Fall 2018- Chapter 8: Warehousing


General Warehouses: A facility that is primarily for the storage and protection of goods, with the need to minimize handling and movement.

Distribution Center: Typically goods are received in large volumes where goods are sorted and consolidated to fulfill customer orders.


Economic Needs for Warehousing

  • Seasonal Production: Proper storage  of seasonal goods such as agricultural commodities
  • Seasonal Demand: Storage of seasonal products when peak seasonal demand hits
  • Production economies of scale: Mass production of products to accommodate future demand.
  • Quick Supply: Goods made available to consumers when needed
  • Continuous production: Sufficient stock of raw materials.
  • Price Stabilization: To keep the price of goods in the market stable


Types Of Warehouses

  • Factory Warehouse – Connects production with wholesalers (Large Order Sizes)
  • Retail distribution center – Advanced order details to perform item picking
  • Catalog retailer/e-tailer – Fulfillment warehouse for catalog sales (Large number of small orders)
  • Support of Manufacturing Operations – Provides raw material and WIP to manufacturing operations


Warehouse and  Supply Chain

The function of warehouses has significantly changed from a way to purely store goods to facilities that are faster, reduce costs, highly flexible, and highly efficient in the face of a growing consumer market.

  • Distribution Centers: Stocked with product to be redistributed to retailer, wholesaler, and directly to consumers
  • Consolidation: Combine product into exact quantities for specific locations
  • Break Bulk: Arrange large shipments for delivery
  • Cross-docking: Unloading incoming trucks directly into outbound trucks wit little storage in between
  • Reverse Logistics: Items goring from end-user to distributor/manufacturer


Ownership Of Warehouses

  • Public Warehouse: Warehouse space that can be leased for short and long term distribution needs
    1. Time based fees: Storage charges
    2. Transaction fees: handling charges, in/out handling fees, special services, etc.)
  • Private warehouse: Owned and operated by suppliers and re-sellers for their own distribution activity
  • Contract warehouse: Handle shipping, receiving, and storage of products on a contract basis.
  • Bonded warehouse: Licensed to receive imported goods for storage, but customs payment is required
  • Government warehouse: Owned, managed, and controlled by central and local government.
  • Co-operative warehouses: Owned, managed, and controlled by co-operative societies


Automated warehouses

With recent technology warehouses now have the capability to be automated at various levels. These levels can range from small conveyor belts to assist in transporting products across small areas all the way to fully automated where little human intervention is needed to handle storage activities.


Climate-Controlled Warehouses

Some warehouses require special handling conditions such as freezers for frozen products, humidity controlled environments for delicate products like flowers or highly sensitive computer products. However they are typically used for agricultural products.


Economic Benefits of Warehouses

  • The more DC’s you have in the network, the greater the inventory cost however the cost of lost sale will be lower as a result of being closer to the customer.
    • Square Root Rule: Total safety stock can be approximated by multiplying the total inventory by the square root of the number of future ware house locations divide by the current number
  • Carrying more inventory at increase operation costs, but transportation costs decline.



This is a type of warehousing that pulls together small shipments from multiple suppliers from a similar location and combines them in to larger more economical shipping loads for the same intended area

  • Consolidation programs can help each individual manufacturer and shipper to have lower total distribution costs
    • Break-bulk in similar except that no storage is per-formed. Operators receive combined order from manufactures and ship to customers and sort or split individual orders and arranged for local delivery. Transport costs are reduced as well as less difficulty in tracking

Accumulation, mixing, and sorting

  • Accumulation
    • When a warehouse accumulates spot stock for a selected amount of a firms product line
    • Seasonal or limited product lines
    • Reduced delivery time by committing inventory to strategic markets during critical marketing periods instead of year-round
    • Allows inventories to be placed into a variety of markets adjacent to important customers just before peaks in seasonal sales
  • Mixing
    • Provides an assortment to customers
    • Desired combination of each product for each market is selected
    • Overall transportation charges can be reduced when warehouses are used and plants are geographically separated
  • Sorting
    • Stocks product combination in anticipation of customer orders
    • Multiple products from different manufacturers and special assortments as specified by customers


  • Delay production by performing light assembly and labeling activities
  • Helps postpone final production until actual demand is known

Market Presence

  • Using local warehouses to gain a competitive advantage and potentially increase profitability
  • Can be more responsive to customer needs and offer quicker delivery

Warehouse design and layout

  • Size of facility
    • Major determinant is the demand that is expected to be stored
    • Effected by product mix and functional requirements such as allocation and automation
    • Miscellaneous space is needed for offices and other value-added functions
  • Number of Stories
    • Limit to 1 so product doesn’t need to move up and down
    • Elevators and conveyors require time and energy and often become bottlenecks
  • Cube utilization
    • Cube utilization – utilize the warehouse’s full volume while maintaining low material costs
    • Challenges include the variety of items and sizes stored
    • Should use the most out of the height of the facility (racking in target)
    • Limited by safe lifting capabilities of equipment such as forklifts
  • Product flow
    • As straight as possible, receive -> store ->ship
    • Minimize congestion and confusion
    • Efficient product slotting has a huge impact on efficiency and productivity
      • Reduce order-picking labor requirements
      • Matching unit loads with storage slots
      • Balance workload between operators
      • Separating similar products can avoid errors
      • Lower product damage
    • Facility layout
      • Maximize flow of material (product volume or velocity)
      • Better for handlers to make a longer move than to have a number of handlers make numerous, individual, short segments
        • Wastes time and increases chance of damage
      • High volume sales should be located so it minimizes distance moved like near primary isles
      • Heavy items lower to the ground to minimize effort and risk; part of ergonomics
    • Material handling
      • Based on physical and volume characteristics
      • Increase cube utilization by using as much height as possible, improving efficiency, increase load per move and speed of response
      • Types
        • Storage and handling equipment – non automated storage like pallets and shelving
        • Engineered systems – custom engineered material-handling systems like conveyors and handling robots
        • Industrial trucks – motorized and operator driven such as forklifts or manually like a hand truck
        • Bulk material handling – used to move and store bulk materials. Often seen on farms and shipyards
    • Pallet Positioning: storing pallets is a critical process during warehousing and must be thought out depending on if the pallets will be retrieved in a last in, first out (LIFO) manner, or first in, first out (FIFO) manner. The more efficient pallets can be stored and retrieved the more money the company will make.
    • Pilferage and Deterioration: consider facility layout, manage inventory, limit access to outsiders, and secure warehouse with alarms and locks. Pilferage is theft of a small quantity of a relatively large shipment. Deterioration is the loss of products due to damage.

Warehouse Operations

  • Receiving: involve the transfer of ownership of goods, which involves financial responsibility. The documentation of this process must be carried out smoothly and accurately to ensure the product meets the customer as soon as possible.
  • Put away: moving of goods from the dock to the most optimal warehouse storage location. This process has a direct impact on the picking process. If goods are not placed in the right location, there is an increase in travel time and the time it takes to pick and pack goods. Failing to store product in the most appropriate location also poses a security threat to the product and safety to the employees.
  • Storage: companies store product in optimal locations in the warehouse to provide the fastest and most efficient turn-around time to satisfy customers
  • Picking: this is the process of retrieving products as quickly and efficiently when the customer places an order for them
  • Shipping: final warehouse process which means all processes before it have a direct impact on its efficiency and effectiveness. Shipping is only considered successful if the right order is sorted and loaded, destined to the right customer through the right mode of transit, and delivered on time.

Key Metrics

  • Customer-Facing Metrics: This is the basis of the accuracy of the contents shipped, if the customer was satisfied, and if the shipment was delivered on time.
    • Perfect Order Measurement: this is a measurement of shipping parameters, such as, was the order delivered to the correct destination, at the correct time, free of defects, and included proper documentation, pricing and invoicing. These are very difficult parameters to meet fully.
  • Internal Metrics: these are parameters that measure the efficiency and timeliness in the warehouse such as, distribution cost per unit shipped, carrying cost of inventory, dock-to-stock cycle time, and material handling damage.


  • Warehouse Management System (WMS): is a software that is designed to allow organization to track products from the time they enter a warehouse until they are shipped. These management systems are also designed to support and optimize warehouse efficiency.


  • Yard Management System (YMS): is a software that is designed to maximize inventory flow as inventory enters and leaves the yard outside. YMS provides real-time information that allows operators to view trucks, trailers, goods and materials from the moment they arrive at the gate to the moment they leave the facility.


Location and Spatial Issue Relationship in Warehouses

  • In response to Hurricane Michael the Georgia department of Agriculture leveraged GIS to conduct assessments of food facilities across Georgia.
    • Collected Data from custom surveys to review each firm’s status of electricity, potable water, sewage system, food handling and preparation areas, and lost food product due to physical damage, loss of power, flooding, etc.
    • Damages to food storage areas helped inspectors determine the impact to Georgia’s food and agriculture center
  • Maharashtra government and Central Warehousing Corporation, has been identified as the nodal body for creating the additional warehousing capacity.
    • Warehouses for storage or grains and other commodities with extra capacity are being geotagged using GIS in order to account for the extra capacity needed by the end of the year.
  • Amazon has created for disaster relief pop-up warehouses where residents can pick up parcel deliveries even if their homes are isolated by storm damage.
    • Flexible warehouses allows amazon to conveniently place needed goods quickly, to manage and store 600,000 amazon donated disaster relief items.


Video Links:

Fully Automated: https://www.youtube.com/watch?v=4DKrcpa8Z_E

Types or warehouses: https://www.youtube.com/watch?v=wUdFQ-8wmQ8

WMS: https://www.youtube.com/watch?v=203Oo_hE37U

Warehouse Space Planning: https://www.youtube.com/watch?time_continue=6&v=_NqsxCJ0vRo

Warehouse Operations: https://www.youtube.com/watch?time_continue=5&v=mm843v3Mj7c


Presentation Link: 





Leave a Reply

Your email address will not be published. Required fields are marked *