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Functions of a Warehouse – A Detailed Guide

Warehouses in the olden days were used purely for the storage of goods. They were usually large buildings located near railway junctions, ports, or business centres.

These warehouses were given on rent wholly or partially for storage of goods, machinery, etc. with the customer having to arrange all activities such as unloading, loading, and packing of their cargo.

Gone are those days when a warehouse meant strictly ‘storage space only’. Most modern warehouses are architectural and technological wonders that cater to almost all the supply chain requirements of its customers.

A supply chain includes all the stages a product passes through, from its production until it reaches the hands of the end customer. Warehousing is an integral part of the modern supply chain and logistics operations. It is where most of the operations take place.

According to 2020 data released by the World Trade Organization (WTO), 17.5 trillion USD worth of goods were exported between countries (this is USD 2 trillion less compared with the figures of 2019, as a result of the slump in trading activities caused by the Coronavirus pandemic). As we can see, this does not include goods sold within countries.

The supply chain of the goods thus traded would have included its storage at some point in time. Imagine the warehouse infrastructures required to hold and handle this whopping quantity of goods!

Are Warehouses Necessary?
The simple answer to this is Yes. Warehousing of goods becomes a necessity due to the time gap between production and demand.

Even goods that are made on demand have to be stored for a brief period. The facility to store goods allows companies to produce or manufacture their products in advance to meet future demands.

For goods with seasonal demand, storage is a necessity. They are produced in advance and warehoused to meet future demand.

Economies of scale require production in prescribed large numbers that cannot be sold to customers all at once. Such goods have to be stored until there is demand for them. Temperature-controlled warehouses cater to the needs of storing ambient, chill, or frozen goods.

Classification of Warehouses
Warehouses may be broadly classified as government-owned, owned by private companies, or by cooperatives.

Bonded warehouses are either run by the government or licensed to private operators by the government. They allow storage of goods without having to pay customs duty until these goods are taken out of the bonded warehouse.

Bonded warehouses are usually used for the storage of high-value imported items such as alcoholic drinks, tobacco, certain electronics, etc.

Requirements of a Modern Warehouse

Besides a convenient location, good accessibility by road, availability of space, and the latest material handling equipment, a warehouse should be designed in such a way that receipt of goods, inspection, storage, issue of goods, and other functions can be done easily.

To avoid bottlenecks inside the warehouse, the Material Flow Planning (MFP) has to be perfect. Material flow may be planned, based on the U-Flow or Through-Flow methods.

In the U-Flow method, goods flow in the shape of ‘U’ through the warehouse. The receipt and dispatch of goods happen at the same side of the warehouse building with the same docks being used to receive as well as dispatch goods.

In the Through-Flow method, goods flow from one end of the warehouse building to the other, often in a straight line. To simplify, goods are received at one end of the warehouse, taken inside for storage, picked, and dispatched from the other end.

The layout of a warehouse has to be planned properly before construction, taking into consideration the following main factors:

  • Fire-fighting equipment
  • Sufficient spacing – aisles, passages, etc.
  • Sufficient space to manoeuvre modern material handling equipment.
  • Ventilation and lighting
  • Heating and refrigeration systems
  • Office space
  • Provision for future expansion of the facility

A good layout design is critical for the maximum efficiency and space utilization of a warehouse.

The Main Functions of a Warehouse
Warehousing is a key component of any supply chain. Let us take a look at the main functions of a warehouse that usually starts with the receipt of goods.

Goods are delivered to a warehouse usually by road transport. Such goods are referred to as Goods Inward. Whether it comes by cargo ship, aircraft, or goods train it has to be moved to a warehouse, however, close it might be to the quayside, runway, or train station using a truck or other suitable vehicle.

The operations manager of the warehouse has to plan and ensure that the resources and arrangements to receive such goods are made in advance. This is called a Goods Inward Plan (GIP).

It may be necessary for the warehouse to arrange for the vehicles to shift cargo from the seaport, airport, or railway station. Staff to unload the goods inward have to be assigned and the necessary material handling equipment made available.

Goods that have come in are unloaded at the warehouse and arranged for an inspection.

The warehouse operations staff have to ensure that what is shown on the packing list is what is actually received at the warehouse. The packing list and the invoice should also match. A goods receipt inspection includes, but is not limited to checking that the quantities are correct, prices shown are accurate, and that there is no damage to the goods or deterioration in quality when received.

Any inaccuracies or other issues should be documented and brought to the attention of the operations supervisor who would then take it to the attention of the stock administration staff. The stock administration staff informs the shipper, the transporter, or the insurance representative of such issues.

Once unloading and inspection of the goods are completed the warehouse operations staff prepares an Inventory Receipt Report (IRR) by consignment. The IRR would show details of the goods received including details of goods received short, excess receipts, expired or damaged goods received, and other such information.

Put-away and Storage
This is the stage when the goods that are received and inspected are moved to their respective system allocated locations on racks inside the warehouse. Very seldom is block-stacking followed in warehouses these days.

In block-stacking, loads are placed on the warehouse floor and stacked on top of each other to a stable height. While it saves space, it can be quite cumbersome to handle.

The IMS allocates locations for the goods inwards based on put-away rules as decided by the warehouse management. Goods for put-away are normally identified using bar codes. Bar codes are computer-readable. Bar code scanners convert the data into readable information such as product and package information, location, etc.

The IMS works out a pattern of storage whereby the stored goods can be accessed easily for later distribution based on the principles of FIFO (First In – First Out), FEFO (First Expiry – First Out), LIFO (Last In – First Out), etc.

Some warehouses use light technology where a system-controlled light guides the operator to the exact location to place the goods. A Put-away report shows the goods that have been received into the warehouse with their respective details and location in the warehouse.

Systems Receipt
Once the put-away of goods is completed, the received quantities are accepted in the warehouse Inventory Management System (IMS). The Stock Administrators of the warehouse are usually responsible for this. They will account for the exact quantities received, at the agreed prices, taking into account short receipts, damaged stocks, etc.

The output here is usually in the form of a Goods Receipt Note (GRN). Typically, with the issue of a GRN, the specific goods are available in the computer systems for re-distribution or sales.

Issue of Stocks
Stocks are issued from a warehouse based on orders received from their customers who could be internal or external. Stocks that are issued are known as Goods Outward.

Most IMS are designed to automatically uploaded orders into the systems for processing. Once orders are uploaded, the system detects out-of-stock items and generates a Pick List (PL) for the remaining ones showing the locations from where they are to be picked by the operator.

Similar to the technology used for put-away, light-based technology may be used to guide the operator to the exact location to pick the goods. Based on the final Pick List, an invoice or Goods Issue Report (GIR) is printed.

The stocks thus picked are moved to the loading area as per a loading plan. A Daily Loading Plan (DLP) is prepared by the operations supervisor taking into account the total number of orders to be dispatched for the day and the priority of each order. The required trucks or truck trailers have to be arranged for the transport of these goods and staff assigned to handle the loading functions.

Goods that are taken out of the warehouse for delivery or dispatch have to be supported by their proper documentation. Invoice, packing list, shipping documents in the case of goods for export, clearance from Road Transport authorities in certain cases, etc. are just a few of these. These have to be collated and kept ready for the driver of the truck transporting the goods.

Cross Docking
Also known as Dock-to-Dock, cross-docking is a very productive method of transporting goods between locations without having to make use of intermediate storage. In this method, instead of storing the goods, they are checked and immediately loaded onto a mode of transport for direct delivery to the customer.

Cross-docking is carried out from a warehouse marshalling or staging area. This is the area where goods are assembled temporarily during their receipt or dispatch. In some cases, it may also be done from the port/airport/railway yard and sent directly to the customer. Cross-docking is usually done when goods are transported from the supplier to the distributor. It saves time, effort, and money.

Stock Counts
Warehouse stock counts or stock-takes help to confirm the accuracy of stocks held in the warehouse. In other words, it checks whether the stocks as per physical count match with the stock of goods according to the system, at a given point in time.

Generally, an annual stock count is a legal requirement for a registered business. It may also be conducted quarterly or half-yearly. Periodic stock counts help to spot errors or issues such as pilferage etc. Discrepancies that are found during a stock count are later corrected or written off after approval by the authorized manager.

Pest Control
Pests cause stock losses amounting to several billion US dollars every year. All warehouses have to be disinfected at regular intervals to prevent damages caused by vermin, rodents, or other pests. The damages caused by these creatures can result in major losses, both to the stocks as well as the warehouse infrastructure.

For example, rodents may gnaw into the wiring of machinery, or plastic and wooden parts, causing fires or other serious accidents. Fumigation, traps, poison baits, etc. are some methods of pest control.

Other Value-added Services
Warehouses often provide value-added services to their customers to retain them as well as attract new customers. Some of the value-added services include packing, labelling, documentation, and other such services.

Warehouse Security
Goods that are stored inside a warehouse and the warehouse infrastructure may be worth millions and require security from damage, pilferage, theft, arson, etc. Warehouses have an obligation to safeguard the goods that have been entrusted in their safekeeping by their customers.

CCTV cameras, motion sensors, alarms, and effective patrolling in and around the warehouse periphery are essential for the safekeeping of the property and goods. A large warehouse may have a security manager to look after such matters and to liaise and maintain a good rapport with the local police force, fire station, and other local authorities.

Insurance cover is normally taken by the warehouse management for the stored goods as well as the warehouse infrastructure and all other equipment. There are various types of insurance for warehouses. These include partial as well as comprehensive insurance to cover incidents like fires, floods, and other types of losses.

However, it will have to be established that the loss was caused despite the warehouse having taken all possible measures to counter these. The customers may also take insurance on the goods owned by them.

Machinery and Equipment Used in Warehouses
Machines and equipment are used in warehouses and yards for the safe and efficient handling of goods and materials in bulk or as separate smaller units. These are known as Material Handling Equipment (MHE). They help to load and unload goods (goods outward – goods inward), move heavy cargo between locations, etc.

Examples of material handling equipment are forklifts, cranes, pallets, heavy-duty sheets for covering goods, etc. A warehouse manager has to ensure that all MHE are serviced according to their prescribed service intervals and maintenance contracts are in place.

Modern warehouses are designed to ensure the maximum efficiency of their operations. Such warehouses have the latest equipment and software such as an Inventory Management System (IMS) to optimize their inventory-related processes. The IMS is often integrated with an Enterprise Resource Planning (ERP) system to bring together the different functions and departments, thereby enhancing the organization’s system capability.

However, qualified and efficient staff are the backbone of any successful logistics operation. How much ever automation and digitalization that may have come in recent times, efficient staff to handle these is of great importance.

In an industry that is dictated by fierce competition, warehouses that make use of the latest trends in technology and which are run by efficient managers and staff are always the front-runners.

Please note that what we have mentioned in this article are some of the main features and functionalities of a modern warehouse.

There may be warehouses that are equipped with other latest and customized equipment. Warehouses may also offer facilities and services to their customers, other than what is mentioned here.

Source: Marine Insight


Guide To Types of Warehouses for Shipping

Importance Of Warehouses
Goods in the process of shipping need safe and secure storage to protect them from the elements of nature, damage and destruction due to careless handling, pilferage, etc.

In business, goods require storage as they wait for the customer. Warehouses are buildings and related infrastructure that are used for the storage of goods.

Warehouses have the facilities for receiving goods, stacking or storing them safely, and picking these goods when it is time to ship them to a customer or a new location.

These activities have to be carried out while ensuring the safety and security of personnel handling the goods at the warehouse, as well as the goods.

Modern warehouses have come a long way from traditional goods sheds or goods yards.

A goods shed is a building without any storage infrastructure that is used for the stacking of goods. Usually, such buildings have no proper safety or security features. A goods yard is an open but usually enclosed compound where goods are kept.

Most modern warehouses are engineering marvels. They have the latest storage and handling equipment and inventory management technologies.

Guide To Types of Warehouses for ShippingWhile optimizing storage space, these latest features ensure accurate stock-keeping and picking of goods.

When the world is more conscious about the quality of products, food safety, etc. security and hygiene of the stored products are given utmost importance in such warehouses.

Important Features of Modern Warehouse
Let us take a look at some of the important features of a modern warehouse.

Availability of Appropriate Storage
Most modern warehouses have an ambient, chill, and frozen storage facilities to cater to the different requirements of the market. It is common to have a customer with the requirement for these three types of warehousing under one roof.

Accessibility to Markets and Ports
Most successful warehouses have proximity to ports. It makes transportation of goods easy – for imports as well as exports.

Safety and Security
For the safety and security of personnel as well as the goods stored within, warehouses these days, have well-trained security staff, CCTV, motion sensors, temperature sensors in storage areas, fire-fighting equipment, etc. They meet all the safety and security standards prescribed by the relevant authorities.

Efficient and well-trained staff
Well-trained and efficient staff help run a warehouse smoothly through proper planning and execution of operations.

Latest storage and handling equipment
Modern technology plays an important role in the success of any warehousing and logistics operation. Equipment, machinery, and software used should be upgraded periodically to meet the demands of the market while making it easy for the user to handle.

Latest storage and handling equipment

Cross-docking facilities
One important feature that most customers look out for in warehouses is the facility to cross-dock.

What is cross-docking?

When goods are received and picked immediately for dispatch and delivery without storing them inside the warehouse, it is called cross-docking. This saves time, storage space, and cost.

Warehouse Management System (WMS)
A Warehouse Management System (WMS) software optimizes storage and the receipt-stacking-picking procedures. It is a system of optimized inventory management.

Enterprise Resource Planning (ERP)
ERP software encompasses inventory management, principal and customer relationship management, as well as accounting. This all-in-one software integrates the functions of a warehouse or even the whole business.

Emergency backup
Facilities for backup in the event of power failures, machinery and equipment breakdown, and other unforeseen calamities should be in place.

Some modern warehouses even have agreements partnering with other warehouses to provide on a reciprocal basis, storage and other facilities in the event of a breakdown.

Large business houses may own warehouses. Those with no warehouse facilities have the option to go to public or private warehouses for their storage needs.

A broad classification based on ownership and running of warehouses includes public, private, and cooperative warehouses.

Types of Warehouses

Public Warehouses
Public warehouses are government-run but available to both the public and private sector businesses. They might not be state-of-art or technologically in front, but they serve the purpose of storage of goods at affordable rates.

Most such public warehouses are located in easily accessible areas that are close to markets as well as seaports or airports.

Private Warehouses
Private warehouses are run by private organizations. Some of them may be for the exclusive storage of goods of the owning company while others are available for the storage of goods to the public.

Other than accessibility, being technologically forward is their strong point. These days most private warehouses have moved from just being storage locations to logistics service providers.

Other than providing storage space for the goods of their customers, they help with planning, implementation, and execution of the customer’s transportation needs, ordering, picking of goods, and purchase requirements. In other words, it means all the inbound and outbound activities of the customer.

The terms ‘inbound and outbound’ broadly translate to purchases from principals and sales to customers. Modern logistics companies usually meet all the requirements of their customers.

Private Warehouses

They may offer warehouse management systems (WMS) for accurate inventory management and enterprise resource planning (ERP) for automation of all logistics-related activities including accounting and customer relationship management (CRM). In certain cases, the ERP includes WMS.

Cooperative Warehouses
Farmers, orchard and vineyard owners, aqua-culturists, etc. usually form cooperatives. These cooperatives may own warehouses that provide the appropriate storage space to their members at subsidized rates.

Depending on the availability of space, cooperative warehouses may also let it out to outside parties at a slightly higher rate.

A further categorization of warehouses based on utilities provided would include bonded warehouses, consolidation warehouses, smart warehouses, etc.

Bonded or Duty-Free Warehouses
Bonded warehouses are customs-approved warehouses that allow businesses to store their imported goods before payment of customs duties and taxes.

Good can be stored in bonded warehouses for an extended period until it has to be taken outside for sale or use after payment of customs duties and taxes.

The goods that are stored in bonded warehouses are classified as ‘duty-free’. Once customs duties and taxes are paid on the goods that are taken out, they are called ‘duty-paid’ goods.

Storing goods in a bonded warehouse does away with the need for immediate payment of customs duties and taxes upon receiving the goods.

It helps the working capital of a business as goods are cleared directly to the bonded warehouse without payment of customs duty and taxes.

This is beneficial to businesses that import high-value goods with a high rate of customs duty.

Customs duty is paid only when goods are cleared. Goods stored in bonded warehouses can be reexported easily. It also facilitates quality checks, sorting, packaging, or processing of such goods while in the bonded storage.

Consolidation Warehouses
When several cargo batches of small volumes from customers, meant for the same destination are combined and shipped, it is called consolidation. Such goods are collected, segregated, and sent by sea freight, usually as full container loads (FCL).

Consolidations help when the volume of cargo to be shipped is small. Consolidators collect cargo from the different customers, consolidate these quantities from their consolidation warehouse to full or near-full container loads for shipment. This helps to bring down the freight cost. This is also called groupage cargo.

Smart Warehouses
Smart warehouses use the latest in technology for receiving, storing, and picking of goods. Smart warehouses may also make use of drones or robots for picking, packaging, and stacking goods.

Enterprise resource planning (ERP) and warehouse management system (WMS) helps to ensure minimum human intervention in matters relating to finance, customer relations and the accuracy of stocks.

Such warehouses are found very useful for the storage of high-value electronic parts, pharmaceutical drugs, etc.

Warehouse Management System (WMS)
Warehouse Management System (WMS) records the receipt, storage location, picking, and dispatch of goods from the warehouse.

It optimizes storage space by suggesting the storage location based on FIFO, FEFO, or LIFO rules of picking goods. WMS provides real-time data to the user.

First-In First-Out (FIFO)
First-In First-Out (FIFO) is the principle of picking goods based on the receipt of goods. Those goods which were received first are the ones to be picked for dispatch.

First-Expiry First-Out is (FEFO)
In First-Expiry First-Out (FEFO), the stock with the earliest expiry date (or Best-Before Date) will be picked first. Both FIFO and FEFO help in maintaining stock freshness at the same time avoiding aged stocks sitting in the warehouse.

Last-In First-Out (LIFO)
Last-In First-Out (LIFO) requires the last item received to be picked first for dispatch. An order from a preferred customer is an example.

These picking rules are based on customer requirements. WMS helps with periodic inventory counts that are required to ensure that stocks are maintained accurately.

Enterprise Resource Planning (ERP)
Enterprise Resource Planning (ERP) includes inventory management, principal and customer relationship management, and accounting. Data from WMS is used in ERP to create accurate business forecasts.

ERP is used in purchase ordering and accounting. It, therefore, integrates all these functions and the organization does not have to invest in multiple software to handle them.

Temperature-controlled Warehouses
As consumer demands increase, they are also more aware of the need to get safe, clean, and hygienic products for the money they spend, especially when it comes to food items, pharmaceuticals, etc. Storage of goods under the correct temperature in hygienic conditions extends its shelf life.

Warehousing technology has kept pace with this demand by having temperature-controlled warehouses to meet the different requirements of storage of different types of items.

Depending on the type of goods stored, warehouses can broadly be classified as ambient, chill, or frozen.

Ambient Warehousing
Also called dry warehousing or warehousing at room-temperature, goods are stored in a dry, clean, and well-ventilated storage area at temperatures between 14° C and 24° C (57.2° F and 75.2° F).

Certain types of food items, vegetables, fruits, canned food items, electronics, etc. require storage at ambient temperatures. The temperature may vary slightly according to the type of item being stored.

Chill Warehousing
Chill warehouses are used for the storage of certain types of vegetables, fruits, dairy produce, meat, seafood, etc. Temperatures between 7° C and 14° C (44.6° F and 57.2° F) are maintained in such warehouses.

Frozen Warehousing
Frozen food, meat, seafood, and some types of pharmaceutical drugs require storage under frozen conditions. Frozen food usually needs to be stored at a constant temperature of -18° C (-0.4° F) or less. When the temperature rises above this, it affects the quality of such items resulting in spoilage.

Frozen Warehousing

Types of Warehouse Racking
Pallets are the flat wooden or plastic structures on which boxes or goods are kept in a warehouse. Pallets usually come in a standard size of 48 inches X 40 inches though pallets of other sizes are also available in the market.

Racking is the multi-level metal framework within a warehouse that holds several pallets.

An efficient racking system optimizes warehouse space making retrieval of inventory, product flow (FIFO, FEFO, LIFO, etc.), and accessibility of pallets easier.

MHE’s (Material Handling Equipment) such as forklifts, automatic pallet jacks, etc. should be able to put the pallets and remove them from the racks easily. Some of the different types of warehouse racking are as follows:

Selective Racking
Consisting of upright frames, horizontal beams, braces, supports, and footplates, selective racking is the most commonly found type of racking in warehouses.

Pallets can easily be put-away and removed from these types of racks as every pallet faces the aisle in front that can be used by forklifts or pallet jacks.

Selective racks are the easiest to assemble and disassemble, using bolts. However, in selective racking, warehouse space is not utilized to the optimum because of the space taken up by several aisles.

Selective Racking

Mobile Racks
Mobile racks are selective racks but with a wheeled-base. These racks can be moved along the tracks that are embedded on the warehouse floor.

Ideal for storing goods in bulk that do not require to be moved frequently, mobile racks provide the maximum space utilization within a warehouse.

Cantilever Racks
Cantilever racks consist of several upright single beams, each with arms that extend outward for carrying the load. It is especially convenient for the storage of long and unwieldy goods such as steel pipes, timber, metal trusses, etc. With a minimum number of parts, this type of racking is very easy to set up.

There are several other methods of setting up racks inside a warehouse. Each method is chosen to suit specific products that have specific storage requirements.

Cantilever Racks

Modern warehouses that meet the above customer requirements will always be in demand. Setting up a warehouse requires a lot of planning, keeping growth in mind.

Choosing the right type of warehouse depends on a company’s warehousing requirements, budget, and other such business factors.

Source: Marine Insight


What is Cross Docking?

Cross Docking is a term used in logistics and warehousing. It is a very effective method of moving goods between suppliers and their customers without having to store them in a warehouse.