What is Warehousing ?
A permanent facility for storing and distributing the products to the end consumers will be required by a logistical system. The location where the inventory i received, stored, and shipped out depending upon the demand is known as a warehouse. These warehouses can be seen as secured and well-protected buildings which have some additional features to avoid any kind of damage to the products and goods that are going to be stored there.
All the activities, that take place between the time when the goods are received into the warehouse and the time when these goods are delivered to the customers, can together be termed as warehousing.
One of the important areas regarding the logistic decisions is warehousing. Warehousing is considered to be a significant element of logistics because the capability of an organization to facilitate the desired level of customer service directly depends on it. There can be three types of warehouses depending upon the ownership; namely public, private, and contractual. There are different merits and demerits associated with each type of warehouses; it is up to the organization to select the kind of warehouse which fulfills its requirements and resources. A sophisticated planning and analysis will be required to select the right kind of warehouse and in this regard the experts from real estate, operational research, and industrial engineering can be quite helpful.
Definition of Warehousing
According to Robert Hughes :
"Warehousing is a set of activities that are involved in receiving and storing of goods and preparing them for reshipment".
Functions of Warehousing
There are number of functions which are performed by a warehouse as a part of the integrated logistic system so that the entire system can function smoothly and optimally. There are mainly three types of functions which are stated below :
1) Movement Function :
Movement function of warehousing encompasses the following activities:
i) Receiving :
In case of receiving the shipment from the sender, there are different types of tasks which are involved. The main activities. which will be included in this are unloading of goods, inventory record updation, damages inspection, merchandise count verification as per the orders and shipping details.
ii) Transferring :
These activities include the task of transferring the received shipment to those locations of the warehouse which are allotted for storing such items so that these inventories can be easily accessed whenever the need arises.
iii) Order Picking/Selection :
The activities related to order picking and selection take place when demand of some products, which are stored in the warehouse, is received by the warehouse from any party.
iv) Shipping :
This activity is followed by order picking and selection. During this activity, the products and goods as demanded by the party are packed for shipping. After this, the mode of transport is selected and inventory. records are updated accordingly.
2) Storage Function :
This function can be executed on semi-permanent or temporary basis. The nature of warehouse storage is determined during the early phase of logistical system designing. Warehouses can store the items temporarily so as to fulfill the demands only. On the other hand, they can store the items for a longer period of time either in case of seasonal products or in the anticipation of forward buying'. The concept of forward buying refers to the practice when products are purchased in the quantity more than the demand because the manufacturers are selling them on discount. By doing this, warehouse owners can enjoy the profit when the prices of products are raised by the manufacturers again.
3) Information Transfer Function :
The function of information transfer is performed simultaneously with other two functions of warehousing, namely, movement function and storage function. The different types of information, which should be provided by the warehouse to its associated firm, includes the information related to stock keeping locations, order fulfillment record, throughout levels (the amount of product moving through the warehouse), inbound and outbound shipments, and so on. In order to procure these types of data, the use of information technology is implemented quite extensively so as to transmit it online for the use of decision makers.
Options of Warehousing
There are following warehousing options through which a warehouse space can be occupied :
1) Private Warehouse :
Private warehouses are those which have their entire warehousing facility under the financial and administrative control of a private firm. It simply means that the operations of warehouse are conducted by the firm who is the legal owner of the products. The warehouses can either be on lease or can be constructed by the firm itself. Lease time can be of three to five The following are three favorable situations to opt for the private warehousing facility :
- When there is a requirement of some special kind of material handling and storing facilities as per the nature of product because such customized facilities cannot be facilitated by the other options.
- When there is a very high volume of product and goods to be handled which can provide the benefits of economies of scale and can optimally utilize the capacity.
- Where high level of supervision is required over the operations.
2) Public Warehouse :
In logistical system, public warehouses are the most popular setups. Any kind of services can be provided by the operator, no matter for how much time it is asked for. Both the benefits, i.e., economies of scale and financial flexibility are provided by the public warehouses. As the main activity of these warehouses is warehousing, thus, they are able to facilitate the greater operating and management expertise. It signifies that the different operative risks associated with the warehousing are well addressed by the warehouse operators and therefore, they are keen to exploit different opportunities available in the market.
3) Contract Warehouses :
The best traits of both public and private warehousing are combined in the contract warehouses. In comparison to the public warehouse arrangements, the contract warehousing services are cheaper as they maintain long-term relationship and share risk, however, there is an obligation of keeping certain amount of fixed assets. Due to shared labour, management, information resources, and equipment among number of clients, the advantages of better flexibility, economies of scale, and expertise are provided by the contract warehouses. The sharing of facilities of warehouse among the different clients of similar industry such as grocery products is quite common in contract warehouses, yet these facilities are not offered to the direct competitors.
In order to cover logistics activities other than warehousing such as inventory control, order and return processing, transportation, customer services, etc., these contract warehouse operators are trying to increase the spread of their services. There are many contract warehouses which have the capability of assuming entire logistics responsibility of different client companies.
Types of Warehouses
The classification of warehouse is discussed below :
1) Bonded Warehouses :
Bonded warehouses are those warehouses that provide the facilities of deferred payment of excise, octroi, or customs duty. These warehouses are governed by the Customs and Excise Act as well as by the Municipal Corporation regulations.
2) Field Warehouses :
The warehouses which are managed by a public warehousing agency in the premise of any company or factory are termed as field warehouses. These kinds of warehouses require the facility of borrowing from a bank against the certification of the products, either finished or work-in-progress, by a professional and independent ware-houseman.
3) Refrigerated Warehouses :
The main function of refrigerated warehouses is to manage and maintain the medical items, chemical products, food items, and all those items which have certain temperature requirements. These warehouses are of two types, i.e., frozen and chilled. The security of perishable products is provided by these warehouses against the payment of storage for the space required by different members.
4) Agricultural Warehouses :
These types of warehouses are mainly used for storing the agricultural products which are grown in their nearby locations.
5) Distribution Warehouses :
These warehouses are the ones which are located near to the consuming areas of certain products. The main purpose of these facilities is to move the goods rather than storing them for long. These warehouses are automated and large in size; reason being the responsibilities of receiving goods from suppliers, taking orders from customers, and delivering the goods to them.
6) Buffer Storage Warehouses :
These warehouses are constructed in the locations which are strategically significant and are equipped with the suitable transport and communication facilities. These warehouses are mainly used by the government agencies to store the fertilizers or food grains for better management and for ensuring the supply to different locations according to the orders received by them.
7) Export and Import Warehouses :
The location of these warehouses is near to the ports which are operational for facilitating the international trades.
8) General Merchandise Warehouses :
The warehouses which are used to handle the general package commodities, e.g. small appliances, household supplies, paper, etc. are referred to as general merchandise warehouses.
9) Household Goods and Furniture Warehouses :
The warehouses which are mainly used to store the large and bulky, products such as furniture and household appliances are known as household goods and furniture warehouses.
Benefits of Warehousing
The importance or benefits of warehousing can mainly be grouped under the following two categories :
1) Economic Benefits :
When the overall logistical costs are decreased because of using one or more warehousing facilities. the benefits of warehousing are said to be achieved. The different economic benefits are discussed below :
i) Consolidation :
One of the important economic advantages of warehousing can be soon as the shipment consolidation. Different manufacturing plants send and transport the material, which is related to a certain customer, on a single transportation shipment to consolidating warehouses. Acquiring the lowest possible transportation rate and decreased blocking at the receiving dock of the customers are the main advantages of this.
ii) Break Bulk and Cross Dock :
Break bulk and cross dock warehouses are different from consolidation warehouses in only one aspect, i.e., the storage facility is not available in break bulk and cross dock warehouses. The main function of break bulk warehouse is BO receive the consolidated goods from a single producer or client and break it into smaller shipments to send it to different individual customers Cross dock facility also serves the same functions as break bulk, the only difference is that various manufacturers send their shipments to cross dick warehouses Cross dock facility is very popular among the retail chains so as to replenish fast moving store inventories.
iii) Processing Postponement :
With the help of processing and light manufacturing activities, warehouses can be used to delay or postpone the production The final production can be postponed or delayed with the help of warehouses, which are equipped with the labeling or packaging facilities. until the demand occurs for the products or goods. It must be noted that the postponement is done deliberately by the companies to avoid wrong manufacturing and incorrect deployment of inventory.
iv) Stockpiling :
In certain businesses, it is almost a necessity to maintain the stock of seasonal products which in turn makes the warehouse services beneficial for the company indirectly. The inventory buffer is facilitated by stockpiling, which facilitates the production activities to take place even within the limitations aroused due to material, resources and the customer.
2) Service Benefits :
The costs may or may not be controlled by the service benefits which are received by warehouse in any logistical system. Different types of service benefits are stated below :
i) Spot Stock :
In case of physical distribution, the feature of spot stock is used most widely. This service is mainly popular among the manufacturers whose product lines are either very limited or are highly seasonal. With the help of advanced inventory commitment to strategic market, there can be a significant reduction in the delivery time in comparison to storing inventories in the warehouse for the complete year or sending shipments directly from the manufacturing plants.
ii) Assortment :
In order to tackle the future orders, different product combinations can be stored in the assortment warehouse. These warehouses can be used by any wholesaler, retailer, or producer to store their product. Assortments in these warehouses not only represent several manufacturers but sometimes also the combination of products as per the demands specified by the customers.
iii) Mixing :
Truckloads or carloads of goods are transferred from manufacturing plants to warehouses in a mixing warehousing. In this way, the transportation activity costs less to the large shipments. As the shipments reach mixing warehouses, they are unloaded followed by the task of separating the combinations as per the requirement of markets and the customers.
iv) Production Support :
Comparatively prolonged activities of production of certain components may be justified by the concept of economies of scale. A stable supply of components and different material is provided to assembly plants by the production support warehousing. These warehouses also maintain a safety stock of those items which are bought from the external vendors so that the long lead times or substantial variations in consumption cannot pose a problem.