WAREHOUSE MANAGEMENT

AND AUTOMATION
 WHAT IS STORED ?
Raw Materials for Production-
Form- Liquid, Solid, Gas
Packing Materials for Packing
Spare parts, consumables for Maintenance
Electrical items
Electronic items
Stationery items
Semi Finished Goods, Finished Goods
No of items ? Volume ?? Value ???
IMPORTANCE OF WAREHOSE- Lungs of Supply chain
 WAREHOUSE

• A warehouse is typically viewed as a place to store inventory

• However, in logistics systems, the role of warehouse is more
properly viewed as a switching facility as contrasted to a
storage facility
• Warehouses are the nodes of supply chain network that
extend the operational reach of the firm and provide a
strategic thrust to objectives
• There have been important developments in stores and
warehousing technology
 NEED FOR WAREHOUSING
o Warehousing is an integral part of logistics system
o In the entire supply chain network, the storage and handling
of products takes place primarily at nodal points
o The need for warehousing arises because the demand for a
product cannot be predicted easily
o There is time lag between production and consumption
o To keep the stocks, warehouse as well as material handling
system is needed
o The warehousing also acts as a shock absorber against market
fluctuations
o Transportation cost can be reduced by shipping the cargo in
large volumes availing quantity discounts
 OBJETIVES OF WAREHOUSING
• Maximise completion of orders on time and in full.

• Minimise the cost of warehouse operations.

• Maximise inventory turnover (i.e., minimise the time that

materials stay in the warehouse).

• Minimise response time to demand and errors in

despatches.

• At the same time, preserve the quality, value and security

of the stored items.

• Reduce wastage, damage.

 Director of Supply Chain
Operations

Warehouse Manager
Internal
External relations integration:
Objectives of Warehouse
with supply chain interaction with
management
partners other
departments

Inventory Receiving Inspection

Issue of
Control Material
Material

Workforce Training
Short term operational Time Horizon Long term planning
 FUNCTIONS OF WAREHOUSE MANAGER
1. Efficient receipt, storage and issue of materials.
2. Control of materials, ensure Requisition and
replenishment of materials. Follow up
3. Co-ordinates with other departments
4. Maintenance of records
5. Safety, Security, House keeping.
6. Training of People
7. Policy, Procedure.
8. Increase efficiency and reducing cost
9. Storage and Preservation of Materials
 Activities in Warehouse
1. REQUISITIONING MATERIAL:
Release of New Requisition, approval,
amendment, cancellation of PR, follow up.
2. MATERIAL INSPECTION:
Inspection of Incoming material, documents.
Handling of control samples. Reporting
discrepancies, rejection, rework. Tagging.
3. WAREHOUSING OPERATIONS:
Issue of materials, Issue on loan.
4. IDENTIFICATION OF MATERIALS:
Codification of materials.
 Activities in Warehouse
4. STOCK VERIFICATION:
Checking physical and system record stocks. Identifying discrepancies and
resolving. Reduce errors.
5. COMPLIANCE TO LAWS:
Documentation as per GST, Rejection, Return, Imports, Safety Regulation,
Licenses for Hazardous/Inflamable material.
6. STOCK MONITORING & CONTROL
Ensure smooth running of production. Report
discrepancies, Alarm.
7. STORAGE & PRESERVATION OF MATERIAL
Reduce damage, wastage, Ensure proper environment for material.
8. SAFETY & SECURITY OF MATERIAL
Valuable material , FG FMCG.
9. SAFE MATERIAL HANDLING & MAINTENANCE OF MH EQUIPMENTS:
Accident free safe environment. Working condition of MH Equipment.
 SECTIONS IN STORES
1. Receipt Stores
2. Inspection Wing
3. Finished Goods Stores
4. Packing section
5. Dispatch Stores
6. Transport and Material Handling section
7. Stores Housekeeping
8. Stock taking/Audit
9. Record Keeping
10.Stores Accounting
 CENTRALISED & DECENTRALISED
STORES
Depends on size of company.
ADVANTAGES OF CENTRALISED STORES:
1. Wide range of goods available at one place.
2. Inventory can be minimum
3. Better control
4. Economies in storage space
5. Possibility of modern handling methods
6. Receipt, Inspection efficiently organised
7. Possibility of standardization
8. Less Manpower, no dupliction
9. Stock turnover increase productivity.
 DISADVANTAGES OF CENTRALISED
STORES
1. Extra Handling required for transportation to
various units.
2. Greater risk- fire- all materials at one place.
3. If System fails/does not run efficiently likely
to interrupt production.
 Types of Stores
1. Functional : Chemicals, Engineering,
2. Physical : Depends of Size and location-
Central, Sub stores, Transit, Site stores.
FUNCTIONAL STORES:
1. Raw Material Store: Larger size, connected
to rail, river, Mfg unit. Open store- coal, steel
plates, fertilizer- sulphur, crude in tank,
segregate explosive, Hazardous, Poisonous.
 Functional stores
2. Production /Tools/Spare parts Store: Consumables
lubricant oils, tools, gloves etc
3. Salvage Store: Rejected material, scrap separately kept
iron, brass, copper.
4. Packing Stores: Packing materials
5. Receipt Stores:
6. Quarantine Store
7. Finished Goods Store
8. Work In Progress Store
9. Bonded Store: Custom duty is not paid
10. Refrigerated Store
11. Flammable Material Stores
 Function stores
12. Dehumidified Store: Moisture free need.
13. Transit Sheds: Roofed sheds without walls
for ease of handling.
14. Dry Tanks: Long term storage made of
steel/concrete. It can be temp controlled.
15. Open Yard : Bulk storage, steel,
 PHYSICAL CONSIDERATIONS
1. Central Store: It can serve two or three factories.
It can be Central Warehouse for FG. Handling
cost to sub unit is more.
2. Sub Store: Located at place of usage. Within
shop floor.
3. Departmental Store: Serve particular
department eg Textile- Spinning, Weaving,
Bleaching, Printing
4. Site Store: Project site , Construction of
Building.
5. Transit Store: Temporary period.
 LOCATION OF STORE
Factors to be considered :
1. Minimum Moving: Near to user. Use of conveyor.
Handling costs.
2. Plan for future.
3. Flexibility.
4. Accessibility for Road, Rail, River transport. Loading
Unloading facility.
5. Services: Water, Electricity, Telecommunication,
drainage.
6. Proximity of Labour: special skills.
7. Local Environment: Flood, Temperature
8. Safety, Security.
 Warehousing Design Principles
• Though the warehousing function is a seemingly simple
operation, the advantages of warehousing are significant
• These advantages can be maximized if the design is optimum,
keeping in mind the specific functions of the warehouse
• A good warehouse layout can Increase output, Improve
Product flow, Reduce costs, Improve service to customers, and
Provide better employee working conditions
• The optimal layout & design will vary with Type of product,
the company’s financial resources, Needs of customers and
Cost trade-offs between labor, equipment, space and
information
• The basic warehouse design principles are described below:
 Warehousing Design Principles
• Product Movement
• Physical facility characteristics and product movement are the
main considerations determining the warehouse design
• The factors that need to be considered in warehouse design are
o Number of storeys in the facility
o Height utilization
o Product flow
• Ideally, the warehouse should be a single storey so that the
product does not have to be moved up and down (using
elevators or stairs) which requires time and energy
• The number of stairs or elevators is normally limited due to
both space requirements as well as cost
 Warehousing Design Principles
• Product Movement
• The design should maximize the use of available cubic space
• Through the use of racking or other hardware, it should be
possible to store products up to the ceiling
• Maximum effective height is limited by safe lifting capabilities
of material handling equipments
• Warehouse design should also allow for straight product flow
through the facility
• 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
 Warehousing Design Principles
• Handling Technology
• This second principle focuses on the effectiveness and
efficiency of material handling technology
• The elements of this principle concern movement continuity
and movement scale economies
• Movement continuity means it is better for handling
equipment to make a longer move than to have a number of
handlers make numerous, individual, short segments of the
same move
• Movement scale economies mean that all warehouse
activities should move the largest quantities possible
• This reduces the cost
 Warehousing Design Principles
• Storage Plan
• According to this principle, a warehouse design should
consider the integrated storage plan and address the specific
characteristics of each product, particularly pertaining to
volume, weight , and storage
• Each of the different types of items require a specific type of
storage and handling and preservation methods
• Product volume is the major concern when defining
warehouse storage plan
• Relatively heavy items should be located low to the ground
• Low density products with high storage volume should be put
on open floor
• Smaller items may require storage shelves or drawers
 Warehousing and Stores Operations
• The functions of warehouses include:
o To issue purchase requisitions when reordering level is reached
o To check bin card balances with physical quantities in the bin, periodically
o To follow rotation of stocks and avoid holding old stocks, FIFO
o To report on waste, scrap, slow moving, non-moving, and obsolete items
o To maintain stores in a tidy manner for easy access to bin at any time
o To receive and issue finished products for dispatch to the distribution chain
• Inbound deliveries which include stock transport orders,
production orders, and Advance Shipping Notification (Vendor
Document) contain exact materials, quantities, and delivery
dates with reference to a purchase order
• This becomes the basis for the receipt process
 Warehousing and Stores Operations

• Stores functions focus on physical movement and storage of

goods and materials
• This involves managing the physical flow and developing and
managing networks of warehouses when needed
• The functions of warehouses include:
o To receive materials, arrange for inspection, and accept them after proper
verification
o To prepare stores received note and circulate copies to all concerned
o To store the accepted materials
o To issue correct materials against authorized requisitions
o To enter receipt, issues, and return of materials in the bin cards and to
maintain other stores records
 RECEIVING MATERIAL
Importance: Coordination- Purchase- Inspection,
Accounts, Payment, Inventory, Production,
Rejection.
Location: Near User, Away from Dispatch Store
Adequate space for Transport, Unloading,
Material handling, security.
Destination: To Quarantine Store for Inspection
To Main Transfer, To Production floor. Heavy
items to Yard.
 RECEIVING STORE
Receiving Store Types:
1. Centralized: All goods received at one place.
2. Semi-Centralized: Paper work is done at one
place but deliveries to shop floor/main store.
3. Decentralized: Attached to group stores.
Material Received from :
1. Suppliers, 2. Sub Stores, 3. Scrap, Salvage
4. Rejected, 5. Returned from Customers
 FUNCTIONS OF RECEIPT STORE
1. Receive goods.
2. Check for quantity, documents- Inv, PL,Ins,LR,
3. Entry in Goods Receipt Register
4. Return transporters Delivery note with
remarks.
5. Notify to Purchase in case of problems.
6. Action for excess, shortage, defectives
7. Action for Rejected material.
 Warehousing and Stores Operations
• Goods Receipt
• The goods received are entered into the Inward Consignment
Register, which keeps all the details
• The receipt of goods is a follow-on activity to purchase order
• It forms the basis for updating the financials and inventory
records
• The materials coming from the supplier come with a challan
from which the receipt is entered Daily Receipts Register
• The storekeeper then prepares a Goods Received Note (GRN),
and copies of the GRN are sent to concerned departments
Warehousing and Stores Operations
Warehousing and Stores Operations
 Warehousing and Stores Operations

• Supplier Payment
• When the materials are accepted by QC department, a copy
of the GRN is sent to Accounts Department for recording

• When the invoice is received, the GRN is matched with the

invoice for payment

• After it is checked and priced by Accounts with reference to

purchase order, it is cleared for issue of payment
 Warehousing and Stores Operations
• Record Keeping
• Information regarding details of materials, quantity received,
are entered in a bin card

• Bin card is a quantitative record of receipt, issue, and closing

balance of each item of stores

• Each bin card is filled up on movement of goods, i.e., on

receipt and issue
Warehousing and Stores Operations
 QUANTITY CHECK METHODS
A. Per cent Sampling
B. Random Sampling
1. Visual: Damage, Contamination, wet
1. By Touch : Fabrics, rough, smooth surface
2. By Smell: Kerosene, oil coconut oil,
3. By Comparison: with samples.
4. Laboratory Testing
5. By Weight at Weighing Scale
6. By Volume (of liquid)
 INSPECTION OF MATERIAL
Responsibility- QAD
SPECIFICATIONS:
IS, IP, USP, BP, ASME,
Blue Print
Sample
Company Specifications
TOLERANCES: Acceptable variability range as per SQC./
past practice/ Experiment/ Bargaining
ACCEPTABE QUALITY LEVEL
STATISTICAL QUALITY CONTROL
ACCEPTANCE /REJECTION ENTRY/INFORMATION
ACCEPTABE QUALITY LEVEL: For acceptance
sampling of each class of item. Lowest lot Quality
that can be accepted.
STATISTICAL QUALITY CONTROL
Sample size, Acceptance No.
ACCEPTANCE /REJECTION ENTRY/INFORMATION
CERTIFIED QUALITY CONTROL:
Supplier certify that shipment meets the
specifications.
 Insurance Claims
In case of damaged goods/shortages
Inform to Purchase.
Insurance Procedure:
Inform to Insurance Agent,
Arrange for Survey
Claim on Transporter
Make remarks on Documents for shortage
Claims documents: Original Ins Policy, Invoice,
RR/LR/BL, Packing List, Damage certificate from
Carrier. To be submitted within time period.
 Warehousing and Stores Operations
• Issue of Materials
• Issue of materials from storage is controlled through Material
Requisition Note and Material Transfer Note
• After the goods issue is posted for outbound delivery, it might
be shipped to the customer directly or consolidation may
occur at one location before one complete shipment is
transported to the end customer
• When the materials are dispatched for outbound delivery, a
packing slip format is prepared, which is added to other
documents on dispatch
• The purpose of packing slip is to identify the packed items at
the receiver’s end
 Introduction

• Role of Warehousing:
• A warehouse is used for four basic reasons:
• To economise on production and transportation costs

• To coordinate supply and demand

• As a help in production

• As a help in marketing
 Warehousing Functionality
• A warehouse is a storage space where a firm stores raw
materials, semi-finished goods, or finished goods, for different
periods in time
• A typical warehouse receives merchandise by rail or truck
• The items are moved to a storage area within the warehouse
and piled in stacks
• When customer orders are received, products are picked and
shifted to the area where the merchandise is assembled and
loaded into delivery trucks
• The productivity of operations in a traditional warehouse is
low because neglected area. no special skills are needed to
perform many of the manual tasks
 Warehousing Functionality
• However, this limitation has been largely overcome through
new operational concepts and technology
• Warehousing has developed into a strategic tool with state-of-
the-art systems capable of providing manufacturing and retail
support
• With advanced I.T., warehouse operators can quickly react to
changes in market conditions
• I.T. also enables measurement of performance under a wide
range of operational conditions
• Efficient warehousing reduction in storage and handling costs
while optimizing production, for manufacturers producing
products at multiple locations
 Warehousing Functionality
• Hub and Wheel Concept
• A central warehouse maintains a basic stock of parts thus
reducing the need to maintain inventory at each assembly
plant
• Using consolidated shipments, products are purchased and
transported to the supply warehouse and then distributed to
manufacturing plants as needed
• When fully integrated, the warehouse is a vital extension of
manufacturing
• JIT Support
• Warehousing is an integral part of JIT and stockless
production strategies
• The JIT concept reduces WIP inventory, but its success is
based on the support of highly dependable delivery system
• Such logistical support is possible only through the use of
strategically located warehouse
 Warehousing Functionality
• Market-oriented Warehousing
• On the outbound side, warehouses also create possibility of
direct customer shipment of mixed products
• This enhances the service capability of the marketing
organization and provides a competitive advantage to the
manufacturing organization
• Similarly, as the cost to retail stores of transporting small
shipments makes direct ordering prohibitive, manufacturers
and wholesalers have a need to utilize warehouses
• The warehousing function continues to be progressively more
important, as companies and industries utilize customer
services as dynamic, value-adding, competitive tools
 Warehousing Functionality
• Direct Mixed Shipments
• Direct mixed shipments have two specific advantages for the
customer

• First, the logistical cost is reduced because full product

assortment can be delivered along with benefits of
consolidated transportation

• Secondly, the inventory of slow-moving products can be

reduced because they can be received in small quantities as
part of consolidated shipments
 Warehousing Functionality
• Improvement in Time and Place Capability
• Conceptually, no warehouse should be included in a logistical
system, unless it is fully justified on cost-benefit basis

• For example, placing a warehouse in a logistical system to

service a specific market segment may increase the cost

• These costs must be exceeded by the benefits of increases in

market share, revenue, and gross margin to make the decision
acceptable
 Warehousing Planning and Cost Reduction
• Warehousing enhances the time and place capability of the
overall logistics system
• However, it needs to be justified on a cost-benefit basis
• The justification is quantified by the return on investment
reflected in the direct cost-to-cost trade-off
• For example, if adding a warehouse to a logistical system
reduces the overall transportation cost by an amount
exceeding the fixed and variable cost of the warehouse, the
warehouse is economically justified
• However, cost-benefit analysis is often difficult to quantify
• Conceptually, a service-justified warehouse would justified if
the net effect contributes to an increase in profitability
 Warehousing Planning and Cost Reduction
• From the service point of view, logistics planning in
warehouse helps to ensure a high level of growth in revenue
• It provides option to keep the costs low, while maintaining
excellent customer service
• The five basic benefits achieved through warehousing are:
o Spot Stock
o Assortment
o Mixing
o Product Support
o Market Presence
 Warehousing Planning and Cost Reduction
• Spot Stock
• A selected amount of a firm’s product line is “spot-stocked” in
a warehouse to fill customer orders during critical marketing
period in a variety of markets
• This allows manufacturers with limited or highly seasonal
product lines to substantially reduce delivery times to
strategic markets
• For example, spot-stocking is commonly used in physical
distribution for agricultural products to farmers during the
growing season
• At the end of the season, the remaining inventory is
withdrawn to a central warehouse
 Warehousing Planning and Cost Reduction
• Distribution Assortment
• A distribution warehouse is used to stock product
combinations in anticipation of customer orders
• It may consist of multiple products from the manufacturer or
special assortments of products as specified by customers
• For example, a manufacturer supplying JIT components would
stock products that may be offered to customer as and when
required
• Distribution warehouses improve service by having inventory
at hand to supply and also allow larger shipment quantities
which in turn reduce transportation cost
 Warehousing Planning and Cost Reduction
• Distribution Assortment Warehouse
 Warehousing Planning and Cost Reduction
• Mixing
• This is similar to consolidation process
• Full truckloads of products are shipped from manufacturing
plants to warehouses
• At the mixing warehouse, the shipments are unloaded and
the desired combination of each product for each customer or
market is selected
• In-transit mixing brings economies when plants are
geographically separated, reducing overall transportation cost
• From service point of view, such warehouses have the net
effect of reducing overall product storage and customer
service is improved, as the inventory is sorted to precise
customer specifications
 Warehousing Planning and Cost Reduction
• Mixing
• Mixing is useful when a buyer purchases a product from a
number of manufacturers
• Establishing a warehouse as a product mixing point offers
transportation economies
• In the absence of mixing points, the cargo moves from
manufacturer’s end to customer in small volumes, which
attracts higher freight rates
• In case of engineering goods, many items are exported in
completely knocked down (CKD) condition
• This is because the importing country regulations prohibit import of pre-
assembled goods
• Whenever goods are shipped on CKD basis, the exporter needs
warehousing facility for reassembly operations
 Warehousing Planning and Cost Reduction
• Production Support
• Production support warehousing meets actual requirements
of raw materials, parts, and subassemblies required for
production in an efficient manner
• It provides for safety stocks on items purchased from vendors
• The different types could be Raw Material Stores, Processed
or Semi-finished Materials Stores, Finished Goods Stores etc.
• The economics is reflected in the ability of providing most
economical total-cost solution in an efficient and timely
manner
 Warehousing Planning and Cost Reduction
• Market Presence
• The major advantage of local warehouses is that such
warehouses can be more responsive to customer needs and
offer quicker delivery than more distant warehouse

• Thus, local warehouses increase the speed of delivery

• In many cases, particularly for FMCG products, this can result

in increased market share and potentially increases
profitability
 Cost Benefits Through Operational Techniques
• Commonly used operational logistics techniques for
cost reductions are:
• i. Consolidation,

• Ii. Break bulk,

• Iii. Processing/Postponement,

• Iv. Stockpiling and

• V. Cross docking
 Cost Benefits Through Operational Techniques
• Consolidation
• Consolidation warehousing is a concept for supply chain
simplification and cost reduction
• In this concept, manufacturers combine their inventories with
that of other manufacturers in huge warehouses that take the
place of internal distribution centers or 3PL logistics providers
• In shipment consolidation, a warehouse receives and
consolidates materials from a number of manufacturing
plants destined to a specific customer on a single
transportation shipment
• The primary benefit of consolidation is that it combines the
logistical flow of several small shipments to a specific market
area
 Cost Benefits Through Operational Techniques
• Consolidation
• This concept is also used beneficially in international trade
• These warehouses are used for consolidation of cargoes
originating from different places but heading for the same
destination
• The LCL cargo arrives at distribution warehouse where it is
consolidated and stuffed in a container which is then
dispatched to the port of destination
• The saving in tariff of containerized cargo more than off-sets
Cost Benefits Through Operational Techniques
• Consolidation
 Cost Benefits Through Operational Techniques
• Consolidation
 Cost Benefits Through Operational Techniques
• Break Bulk
• This is opposite of consolidation
• The import cargo arrives as FCL
• The cargo is split in smaller consignments at the warehouse and
dispatched to receiver consignees
• The economy in freight in this similar to consolidation
• In export operations, this system saves cost, particularly when
individual orders are so small that the minimum space stipulation
by the shipping line cannot be fulfilled
• A break bulk operation receives combined customer orders from
manufacturers, sorts or splits individual orders and delivers them to
individual customers
• Break bulk as used here is different from the term used in maritime
shipping
Cost Benefits Through Operational Techniques
• Break Bulk
 Cost Benefits Through Operational Techniques
• Processing/Postponement
• Warehouses can also be used to postpone, or delay
production
• For example, a warehouse with packaging or labeling capacity
allows postponement of final production until actual demand
is known
• Once a specific order is received, the warehouse can complete
final processing and packaging
• Processing and postponement provides two economic
benefits:
o First, risk is minimized because final packaging is not completed until
order is received
o Second, the required level of total inventory can be reduced
Cost Benefits Through Operational Techniques
• Processing/Postponement
 Cost Benefits Through Operational Techniques
• Stockpiling
• Stockpiling provides an inventory buffer, which allows
production efficiencies within the constraints imposed by
material resources and consumer behavior while supporting
marketing requirements
• For example, in case of seasonal products, like agricultural
commodities which are harvested at specific times but
consumed throughout the year, or products which are
manufactured throughout the year but sold mainly during
festival seasons, such products require warehouse stockpiling
 Cost Benefits Through Operational Techniques
• Cross Docking
• Cross docking is a practice in logistics of unloading materials
from an incoming truck or rail car and loading these materials
in outbound trucks or railway wagons, with little or no storage
in between
• Shipments typically spend less than 24 hours at the facility,
sometimes less than an hour
• Cross docking may be done to change type of conveyance, or
to sort material intended for different destinations, or to
combine material from different origins
• Cross docking simply means receiving goods at one door and
shipping out through the other door almost immediately
without putting them in storage
 Cost Benefits Through Operational Techniques
• Cross Docking
• Typical applications of cross docking are:
o “Hub and spoke” arrangements, where materials are brought in to one
central location and then sorted for delivery to a variety of destinations
o Consolidation arrangements, where a variety of smaller shipments are
combined into one larger shipment for economy of transport
o Deconsolidation arrangements, where large shipments are broken down
into smaller lots for ease of delivery
• Cross docking shifts the focus from “supply chain” to “demand
chain”
• For example, goods arriving from a vendor already have a
customer assigned, so workers move the shipment from
inbound truck to an outbound truck bound for the
appropriate destination
Cost Benefits Through Operational Techniques
Cost Benefits Through Operational Techniques
 Cost Benefits Through Operational Techniques
• Cross Docking
• Cross docking can take many other forms like:
o Manufacturing cross docking,
o Retail cross docking, and
o Opportunistic cross docking
• Manufacturing cross docking
o Manufacturing cross docking includes receiving and consolidating inbound
supplies to support JIT manufacturing
o For example, a manufacturer might lease a warehouse close to its plant,
and use it to prepare sub-assemblies or consolidate kits of parts
o Because the demand for parts is known, say, from the output of an MRP
system, there is no need to maintain stock
 Cost Benefits Through Operational Techniques
• Distributor Cross Docking
• Distributor cross docking consists of consolidating inbound
products from different vendors into a multi-SKU pallet, which
is delivered as soon as the last product is received

• For example, computer distributors often source components

from different manufacturers and consolidate them into one
shipment in in merge-in-transit centers, before delivering
them to the customer
 Cost Benefits Through Operational Techniques
• Transportation Cross Docking
• Transportation cross docking means consolidating shipments
from different shippers in the LTL and small package industries
to gain economies of scale

• For small package carriers, material movement in the cross

dock is by a network of conveyors and sorters;

• For LTL carriers, it is mostly by manual handling and fork lifts

 Cost Benefits Through Operational Techniques
• Retail Cross Docking
• This consists of receiving products from multiple vendors and sorting into
outbound trucks for different stores
• Cross docking has been cited as a major reason Wal-Mart surpassed K-
Mart in retail sales in the 1980s
 Cost Benefits Through Operational Techniques
• Opportunistic Cross Docking
• Opportunistic cross docking in any warehouse, means
transferring an item directly from the receiving dock to the
shipping dock to meet a known demand
• The common elements to all of these operations are
consolidation and extremely short cycle times, usually less
than a day
• The short cycle time is possible because the destination for an
item is known before or determined upon receipt
 Cost Benefits Through Operational Techniques
• Another way to classify cross docking operations is when the
customer is assigned to an individual pallet or product
• There are two major systems:
• Pre-distribution Cross Docking
o In this case, the customer is assigned before the shipment leaves the
vendor, so it arrives at the cross dock duly bagged and tagged for transfer
o This is difficult to implement vendors of the cross dock must know which
customers of the cross dock need what before they send the shipment
o This involves extensive information transfer, system integration, and
coordination
 Cost Benefits Through Operational Techniques
• Post-distribution Cross Docking
o In this case, the cross dock itself allocates material to its stores
o For example, a cross dock at a Big Bazaar might receive 10 pallets of Surf
Detergent without labels for individual stores
o Workers at the cross dock allocate 2 pallets to the Gurgaon Store, 5 pallets
to Connaught Place Store and so on
• Warehousing has four major functions – receiving, storage,
order picking, and shipping
• Storage and order picking are typically the most costly
• Storage is a high cost item because of inventory holding costs
and order picking because it is labor intensive
 Cost Benefits Through Operational Techniques
• Issues in Cross docking
• Cross docking is a logistics technique that eliminates the
storage and order picking while still allowing it to serve its
receiving and shipping functions
• There is also reduced handling cost at the cross dock facility
since products are not stored
• When properly implemented, cross docking enables firms to
eliminate inventory costs and reduce transportation costs
often at the same time
• Design of the cross dock becomes important from the point of
view of efficiency
 Cost Benefits Through Operational Techniques
• Cross docking is a complex operation involving extensive
coordination between the distributor and its suppliers and
customers
• Increased communication between the channel partners is
often a big obstacle
• Cross docking is successful when the product quality is high
• Cross docking is attractive for two main reasons:
o For items with stable demand, cross docking reduces inventory holding
costs. The retailer essentially replaces inventory with information and
coordination
o For LTL and small package carriers, cross docking reduces transportation
costs. Cross docking is a way to consolidate small shipments to achieve
truckload quantities
 Warehousing Options
• It is not necessary for a firm to own and operate its
warehousing requirements
• The different options include:

o Owner-operated Warehouse

o Private Warehouse

o Public Warehouse
 Warehousing Options
• Owner-operated Warehouse
• This is operated by the firm owning the product
• The actual facility, may however, be owned or leased
• The decision to own or lease is essentially a financial decision
• The major benefits of owner operated warehousing are better
control and flexibility
• Control facilitates the ability to integrate warehouse
operations with the rest of firm’s internal logistics processes
• Owner operated facilities provide the freedom to adjust
operating policies and procedures to meet the unique
requirements of the firm
 Warehousing Options
• Private Warehouse
• These warehouses charge a basic fee for handling and storage
• The handling charge is based on the number of cases or
weight handled
• For storage, the charge is assessed on the number of cases or
weight in storage during the month
• When economies of scale are not possible in a private facility,
public warehousing is a low cost alternative
• Each warehouse type differs in its material handling and
storage technology on the basis of product and environmental
characteristics
 Warehousing Options
• Private Warehouse
• Private warehouses are classified on the basis of range of
specialized operations performed as follows:
• General Merchandise Warehouses
o This type is used to store goods that are readily handled, are packaged,
and do not require a controlled environment
o Traditional general warehouses receive and ship goods on behalf of their
customers, serving as middlemen in the transportation process and a vital
part of the logistics business
o Some private warehouses diversified into additional types of services
typical of freight forwarders or transport companies than of general
warehouse operators
o General warehouses use EDI and other electronic devices such as bar
coding and RFID monitoring to enhance productivity and efficiency
 Warehousing Options
• Private Warehouse
• Refrigerated Warehouses
o These are specialist warehouses designed to handle and maintain
products that are perishable, such as food, medical items, and chemical
products with special temperature requirements
o Besides high standards for product quality and safety, these warehouses
must also possess efficiency and reliability
o Energy is a major contributor to the cost of business
o There are also issues of environmental regulation, equipment flexibility,
and logistics management to be dealt with
o Operators of private refrigerated warehouses are increasingly using
automation technology to provide efficient cost-effective services
demanded by food processors
 Warehousing Options
• Private Warehouse
• Commodity Warehouses
o These are designed to handle bulk materials such as wheat, rice, sugar, etc.
o Non-food commodities include jute, fertilizers, wood pulp, tobacco etc.
o Some commodities can also be in liquid form, such as petroleum products,
as well as many chemicals
o Due to diverse nature of commodities, many items require special handling
or storage considerations
o For example, grain storage warehouses may require elevators, liquid
commodities may require tanks, and a commodity like tobacco requires a
barn
 Warehousing Options
• Private Warehouse
• Bonded Warehouses
o These warehouses are licensed by the government to store goods prior to
payment of taxes or duties
o This facility of storing imported goods in Customs Bonded Warehouses
without payment of customs duty is permitted under the Customs Act, 1962
o The warehouses are to be licensed at particular places only
o All warehoused goods are subject to the control of Customs Officers
o The owner of the warehoused goods may inspect, sort, show for sale, take
samples etc. from the bonded goods with the permission of customs officer
o The owner of the bonded goods has also to pay rent to warehouse keeper
and warehouse charges at the rates fixed under law
o In addition to bonded warehouses for imported items, such warehouses are
also used for items that are subject to Excise Duty
 Warehousing Options
• Public Warehouse
• The Central Warehousing Corporation (CWC) was set up in
1957 under the Agricultural Produce Development and
Warehousing Corporations Act, 1956
• Functions of CWC under this Act are:
o Acquire and build godowns and warehouses at suitable places
o Run warehouses for storage of agricultural produce, fertilizers, etc.
o Arrange facilities for transport of agricultural produce, seeds, fertilizers
etc. to and from warehouses
o Subscribe to the share capital of State Warehousing Corporation
o Act as agent of government for transport of agricultural produce, seeds,
fertilizers etc. and
o Carry out such other functions as may be prescribed
 Warehousing Options
• Public Warehouse
• There are three agencies in the public sector which are
engaged building large scale warehousing capacity; these are:
o Food Corporation of India (FCI),
o Central Warehousing Corporation of India (CWC), and
o 17 State Warehousing Corporations (SWCs)
• Apart from storage, CWC also offers services in the areas of
clearing and forwarding, handling and transportation,
distribution, disinfestations, fumigation, and other ancillary
services such as safety and security, insurance, etc.
• CWC is also operating Custom Bonded warehouses
 Warehousing Options
• Public Warehouse
• FCI is a PSU which is also in warehousing

• In addition, 17 states also have SWCs that supplement the

capacity of CWC

• SWCs are primarily for storage of agricultural produceseeds,

fertilizers etc.
 Future Expansion
• While planning the warehouse facility, sufficient attention has
to be given for future requirements
• In case of expansion, material handling facilities and the
storage plan should be expandable in a manner that the
integrated design of the warehouse maintains its desired
characteristics and maximum efficiency of product flow
• When situations arise where the principles conflict, the design
principles should be considered as general guidelines and
solutions should be found based on the specific situation or
problem