1. Warehousing Management
Objectives of Efficient Warehouse 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 w/ customers

2. Warehousing Management
Benefits of Warehouse Management
Provide a place to store & protect inventory
Reduce transportation costs
Improve customer service levels
Complexity of warehouse operation depends on the # of SKUs handled & the # of orders received & filled
Most activity in a warehouse is material handling

3. Warehousing Management
Costs of Operating a Warehouse
Capital costs
costs of space & materials handling equipment
Operating costs
cost of labor
measure of labor productivity is the number of units that an operator can move in a day

4. Warehouse Activities Receive goods Identify the goods
Dispatch goods to storage
Hold goods
Pick goods
Marshal shipment
Dispatch shipment
Operate an information system

5. Warehouse Activities Receive goods
accepts goods from outside transportation or attached factory & accepts responsibility
check the goods against an order & the bill of lading
check the quantities
check for damage & fill out damage reports if necessary
inspect goods if required

6. Warehouse Activities Identify the goods Dispatch goods to storage
items are identified with the appropriate stock-keeping unit (SKU) number (part number) & the quantity received recorded
Dispatch goods to storage
goods are sorted & put away
Hold goods
goods are kept in storage & under proper protection until needed
Pick goods
items required from stock must be selected from storage & brought to a marshalling area

7. Warehouse Activities Marshal the shipment Dispatch the shipment
goods making up a single order are brought together & checked for omissions or errors; order records are updated
Dispatch the shipment
orders are packaged, shipping documents are prepared, & goods loaded on the vehicle
Operate an information system
a record must be maintained for each item in stock showing the quantity on hand, quantity received, quantity issued, & location in the warehouse

8. Warehouse Activities
Maximize productivity & minimize cost, warehouse management must work w/the following:
Maximize use of space
space is the largest capital cost
Effective use of labor & equipment
labor is the largest operating cost
material handling equipment is the second largest capital cost

9. Warehouse Activities Factors influencing effective use of warehouses
cube utilization and accessibility
stock location
order picking and assembly

10. Warehouse Activities 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 w/ a minimum amount of work

11. Warehouse Activities Stock Location Objectives:
To provide the required customer service
To keep track of where items are stored
To minimize effort to receive, put away, and retrieve items
Basic Stock Locating Systems
Group functionally related items together
Group fast-moving items together
Group physically similar items together
Locate working stock and reserve stock separately

12. Warehouse Activities (Stock Location)
Fixed Location
SKU assigned a permanent location, & no other items are stored there
Fixed-location systems usually have poor cube utilization
Usually used in small warehouses; throughput is small, & there are few SKUs

13. Warehouse Activities (Stock Location)
Floating (Random) Location
Goods stored wherever there is appropriate space
Advantage is improved cube utilization
It requires accurate and up-to-date information
Warehouses using floating-location systems are usually computer-based

14. Warehouse Activities (Stock Location)
Two other systems sometimes used are:
Point-of-use storage
Inventory stored close to where it will be needed
Used in repetitive manufacturing & JIT systems
Central storage
Contains all inventory in one central location

15. Warehouse Activities (Stock Location)
Advantages of Point-of-use Storage
Materials are readily accessible to users
Material handling is reduced or eliminated
Central storage costs are reduced
Material is accessible all the time

16. Warehouse Activities (Stock Location)
Advantages of Central Storage
Ease of control
Inventory record accuracy is easier to maintain
Specialized storage can be used
Reduced safety stock, since users do not need to carry their own safety stock

17. Warehouse Activities Order Picking and Assembly
When an order is received, items must be obtained from the warehouse, grouped, & prepared for shipment, systems used:
Area system
Zone system
Multiorder system

18. Warehouse Activities Order Picking and Assembly Area system
Order picker circulates throughout warehouse selecting items on an order -- order is ready to ship when order picker is finished
Zone system
Warehouse is divided into zones, & each picker works only in an assigned zone -- order is divided by zone, & the items from each zone are sent to the marshaling area
Multiorder system
Same as the zone system, except that each picker collects items for a number of orders at the same time

19. Warehousing: Physical Control and Security
Physical Control & Security - Elements
Good part numbering system
Simple, well-documented transaction system
Identify the item
Verify the quantity
Record the transaction
Physically execute the transaction
Limited access
Inventory must be kept in a safe, secure (locked) place with limited general access
Well-trained workforce

20. Warehousing: Inventory Record Accuracy
Accurate inventory records enable firms to:
Operate effective materials management systems
Maintain satisfactory customer service
Operate effectively & efficiently
Analyze inventory

21. Warehousing: Inventory Record Accuracy
Three pieces of information must be accurate:
Part description (part number)
Quantity
Location
Inventory is a tangible asset that is easy to lose track of unless properly controlled
Inaccurate inventory records will result in:
Lost sales, shortages, & disrupted schedules
Excess inventory (of the wrong things)
Ineffective MRP / MRPII / ERP

22. Warehousing: Inventory Record Accuracy
Causes of Inventory Record Errors
Unauthorized withdrawal of material
Unsecured stockroom
Poorly trained personnel
Inaccurate transaction recording
Poor transaction recording systems
Lack of audit capability

23. Warehousing: Inventory Record Accuracy
Measuring Inventory Record Accuracy
It is not practical to expect 100% accuracy.
Tolerance
To judge inventory accuracy, a tolerance level for each part must be specified
Tolerance is the amount of permissible variation between an inventory record & a physical count.
Tolerances are set on individual items based on value, critical nature, availability, lead time, ability to stop prod., safety problems, or difficulty of measurement.

24. Warehousing: Auditing Inventory Records
Two basic methods of auditing inventory:
Periodic (usually annual) counts of all items
Cyclic (usually daily) counts of specified items
Auditing the system finds causes of record inaccuracy & eliminate them
Cycle counting does this; periodic audits tend not to

25. Warehousing: Auditing Inventory Records
Factors in good preparation for a physical inventory are:
Housekeeping
Identification
Training

26. Warehousing: Auditing Inventory Records
A physical inventory consists of four steps:
Count items & record count on an attached ticket
Verify this count by recounting or by sampling
When the verification is finished, collect the tickets & list the items in each department
Reconcile the inventory records for differences between the physical count & inventory dollars

27. Warehousing: Auditing Inventory Records
Problems with annual physical inventory:
Usually the factory/facility has to be shut down, thus losing production or business
Labor & paperwork are expensive
Job is often done hurriedly & poorly since there is much pressure to get it done
Many times, more errors are introduced than are eliminated

28. Warehousing: Auditing Inventory Records
Cycle Counting
A system of counting inventory continually throughout the year
Advantages of cycle counting:
Timely detection & correction of problems
Complete or partial reduction of lost production
Use of personnel trained & dedicated to cycle counting
Count frequency
Number of times an item is counted in a year

29. Warehousing: Auditing Inventory Records
Count Frequency should increase as the value of the item & number of transactions (chance of error) increase, e.g., base the frequency of count on annual dollar value usage
Methods used
ABC Method
Zone Method
Location Audit System

30. Warehousing: Auditing Inventory Records
Cycle counts can be scheduled at regular intervals or special times
When to Count
When an order is placed
When an order is received
When the inventory record reaches zero
When an error occurs