Supply Chain Management
Unit 4: Warehouse Management
Module 1: Introduction to Warehouse Operations
4-1-1
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
4-1-2
QUESTION
•
•
•
•
•
Why are warehouses and inventory
management needed?
Storage of goods
Reduce transportation costs
Improve operational flexibility
Shorten customer lead times
Lower inventory costs
4-1-3
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
4-1-4
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
4-1-5
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
4-1-6
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
4-1-7
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.
4-1-8
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.
4-1-9
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.
4-1-10
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.
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
4-1-11
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.
4-1-12
Formal Customs
Entry
Customs Bond
Duty Payment
Taxes
Permitted Activity
Bonded Warehouse
Documents filed before
material is receipted in
warehouse
Required for all
warehouse entry
Duties paid at time of
withdrawal
Taxes due on January 1st
each year
Material may be cleaned,
repackaged, and sorted
under Customs
supervision
Waste or Damaged
Goods
Domestic Materials
Duty paid at warehouse
receipt
Cannot be comingled
Storage Period
Not to exceed 5 years
Foreign Trade Zone
Documents filed when
material is removed from
the warehouse
No bond required
Duties paid at time of
withdrawal into the USA
Not taxed
Material may be stored,
inspected, repackaged,
repaired, tested, cleaned,
sampled, displayed,
processed, assembled,
salvaged, or re-exported.
No duties paid on waste or
non-usable materials
Admitted without Customs
permit
Unlimited
4-1-13
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.
4-1-14
Warehouse Layout
Typical Warehouse Layout
•
•
•
•
Receiving area
Staging area
Storage area
Value-add area
Bulk
Case Pick
Value-add
Storage
Storage
Processing Area
Staging Area for Receiving and Shipping
4-1-15
Receiving Area
The receiving area of a warehouse
contains dock doors sufficient to
accommodate the conveyance equipment
that delivers material into the warehouse
facility.
4-1-16
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.
4-1-17
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.
4-1-18
Value-Add Area
For 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.
4-1-19
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.
4-1-20
Warehouse Operations
•
•
•
•
•
•
•
•
Receiving
Pre-packaging (optional)
Put-Away
Storage
Order Picking
Packaging and/or Pricing (optional)
Sortation and/or Accumulation
Unitizing and Shipping
4-1-21
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
4-1-22
World-class Warehousing Practices
Take Warehouses from
Stage 1 to Stage 5
4-1-23
World-Class Warehousing Practices
PROCESS
Stage 1
Stage 2
Stage 3
Stage 4
Stage 5
Receiving
Unload,
stage, & incheck
Immediate
put-away to
reserve
Immediate
put-away to
primary
Crossdocking
Prereceiving
Put-away
First-come- Batched by
zone
first-serve
Batched &
sequenced
Location-tostocker
Automated
put-away
Reserve Storage
Floor
storage
Conventional
racking & bins
Some double
deep storage
Some
narrow aisle
storage
Optimal
hybrid
storage
Picking
Pick-tosingleorder
Batch picking
Zone picking
- Progressive
assembly
Zone-picking
Dynamic
Downstream picking
sorting
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-totrailer
Work
Measurement
No
standards
Standards
used for
planning
Standards
used for
evaluation
Standards
used for
incentive
pay
Standards
used for
continuous
feedback
Paper
Bar code
scanning
Handsfree
Virtual
displays
Communications
RF terminals
4-1-24
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
4-1-25
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.
3-1-26
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 bestpractice 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
4-1-27