WAREHOUSE MANAGEMENT WORLD CLASS PRACTICES

MBA (Entrepreneurship 2009-2011)

Submitted to: Prof. Dr.J.P.Saxena Senior lecturer (Operations management) Amity Business School (Noida)

Submitted by: Amit Kalwani Harish Kumar Harmeet Sehgal Mukundan R Nadeem Ahmed

Table of Contents

Abstract Objective Literature Review Organization Structure Of Stores Division Warehousing World Class Practices

Receipt and Inspection of Materials Issue of Materials Stock & Inventory Management Material Storage & Handling Material Handling Time Storing the product in relation to flow/ rate of movement Location & Layout of the Warehouse Warehouse Design Criteria Operational standards needed Warehouse Safety and Security Multitasking work force

Warehouse Management Systems (WMS) Interpretation Conclusion Recommendation Bibliography

Abstract:
Inside the walls of the warehouse, the utilization of every componentspace, people, inventory and equipmentwill impact the bottom line in profound ways over time. Warehouse Management enables us to analyze these components continually, so we can conserve effort, fill orders faster and more accurately, save space and reduce inventory.

Objective
The Objective of the project is to understand the world class operations and procedures in the warehouse; and how efficiently the warehouses are managed throughout the world.

Warehouse Management:
Warehouse Management provides the insight into your inventory and the warehouse management tools to help you increase customer satisfaction and reduce costs. Warehouse Management exchanges information with many other functional areas in the solution including Logistics, Production and Trade, to help improve your overall business performance. Warehouse Management is used to optimize:

Inventory: With our complete inventory management capabilities, track data on every unit utilizing the latest technologies. Labor: Make people more efficient by managing their tasks and improving their processes. Plan and balance workload and monitor activities with integration to Labor Management. Physical Space: Cross-docking and flow-through capabilities, plus integration with Yard Management, reduce the need for warehouse space. Time: Automate picking, packing and shipping, and minimize the number of moves per order

Literature Review: Warehouse:

A warehouse is a planned space for the storage and handling of goods and material. Its main purpose is to keep the goods for the longer time and whenever there is a demand for the product, it will be supplied as fast as possible and reaches the customer in its original position.

NEED FOR WAREHOUSES

1.
Seasonal Production : The agricultural commodities are harvested during certain seasons, but their consumption or use takes place throughout the year. Therefore, there is a need for proper storage or warehousing for these commodities, from where they can be supplied as and when required. 2. Seasonal Demand: There are certain goods, which are demanded seasonally, like woolen garments in winters or umbrellas in the rainy season. The production of these goods takes place throughout the year to meet the seasonal demand. So there is a need to store these goods in a warehouse to make them available at the time of need. 3. Large-scale Production: In case of manufactured goods, the production takes place to meet the existing as well as future demand of the products. Manufacturers also produce goods in huge quantity to enjoy the benefits of large-scale production, which is more economical. So the finished products, which are produced on a large scale, need to be stored properly till they are cleared by sales. 4

4. Quick Supply: Both industrial as well as agricultural goods are produced at some specific places but consumed throughout the country. Therefore, it is essential to stock these goods near the place of consumption, so that without making any delay these goods are made available to the consumers at the time of their need.

5. Continuous Production: Continuous production of goods in factories requires adequate supply of raw materials. So there is a need to keep sufficient quantity of stock of raw material in the warehouse to ensure continuous production. 6. Price Stabilization: To maintain a reasonable level of the price of the goods in the market there is a need to keep sufficient stock in the warehouses. Scarcity in supply of goods may increase their price in the market. Again, excess production and supply may also lead to fall in prices of the product. By maintaining a balance in the supply of goods, warehousing ensures price stabilization. Five basic service benefits are achieved through warehousing: Spot stock, Assortment, Mixing, Production support, and Market presence

ORGANISATION STRUCTURE OF STORES DIVISION

Stores manager

Engineer, Inventory Control Inventory Control & Stock Records Room

Officer 1 (Warehouse 1)

Officer 2 (Warehouse 2)

Inventory Control Inventory Controller 1 Inventory Controller 2 Material Clerk Clerk/Typist/Data Entry Operator

Records Stock Record Controller Material Clerk

Warehouse A Store Keeper 1 Store Keeper 2 Clerk/Typist Fork Lift Operator Labour

Inspection Inspection Controller Materials Inspectors Labour

Warehousing World class Practices

Using the best practices in managing the stocks of the industry becomes the part of world class practices. Using most efficient methods for controlling the product inventory and adopting outsourced techniques in order to control warehouse activities, including receiving, storing, assembling, kitting, picking and the dispatching of customers/ users orders. Some of the points need to be kept in mind in relation to the world class practices. They become a platform for the adaptation of the world class practices in the organization. They are, 1.

Receipt and Inspection of Materials:

The following procedures are adopted in a warehouse on receipt of materials;

Receipt of material: The materials on receipt are taken to their allotted spaces in the warehouses. The delivery slip and the bill copy are filed in the warehouse for reference. The original bill reaches the accounts department for the payment to be made. The materials are then Unloaded from the delivery trucks. The materials are handled carefully while unloading. Old worn out truck tires are used to provide a cushioning effect while unloading heavy materials. The materials are then inspected for any defects against the required and standard specifications. This is done by inspection controller in large organizations. The quality controller also plays a vital role in material inspection. The Control samples or standards are kept separately to check the materials to be inspected. The Storekeeper documents the accepted materials. 7

2.

Issue of Materials

The procedure for the issue of stock items includes that the materials are to be issued, to authorized persons only and upon presentation of completed and approved store requisition and issue note. In large organizations the distribution of issue notes is done by authorized persons. They issue different colored slips to the different departments when a stock item is issued. Pink Copy User Green Copy Finance Department Original (White) Stores Division

3. Stock & Inventory Management

The biggest problem comes when we keep too much stock with us, so we need a proper check on getting and sending the material. Stock within the warehouse need to taken care which will surely increase the cost of the organization and finally, it will increase the price of the product. Stock Control is used to evaluate how much stock is used. Stock taking is done by the Store Keeper. It is also used to know what is needed to be ordered. Stock control can only happen if a stock take has taken place. Stock rotation must be put into use with stock control by using the oldest products before the newer products. Periodic Stock Checking: There must be proper check over the stock; it must be evaluated from time to time. The task of the operation manager is to make a proper flow of stock as when it is required. From time to time it must be checked that how much of goods are with them and give the required information from time to time to the production department, so that none of the stock will remain stand still.

To ensure a proper check on the product that is with us, we need to use tools, such as; ABC (Or Pareto) Analysis ABC analysis is an inventory categorization technique often used in materials management system. It is also known as Selective Inventory Control. ABC analysis provides a mechanism for identifying items which will have a significant impact on overall inventory cost whilst also providing a mechanism for identifying different categories of stock that will require different management and controls

When carrying out an ABC analysis, inventory items are valued (item cost multiplied by quantity issued/consumed in period) with the results then ranked. The results are then grouped typically into three bands. These bands are called ABC codes. It divides inventory into three classes based on annual cost volume Class A - high annual cost volume Class B - medium annual cost volume Class C - low annual cost volume

Cycle Counting A cycle count is an inventory management procedure where a small subset of inventory is counted on any given day. Cycle counts are less disruptive to daily operations, provide an ongoing measure of inventory accuracy and procedure execution, and can be tailored to focus on items with higher value or higher movement. To conduct efficient and accurate cycle counts, many organizations use some form of software to implement an inventory control system, which is part of a warehouse management system. These systems may include mobile computers with integrated barcode scanners that allow the operator to automatically identify items, and enter inventory counts via keypad. The software then transmits data to a database on a host system which can generate inventory reports. Product coding: Product code is a unique identifier, assigned to each finished/manufactured product which is ready, to be marketed or for sale. It enables easy method of tracking the product until it reaches the customer or end user. The various Codes used are: Universal Product Code, common bar code used to identify products Electronic Product Code Serial number, a number identifying an item

Quality records are maintained for the materials/stock specification. These include

Procedures to be followed in handling material/stock Detail specifications of every item. Inspection reports. Quality reports. Descriptive reports. Details of approval period of retention of various documents.

Material Storage & Handling:

Handling the material is one the most important part of warehousing. Material Handling is the movement, storage, control and protection of materials, goods and products throughout the process of manufacturing, distribution, consumption and disposal. The focus is on the methods, mechanical equipment, systems and related controls used to achieve these functions. The material handling industry manufactures and distributes the equipment and services required to implement material handling systems. Material handling systems range from simple pallet rack and shelving projects, to complex convey or belt and Automated Storage add Retrieval Systems (AS/RS). Equipments used for handling material include: Hydraulic jacks, Dump trucks, Wheel Barrows, Trolleys, Forklift Truck (Diesel/ Battery operated ), Damaged tires used for providing cushion support for heavy materials during unloading; Iron bars, Slings and ropes, Chain Pulley Blocks, Hammers, Spanners, Pliers, Wooden Blocks, pallets (Wooden, plastic) Effective Materials Handling

Good materials handling practice is the responsibility of all members of the manufacturing team, form the top management down to the trucker working in the aisle of the plant.

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Optimum effectiveness of materials handling procedures can only be attained if each individual recognizes and plays his part. Education and training in materials handling are prerequisite to minimum materials handling costs. In world class warehouses the responsibilities assigned such a staff group may well include: 1. Determining all new methods for the handling of new materials or products and selecting the equipment to be utilized. 2. Conducting research in materials handling methods and equipment. 3. Conducting education and training for all manufacturing personnel in good Material handling practices. 4. Establishing controls of current materials handling costs by analysis of costs and comparison to budgets of either unit or total materials handling costs. 5. Initiating and conducting a continuing materials handling cost-reduction or cost improvement program. 6. Determining measurements for effectiveness of materials handling that can become the yard sticks for progress in this activity. 7. Developing and conducting a preventive maintenance program for all the materials handling equipment.

Material Handling Time:

Reducing handling increases the productivity and lowers costs. If we are putting the product into the store and picking from store it will raise its handling time and will prove to be cost ejective for the firm. Again and again putting the resources on a material; whether in its transportation, packaging, storing, etc will raise the expenses of the firm which is not acceptable in any form. If we are putting our men, material and money in sending the good to the customer again and again it will finally affects the overall expenses of the business concern. In a world class warehouse the materials are inspected before they are shipped, to ensure the quality and life of the product.

Storing the product in relation to flow/ rate of movement:

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Demand will not remain same for all of the year, there will be rise and fall in the demand from time to time. For whole of the year there will be variations in the demand and supply of the product, so as per this demand we need to maintain the flow of material within the warehouse. Demand forecasting is the way of estimating the quantity of a product or service that consumers will purchase. Demand forecasting involves techniques including both informal methods and quantitative methods, such as the use of historical sales data or current data from test markets. Demand forecasting may be used in making pricing decisions, in assessing future capacity requirements. The Operations manager forecasts the demand and accordingly the stock and inventories are stocked in the warehouse.

Location & Layout of the Warehouse:

A proper zoning of the warehouse must be ensured. Each and every product must be identified very easily when it is required. They must be assigned with the numbers and sign marks in order to identify them easily and save time. We must prepare record of item quantity, time and arrival location, storage location, quantity balance, and ultimate location. Maintain Real-time information on the quantity, location, status, and history of every inventory item within the warehouse. Check inventory availability across all warehouses during order creation. Support your complex needs with multi-location inventory, kits and assemblies, multiple units of measure, lot tracking, serialized inventory and specific costing, matrix items. Provides real-time indicators of material received on status ok, discrepancy material, or part per million statistics.

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Warehouse Location: There is no limit on the number of warehouses that may be defined within an entity, and there is no limit on the number of locations that may be defined within a warehouse. Warehouse locations have many synonyms including bins, zones and storage area, among many others, but in there must be a location is a specific storage area, which may constitute a rack/bin type of entry, or a larger bulk storage area. The locations can also identify shop floor areas where inventory is held prior to pull type material issues. Shop floor locations of this type are considered by the system to be a part of the warehouse. A separate location classification can also be given to shipping and/or receiving locations. For warehouse picking purposes, a location sequence number can be assigned to locations and will be used as an optional method when defining the order in which sales orders or production material is to be picked.

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A location can also be used to track the inventory of vendor and/or customer distributors. A single location of the distributor type will be used to cover an entire customer distributor or vendor distributor inventory. If the user does not wish to maintain location control in the inventory, both a default warehouse and a default location must be defined in the facilities parameters. An entry of these two default values will indicate to the system that only the default location is to be used for all types of inventory transaction. Location Flexibility:

Location flexibility refers to the ability to quickly adjust warehouse location and number in accordance with seasonal or permanent demand changes. For example, in-season demand for agricultural chemicals requires that warehouses be located near markets that allow customer pickup. Outside the growing season, however, these local warehouses are unnecessary. Thus, the desirable strategy is to be able to open and close local facilities seasonally. Public and contract warehouses offer the location flexibility to accomplish such requirements.

Warehouse Layout and Design: The Warehouse

Provides for the transportation interface. Provides for order-picking space. Provides storage space. Provides recouping, office, and miscellaneous spaces. Determines each items order quantity. Converts units into cubic footage requirements. Allows room for growth. Allows adequate aisle space for materials handling equipment.

Warehouse layout includes:

o o

Zones Locations 14

o o

Equipment Stations

Zones: The zones are specific locations inside a warehouse that has common properties.

A Zone ID used to represent a group of locations that share common properties (refer zone, shipping zone, returns zone) Used to manage product flows into and out of groups of locations Used to determine users work assignments in the zone May represent a physical area A location can belong to only one Zone

Locations: They are various physical areas inside a warehouse

A Location ID is given to a space in a location where inventory is placed for any length of time Always associated with a zone and a location Primary mechanism used for tracking and processing inventory as it is received, stored, retrieved, and shipped

Example Locations:
o o o

STOR1-01020401 = at Aisle 1, Bay 2, Level 4 Bin 1 RECEIVE-1 = Receiving Dock 1 V1-000001 = Value Added Services Station 1

Equipment: Equipment defines a vehicle or piece of machinery used to perform a processing activity such as receive, move, pick, pack, or ship within a warehouse Stations:

A physical location that is used as a work space in order to perform a specific activity or a group of activities A Station is unique for a Node Used for:
o

Creating tasks

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o o

Recording location where work is being performed Associating devices that may be used at the station level Receiving Station Ship/Sort Location Value Added Services Station

Examples:
o o o

Warehouse Design Criteria

Warehouse design criteria address physical facility characteristics and product movement. Three factors to be considered in the design process are: the number of stories in the facility, height utilization, and Product flow. Number of stories in the facility The ideal warehouse design is limited to a single story so that product does not have to be moved up and down. The use of elevators to move product from one floor to the next requires time and energy. The elevator is also often a bottleneck in product flow since many material handlers are usually competing for a limited number of elevators Height utilization

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 Regardless of facility size, the design should maximize the usage of the available cubic space by allowing for the greatest use of height on each floor. Most warehouses have 20- to 30-foot ceilings; although modern automated and high-rise facilities can effectively use ceiling heights up to 100 feet. Through the use of racking or other hardware, it should be possible to store products up to the building's ceiling. Maximum effective warehouse height is limited by the safe lifting capabilities of material-handling equipment, such as forklifts Product flow Warehouse design should also allow for straight product flow through the facility whether items are stored or not. In general, this means that product should be received at one end of the building, stored in the middle, and then shipped from the other end. Straight-line product flow minimizes congestion and confusion.

Operational standards needed:

1. Costs & utilization of Resources :Resources are always limited, so we need to utilize them at the optimum level and make maximum benefit out of them. Whether it men, material or labor, resources are always scarce in nature, which demands for its best utilization. Whenever the resources are fully utilized, the cost will naturally come down.

2. Performance of activities :A number of activities are to be performed within the organization or the warehouse. Every activity to be looked in a better way and should taken care. From lifting the material from the trucks to taking it to the store, care should be taken, to save the goods or product from breakage or damage. A machine has to be checked from time to time for its smoothness of working. Projects need to be handled carefully, while planning and there execution.

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3. Accuracy of activities :The orders that are to be given must be dispatched as per the guidelines and in a complete way. Whenever there is order for the product, as the product is demanded, guidelines are forward to the production department and as per the specification goods are delivered.

4. Lead time for activities :The time taken from the receipt of order till the time of dispatching of goods is known as lead time. In the manufacturing environment, Lead Time has the same definition as that of Supply Chain Management, but it includes the time required to ship the product to the purchaser. The shipping time is included because the manufacturing company needs to know when the parts will be available for Material requirements planning. It is also possible for lead time to include the time it takes for a company to process and have the part ready for manufacturing once it has been received. The time it takes a company to unload a product from a truck, inspect it, and move it into storage is non-trivial. With tight manufacturing constraints or when a company is using Just in Time manufacturing it is important for supply chain to know how long their own internal processes take.

Warehouse Safety and Security:

Warehouses deals with large amount of inventory that need to be kept under proper observation and must undertake the most efficient check system. Goods must be safely loaded and must be taken care when they are taken out of the vehicle until it reaches the store where it has to be kept.

Entry to warehouse must be limited to authorize personnel. Operations Manager should hold the warehouse keys at the closing of the warehouse. Issue of stock and inventory to authorized personnel. There should be adequate safety from fire and the materials are to be stored under their required storage conditions.

Multitasking work force:

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World class warehouses have multitasked work force; who are able to perform several tasks within the warehouse. Work force must be active in order to take the decisions as per their talent in difficult situations. Certain things that need to be considered are as follows; Communication In warehousing a message is transferred from one person to another by the means of communication, which need to be taken care for accuracy. Managing Change To be successful with any change initiative - such as a warehouse reconfiguration, a change in processes or in ways of working - getting the direct input of the warehouse team to your work at all stages is of paramount importance. These are the people who will be most affected by the change and involving them early and at all stages enables them to become most efficient.

Warehouse Management Systems (WMS)

It is a key part of the supply chain and primarily aims to control the movement and storage of materials within a warehouse and process the associated transactions, including shipping, receiving, put away and picking. The systems also direct and optimize stock put away based on real-time information about the status of bin utilization. Warehouse management systems often utilize Auto ID Data Capture (AIDC) technology, such as barcode scanners, mobile computers, wireless LANs and potentially Radio-frequency identification (RFID) to efficiently monitor the flow of products. Once data has been collected, there is either batch synchronization with, or a real-time wireless transmission to a central database. The database can then provide useful reports about the status of goods in the warehouse. The objective of a warehouse management system is to provide a set of computerized procedures to handle the receipt of stock and returns into a warehouse facility, model and manage the logical representation of the physical storage facilities (e.g. racking etc), manage the stock within the facility and enable a seamless link to order processing and logistics management in order to pick, pack and ship product out of the facility. Warehouse management systems can be stand alone systems or modules of an ERP system or supply chain execution suite.

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The primary purpose of a WMS is to control the movement and storage of materials within a warehouse you might even describe it as the legs at the end-of-the line which automates the store, traffic and shipping management. In its simplest form, the WMS can data track products during the production process and act as an interpreter and message buffer between existing ERP and WMS systems. Warehouse Management is not just managing within the boundaries of a warehouse today; it is much wider and goes beyond the physical boundaries. Inventory management, inventory planning, cost management, IT applications & communication technology to be used are all related to warehouse management. The container storage, loading and unloading are also covered by warehouse management today. Even production management is to a great extent dependent on warehouse management. Efficient warehouse management gives a cutting edge to a retail chain distribution company. Warehouse management does not just start with receipt of material but it actually starts with actual initial planning when container design is made for a product. Warehouse design and process design within the warehouse is also part of warehouse management. Warehouse management is part of Logistics and SCM.

Warehouse Management monitors the progress of products through the warehouse. It involves the physical warehouse infrastructure, tracking systems, and communication between product stations. Warehouse management deals with receipt, storage and movement of goods, normally finished goods, to intermediate storage locations or to final customer. In the multi-echelon model for distribution, there are levels of warehouses, starting with the Central Warehouse(s), regional warehouses services by the central warehouses and retail warehouses at the third level services by the regional warehouses and so on. The objective of warehousing management is to help in optimal cost of timely order fulfillment by managing the resources economically.

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Interpretation:
Companies are constantly trying to find ways to improve performance and warehouse operations is area where supply chain managers can focus to gain maximum efficiency for minimum cost. To get the most out of the operation, a number of best practices can be adopted to improve productivity and overall customer satisfaction. Although best practices vary from industry to industry and by the products shipped there is a number of best practices that can be applied to most companies. When considering the level of effort involved in warehouse operations, the greatest expenditure of effort is in the picking process. To gain efficiencies in picking the labor time to pick orders needs to be reduced and this can achieved in a number of ways. Companies with the most efficient warehouses have the most frequently picked items closest to the 21

shipping areas to minimize picking time. These companies achieve their competitive advantage by constantly reviewing their sales data to ensure that the items are stored close to the shipping area are still the most frequently picked. Warehouse layout is also important in achieve greater efficiencies. Minimizing travel time between picking locations can greatly improve productivity. However, to achieve this increase in efficiency, companies must develop processes to regularly monitor picking travel times and storage locations. Warehouse operations that still use hard copy pick tickets find that it is not very efficient and prone to human errors. To combat this and to maximize efficiency, world class warehouse operations had adopted technology that is some of todays most advanced systems. In addition to hand-held RF readers and printers, companies are introducing pickto-light and voice recognition technology. In a pick-to-light system, an operator will scan a bar-coded label attached to a box. A digital display located in front of the pick bin will inform the operator of the item and quantity that they need to pick. Companies are typically using pick-to-light systems for their top 5 to 20% selling products. By introducing this system companies can gain significant efficiencies as it is totally paperless and eliminates the errors caused by pick tickets. Voice picking systems inform the operator of pick instructions through a headset. The pick instructions are sent via RF from the companys ERP or order management software. The system allows operators to perform pick operations without looking at a computer screen or to deal with paper pick tickets. Many world class warehouse operations have adopted voice picking to complement the pick-to-light systems in place for their fast moving products. Although many companies will not be able to afford new technologies for picking, there are a number of best practices that can be adopted to improve efficiency and reduce cost.

Conclusion:
Warehousing clearly has a critical part to play, in all aspects of supply chain management. It also needs to be involved in the strategic aspects of a business and this will involve being aware of the development of the business in terms of the future production, product, suppliers, customers, and all the associated product volumes and throughputs. Each and everyday new technology is being evolved, so in warehousing with the help of these world class technological innovations, we can make it more technically competent and innovative; thereby increasing the efficiency of the business operations.

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Bibliography:
1. Emmett, Stuart; Excellence in Warehouse management 2. Dr J.P.Saxena; Vikas Publishing House Pvt Ltd, India; Warehouse management and inventory control, 3rd Print 3. K. S. Mohan ; Macmillan India Limited; Stores Management, 2nd Edition 4. www.warehousingforum.com/best.html 5. www.smthacker.co.uk/lean_supply_chains.htm 6. http://logistics.about.com/od/tacticalsupplychain/a/wms_best_prac.htm 7. http://en.wikipedia.org/wiki/Warehouse_management_system 8. http://logistics.about.com/od/supplychainsoftware/a/ImplementingWMS.htm

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