1. GLOBAL PURCHASING & MATERIALS HANDLING
CHAPTER VI
warehouse management

2. outline Warehouse Activities Warehouse Management
How to supply an efficient warehouse.
Warehouse Layout
Warehouse Auditing
RFID and Warehose Technologies

3. warehouse
A combination of two words ‘ware’ and ‘house’ which means that it is a place to house or store wares like items or articles.

4. warehouse Stores inventory for a period of time.
Storage of raw materials especially
Protection of goods or materials.
Turn over inventory rapidly as a distribution center.
Warehouses store,
Raw materials
Finished Goods
Supplies and spare parts.

5. Warehousing management
The objective of warehousing is to minimize cost when realizing maximum customer service by
Providing timely customer service
Keeping track of items so that they can be found readily and correctly.
Minimizing the total physical effort and thus the cost of moving goods into or out of storage.
Providing communication with customers.

6. Warehouse activities Receive Goods: Identify goods
Dispatch goods to storage
Hold goods
Pick goods
Marshal the shipment
Dispatch the shipment
Operate an information system

7. Warehouse activities
Receive Goods: Accepting goods from outside transportation or an attached factory.
Checking the goods against an order or bill of lading.
Checking the quantities
Checking for any damage
Inspection of Goods if required.

8. Warehouse activities
Identify Goods: Items are identified with the appropriate stock keeping units(SKU) ,number(part number) and the quantity. These data are recorded.
Dispatch Goods to Storage: Goods are sorted and put away. The location of goods must be recorded.
Hold Goods: Storing goods by protecting from environmental factors.

9. Warehouse activities
Pick Goods: Items are selected from storage and brought to marshalling area. When realizing this, items must be accessible.
Marshal the shipment: Checking for missing and correct items,order records are updated if necessary.
Dispatch the shipment: Orders are packaged, shipping documents are prepared and goods loaded on the vehicle.

10. Warehouse activities
Operate an Information System: We need to know what is in the warehouse, what came into storage in the past, quantity, what will come into storage tomorrow, when a particular good will come into storage e.t.c. This system which we need can be very simple or may be a sophisticated computer based system.
The complexity of system depends on number of SKUs handled, the quantity, number of orders received and fulfilled.

11. warehouse management
Maximum Use of Space: This means not only the floor space but also the cubic space. But maximizing the space necessitates capital cost.
Effective use of Labor and Equipment: Materials handling equipment has the second – largest capital cost after space cost and labor cost has the largest operating cost. This situation represents a trade-off.
We can increase capital cost by investing machine but labor costs reduces.

12. warehouse management
Maximum Use of Space(Cube Utilization): This means not only the floor space but also the cubic space. But maximizing the space necessitates capital cost. Cube utilization is the use of space horizantally and vertically.
Effective use of Labor and Equipment(Accessibility): Materials handling equipment has the second – largest capital cost after space cost and labor cost has the largest operating cost.This situation represents a trade-off.
We can increase capital cost by investing machine but labor costs reduces.

13. warehouse management
We have to select the best mix of labor and equipment to maximize the productivity of the operation.
Providing ready access to all SKUs should be easy to identify and find material.
Most of the activity that goes on in a warehouse is materials handling, so moving of the goods must manage efficiently.

14. effective warehouse management
Cube Utilization and Accessibility
Stock Location(Layout)
Order Picking and Assembly
Packaging

15. effective warehouse management(Cube Utilization and Accessibility)
Goods are stored on the floor and in the space above.
Space is also required for aisles receiving and loading, order picking , order assembly and offices.
Pallet positions verify the cube utilization.

16. effective warehouse management(Cube Utilization and Accessibility)

17. effective warehouse management(Cube Utilization and Accessibility)
Pallet position is related to
Floor storage
Whether pallets are stacked on eachother
Maximum stacking height(Ceiling height and weight restriction, HSE regulations)

18. effective warehouse management(Cube Utilization and Accessibility)
Accessibility means the ability to get goods with a minimum of effort, Without moving other goods,
As long as all pallets contain the same SKU, there will be no problem with accessibility.
When several SKUs are stored in the area, each product should be accessible with a minimum difficulty.

19. effective warehouse management(Cube Utilization and Accessibility)
Product A B C D E
Utilization = 12 pallets / (5 x 3) spaces = 80%

20. effective warehouse management(layout)
Layout is concerned with the location of individual items in the warehouse. There is no single universal stock location system suitable for all occasions.
Which system will be used depends on the type of goods,the size of orders and too many conditions similar to these ones.

21. effective warehouse management(layout)
Basic Layout Systems:
Group functionally related items together: For example; putting all hardware items in the same area of the warehouse. If functionally related items are ordered together, order picking is easier. And moreover, personnel is familiar with the location of item.(Hardware items, bulk items)

22. effective warehouse management(layout)
Basic Layout Systems:
Group fast moving items together: If fast-moving items are placed close to the receiving or shipping area, the work of moving them is reduced.Slower-moving items can be placed in more remote areas of the warehouse.

23. effective warehouse management(layout)
Basic Layout Systems:
Group physically similar items together: Physically similar items often require their own particular storage facilities and handling equipment.(Small packaged items, tires, drums,cartons or frozen foods)

24. effective warehouse management(layout)
Basic Layout Systems:
Locate working stock and reserve stock seperately: Working stock can be located close to shipping area whereas reserve stock used to replenish the working stock can be located more remotely. This allows order picking to occur in a compact area.

25. effective warehouse management(layout)
Fixed Location: An SKU is assigned a permanent location and no other items are stored there. This system reduces amount of record keeping and it results in poor cube utilization. Fixed Location Systems are often used in small warehouses.
Floating Location: Goods are stored wherever there is appropriate space for them.The advantage of this system is its improving cube utilization.On the other hand, it requires accurate and up-to-date information on locations.So we have to use computer-based systems in the warehouses using this model.

26. effective warehouse management(layout)
Point-of-use storage: In a repetitive manufacturing and JIT environment, inventory is stored close to where it will be used.There several advantages of this model.
Materials are readily accessible to users at all times.
Material handling is reduced or eliminated.
Central storage costs are reduced.
This method is excellent as long as inventory is kept low and personnel can keep control of records.

27. effective warehouse management(layout)
Central storage: As opposed to point-of-usage model, ın this model all inventory is in one central location
Ease of control.
Inventory accuracy is easier to maintain.
Specialized storage can be used.
Reduced safety stock, since users do not need to carry their own safety stock.

28. effective warehouse management(order picking and assembly)
Once an order is received,
It is retrieved, assembled, and prepared for the shipment.
These processes contains,
Labor
Data Flow
Movements of goods or material.
There are several systems that can be used to organize these processes.

29. effective warehouse management(order picking and assembly)
Area System: The order picker circulates throughout the warehouse selecting the items on the order like in a supermarket. Then, the items are taken to the shipping area.This system is generally used in small warehouses where goods are stored in fixed locations.

30. effective warehouse management(order picking and assembly)
Zone System: The warehouse is divided into areas and order pickers work only in their own area and deliver materials to the marshalling area. Zones are established by means of;
Type of storage
Type of material handling required.
Orders are prepared for the shipment in the marshalling area.

31. effective warehouse management(order picking and assembly)
Multi-order System: It is a mixed type of area and zone systems. Multiple orders are gathered together and all the items are divided by zone. It is used where there are many items or many small orders.
Advantage
Disadvantage
Area
Simple to manage and control
If order size increases, it becomes unwieldy
Zone
Better to manage, because, process is separated into small areas.
It may increase personnel cost
Multi
Most suitable for the situation in which there are many items. -

32. Physical control
Inventory is tangible and always have a risk of becoming lost, stolen and it is always open to failure.
Thus, we need a system to make it difficult for people to make mistakes or forget to update records. It is maintained by means of;
A good part numbering system
A simple well documented transaction system

33. Physical control(part numbering)
Each part has an unique number used only for that part.
Every part must have descriptive part numbers to assist in order picking and process.

34. Physical control(transaction)
Identify the item: Errors occur due to incorrect identification.After receiving an item, the order specifications(quantity ,part number and everything about the order) must be identified.The location of item must be accessible for everyone in the warehose system.
Verify quantity: Manual counting or Standart sized containers.
Record Transaction: Recording all information.
Execute Transaction:Moving the goods.

35. Accuracy of inventory
Efficieny in a warehouse is up to the accuracy of inventory, because you decide to buy or not, release order or not and make a financial analyses according to stock quantities.
If not so, there will be shortages or overstock of materials,disrupted schedules,late deliveries, lost sales.
Especially part description, quantity and location must be definetely accurate.

36. Accuracy of inventory Causes of Inventory Errors Unsecure stockroom
Unauthorized withdrawal of material
Unsecure stockroom
Poorly trained personnel
Inaccurate transaction recording
Poor transaction recording system
-system should reduce the likelihood of human error
Lack of audit capability

37. Accuracy of inventory
Tolerance:

38. Auditing inventory records
Periodic(Annual) Inventory Control: The aim is to correct on hand balance. All types of material is counted and compatability of shelf and system stocks are checked.
Cycle Counting: The aim is to find the reasons for error and to prevent from them.Inventory is counted throughout the year.Some items are counted frequently depending on its value or past history problems.

39. Auditing inventory records
Periodic(Annual) Inventory Control:
The primary purpose is to satisfy financial side.
Planner side is interested in all details of material.
Financial side is concerned with only the total value.

40. Auditing inventory records
Periodic(Annual) Inventory Control:
This control method has some disadvantages:
It takes too much time,but is is wanted to be realized in a short time.
Factory shutting down causes production loss.
Open to cover error with new errors.
People may not be familiar with the items
Labor and paperwork effort.

41. Auditing inventory records
Cycle Inventory Control:
This control method has some advantages:
Timely correction of problems:
Reduction of loss production:
Training of personnel: Familiar with the items, fewer errors , able to identify problems.

42. Auditing inventory records
Counting Frequency:
Management establishes a rule for how many times an item should be counted per year
e.g. ‘A’ items once per month, ‘B’ items quarterly, ‘C’ items twice per year
a mix of all items is counted every day
computerized systems can identify daily lists of items to count

43. Technology applications
Barcodes:
Paper labels which show a product code
RF Tags:
Radio Frequency
do not need to ‘see’ the item
These technological applications;
Reduce recording errors,
Improve transaction speed.
Barcode and RFID concepts will be discusses in Term Projects.