Supply Chain

Academy
Warehouse
Management
Fundamentals

Course
Notes
Content
1. Warehouse Management Definitions

2. Warehouse Management Objectives

3. Size and Location Planning

4. Layout Planning

5. The Impact of Errors of Warehouse Operations

6. Receiving, Putaway and Storage

7. Order Picking, Packing and Shipping

8. Warehouse Safety – Docks, Forklifts, Conveyors and Storage

9. Warehouse Safety – Ergonomics, Recharging Stations, Chemical Spills

and Accident Prevention
1. Warehouse Management Definitions

• Warehouses are operated by manufacturers, suppliers, distributors, retailers and 3rd party
logistics providers.

• There are three major types of warehouses. Manufacturing, distribution and special purpose
& public sector warehouses.

• There are three types of manufacturing warehouses. Raw material warehouses for storing
components, work-in-progress or WIP warehouses for storing partially completed goods
inside the factory and finished goods warehouses for storing finished goods.

• There are six types of distribution warehouses. Distribution centers, cross-dock centers,
fulfillment centers, retailer warehouses, value-added-services or VAS warehouses and
bonded warehouses.
• Distribution centers are used by distributors to combine small shipments from many
manufacturers into a single large shipment for retailers.

• In cross-dock centers, shipments move directly from the manufacturer’s truck to the
retailer’s truck without being stored in a warehouse.

• Fulfillment centers ship products directly to end customers.

• Retailer warehouses are used by retailers to store products close to their retail stores.
• In VAS warehouses, products can be customized for specific customers.

• Bonded warehouses enable companies to move shipments between different countries

while paying customs duties only once.

• Reverse logistics warehouses, sortation centers and public sector warehouses are types of
special purpose & public sector warehouses.
2. Warehouse Management Objectives

• Reasons why Warehouses are needed include:

o Demand changes: Holding inventory allows us to keep production steady throughout

the year and to fill orders quickly when demand is high.

o Seasonal Demand: To store inventory that is built up to be sold during periods of

high demand, such as the holiday season.

o Supply problems: To have a extra components available, in case goods are not
delivered on time.

o Transportation costs: Transportation cost of shipping larger quantities of goods and

keeping them in stock can be lower than the transportation cost of making many
shipments of small quantities.

o Economies of scale: Transporting full truckloads of goods and keeping them in stock
can be cheaper than transporting partly empty trucks.
 o Bulk Discounts: Suppliers frequently offer bulk discounts, making it cheaper to order
large quantities and keep them in stock.

o Customer Response time: Keeping inventories of finished goods can help the
company to fill customer orders faster

• Warehouse Management creates value for the company in many ways including:

o Warehouse location: Having warehouses close to customers can help to fill

customer orders quickly.

o Warehouse layout: A warehouse layout in which items stored are easy to find can
reduce delays and errors in shipping orders.

o Inventory planning: Maintaining the right inventory levels can help the company to
always ship customer orders on time, without the risk of inventories getting damaged
or becoming obsolete.
o Warehouse Operations Management: A well-run warehouse can ensure that goods
are shipped to the customer according to the customer’s specifications.

o Value-added services: Goods can be customized for individual customers in a

warehouse before they are shipped to the customer.
3. Size and Location Planning

• Investing in a warehouse is an important decision. Where the warehouse is located, how big
it is, and how the space within the warehouse is organized, all have a big impact on how well
your company will be able to serve its customers, and on the profitability of your company.

• In order to decide on the location of the warehouse, first consider what the business needs,
such as what group of customers it will serve.

• You must also consider the trade-off between cost and closeness to customers.

• Ease of access - for both employees and inbound and outbound deliveries - is also a factor in
deciding where to locate a warehouse.
• Availability of skilled labor is another factor in warehouse location.

• Government regulations and company strategy also affect warehouse location decisions.

• After location, warehouse size is the second question that must be answered for warehouse
design.

• Warehouses should not be any bigger than they need to be due to the extra cost of building
and maintaining the warehouse.

• To calculate how big a warehouse must be, first calculate how much space your average
volume of inventory will occupy.
• Honeycombing means that storage space is lost because pallets are not always full, and that
that space cannot be used to store other products.

• To decide how much storage space you need, you will need to look at average demand and
peak demand. Where peak demand is not much higher than average demand and lasts for a
longer time, you may decide to have enough storage space to handle peak demand.

• Where peak demand is much higher than average demand and lasts for a short period of
time, you may decide to only have enough space to handle average demand.
• How demand changes over the course of a year is known as the “demand profile”.

• To calculate how much storage space your warehouse must have, you will need to know the
amount of Days of Supply (DOS) the warehouse will hold and combine that with the monthly
demand for storage space.

• A good rule of thumb is that the storage space in a warehouse only occupies 60% of the total
space needed for the warehouse.
4. Layout Planning

• There are two ways to design the material flow of a warehouse; “U-shaped flow” and
“Through flow.”

• In the “U-shaped Flow,” the receiving and shipping docks are on the same end of the
warehouse.

• Advantages of using the “U-shaped Flow” include speed, dock flexibility, cross-docking,
utilization of docks, utilization of forklifts, and better security.

• In “Through flow,” the receiving and shipping docks are on different sides of the warehouse.
• Items must travel a longer distance when using the “Through flow” warehouse design, and
none of the advantages of the “U-shaped flow” apply.

• “Through flow” can be used when items entering the warehouse must go through various
process steps before being shipped out the other end.

• “Through flow” may also be used in value-added warehouses where entering items must
pass through different machines before being shipped.

• Last In First Out (LIFO) is where the last item stored is the next item picked for shipment.
LIFO works best where items do not have expiry dates.
• “Drive-in racking”, where forklifts drive in and put pallets on the rack, uses LIFO, because
forklifts pick from the same side of the racks as when they putaway items.

• First In First Out (FIFO) is where the first item stored is the first to be picked for shipment. It
is important to use FIFO when items have short expiry dates.

• “Drive-through” racking allows forklifts to drive in one side and pick items from the other
side, which means that FIFO can be used.

• With “push-back” racking, forklifts store pallets by pushing back the pallets already in the
rack. This type of racking can only use LIFO.

• “Pallet-flow” racking is similar to push-back racking, except that pallets can be picked from
the other side, meaning that FIFO can be used.
• “Wide aisle” racking means single pallets are putaway and picked individually. This type of
racking should be used when you have lots of space available and different products needs
to be stored individually.

• Flush docks are where the truck backs straight into the dock at a ninety-degree angle.

• In a sawtooth dock, trucks back in at an angle instead of straight back. This type of dock is
used where there is not enough space for trucks to back in straight. The disadvantage is that
it uses extra space inside the warehouse.

• In open docks, items can be damaged by the weather, since they are loaded and unloaded
outside the warehouse.
• Closed docks are where trucks drive completely into the building. They are used when
temperature and security are extremely important.
5. The Impact of Errors of Warehouse Operations

• One of the most important purposes for a warehouse is to improve customer service.

• The example in the story relates to picking and receiving.

• However, other errors, like failing to scan an item into inventory or putting away items in the
wrong place have a similar effect.
• In all theses cases, the cost to package, handle, transport, and the lost time for our
employees and customers will come back to hurt your company in the long run.

• The longer a mistake is allowed to remain unresolved, the costlier it is to resolve.

• Slingers ultimately goes out of business and Slingers’ employees have lost their jobs because
many such incidents occurred and word spread throughout the public that Slingers cannot be
trusted.
• Your company competes as part of a supply chain.

• All the costs incurred as raw materials are turned into finished products must be paid for by
the customer in the final pricve of the product.

• Therefore, if your organization cannot keep costs lower than the price they are able to
charge, they will go out of business.

• Bad customer service will lead directly to less sales, and ultimately could put your company
out of business.
6. Receiving, Putaway and Storage

• There are six phases in warehousing operations; Receiving, Putaway, Storage, Picking,
Packing, and Shipping.

• When scheduling a shipment, the supplier must provide name of the product, the
manufacturer, number of pallets, numbers of boxes and more.

• Cross-docking is where deliveries go directly from one truck to another. Scheduling becomes
especially important when conducting cross-docking.

• ASN or Advanced Shipping Notification is where the shipper sends details of the shipment
electronically.
• Receiving a shipment means assigning the receiving door, matching the items with the ASN
and packing list, and conducting a pre-inspection and full inspection of the items.

• Items received damaged can either be sent back, put aside for re-work or repackaging, or
scrapped.

• Suppliers are segmented into ‘A’, ‘B’, or ‘C’ categories based on their quality record.

• Suppliers that almost always deliver perfect shipments are ‘A’ suppliers. Their shipments can
be put directly into storage with only a brief visual inspection.
• ‘B’ suppliers have occasional quality issues. A sample from their shipments should be
inspected, with a full inspection if problems are found.

• ‘C’ suppliers are those who often have quality issues. Their shipments require a full
inspection.

• Putaway is the second phase of the warehouse operations process.

• Categorizing and storing items are part of the Putaway phase.

• Items are categorized based on how often they must be picked for delivery. Those that are
picked most often are fast-movers and are often stored in the front of the warehouse.

• Slow-movers are picked less often and are stored in the middle of the warehouse.

• Non-movers are the slowest moving items and are stored in the back of the warehouse.

• Storage is the third phase of the warehouse operations process.

• Stock rotation, replenishment and cycle counting are part of the storage phase.
7. Order Picking, Packing and Shipping

• Order picking is very important to your organization’s profitability and customer satisfaction.

• Studies have found that each order picking error can cost an organization as much as 70
dollars.

• There are four ways to conduct order picking; single order picking, batch picking, zone
picking, and wave picking.

• Single order picking is where one picker picks all the items needed for an order.

• In Batch picking, orders with many common items are batched together. A picker works on
multiple orders by first picking all of one item needed for multiple orders, and then all of the
next item until all orders are complete.
• In Zone picking, each picker is assigned to a zone. He picks all the items needed for an order
in his zone and puts them in a box on a conveyor belt. The box moves on the conveyor belt
to the next zone until the order is complete.

• Wave picking combines batch and zone picking. Orders are grouped into batches by a
common characteristic, like by transportation carrier. Pickers in each zone pick items for all
orders in that batch of orders and deliver the items to the shipping point where they are
separated into individual orders.
• Packing is the fifth phase of the warehouse operations process.

• Careful attention to the packing specification is the most important part of this phase.

• Shipping is the sixth and final phase of the warehouse operations process. Items must be
staged, loaded and packed securely during this phase.

• Ensuring all the right documentation is correct and complete is an important part of the
Shipping phase.
8. Warehouse Safety – Docks, Forklifts, Conveyors and Storage

• 100 associates are killed and nearly 100,000 are injured every year in warehouses in the
United States – warehouse safety is serious stuff.

• OHSA is the Occupational Safety and Health Administration – it is an agency of the US

Department of Labor and the European equivalent is called EU-OSHA.

• Those organizations have idenfied hazards and guidelines for preventing accidents.

• There are many risks involved with docks – mainly involving the risk of falling off.

• Associates should make sure there are plenty of visual warnings,

• be careful when driving near dock edges

• and secure the dock plate when loading and unloading trucks among other safety
precautions.

• Forklifts are a major cause of accidents in warehouses.

• You should never do ‘stunt driving’, drive too fast, or carry loads heavier than the
manufacturer of the forklift recommends among other safety precautions.

• The main risk with conveyors involves hands, feet, or clothing getting stuck in a conveyor’s
pinch points.

• To reduce the risk of this happening, associates should inspect conveyors regularly,
• apply guards to pinch points, follow lock-out procedures, and ensure there is sufficient
lighting.

• Regarding material storage safety, stack items in an organized way, place heavier loads on
lower shelves, revoe one object at a time, and keep aisles clear.
9. Warehouse Safety – Ergonomics, Recharging Stations, Chemical Spills and
Accident Prevention

• Ergonomics is the process of designing workplaces in order to minimize strain on the people
that use them.

• Avoid twisting while carrying a box.

• Instead, take small steps moving your feet to turn.

• Use lifts and other mechanical equipment to move and lift items whenever possible.

• Refuelling and recharging stations are other sources of hazards in a warehouse.

• Areas around refuelling and recharging statons, as well as the warehouse in general, should
have good ventilation.

• Battery acid can be very dangerous.

• Avoid handling batteries as much as possible, and if you must handle a battery ensure you
have perpsonal protective equipment – PPE – that protects your eyes, hands, and face as a
minimum.

• Never smoke near a recharging or refuelling station.

• In order to prevent accidents with chemical spills and minimize their impact if they do
happen, maintain a Material Safety Data Sheet, or MSDS, for every chemical you store.

• Ensure you wear the appropriate PPE anytime there is a risk of coming into contact with
hazardous chemicals.

• Conduct regular checks of fire extinguishers, learn your emergency evacuation plan, and ask
for training or instructions for using all safety equipment that you may be expected to use.