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Warehousing Principles

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Warehousing Principles

Warehousing Principles - Warehouses are an important component of the modern supply chain. The supply chain involves activities in various stages, including:

  • Sourcing
  • Production
  • distribution of goods
  • handling of raw materials and goods in the process of
  • Handling of finished products.
A warehouse can be described as part of a company's logistics system that serves to store products and provide information about the status and condition of materials/supplies stored in warehouses so that the information is always up-to-date and easily accessible to anyone of interest.

The warehouse is an integral part of the supply chain. Challenging trends in the supply chain, such as increased market volatility, and the need to shorten customer lead time, all impact the expected role of warehouses.

Warehouse Management Objectives

1. Speed

The speed of delivery to the market and meeting changing demand is an important issue that management uses as a strategy in competing.

2. Efficiency

Supply chain efficiency is measured and improved continuously by continuous improvement teams from various units.

3. Effectiveness

The effectiveness that allows customers or users to get the company's products easily.
Reliability. Reliability of information, communication, and execution for all functions to work properly.

The types of warehouses in the supply chain vary greatly, depending on their role in the supply chain, namely:
  • Based on the stage in the supply chain, it is a known warehouse for the storage of raw materials, goods in the process, and finished goods.
  • By geographic region, for example, regional warehouse to serve the whole world or several countries, national warehouse to serve regions throughout one country, or local warehouse to serve a specific region.
  • By product type, e.g. warehouse for spare parts storage, assembly warehouse (e.g. for car assembly), frozen food, perishable food, and dangerous goods;
  • Based on functions, e.g. warehouse for inventory storage, warehouse for sorting (e.g. as a liaison of postal shipment processing warehouse.
  • Based on ownership, a user's self-managed warehouse (e.g. manufacturer or retailer) or warehouse managed by a third-party logistics company;
  • Based on the use of the company, for example, a dedicated warehouse, or a shared warehouse.
  • Based on its area, the warehouse with an area ranging from 100 square meters or less and warehouse with an area of more than 100,000 square meters.
  • Based on its height, Warehouse Building Height ranging from warehouse about 3 meters to warehouse "high-bay" with height more than 45 meters.
  • Based on the tools used, from warehouses that operate manually or warehouses with automatic operation.
The main purpose of the warehouse is to facilitate the movement of goods through the supply chain to the end consumer. There are many techniques used to reduce the need to hold supplies, such as flexible manufacturing systems, supply chain visibility and express delivery, just-in-time (JIT), efficient consumer response (ECR), and collaborative planning, forecasting, and replenishment (CPFR).

In the context of the supply chain, a warehouse has the following functions:
  • Inventory holding point.
  • Consolidation center.
  • Cross-dock center.
  • Sortation center.
  • Assembly facility.
  • Trans-shipment point.
  • Returned goods center.
Since warehouses operate as an integral component of the supply chain, the context of the broader business strategy should be considered when making important decisions about this warehouse facility. Some things to consider include:

1. Market/industry trends

Some industries are undergoing very significant developments and changes, mainly triggered by technological developments. This impacts warehouse design needs, both in terms of warehouse technology, warehouse-type, layout, and warehouse location, according to market needs and industry trends.

2. The purpose of the company

The purpose of the company will be to determine the design options of the warehouse. Different corporate objectives will have an impact on warehouse management policies. 

The company's objectives will be to determine the company's positioning, the value proposition offered, and the marketing strategies implemented. All of which will have an impact on design choices and warehouse management policies.

3. Business plan

The company's business plan contains the projected target market, sales potential, and development of the company's service point, which impacts warehouse development decisions and distribution systems to be executed.

4. Supply chain strategy

Each warehouse choice and policy is determined by the company's supply chain strategy. The supply chain strategy will impact the number, location, system, technology, and layout of the warehouse, as part of the company's supply chain system.

5. Customer service level

The level of customer service determines the responsiveness of the company in serving customers, including response in the speed of inventory fulfillment under the policies and warehouse systems operated.

6. External factors

External factors that affect warehouse design and policy include regulation in the field of building construction, health and safety, environment, manual handling, working hours, fire prevention, packaging, food safety, and so on.

Management decisions about warehouse planning include:
  • How many warehouses should be available?
  • Where should the warehouse be placed?
  • How much inventory should be filled at each warehouse?
  • Which customers should be served by each warehouse?
  • How should customers order from the warehouse?
  • How should warehouse orders be from suppliers?
  • How often should deliveries be made to each customer?
  • How should the level of service be provided?
  • What kind of method of transportation should be used?

Warehouse Operations

Each warehouse must be designed to meet the specific needs of the supply chain. Nevertheless, certain operations are common to most warehouses.

These functions are as follows:

a. Receiving

This activity usually involves dismantling goods from incoming transport vehicles, checking purchase orders, and recording goods entered into computer systems. Quality inspection of goods can be carried out as part of this activity. From here, the item is then placed (put–away) in the warehouse.

b. Reserve storage

Goods are usually taken to the spare storage area, which is the largest user of space in the warehouse. The area has most of the inventory at the identifiable warehouse site. When needed, the goods are taken from the backup storage directly to the shipment (if, for example, a full pallet is required by the customer) or to fill the pick-up location of the goods.

c. Order picking

When an order is received from the customer, the goods must be taken from the warehouse in the right amount and time to meet the required level of service. 

Picking orders can contain some order lines, each order line requires a specific number of individual product lines. If the order line is for a full unit load, such as a pallet, then this command can be retrieved directly from the backup storage. 

However, if the order line is less than a unit load, such as some cases or items, then the item will usually be taken from the pick-up location. If only a small number of products are stored in the warehouse, then the backup and retrieval of goods can be combined, and the items are taken from this consolidation site. 

Picking is a major warehouse operation, both in terms of cost and service, as a significant proportion of warehouse costs are usually required for this function to achieve a high level of order accuracy.

d. Sortation

For small sizes, sometimes more precisely order together in one quantity (batch) and treat them as one order for retrieval purposes. In this case, the batch that has been taken must be sorted into individual goods retrieval orders before delivery.

e. Preparation and service are value-added

The goods must be arranged into a complete customer order ready for delivery. Unless goods are taken directly to shipping containers, they will be assembled or packaged together.

f. Marshaling and dispatching

Goods are arranged together to be loaded onto the vehicle and then delivered to the next 'node' in the supply chain.


Warehousing typically accounts for about 20 to 30 percent of the logistics costs. Warehouse cost details vary by operating properties, as follows:
  • Staff – 45 to 50 percent;
  • Building – 25 percent, including lease or depreciation of the building
  • Building services – 15 percent, including light, electricity, building maintenance, insurance, and tariffs
  • Equipment – 10 to 15 percent, including rental or depreciation, equipment maintenance, and operating costs
  • Information technology – 5 to 10 percent, including terminal systems and data.
For automated warehouses, equipment numbers will usually be much higher, although it should be noted that most automated warehouses still have the manual operation for activities such as case retrieval and packing.

Load unit

Most supply chains are organized based on the concept of load units, where goods are transported, stored, and handled in standard modules. At different levels, for example with goods placed in cardboard, which are placed on pallets, in turn, can be loaded in ISO containers for export shipping.

The use of such unit loads enables the transport, storage, and handling of systems to be designed around common dimension modules. In warehousing, some of the most commonly used load units are as follows :

1. Palette

Pallets are the most common form of load units stored in warehouses. Pallets lift flat platforms, where goods can be placed, and fork trucks can be inserted to lift and move them.

Entries for forks can be on all four sides, known as four-way palette entries, or only on two sides, known as two-way entry palettes. Most pallets are made of wood, although some are made of plastic or fibreboard.

There are various standard sizes of pallets for use in different industries. These variations can cause problems both in terms of international transport and in equipment rack design. 

In continental Europe the most common type is Euro pallet (1,200 millimeters by 800 millimeters), while in the UK the standard size is slightly larger (1,200 millimeters by 1,000 millimeters), the size is the same as that in the United States (48 inches by 40 inches).

2. Cages and pallet boxes

It is used for the contents of goods that may fall off the standard pallet. Cages and pallet boxes have solid sides or mesh sides that can be built into, for example, steel or plastic. They can be picked-up by fork-lift trucks and can often be stacked on top of each other.
  • Roll-cages, It is usually made of steel and often consists of bottom mesh, sides, and shelves. Wheels are mounted to every angle so roll-cages can be pushed. Forks can be inserted under the base, so roll-cages can be moved with pallet trucks. Generally, roll-cages are used in retail distribution for delivery to stores.
  • Tote bins, Plastic tote bins are used in many warehouses for the storage and handling of small parts. The size of tote bins varies: length 600 millimeters, width 400 mm, and height 300 mm. Tote bins open at the top or have a closable lid, and can store many items or boxes in them.
It consists of a base equipped with wheels, where plastic trays and tote bins can be stacked. Dolly is often used in retail distribution.

Large intermediate containers (IBCs). It is usually used to store and move liquids and solid particulate products in a large unit of about a ton or two. IBCs offer an alternative to bulk handling for such products. 

Depending on the characteristics of IBCs, IBCS can be lifted by a fork-lift truck, either from below or from the rope above. Some can be stacked in blocks, one on top of the other.

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