUSE
The capacity of warehouse affected by number of
Type of material to be handling
Handling system to be used
Stock layout arrangements
Local building codes
Office area required etc.
33. Ceiling Height: ceiling heights depends on construction costs, material
handling costs, and load stacking characteristics.
Length and Width of Warehouse: The length and width of the
warehouse building has to be decided based on the material movement
through a warehouse and construction.
Rail Platforms Connectivity: every warehouse requires trucks docks. The
need for a rail platform in addition to truck docks depends on whether
the product is to be received or dispatched by rail.
High Truck docks Capacity: Inward rail consignments or empty wagons
arrive at the warehouse in batches. But trucks arrive one at a time and
in random manner.
Warehouse Security From:
• Theft and house breaking
• Riots and Civil Commotion
• Moisture, Insects and rodents
SELECTION OF WAREHOUSES