WAREHOUSING &
INVENTORIES
Definitions
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Warehouse- is a building or a land area used for the
storage and security of goods and raw materials.
Warehousing- an activity that includes storing, securing
and managing of raw materials, or goods in a
warehouse.
Cross-docking-is the action of unloading materials from
an incoming truck or rail car and immediately loading
these materials in outbound trucks or rail cars, thus
eliminating the need for warehousing.
Main warehousing phases are
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Receiving- includes providing the assurance that the quantity and
quantity of materials are as ordered, as well as processing the
receipts of all materials coming into warehouse and repacking in
order to increase storage-cube efficiency.
Storage- includes placing of coming good and materials in storage,
material handling, location verification.
Order picking- includes picking of goods from storage, packing and
accumulation of distributed picks into complete orders
Shipping- includes checking of the order completeness, preparing
shipping documents, choosing the carrier and preparing goods for
loading.
Warehouse types
Warehouse functions
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Goods inwards,
Reserve storage,
Replenishment,
Order picking,
Sortation,
Secondary sortation,
dispatch
Material flow in warehouse can be
organized as follows:
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U- shape (see picture below)-when materials enter
and exit warehouse at the same side of the facility
Straight-thru (see picture below)- when materials is
enter and exit warehouse at the opposite side of
the facility
Multistory flow pattern- when in order to save
space goods are stored at different level in
warehouse.
U-shape
Advantages:
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good utilization of dock resources e.g. dock doors,
equipments and space
easy cross-docking operations
good truck utilization due to the closest location of
receiving and shipping docks especially essential by
fast moving goods handling
high security because entry and exit is at the same
side.
Straight thru
Advantages:
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fast flow of materials thru warehouse
reductions of congestion of reviving and shipping
operation due the fact that they are executed at
separate side of a facility
can be used for cross-docking operation
barcodes
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Barcode symbol – Dark bars or stripes (some narrow some wide)
printed side-by-side on merchandise and other items. Each bar
represents a number, and together they represent a code that can
be read by machines called bar code readers or scanners (such as
those used at supermarket checkout counters). The data read by the
reader is passed on to a computer which matches the code with the
stored information such as the item's name, price, size, quantity in
stock. Out of about a dozen internationally-recognized bar code
symbologies, the four most common are Universal Product code
(UPC), and its newer European Article Numbering (EAN) version
called UPC/EAN-128 (both used in retail industry), and Code 39
and Interleaved 2 Of 5 (both used in most other industries).
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Barcode reader (scanner) – Electronic device that scans a
barcode by shining a laser beam on it. Barcode readers
(unlike magnetic-stripe readers) are 'non-contact' automatic
data capture devices, operate only at short distances (a few
inches), and (unlike in radio frequency identification) do not
provide 'out of line of sight' reading. Also called barcode
scanner or just scanner.
RFID (Radio Frequency Identification) Automatic
identification of packages, products, machinery, etc., through
attached transponders. RFID provides 'out of line of sight'
identification, and at distances much greater than that can
be scanned by barcode readers.
Bar code structure:
 Country number – 3
 Coding organization number – 4
 Individual item number – 5
 Check-point -1
Start/6 data signs/’coma’/6 data signs/stop
BAR CODES - EXAMPLES
SCANNERS- EXAMPLES
BARCODES - USE
EDI – using computers and the net to exchange
information
customer
supplier
The bar-code differ on account of their use:
 EAN 13 (European Article Number): main code,
 EAN 128: gives additional data concerning serial
number, date of manufacturing etc.
What are the advantages of bar codes?
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Materials handling- a way in which materials are
moved through the warehouse area.
Materials handling equipment- is all kind of
equipment that is used for movement, storage and
control of materials and goods in warehouse.
Handling in warehouse has a major impact on how
effectively materials flow through the logistics
system. It has big influence on the cost, resource and
time needed for order completion. Handling
equipment is very often capital-intensive but reduce
the labor-intensive activities in warehouse. Moreover
there is a number of goods to have to be moved
manually.
There is a number of methods that are used for handling materials in
warehouse. Among the most common are:
• manual handling – done by hand without usage of any special
equipment
• manually operated trucks and trolleys (see table below),
• operator-controlled and driven power trucks (see table below),
• driverless and computer-controlled power trucks and trolleys
• crane systems (see table below)
• conveyors (see table below)
Equipment category
Equipment
Manually operated
trucks and trolleys
Platform trolley
Folding trolley
Cage trolley
Operator-controlled and
driven power trucks
Flatbed carrier
Tow tractor
Power pallet truck
Forklift
Cranes
Jib crane
Gantry crane
Folding crane
Conveyors
Belt conveyors
Roller conveyors
Chain conveyor
Examples
Summary
Warehousing management takes 3 factors into
consideration:
 Space
 Equipment
 Organization.
Definitions
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Inventories – goods or materials held available in stock
Inventory management – specifying the size and placement of
stocked goods. The scope of inventory management includes the
following issues: replenishment lead time, carrying costs of inventory,
asset management, inventory forecasting, inventory valuation,
inventory visibility, future inventory price forecasting, physical
inventory, available physical space for inventory, quality
management, replenishment, returns and defective goods and
demand forecasting.
Delivery cycle – time period between acceptance of an order and
final delivery of the product.
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Buffer/safety stock – stock kept to ensure continuity of
processes
Anticipation stock – extra stock for periods of forecasted
increased demand
Pipeline stock – goods still in transit or in the process of
distribution
Raw materials - materials and components scheduled for use
in making a product.
Work in process, WIP - materials and components that have
begun their transformation to finished goods
Finished goods - goods ready for sale to customers
Forecasting – assessing or calculating future demand
Inventories rotation
Information stock – a level of stock at which ordering some goods is recommended
Safety stock – a level of stock lower than information stock
Delivery cycle – time period between acceptance of an order and final delivery of the product
stock
1. ……….
2. ……….
3. ……….
time
Pareto analysis
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Pareto analysis (sometimes referred to as the 80/20 rule and as ABC
analysis) is a method of classifying items, events, or activities according to
their relative importance. It is frequently used in inventory management
where it is used to classify stock items into groups based on the total annual
expenditure for, or total stockholding cost of, each item. Organisations can
concentrate more detailed attention on the high value/important items.
Pareto analysis is used to arrive at this prioritisation.
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The precise shape of a Pareto curve will differ for any analysis but the broad
shape remains similar - following 'the 80/20 rule'. Vilfredo Pareto was a 19th
century economist who observed that 80% of Italy's wealth was owned by 20% of
the population.
The alternative term ABC analysis stems from the fact that the first 20% of
important items are known as Category A items, the next, typically 40% are
Category B items and the relatively unimportant, though larger in number, 40% are
Category C items.
Close control is more important for fast moving items with a high unit value.
Conversely, for slow moving, low unit value items the cost of the stock control system
may exceed the benefits to be gained and simple methods of control should be
substituted.
Taking inventory as an example, the first step in the analysis is to identify those
criteria which make a significant level of control important for any item. Two
possible factors are the usage rate for an item and its unit value.
These two factors can be multiplied to give the annual requirement value (ARV) - the
total value of the annual usage.
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If the stock items are then listed in descending order of ARV, the most
important items will appear at the top of the list. If the cumulative ARV is
then plotted against number of items then a graph known as a Pareto curve
is obtained.
In this case, typically, the first 20% of items in the list will account for
approximately 80% of cumulative ARV. For a company with a stock list of
1,000 different items this means that paying more attention to the top 200
items (with a sophisticated stock control system) will give close control of
about 80% of total stock investment.
The next, say, 40% of items, will, typically, account for a further 15% of
cumulative ARV. These can be subject to less precise control methods.
The last 40% of (low value of low usage) items then account for a mere 5%
of ARV and can be controlled with a simple system.