A Warehouse Is A Commercial Building For Storage of Goods

WAREHOUSING
Meaning
A warehouse is a commercial building for storage of goods. Warehouses are used by
manufacturers, importers, exporters, wholesalers, transport businesses, customs, etc. They are
usually large plain buildings in industrial areas of cities and towns. They usually have loading
docks to load and unload goods from trucks. Sometimes warehouses load and unload goods
directly from railways, airports, or seaports. They often have cranes and forklifts for moving
goods, which are usually placed on ISO standard pallets loaded into pallet racks.
Types of Warehouses
The warehouse is the most common type of storage though other forms do exist (e.g.,
storage tanks, computer server farms). Some warehouses are massive structures that
simultaneously support the unloading of numerous in-bound trucks and railroad cars containing
suppliers’ products while at the same time loading multiple trucks for shipment to customers.
Below we discuss five types of warehouses:
1. Private Warehouse - This type of warehouse is owned and operated by channel
suppliers and resellers and used in their own distribution activity. For instance, a
major retail chain may have several regional warehouses supplying their stores or a
wholesaler will operate a warehouse at which it receives and distributes products.
2. Public Warehouse - The public warehouse is essentially space that can be leased to
solve short-term distribution needs. Retailers that operate their own private
warehouses may occasionally seek additional storage space if their facilities have
reached capacity or if they are making a special, large purchase of products. For
example, retailers may order extra merchandise to prepare for in-store sales or order a
large volume of a product that is offered at a low promotional price by a supplier.
3. Automated Warehouse - With advances in computer and robotics technology many
warehouses now have automated capabilities. The level of automation ranges from a
small conveyor belt transporting products in a small area all the way up to a fully
automated facility where only a few people are needed to handle storage activity for
thousands of pounds/kilograms of product. In fact, many warehouses use machines to
handle nearly all physical distribution activities such as moving product-filled pallets
(i.e., platforms that hold large amounts of product) around buildings that may be
several stories tall and the length of two or more football fields. Climate-Controlled
Warehouse - Warehouses handle storage of many types of products including those
that need special handling conditions such as freezers for storing frozen products,
humidity-controlled environments for delicate products, such as produce or flowers,
and dirt-free facilities for handling highly sensitive computer products.
4. Distribution Center - There are some warehouses where product storage is
considered a very temporary activity. These warehouses serve as points in the
distribution system at which products are received from many suppliers and quickly
shipped out to many customers. In some cases, such as with distribution centers
handling perishable food (e.g., produce), most of the product enters in the early
morning and is distributed by the end of the day.
FUNCTIONS INVENTORY MANAGEMENT

Definition:
Inventory management is an approach for keeping track of the flow of inventory. It starts
right from the procurement of goods and its warehousing and continues to the outflow of the raw
material or stock to reach the manufacturing units or to the market, respectively. The process can
be carried out manually or by using an automated system.
When the goods arrive at the premises, inventory management ensures receiving, counting,
sorting, arrangement, storage and maintenance of these items, i.e. stock, raw material,
components, tools, etc., efficiently.
To see how this whole system functions, we should first understand the flow of inventory in an
organization. The same has been represented in the following diagram:
Here, the goods which are stored in the warehouse can be utilized in the following two ways:
 Direct distribution in the market i.e., to the wholesalers, dealers, retailers or customer; or
 Sent to the production units for manufacturing of finished goods.
There are many inventory management techniques available for organizations to choose from.
Some of the most common ones are
1) EOQ (economic order quantity),
2) ABC analysis, just-in-time management,
3) EQR model, VED analysis,
4) LIFO (last in last out) and
5) FIFO (First In First Out).
INVENTORY MANAGEMENT OBJECTIVES

Inventory management is performed to simplify the operational activities. Some of the
primary objectives for which it is carried out are as follows:
 Preventing Dead Stock or Perishability: With an optimal inventory level, the chances
of wastage in the form of goods spoilage or dead stock.
 Optimizing Storage Cost: It reduces the chances of maintaining excessive stock, even
the requirements are pre-determined, which ultimately cuts done the unnecessary
warehousing costs.
 Maintaining Sufficient Stock: Now, the production department need not worry about
the shortage of raw material or goods because of its constant supply.
 Enhancing Cash Flow: Inventory has a significant impact on the cash flow of the
company. With effective inventory management, the organization can ensure sufficient
liquid cash to enhance its operational efficiency.
 Reducing the Inventories’ Cost Value: When there is a constant purchase of goods or
stock, the organization can ask for discounts and other benefits to decrease the purchase
price.
Types of Inventory Management
While installing an inventory management system, the organization has to consider the
various aspects like cost, budget, utility and accessibility. However, it can be classified into the
following types:
Bar-code Inventory Management

The barcode system is its automated and simplified version. The management can find
out the stock remaining with just one click on a computer device. The scanned barcodes enable
the software to maintain a track of all the purchases and the flow of inventory.
Continuous Inventory Management
It links the barcode and radio frequency identification with the accounting inventory
system, inventory received, and point of sales systems along with the production system, to trace
the path of inventory movement. It is mostly beneficial for accounting purpose. This is also
termed as perpetual inventory management.
Periodic Inventory Management
It is a manual process, which is used for determining the closing inventory value, for
putting it up in the ledger at the end of a financial year. Depending on the organizational need, it
can also be analyzed quarterly. However, it is a time-consuming way, since the inventory has to
be physically counted.
INVENTORY MANAGEMENT PROCESS
Since it is a process of identifying and resolving inventory-related obstacles. Given below
is the step by step method of improving the organization’s inventory management system:
Step 1: Determining the Loopholes

The foremost step is to evaluate the inventory requirement and the actual stock of the
goods. Also, the reasons for this gap between the demand and inventory should be ascertained.
Step 2: Analyzing Consumer Demand and Spending Patterns
The market demand forecasting holds equal importance. This is because it helps the
organization to estimate the production quantity, which ultimately leads to the maintenance of
adequate inventory.
Step 3: Evaluating the Cost Involved
Its implementation involves different types of expenses such as warehousing,
maintenance, transport, bulk discounts and supply chain costs. Each of these should be well
analyzed.
Step 4: Identifying the Extent of Process Automation
It is not possible for every organization to completely automate the inventory
management process. However, the management can recognize those particular areas where
there are possibilities of automation.
Step 5: Inspecting Supplier’s Practices and Performance
The next step is to find out the suppliers’ inventory management practices since this
strategy cannot be implemented solely. If the supplier is resistant to change and tends to proceed
with the traditional means, the organization needs to look for alternative vendors.
Step 6: Classifying Inventories into Different Categories
The goods have to be segregated into various categories depending upon the product
type, customer class, maintenance cost or profit margin.
Step 7: Setting Objectives for Each Inventory Category
To efficiently manage and track the performance of the applied technique for each
category, it is essential to set individual goals. It not only provides a base for benchmarking but
also identifies the problems and issues faced in each of these categories.
Step 8: Prioritizing the Areas of Improvement
Now, that we are aware of the problems, the next step is about finding out the density of
each issue and its impact. The concerns which can be resolved immediately needs to be
addressed first. And then, the ones which are complex and requires restoration should be
considered.
Step 9: Taking Advice or Opinion from Experts
Designing an appropriate inventory management system is the task of the personnel who
specialize in the field. Thus, at this stage, the organization needs to hire consultants or experts for
advice and opinion on current technology and problem fixation within the desired budget.
Step 10: Framing Suitable Inventory Management Policy
The last step is to implement a satisfactory inventory management strategy for the desired
change. This improvement should be incorporated as an inventory management policy to deal
with the changes in demand and add value to customer experience.
IMPORTANCE OF INVENTORY MANAGEMENT
The evolving technology and changing consumer preference have significantly brought forward
the need for a robust inventory management system. Given below are some of the most
prominent reason for which it is considered beneficial for every business entity:
Enables Enterprise Resource Planning (ERP)

The ERP software accommodates and links the different business operations. These are
inventory procurement, warehousing, production, human resource, finance, marketing and sales
to one another. In this process, inventory management contributes its part of providing the
necessary data.
Proper Warehouse Management
The barcode system, LIFO and FIFO techniques provide a clear picture of the past and
present inventory available with the company to optimize the warehousing functions.
Efficient Inventory Valuation
It provides for proper evaluation of the different types of inventory, i.e., stock in hand,
opening and closing stocks, raw material, finished goods, etc. This data is also used to prepare
the cost sheet.
Supports Supply Chain Management
Being a segment of supply chain management, it is responsible for streamlining all the
warehousing operations and flow of raw material or stock.
Manages Sales Operations
Sales, as we know, is a continuous process which depends upon the production of goods
or services. If there is inefficient inventory management in the organization, the chances of
unavailability of raw material for manufacturing may arise.
CHALLENGES FACED IN INVENTORY MANAGEMENT
Inventory management has become an inevitable part of significant business entities. Also, many
small organizations have adopted the concept to keep track of their stock and raw material.
But while practically implementing it, the companies have to deal with the following limitations:
 Lack of Knowledge: The personnel at the receiving and warehousing departments may
lack the required expertise and adequate knowledge of segregating the regular and seasonal
goods out of the whole stock.
 Expanding Product Portfolios: The customers’ demand and requirements for a wide
range of products have tremendously increased the inventory size, making it difficult to
manage, manually.
 Supply Chain Complexity: The organization, at times, fail to track the stock or goods
during the supply chain process. Moreover, it is not necessary that the business partners
also maintain an inventory management system, creating hurdles.

A Warehouse Is A Commercial Building For Storage of Goods

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WAREHOUSING

FUNCTIONS INVENTORY MANAGEMENT

INVENTORY MANAGEMENT OBJECTIVES

Bar-code Inventory Management

Step 1: Determining the Loopholes

Enables Enterprise Resource Planning (ERP)

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