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Distribution Management

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WAREHOUSING / STORAGE
Distribution Management, 7th Semester – B.B.A. By Mr. Navin Raj Saroj M.B.A. (Marketing)
WAREHOUSING AND STORAGE
“Warehousing and storage is an act of storing and assorting the
finished goods so as to create maximum time utility at minimum
cost”
• Need for storage arises both for raw material as well as finished
products
• STORAGE involves proper management for preserving goods from
the time of their production or purchase till actual use.
• When this storage is done on a large scale and in a specified
manner it is called WAREHOUSING.
Now a days, many private firms are turning to distribution centers
rather than constructing the warehouses.
The concept of distribution warehouse or a
distribution centre is vastly different from the
earlier concept of a godown for storage. The
godown is merely a dumping place. Godowns are
maintained merely for storage of surplus goods.
The establishment of warehouses is ensuring a
continuous and uninterrupted supply of goods.
CONCEPT OF WAREHOUSING
CONCEPT OF WAREHOUSING
A warehouse is a location with adequate facilities
where volume shipments are received from a
production Centre, broken down, reassembled into
combinations representing a particular order or
orders, and shipped to the customer’s location or
locations. The rationale for establishing a
warehouse in a distribution network is the creation
of a differential advantage for the firm. This
advantage accrues from achieving a lower overall
distribution cost and or obtaining service advantage
in a market area.
WAREHOUSE ALTERNATIVES
1. Private Warehouses
 Owned or leased by the product owner
 Control is fully with the product owner
 Changes can be made to integrate the warehouse with
rest of the logistical system
 Provides market presence to the product owner
 There is no profit to be added to the cost
-continue
2. Public Warehouses
 Available to companies on hire
 Overheads get distributed over a large customer base
 As warehousing is their core business public warehouses
offer expertise in management
 Flexibility of location
 Significant scale economies, several users and resultant
volume, benefits in transportation costs
WAREHOUSE ALTERNATIVES Cont…

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Warehousing

  • 1. WAREHOUSING / STORAGE Distribution Management, 7th Semester – B.B.A. By Mr. Navin Raj Saroj M.B.A. (Marketing)
  • 2. WAREHOUSING AND STORAGE “Warehousing and storage is an act of storing and assorting the finished goods so as to create maximum time utility at minimum cost” • Need for storage arises both for raw material as well as finished products • STORAGE involves proper management for preserving goods from the time of their production or purchase till actual use. • When this storage is done on a large scale and in a specified manner it is called WAREHOUSING. Now a days, many private firms are turning to distribution centers rather than constructing the warehouses.
  • 3. The concept of distribution warehouse or a distribution centre is vastly different from the earlier concept of a godown for storage. The godown is merely a dumping place. Godowns are maintained merely for storage of surplus goods. The establishment of warehouses is ensuring a continuous and uninterrupted supply of goods. CONCEPT OF WAREHOUSING
  • 4. CONCEPT OF WAREHOUSING A warehouse is a location with adequate facilities where volume shipments are received from a production Centre, broken down, reassembled into combinations representing a particular order or orders, and shipped to the customer’s location or locations. The rationale for establishing a warehouse in a distribution network is the creation of a differential advantage for the firm. This advantage accrues from achieving a lower overall distribution cost and or obtaining service advantage in a market area.
  • 5. WAREHOUSE ALTERNATIVES 1. Private Warehouses  Owned or leased by the product owner  Control is fully with the product owner  Changes can be made to integrate the warehouse with rest of the logistical system  Provides market presence to the product owner  There is no profit to be added to the cost -continue
  • 6. 2. Public Warehouses  Available to companies on hire  Overheads get distributed over a large customer base  As warehousing is their core business public warehouses offer expertise in management  Flexibility of location  Significant scale economies, several users and resultant volume, benefits in transportation costs WAREHOUSE ALTERNATIVES Cont…
  • 7. 3. Contract warehouses  Contract warehouse operators take over logistics responsibility from manufacturing company  Long term relationship and customized service  Expertise of management  Shared resources with several clients WAREHOUSE ALTERNATIVES Cont…
  • 8. 4. Government Warehousing: These warehouses are owned, managed and controlled by central or state governments or public corporations or local authorities. Food Corporation are examples of agencies maintaining government warehouses. WAREHOUSE ALTERNATIVES Cont…
  • 9. PURPOSE OF WAREHOUSING To provide desired level of customer service at the lowest possible total cost It is the part of the firm’s logistics system that stores products (raw materials, packing materials, WIP, FG) at and between point of origin and point of consumption and provides info to management on the status, condition and disposition of items being stored. Distribution Warehousing relates mainly to FG
  • 10. REASONS FOR WAREHOUSING Service Related • Maintain source of supply • Support customer service policies • Meet changing market conditions • Overcome time and space differentials • Provide customers with the right mix of products at all times • Temporary storage of materials to be disposed or re- cycled Cost Related • Achieve production economies • Achieve transportation economies • Take advantage of quantity purchase discounts and forward buys • Least logistics cost of a desired level of customer service
  • 11. FUNCTIONS OF WAREHOUSING Receiving Goods: A warehouse accepts the merchandise delivered by a transporter or an attached factory and then accepts the responsibility for the merchandise. Identifying Goods: The appropriate stock keeping units are identified and a record made of the number of each item received. Sorting Goods: The incoming goods are sorted out for appropriate storage area in the warehouse. Dispatching Goods to Storage: The goods are kept aside when they can be found later, when needed. Holding Goods: the goods are kept in storage under proper protection until needed in the warehouse.
  • 12. FUNCTIONS OF WAREHOUSING Retrieving Selecting or Packing Goods: items ordered by customers are taken out from storage and grouped in a manner useful for the next step. Marshalling Goods: The several items making up a single order are brought together and checked for completeness and order records are prepared or modified. Dispatching Goods: The consolidated order is packaged suitably and directed to the right transport vehicle. The necessary shipping and accounting documents are also prepared. Preparing Records and Advices: the number of orders received, the items received and on hand etc., are recorded for replenishment action and stock control, and the demand and receipt data are forwarded to a control centre located elsewhere.
  • 14.  The primary objective of warehouse is movement of goods.  To maintain the flow of goods throughout the system, these goods may be raw materials or finished products.  To set up a network of warehouses closest to the customer locations to service markets better and minimize cost • 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 with customers OBJECTIVE OF WAREHOUSING
  • 15. To ensure a continuous, uninterrupted supply of goods in the market are for the following: 1. Ensure protection against delays and uncertainties in transportation arising from a variety of factors; 2. Eliminating lack of sophistication in production control and consequent uncertainties in the availability of product at the desired time and place; 3. Providing for adjustment between the time of production and the time of use because production and use can be seldom synchronised; 4. Serving as reservoir of goods, receiving surplus goods when production exceeds demand and releasing them when a scarcity is anticipated. ROLE OF WAREHOUSING
  • 17. PROCEDURES TO IMPROVE MATERIAL HANDLING  Flow chart of present operations should be prepared. This chart should trace the flow to goods from the end of the production line, or from another warehouse, to deliver to the customer,  For each movement, the volume of each product moved, the method of movement, the unit handling cost, and the average distance moved must be worked out and ascertained.  Combining new equipment in various ways, cutting or modifying existing operations, revising arrangements for facilities and new alternative methods may be worked out.  New methods must be evaluated by balancing benefits with costs.  Branch warehouses may be added to step up stock handling operations.  The warehouse concept is changing under the impact of automation, structural modifications within the warehouse industry.
  • 20. WAREHOUSING OPERATIONS – RECEIPT OF GOODS The following operations are carried out before the acceptance of goods for storage and issue of a warehouse receipt: i. The user of the facility or depositor tenders the goods for storage ii. Technical assistance to examine the goods visuals and worth storage iii. The goods are stored in good conditions iv. To clean the goods or commodities as per requirement v. The goods sample checked on routine basis, vi. The stocks are graded – moisture content, foreign matter, shriveled grains, dirt etc. vii. Packages or bags standardization as per norms, viii. bags or packages are stacked on the wooden crates, ix. Data base update and record keeping by the warehouse manager
  • 21. One of the fundamental features of warehousing is scientific storage and preservation of goods. A warehouseman is responsible for delivery of goods in the same condition as regards quantity and quality as they were when they were bought for storage in the warehouse. In order to ensure that the quality remains the same and is well preserved, the following steps are taken: 1. Samples obtained after the scientific sampling of the stocks is duly sealed with a signed sample slip put inside the bag, 2. The warehouse demarcated into different sections for storage of different commodities or items according to their nature. 3. crates or pallets are used where goods are to be stacked on the floor 4. Different stacking methods are adopted, depending on the size of packages and the duration of storage 5. Quick moving goods are stored in separate section, 6. Operational spaces between stacks for re-stacking and turnover etc. WAREHOUSING OPERATIONS – STORAGE IN WAREHOUS
  • 22. The delivery of goods is conditioned by the following factors: 1. The goods stored in the warehouse may be delivered in one lot or in installments, 2. To examine the goods condition before the delivery of goods, 3. Application for delivery of goods has to be tendered by the depositor, 4. Work on the storage charges, insurance, delivery challan etc. 5. Necessary entries made before the delivery of goods, 6. The stocks are delivered against the acknowledgement of the depositor. WAREHOUSING OPERATIONS – DELIVERY OF GOODS
  • 23. Some of the factors contribute for cost differences in Warehouse; 1. Space utilization in warehouse, 2. Stacking and Non-stacking qualities of product, 3. Handling techniques 4. The size and weight of individual products or packages, Warehousing Services Temporary Storage, Quick Delivery Balancing of Supply and demand Manipulation in transit Specialized services for particular commodities Refrigeration or cold storage Invoicing and Collection etc. WAREHOUSING OPERATIONS – WAREHOUSING SERVICES
  • 24. WAREHOUSES  Support Manufacturing  Mix products from multiple facilities for shipment to a single cutomer  Break – bulk  Aggregate  Used more as a ‘flow-thru’ point than as a ‘hoarding’ (Symbolic procedure only) point
  • 25. I. Bonded Warehouses: Private and Public warehouses can be bonded under the customs and Excise Act and Municipal Corporation regulations, facilitating deferred payment of customs. II. Field Warehouses: Field warehouses are those which are managed by a public warehousing agency in the premises of a factory or company which needs the facility for borrowing form a bank against the certification of goods in storage or in process by an independent professional warehouseman. III. Cold Storage: Cold storage facilities are provided for perishables against payment of a storage charge for the space utilized by different parties, IV. Agricultural Warehouses: These warehouses are meant for storing agricultural produce grown in a certain area and are located in assembling or regulated markets. TYPES OF WAREHOUSING
  • 26. V. Distribution Warehouses: These warehouses are located close to the manufacturing concerns or consuming areas and time taken for transit. VI. Buffer (Safeguard) Storage Warehouses: these warehouses are built at strategic locations with adequate transport and communication facilities. They store food grains or fertilizers etc. VII. Export and Import Warehouses: These warehouses are located near the ports from where international trade is undertaken. They provide transit storage facilities for break – bulk, packaging, inspection, marking etc., are available at these warehouses. TYPES OF WAREHOUSING cont…
  • 27. The following considerations determine the location of a warehouse; 1. Market service area and cost of distribution from the warehouse to the market area. 2. Satisfaction of transport requirements and facilities available in the form of rail, link roads and road vehicles. 3. Transportation rates prevailing in the area and distribution costs per unit. 4. Competition by rival companies and whether they have warehouses in the same area. 5. Availability of power, water, gas, sewerage disposal and their cost. 6. Labour supply and labour costs in the area. 7. Industrial relations climate and labour productivity. 8. Pricing arrangements and level of service desired to be rendered in terms of availability of the product to the customer. 9. Real estate, excise and government taxes assessed in the area. WAREHOUSE LOCATION
  • 28. 10. Attitude of local residents and government toward establishments of the warehouse. 11. Restrictions associated with warehouses 12. Potential for the later expansion 13. Cost of land for the warehouse and other costs. 14. Possibility of change in the use of the facility at a later date if the company so desires, and lease or sale of the land and buildings. WAREHOUSE LOCATION Cont…
  • 29. LOCATION OF DEPOTS AND DISTRIBUTION WAREHOUSES The location of depot or distribution warehouse with reference to a marketing centre has considerable influence on not only the cost of distribution but also on the level of service and psychological advantages over a competitor whose supply point is far removed from the marketing centre. There is a heavy fixed capital investment involved in locating a depot or warehouse (A) Location of a Single Depot: A single depot serve a area in extreme situation, to serve areas more than one depot is required. The methods adopted to select a single depot location have been selected on the basis of ; i. Location at Centre of Gravity of Area: this point is expected to be at the minimum average distance from all the locations in the area. ii. Location at Centre of Gravity of Load or Tonne – Centre: Location chooses based on location of each customer to be served and weights hung on strings in proportion to each customer annual purchases. Location of Centre of Gravitiy of Tonne – Kilometres or Tonne – Kilometre Centre: The depot may turn out to be in the middle of a lake or in a spot where no suitables or buildings are available, or where the construction of the warehouse building is not permitted by town and country planning, zoning rules etc.
  • 30. B. Multi – Depot Networks: Trying out a large number of feasible configurations of multiple areas in a way which converges in each case on the best one, and repeating this for one depot, two depots, three, four or five depots etc. i. Number of Warehouses and Costs: Warehouse costs include; 1. Revenue costs of the land and buildings used for storage, assembly and loading (rent, rates, maintenance, heating, lighting etc.) 2. Interest on the capital value of the stocks, 3. Loss of, damages to, and depreciation of, stocks; 4. Direct costs of receiving goods into stock and assembling orders for dispatch, including any idle time of order – pickers 5. Supervision and administration of delivery fleet and provision of reserve capacity. LOCATION OF DEPOTS AND DISTRIBUTION WAREHOUSES Cont…..
  • 31. WAREHOUSE BUILDING PLAN A warehouse building has to be planned and designed bearing in mind the kinds of goods that are likely to be stored, the type of handling equipment that are likely to be used and the height up to which the stacks may be built. Following are the constructional requirements of a warehouse: i. Site ii. Cleanliness iii. Foundation iv. Pavement v. Roof vi. Floor and Walls vii. Doors viii. Windows ix. Ventilations x. Drain Pipes
  • 32. CAPACITY OF WAREHOUSE The capacity of warehouse affected by number of factors; Type of material to be handling Handling system to be used Aisle requirements Stock layout arrangements Dock requirements Local building codes Office area required etc.
  • 33.  Ceiling Height: ceiling heights depends on construction costs, material handling costs, and load stacking characteristics.  Length and Width of Warehouse: The length and width of the warehouse building has to be decided based on the material movement through a warehouse and construction.  Rail Platforms Connectivity: every warehouse requires trucks docks. The need for a rail platform in addition to truck docks depends on whether the product is to be received or dispatched by rail.  High Truck docks Capacity: Inward rail consignments or empty wagons arrive at the warehouse in batches. But trucks arrive one at a time and in random manner.  Warehouse Security From: • Theft and house breaking • Fire • Riots and Civil Commotion • Moisture, Insects and rodents SELECTION OF WAREHOUSES