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Unit 4: Warehouse Management

Module 1: Introduction to Warehouse Operations

Supply Chain Management

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Learning Objectives• Determine the need for warehouses and

inventory management• Identify the various types of warehouses• Identify and describe the different types of

warehouse processes• Describe the Plight of the Warehouse Manager• Identify World-Class warehousing principles• Introduce industry specific professional

organizations

QUESTION

Why are warehouses and inventory management needed?

• Storage of goods• Reduce transportation costs• Improve operational flexibility• Shorten customer lead times• Lower inventory costs

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Storage of Goods

This is the most basic operation performed by warehouses

Evens out the flow of goods in the supply chain by storing goods until they are needed

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QUESTION

What is inventory?

• Goods that support the production of raw materials and unfinished items

• Items used for maintenance, repair, and operating supplies

• Raw goods, finished goods and spare parts• Post-consumer items such as returns, scrap,

and recyclable materials

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Why is Inventory Management Needed?• Inventory is a necessity

– Supports production and manufacturing activities– Covers for exceptions in the supply chain– Supports maintenance, repairs, and operations– Supports customer service activities– Supports post-consumer activities– Offers strategic opportunities to the supply chain

• There are costs associated with having inventory– Holding costs– Setup costs– Purchasing costs

• Balance inventory levels with cost of holding inventory– Minimize costs– Not too much excess inventory– Enough inventory to respond to demand when it is needed

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Types of Warehouses

• Raw Material Warehouse• Work in Process (WIP) Warehouses• Finish Goods Warehouses• Distribution Warehouses and Distribution

Centers• Fulfillment Centers• Climate-Controlled Warehouses• Special Case (Foreign Trade Zone and Bonded

Warehouses

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Raw Material Warehouse

These warehouses are generally large in scale and designed to hold large quantities of bulk materials. Two examples of raw materials warehouses might be petroleum warehouses that store raw crude oil and grain silos that house grains and corn.

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Work In Process (WIP) Warehouse

WIPs hold partially completed assemblies and products at various points along an assembly or production line. They can occupy a small footprint inside a factory or manufacturing center or can be located in a separate facility.

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Warehouses - Other• Finished goods warehouses - Usually located

near the manufacturing center, finished goods are stored here until there is a demand for them.

• Distribution warehouses and distribution centers - collect and consolidate goods from many sources and then provide consolidated delivery into a network of common customers.

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Warehouses - Other• Fulfillment warehouses and centers - receive

goods from distribution centers and ship them to individual customers.

• Climate Controlled Warehouses:Frozen foods, chilled foods, and products that must be maintained at a set temperature are shipped through climate-controlled warehouses.

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Food Name

Refrigerating Temperature

（F）

Relative Humidity （%）

Apple 30 to 33 85~95

Banana 53 85

Pear 31 to 34 85~95

Grapes 34 to 37 85~90

Onion 29 80

Potato 37 to 41 85~90

Egg 30 to 33 85~85

Fresh Pork 32 to 34 85~90

Frozen Pork

-11 to 5 85~90

Frozen Poultry

-22 to 14 80

Sausage 25 to 41 85~90

Beer 32 to 41

Warehouses - Other

Special Case Warehouses • Foreign Trade Zones (FTZs) - a designated area

within the borders of the USA that is treated as being outside of U.S. Customs Territory for the purpose of customs duty payment.

• Bonded Warehouse - Similar to an FTZ, a Bonded Warehouse is a secured facility under the control of U.S. Customs where imported materials are stored with the purpose of delaying the payment of tariffs and duties. There are, however, several key differences between a Bonded Warehouse and an FTZ.

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Bonded Warehouse Foreign Trade Zone Formal Customs Entry

Documents filed before material is receipted in warehouse

Documents filed when material is removed from the warehouse

Customs Bond Required for all warehouse entry

No bond required

Duty Payment Duties paid at time of withdrawal

Duties paid at time of withdrawal into the USA

Taxes Taxes due on January 1st each year

Not taxed

Permitted Activity Material may be cleaned, repackaged, and sorted under Customs supervision

Material may be stored, inspected, repackaged, repaired, tested, cleaned, sampled, displayed, processed, assembled, salvaged, or re-exported.

Waste or Damaged Goods

Duty paid at warehouse receipt

No duties paid on waste or non-usable materials

Domestic Materials Cannot be comingled Admitted without Customs permit

Storage Period Not to exceed 5 years Unlimited

Private vs. Public Warehouses

• Private warehouses are warehouse facilities owned by a distributor or manufacturer and strictly used for their sole purposes. The inventory stored and the activities performed in these facilities support the goals of the organization.

• Public warehouses seek economies of scale by sharing resources. They generally store and manage multiple customers’ inventories and can leverage the space and warehouse resources across these multiple customers.

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Warehouse Layout

• Receiving area• Staging area• Storage area• Value-add area

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Bulk

Storage

Case Pick

Storage

Value-add

Processing Area

Staging Area for Receiving and Shipping

Typical Warehouse Layout

Receiving Area

The receiving area of a warehouse contains dock doors sufficient to accommodate the conveyance equipment that delivers material into the warehouse facility.

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Staging Area

The staging area is the temporary containment of material for inspection, unpacking or packing, and repackaging of material for subsequent storage or shipment.

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Storage Area

Storage areas are where material is stored until needed. These areas are where warehouse material handling equipment such as racking, shelving and other storage media are set up.

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Value-Add AreaFor warehouses that are performing value-added activities such as kitting, sequencing, repackaging, labeling, or minor sub-assembly, a designated area is set up to ensure that the appropriate amount of space necessary to perform the activities is available and to accommodate the equipment needed to perform these activities.

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Warehouse Flow• Warehouses typically use one of three layouts: U-shape,

Straight-thru, or Modular. • The U-shaped layout is the most popular layout.• A typical “U” formation brings material in the front of the

warehouse, stores and/or processes it in the middle and back of the warehouse, and then ships it out the front of the warehouse.

• The layout and thus the flow through the warehouse are dependent on the size of the facility; the number and placement of the dock doors; and the characteristics of the activity occurring in the warehouse.

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Warehouse Operations

• Receiving• Pre-packaging (optional)• Put-Away• Storage• Order Picking• Packaging and/or Pricing (optional)• Sortation and/or Accumulation• Unitizing and Shipping

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Plight of Warehouse Management

• More / smaller transactions• Manage more items• More product and service customization• More value-added services• More returns• More international orders

Less time for ORDER PROCESSING / MARGIN OF ERROR Less Skilled WMS Labor

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World-class Warehousing PracticesTake Warehouses from

Stage 1 to Stage 5

Stage 1

Stage 2

Stage 3

Stage 4

Stage 5

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World-Class Warehousing Practices

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PROCESS Stage 1 Stage 2 Stage 3 Stage 4 Stage 5

Receiving Unload, stage, & in-check

Immediate put-away to reserve

Immediate put-away to primary

Cross-docking

Prereceiving

Put-away First-come-

first-serve

Batched by zone

Batched & sequenced

Location-to-stocker

Automated put-away

Reserve Storage Floor storage

Conventional racking & bins

Some double deep storage

Some narrow aisle storage

Optimal hybrid storage

Picking Pick-to-single-order

Batch picking Zone picking - Progressive assembly

Zone-picking - Downstream sorting

Dynamic picking

Slotting Random Popularity based

Popularity and cube based

Popularity, cube, and correlation based

Dynamic slotting

Replenishment As needed - Pick face complete

As needed - Downstream complete

Anticipated -- By sight

Anticipated - Automated

Pick from reserve storage

Shipping Check, stage, & load

Stage & load Direct load Automated loading

Pick-to-trailer

Work Measurement

No standards

Standards used for planning

Standards used for evaluation

Standards used for incentive pay

Standards used for continuous feedback

Communications Paper Bar code scanning

RF terminals Handsfree Virtual displays

Professional Organizations

• International Warehousing Logistics Association (IWLA). WWW.IWLA.COM

• Warehousing and Education Research Council (WERC). WWW.WERC.ORG

• Council of Supply Chain Management Professionals (CSCMP). WWW.CSCMP.ORG

• National Association of Foreign Trade Zones (NAFTZ). WWW.NAFTZ.ORG

• American Society for Quality (ASQ). WWW.ASQ.ORG

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Summary

• Warehouses are a critical part of the supply chain.

• Materials moving through the supply chain enter warehouses, where they are handled, stored, and ultimately shipped downstream to customers when needed.

• Understanding the types of warehouses and the roles they play in the supply chain is a prerequisite to knowing when and why to select a particular type of warehouse to satisfy customer needs.

Summary, cont.• Most warehouses are configured to handle the

same set of activities: receiving, prepackaging, put-away, storage, order picking, accumulation and sortation, packaging and/or pricing, and unitizing and shipping.

• The key to successful implementation of best-practice warehousing operations requires obtaining and understanding a comprehensive item level analysis of the material being handled, and then using that information to make warehousing decisions

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