Retrieval and Transaction

UNIT 15 LOCATION AND STRUCTURE OF Processing System

WAREHOUSE

Objectives
After completion of this unit, you should be able to:
• understand the role of warehouses in organization;
• appreciate the importance of warehouse location;
• know the factors that influence the decision making process while locating the
warehouse;
• get an idea of the objective of warehouses layout;
• be familiar with the factors to be considered while planning the layout;
• understand the safety considerations while planning the layout; and
• understand the function and structure of warehouses.
Structure
15.1 Introduction
15.2 Warehouse Location
15.3 Warehouse Layout
15.4 Warehouse Safety
15.5 Warehouse Functions
15.6 Warehouse Structure
15.7 Summary
15.8 Self Assessment Exercises
15.9 References and Suggested Readings

15.1 INTRODUCTION

Warehouses play a vital role in the effective operations of a company. Incoming

materials and supplies, in process goods, and finished goods are important assets
to a business enterprise. In a majority of manufacturing organizations, materials
constitute the major fraction of cost, i.e., 40 to 80% of total cost. The cost of
capital blocked in inventories is substantial. Since production and consumption
cycles rarely match, the success of any business, besides other factors, depend
largely on the process of efficient storage and material control of these assets in
order to provide uninterrupted supply to the points of use or consumption and the
warehouse is the place for the operation of this process. Warehouse management
is concerned with carrying the right kind of materials or goods in right quantity
neither in excess nor in short supply and also keeping it safe against any kind of
deterioration, pilferage or theft. Warehouse is the custodian of the organization’s
money, as money is locked up in stocks.

Business organizations utilize warehouses for a variety of needs. It may serve as

a storage point and /or a transit facility for incoming, in process or outgoing
goods and also for receipt trans-shipment of finished goods when located at some
point between the company’s plant and its customer.

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15.2 WAREHOUSE LOCATION

The location of the warehouse is a crucial decision which has to be taken with
utmost care as the process of relocation, once the facilities are installed and
made operational, can be an expensive exercise.

The optimal location of warehouses result in the following advantages:-

• Minimization of total transportation, handing and other related costs.
• Minimization of delays in providing materials and goods to the point of use or
consumption.
• Maximization of effectiveness of warehouse operations.
• Conservation of efficiency of human, machine and equipment.
• Better Facility planning.
• Lending flexibility and adaptability to the organisations futuristic outlook.
The factors that influence the location of warehouse:

1) The point of use or consumption: The point of use or consumption is an

important criteria in deciding upon the location of warehouses. This ensures
availability of the requirements in time. Delays in the availability of materials,
goods or supplies can result in idle facilities and slippages in delivery
commitment, which not only adds to the operating costs but also affects the
goodwill and the organisation in the market place raw material warehouse is
usually located near the first operation. in Process warehouse are near the
subsequent operations and finished goods warehouse are near the shipping
areas.

2) The Size of the plant: In large organizations it may not be possible to locate
the warehouses which are convenient and equally accessible to all consuming
units and at the same time be near to the material receiving section. This leads
to the concept of decentralized warehouses. In such a case, a central
warehouse can be located near the receiving station and issues can be
decentralized by setting up sub-units of the control warehouse located close to
the various user departments to meet their day-do-day requirements of essential
supplies.

3) The nature and classification of materials: In case of heavy, bulky,

perishable or critical items, the warehouse should be essentially located near the
point of use or consumption, therefore the nature of the item is an important
factor in deciding upon the location. The value, variety and volume of goods and
materials to be handled should also be considered in the process of warehouse
location .

4) Material handling consideration: The accessibility of the central receiving

station by rail or road has a decisive role to play in the locational process. Also
the warehouse location should lie, as far as practicable, in the flow path of
material. This reduces the total cost of transportation and handling. The general
principle during warehouse location is to minimize the kg-km of transportation
and handling the materials.

5) Locational factors for transit warehouses: In case of transit warehouse

located at some point between the company’s plant and its customer or sources
of supply, factors such as proximity to convenient means of transportation (by
rail, road or port), sources of supply and market and also the availability of
2 labour and power primarily influence the locational orientation.
6) Models of facility planning: For a rational and logical approach towards the Retrieval and Transaction
locational decision making particularly in large size organizations, the models, of Processing System
facilities planning can be applied effectively.

15.3 WAREHOUSE LAYOUT

Warehouse layout is the internal design or the functional design. An efficient

layout and design is very important from the point of view of its functioning
which is in turn, linked to the functioning of the plant. A good layout helps in
easy receipt locating, packing, issuing and inspection of goods, dispatching the
goods, effects proper storage and preservation and also simplifies stock taking.
The efficiency of the storage system may be compared and assessed in terms of
unit cost (per volume or weight) of moving goods through storage sites or storage
area over a given period. It usually takes into account the elements of labour,
space and equipment needs and costs.

In any specific storage system design, these may be some advantages in

sacrificing the accessibility to stocks in favour of getting more stores in less
space, or vice versa. Thus, while it is not possible to arrive at any absolute
criterion for the efficiency of one storage system over another, the selection of
the right system will depend upon assessing and evaluating the requirements in
terms of the manufacturing strategy or the distribution strategy.

The size, design and layout of warehouse must, therefore be an integral part of a
wider systems design and management strategy. It must also be realized, that
what happens in a warehouse affects the whole range of other activities.

The objectives of a good warehouse layout are to achieve the following:

1) Maximum ease of operation with ready accessibility of major materials.
2) Straight line or semi-circular flow of materials from receipt to dispatch with
minimum back tracking.
3) Maximum use of space for storage
4) Minimum handling of materials
5) Minimum traverse distances while materials get transported into and transported
out.
6) Lowest possible need and use of material handling devices.
7) Preservation and protection of materials by ensuring adequate environmental
conditions internally and externally.
8) Elimination of pilferage and thefts.
9) Easy, prompt and seedy physical verification and stock taking.
10) Flexibility of operations with a futuristic outlook.
The information needs while planning the layout are as follows:
1) Classification of store items by size, number, weight, frequency of handling,
handling arrangements required and perishability.
2) Floor space and height required to store the items.
3) Deciding in advance whether to go for fixed location. Random location or Zoned
location of stocks or a combination of these.
Fixed location: Stock can be found immediately without a complex system of
recording but there can be a considerable waste of space.
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Warehousing Random Location: Space is better utilized, but good and elaborate records
have to be kept about where the materials are.
Zonal Location: Goods of a particular product group are stored in a given area.
4) Units withdrawn/ issued at a time.
5) Maximum number of units to be stored at one time.
6) Storage facility required that best suits the items.
7) List of available storage space for different kinds of storage facilities.
8) Determining the sequence of laying out storage space for locating the materials.
9) Size and shape of the space available for laying out the stores.
10) Preparation of flow diagram of the flow of materials through the stores.
The features of a good layout are as follows:
1) Provision of sufficient number of passages (aisles) besides sufficient number of
cross aisles. The area earmarked for aisles should not exceed 30% of the total
area.
2) Provision of multi-dimensional shelves or sections for storing different items.
3) Receiving-end and dispatch-end are at opposite points.
4) Provision of emergency exit.
5) Provision for fire-fighting facilities advantage points and free of encumbrances.
6) Provision of lighting, ventilation, heating and refrigeration system installed
wherever required.
7) Offices, clock rooms and toilets provided close to the receiving yard and
dispatch yard.
8) The space for receipt and inspection provided adjacent to the main stores.
9) Effective utilization of the third dimension.
10) Proper markings made at various storage spaces to facilitate location and
identifications.
11) The layout should permit the use of modern material handling equipments.
12) Provision for future expansion.
13) A pleasing and hygienic environment through proper selection of the colour of
walls, provision for exhaust and cleaning.
Activity 1
Is it always not possible to implement a good warehouse layout? Comment on the
management strategy keeping cost and time factors in mind.
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15.4 WAREHOUSE SAFETY

Warehouse safety is a very important aspect to be considered while designing

4 and laying out the warehouse. Since large volume of goods are handled everyday
therefore the probability of occurrence of accidents cannot be ruled out. Retrieval and Transaction
Accidents may cause damage to life and property and also reduces morals and Processing System
effectiveness of the entire system.

The following measures are necessary if accidents are to be prevented:

1) Safety consciousness should be installed in the minds of warehouse personnel
through training programmes, visual aids and literature.
2) Safety appliances or personal protective equipments like goggles, hand gloves,
helmets etc., must be provided and their use must be encouraged.
3) Good housekeeping is essential, this means that gangways must be clean,
adequately wide so that movement of forklifts, trolleys and industrial tractors is
smooth. Stocking must be in appropriate locations so that handling is minimum.
4) All warehouse equipments must be kept in good order. This includes adequate
maintenance practices with regard to forklifts, overhead cranes, trolleys,
conveyors etc. operators must be trained in safety aspects so that safety
precautions are not overlooked.
5) Healthy competition can be stimulated by installing safety awards and cash
prized which bring recognition to the concerned warehouse personnel for safety
practices. This also motivates others to practice safety.
6) Provision of fire fighting facilities is necessary especially where inflammable
materials are stored and handled. In point of fact, large organizations have a
well-maintained fire fighting equipment with the warehouse in preparedness.
This, in the long run reduces losses and insurance expenses. Fire extinguishers,
fire escapes, alarms and sprinklers must be available and personnel should be
familiar in handling them.
7) Other factors which merit attention include provision of toilets, exhausts, routine
maintenance equipments, safe electrical wiring etc.

15.5 WAREHOUSE FUNCTIONS

The functions of warehouse can be classified as follows:

1) To receive raw materials components, tools, equipments and other items and
account for them.
2) To provide adequate and proper storage and preservation to the various items.
3) To meet the demands of the consuming departments by proper issues and
account for the consumption.
4) To minimize obsolescence, surplus and scrap through proper codification,
preservation and handling .
5) To highlight stock accumulation, discrepancies and abnormal consumption and
effect control measures.
6) To ensure good housekeeping so that material handling, material preservation,
stocking, receipt and issue can be done adequately.
7) To assist in stock verification and stock accounting and provide supporting
information for effective purchase action.
8) To implement and maintain quality systems in warehouses.

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15.6 WAREHOUSE STRUCTURE

The warehouse structure can be decentralized or centralized depending upon the

organizational requirements. In decentralized stores system, each section of the
industry has a separate stores attached with it, whereas in centralized stores
system, the main store is located centrally.
Advantage of Centralisation of Warehouse:
• Better supervision and control
• Requires less personnel to manage
• Better layout of stores
• Inventory checks are facilitated
• Optimum stores can be maintained
• Fewer obsolete items
• Better security arrangements can be made
• Less risk of loss by fire or theft
• Less chances of production stoppages due to prompt availability of materials.
• Reduced material handling and associated costs.
• Convenient for user departments
Disadvantages of Centralized Warehouse Systems:
• Congestion in the storeroom
• Chances of misappropriation and thefts of particular items
• Possible delays in service to user departments
• Advantage of decentralization of stores
Disadvantages of Decentralization of Warehouse:
• Greater inventory carrying cost
• Difficulty in supervision and control.
The warehouse structure should emphasize on centralized control and
decentralized activity. The principal sections of a warehouse are generally:
• The receipt section
• The storage section
• The issue section

15.7 SUMMARY

Warehouse management is concerned with providing inventories in right quantity

and quality and in the right time to the points of use or consumption. In this unit,
the importance of location and layout of warehouse has been stressed upon as
these factors greatly influence the overall organizational efficiency. Any
warehouse system is a compromise between the use of space and the use of
time. Choosing the most suitable system means dealing with a number of
interacting and often conflicting factors. The success in achieving warehouse
efficiency depend upon the careful consideration and evaluation of the various
factors during the decision making process.
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15.8 SELF ASSESSMENT EXERCISES Processing System

1) What are the factors to be considered while locating the warehouse?

2) Write a descriptive note on “efficient layout of warehouse”.
3) What are advantage and disadvantages of centralized warehouse and
decentralised warehouse?
4) What are the objectives of a good warehouse layout?
5) Discuss the safety considerations while designing and laying out the warehouse.
6) Discuss the major functions of warehouse in an organization.
7) How would you choose the best location for a new warehouse?

15.9 REFERENCES AND SUGGESTED READINGS

Bhat K. Shridharan, Materials Management, Himalaya Publishing House, Mumbai.

Datta A.K., Material Management, Inventory Control and Logistics Jaico Publishing
House, Bombay.

Gopalkrishanan, P. and Sundaresan, M, Materials Management – An

Integrated Approach, Prentice Hall of India, New Delhi.

Khanna, O.P., Industrial Engineering and Management, Dhanpat Rai, Delhi.

Kumar Surender, Industrial Engineering and Management of Manufacturing

Systems, Satya Prakasan, New Delhi.

Lee L. and Dobler D.W., Purchasing and Materials Management: Text and
Cases, Tata McGraw Hill, New Delhi.

Moore, J.M., Plant Layout and Design, Macmillan, New Youk.