What is Warehousing? Types, Functions, Importance, Needs, Factors of Location

What is Warehousing?

A warehouses a place to store inventory. Warehousing means maintaining the stock of raw materials, components, spare parts, fuels, work in process, finished goods etc. in a convenient storage location and from there, retrieving the stock as and when required. Warehousing is a part of development of facility structures. A facility structure is a part of logistical infrastructure which supports one or more logistical functions.

Further, warehousing refers to the activities involving storage of goods on a large-scale in a systematic and orderly manner and making them available conveniently when needed. In other words, warehousing means holding or preserving goods in huge quantities from the time of their purchase or production till their actual use or sale.

---

Functions of Warehousing

These are functions of warehousing given below:

1. Receiving
2. Inspection
3. Repackaging
4. Put Away
5. Order Picking or selection Order
6. Sortation
7. Packing and Shipping
8. Cross Docking
9. Replenishing

Receiving

This includes the physical unloading of incoming transport, checking, recording of receipts, and deciding where the received goods are to be put away in the warehouse. It can also include such activities as unpacking and repackaging, quality control checks and temporary quarantine storage for goods awaiting clearance by quality control.

Inspection

Quality and quantity check of the incoming goods for their required characteristics.

Repackaging

Incoming lot may be having non-standard packaging which may not be stored as it is in the respective location. In those cases these materials have to be pre packed in unit loads/pallet loads suitable for storage.

Put Away

Binning and storing the goods in their respective locations including the temp locations from the receiving docking area.

Storage

Binning the approved material in their respective locations.

Order Picking or selection Order

Goods are selected from order picking stock in the required quantities and at the required time to meet customer orders. Picking often involves break bulk operations, when goods are received from suppliers in, say, whole pallet quantities, but ordered by customers in less than pallet quantity.

Order picking is important for achieving high levels of customer service; it traditionally also takes a high proportion of the total warehouse staff complement and is expensive. The good design and management of picking systems and operations are consequently vital to effective warehouse performance.

Sortation

This enable goods coming into a warehouse to be sorted into specific customer orders immediately on arrival. The goods then go directly to order collation.

Packing and Shipping

Picked goods as per the customer order are consolidated and packed according to customer order requirement. It is shipped according to customer orders and respective destinations.

Cross Docking

Moves products directly from receiving to the shipping dock – these products are not at all stored in the specific locations.

Replenishing

This is the movement of goods in larger order quantities, for example a whole pallet at a time , from reserve storage to order picking, to ensure that order picking locations do not become empty. Maintaining stock availability for order picking is important for achieving high levels of order fill.

---

Importance Of Warehousing

The need of warehousing or importance of warehousing are given below:

1. Seasonal Production
2. Seasonal Demand
3. Large-scale Production
4. Quick Supply
5. Continuous Production
6. Price Stabilization

Seasonal Production

We know that agricultural commodities are harvested during certain seasons, but their consumption or use takes place throughout the year. Therefore, there is a need for proper storage or warehousing for these commodities, from where they can be supplied as and when required.

Seasonal Demand

There are certain goods, which are demanded seasonally, like woolen garments in winters or umbrellas in the rainy season. The production of these goods takes place throughout the year to meet the seasonal demand. So there is a need to store these goods in a warehouse to make them available at the time of need.

Large-scale Production

In case of manufactured goods, now-a-days production takes place to meet the existing as well as future demand of the products. Manufacturers also produce goods in huge quantity to enjoy the benefits of large-scale production, which is more economical. So the finished products, which are produced on a large-scale, need to be stored properly till they are cleared by sales.

Quick Supply

Both industrial, as well as agricultural goods, are produced at some specific places but consumed throughout the country. Therefore, it is essential to stock these goods near the place of consumption, so that without making any delay these goods are made available to the consumers at the time of their need.

Continuous Production

Continuous production of goods in factories requires an adequate supply of raw materials. So there is a need to keep sufficient quantity of stock of raw material in the warehouse to ensure continuous production.

Price Stabilization

To maintain a reasonable level of the price of the goods in the market there is a need to keep sufficient stock in the warehouses. Scarcity in supply of goods may increase their price in the market. Again, excess production and supply may also lead to fall in prices of the product by maintaining a balance of supply of goods, warehousing leads to price stabilization.

---

Types of Warehouses

Let us identify the different types of warehouses. In order to meet their requirements, various types of warehouses came into existence, which may be classified as follows:

1. Private Warehouses
2. Public Warehouses
3. Government Warehouses
4. Bonded Warehouses
5.  Co-operative Warehouses

Private Warehouses

The warehouses which are owned and managed by the manufacturers or traders to store, exclusively, their own stock of goods are known as private warehouses. Generally, these warehouses are constructed by the farmers near their fields, by wholesalers and retailers near their business centers and by manufacturers near their factories.

The design and the facilities provided therein are according to the nature of products to be stored.

Public Warehouses

The warehouses which are run to store goods of the general public are known as public warehouses. Anyone can store his goods in these warehouses on payment of rent. An individual, a partnership firm or a company may own these warehouses.

To start such warehouses a license from the government is required. The government also regulates the functions and operations of these warehouses. Mostly these warehouses are used by manufacturers, wholesalers, exporters, importers, government agencies, etc.

Government Warehouses

These warehouses are owned, managed and controlled by central or state governments or public corporations or local authorities. Both government and private enterprises may use these warehouses to store their goods Central Warehousing Corporation of India, State Warehousing Corporation and Food Corporation of India are examples of agencies maintaining government warehouses.

Bonded Warehouses

These warehouses are owned, managed and controlled by government as well as private agencies. Private bonded warehouses have to obtain license from the government. Bonded warehouses are used to store imported goods for which import duty is yet to be paid.

In case of imported goods the importers are not allowed to take away the goods from the ports till such duty is paid. These warehouses are generally owned by dock authorities and found near the ports.

Co-operative Warehouses

These warehouses are owned, managed, and controlled by cooperative societies. They provide warehousing facilities at the most economical rates to the members of their society.

---

Needs of Warehouse

These are needs of warehouse to perform certain functions such as:

1. Seasonal Production
2. Seasonal Demand
3. Large Scale Production
4. Quick Supply
5. Continuous Production
6. Price Stabilization

Seasonal Production

You know that agricultural commodities are harvested during certain seasons, but their consumption or use takes place throughout the year. Therefore, there is a need for proper storage or warehousing for these commodities, from where they can be supplied as and when required.

Seasonal Demand

There are certain goods, which are demanded seasonally, like woolen garments in winters or umbrellas in the rainy season. The production of these goods takes place throughout the year to meet the seasonal demand. So there is a need to store these goods in a warehouse to make them available at the time of need.

Large Scale Production

In case of manufactured goods, now-a-days production takes place to meet the existing as well as future demand of the products. Manufacturers also produce goods in huge quantity to enjoy the benefits of large scale production, is more economical.

So the finished products, which are produced on a large scale, need to be stored properly till they are cleared by sales.

Quick Supply

Both industrial as well as agricultural goods are produced at some specific places but consumed throughout the country. Therefore, it is essential to stock these goods near the place of consumption, so that these goods are made available to the consumers without delay, at the time of their need.

Continuous Production

Continuous production of goods in factories requires adequate supply of raw materials. So there is a need to keep sufficient stock of raw material in the warehouse to ensure continuous production.

Price Stabilization

To maintain a reasonable level of the price of the goods in the market there is a need to keep sufficient stock in the warehouses. Scarcity in supply of goods may increase their price in the market. Again, excess production and supply may also lead to fall in prices of the product.

By maintaining a steady supply of goods, warehousing leads to price stabilization.

---

Factors of Location Warehouse

The following additional considerations determine the location of a warehouse:

1. Market service area and cost of distribution from the warehouse to the market service area.
   
   
2. Satisfaction of transport requirements and facilities available in the form of rail, link roads and road vehicles.
   
   
3. Transportation rates prevailing in the area and distribution costs per unit.
   
   
4. Competition by rival companies and whether they have warehouse in the same area.
   
   
5. Availability of power, water, gas sewage disposal and their cost.
   
   
6. Labour supply and labour costs in the area.
   
   
7. Industrial relations climate and labour productivity.
   
   
8. Pricing arrangements and the level of service desired to be rendered in terms of availability of product to the customer.
   
   
9. Individual company requirements and constraints.
   
   
10. Real estate, excise and government taxes assessed in the area.
    
    
11. Attitudes of local residents and government towards establishment of the warehouse.
    
    
12. Restrictions associated with warehouses.
    
    
13. Potential for later expansion.
    
    
14. Cost of land for the warehouse and other costs.
    
    
15. Possibility of change in the use of the facility at a later date if the company so desires, and lease or sale of the land and buildings.

---

Warehouse Facility Development

Warehouse Facility means any funding arrangement, other than a Residual Funding Facility, with a financial institution or other lender or purchaser under which advances are made to a Warehouse Entity. In other words, the borrowing of funds by a retail lender on a short-term, revolving basis using the loans as collateral. This form of interim financing is used to raise funds to make the loans and carry the loans until they are securitized (packaged and sold out of the warehouse to the investor). Proceeds from the sale are then used to reduce the warehouse loan.

Maximise and optimise all available space

Rather than expand the footprint of your warehouse, consider better use of vertical space. Adding taller storage units and the right equipment to pick and store material can help you keep more in the same square footage, rather than adding expansion costs. In addition, think about the type and variety of shelving used.

Storing small items on pallet racks wastes space, and makes it easy to misplace items. Rather than using the same racks throughout your warehouse, you may need various types of shelving for different materials. Also, try using standardised bins to help keep shelves neat and orderly.

Lean Inventory

Adopting lean inventory for your warehouse is just as important as it is in manufacturing. The basic premise of lean is only what you need, and nothing more. Possibly reduce or eliminate safety stocks, and try to get suppliers to deliver smaller quantities more frequently.

Adopt enabling technology

A warehouse management system (WMS) or an ERP system with a strong WMS module can improve efficiency by suggesting the best routes and methods for picking or put-away. In addition, the system provides automated pick lists that can be sent to mobile readers and devices to help eliminate mistakes and reduce wasted time and paper.

Your warehouse will be neater and greener. Using barcode or radio frequency identification (RFID) readers can improve accuracy of transactions, and reduce picking errors. In fact, research conducted at the University of Arkansas shows that using RFID increased inventory accuracy by 27 per cent in just 13 weeks.

Organise workstations

Organising workstations improves productivity because workers do not have to search for tools or equipment. Use the “5S” method from lean manufacturing to ensure your workstations are as organised as possible. It consists of: Sort; Set in order; Shine; Standardize; and Sustain – all techniques designed to keep clutter at bay, reduce errors, and improve safety and organisation.

Optimise labour efficiency

If your WMS doesn’t have the ability to generate efficient picking plans, create them manually. Analyse your material usage patterns, and store high-volume items together near the front of the warehouse to eliminate travel time. Also, store items that are frequently sold together near one another. Basically, you will streamline operations if you try to keep the items you pick most often in the most accessible locations to eliminate picking delays.

---

Uses of Warehousing Management System

Warehousing offers many advantages to the business community. Whether it is industry or trade, it provides a number of benefits which are listed below.

Protection and Preservation of goods

Warehouse provides necessary facilities to the businessmen for storing their goods when they are not required for sale. It provides protection to the stocks, ensures their safety and prevents wastage. It minimises losses from breakage, deterioration in quality, spoilage etc. Warehouses usually adopt latest technologies to avoid losses, as far as possible.

Regular flow of goods

Many commodities like rice, wheat etc. are produced during a particular season but are consumed throughout the year. Warehousing ensures regular supply of such seasonal commodities throughout the year.

Continuity in production

Warehouse enables the manufacturers to carry on production continuously without bothering about the storage of raw materials. It helps to provide seasonal raw material without any break, for production of finished goods.

Convenient location

Warehouses are generally located at convenient places near road, rail or waterways to facilitate movement of goods. Convenient location reduces the cost of transportation.

Easy handling

Modern warehouses are generally fitted with mechanical appliances to handle the goods. Heavy and bulky goods can be loaded and unloaded by using modern machines, which reduces cost of handling such goods. Mechanical handling also minimizes wastage during loading and unloading.

Useful for small businessmen

Construction of own warehouse requires heavy capital investment, which small businessmen cannot afford. In this situation, by paying a nominal amount as rent, they can preserve their raw materials as well as finished products in public warehouses.

Creation of employment

Warehouses create employment opportunities both for skilled and unskilled workers in every part of the country. It is a source of income for the people, to improve their standards of living.

Facilitates sale of goods

Various steps necessary for sale of goods such as inspection of goods by the prospective buyers, grading, branding, packaging and labelling can be carried on by the warehouses. Ownership of goods can be easily transferred to the buyer by transferring the warehouse keeper’s warrant.

Availability of finance

Loans can be easily raised from banks and other financial institutions against the security of the warehouse-keeper’s warrant. In some cases warehouses also provide advance to the depositors of goods on keeping the goods as security.

Reduces risk of loss

Goods in warehouses are well guarded and preserved. The warehouses can economically employ security staff to avoid theft, use insecticides for preservation and provide cold storage facility for perishable items. They can instal fire-fighting equipment to avoid fire. The goods stored can also be insured for compensation in case of loss.