Warehousing and Inventory Management - Case Study Example

Warehouse Warehouse is the normally the huge commercial establishments used for storage of goods and material. Warehouses are the building not only used by the manufacturers or manufactured products but also essential part of businesses that are concerned with supply chain like Supplier, distributors, transporters, importers and exporters etc. Generally, a typical warehouse is a big plain building in an industrial area and may have a port for up and downloading. Moreover, you can find such established primarily at Airports, Docks and Railways stations. Warehouses seem incomplete without cranes and other equipment of moving materials. Raw materials, components, and finished goods are among the most common material one can find in a ware house. History of Warehouses The history of warehousing can be traced back in the form of granaries that were supposed to store food. As the world came to know about sea routes and trading through sea routes that was the time warehouses found its first form. Port was the centre of warehouses followed by rail road stations. Among the very first organization was American Warehousemens Association, 1891, that was established to manage the warehouses and protect the rights of the one who give to store from rail road companies control over freight depots. War World true was the time when warehousing was groomed and new techniques and methods were implemented from efficiencies and design was modified as well for effectiveness. In the late twentieth century, warehouses was supposed to lose its importance among the industries because of many technological improvements, the IT hype and methods like Just In Time inventory system that don’t have essential place for the warehouses. But in21st century they are coming back with more than just storage facility. Warehouses are supposed to be 3rd party logistics in now days. Purpose of Warehouse The need for warehouses arises for many reasons: 1. To store the seasonal products especially the agriculture commodities those are seasonal and were not available throughout the year. This was the need to have a proper storage in order to maintain and preserve the excess to use throughout the year. 2. Some products may not in demand throughout the year for example warm clothes in winter and light for summers. 3. In many manufacturing units, large scale was followed and produces the products and storage and supply afterwards according to the demand conditions. 4. To store for unexpected supply needs. 5. To keep the supply steady that can stabilize the demand by eliminating supply demand fluctuations. Functions The functions of Warehouses include i. Storage of Goods ii. Protection of goods iii. Risk bearing iv. Financing v. Processing vi. Grading quality vii. Transportation Processes The process and operations of warehouses:- Receiving Put away Order preparation and Picking Shipping Inventory Management Warehouses also offer some complimentary services like Packing and Kitting etc Management and monitoring of materials in warehouses can be done through software that came under the head of Warehouse Management System. (WMS) Today, there are warehouses that care completely automated and optimized in terms of effectiveness and efficiencies. There are automated warehouses without any labour and shift goods from a point to another through automated mobile shelves. Warehouse Automation In the fast pace world of today, the power of automation is hard to stress out. Knowing the product, location, distance, picks it and deliver can make tremendous changes depending on the effectiveness and efficiency of operations. Automated warehouses record incredible costs saving to the firms that have installed the technologies. Automation along with RFID technology optimized the whole system further enhances efficiency and provides additional cost savings. To the haste of operations and urgency of demand has led the conventional warehousing system simply outdated because of effectiveness. Today, all that value is time and perfection execution and implementation of plan though it is as small as supply goods to final seller or order the material as ran out of stock. The automation not only monitor the movement but also the quantity and other data analysis and what should be the plan of order placement. These have been enabled by RFID technologies and strong Data base computing. Today, a ware house is not the one with just a single or couple of items but a large list of components, from small to large, in process to complete. Monitor and control all with manual efforts is going more and more difficult. So as the report generation and order placement to the suppliers has been enhanced by good monitoring activities. Vehicles and Equipment: The equipment and vehicles is totally depended on the material stored in a specific warehouse. The size of truck differs and the size of the material so as the power of towing machines, Pallet handling and other carriers. Warehouse Management System Warehouse management system is of essential importance in terms of supply chain and inventory management. It uses combination of different technologies together in order to make warehousing and supply chain automated. Bar codes, RFIDs, scanner, internet or networks are off importance. It can be a standalone system or module derived form organization ERP. The main purpose of a warehouse management system is to offer a set of computerized procedures to handle the stock and returns into a warehouse facility, model and manage the logical representation of the physical storage facilities, and able to manage the stock within the facility and enable a flawless link to order processing and logistics management in order to pick, pack and ship product out of the facility. Buffer Stock Buffer stock is an attempt to have a stock reserved for any uncertain event. Business used these buffer stocks of raw material so that if the shipment gets delay it can be used to complete the process. In terms of finished goods inventory, these stock piles are hold for irregular demand and supply condition. This buffer stock is different from general inventory. Inventory is the part of process, where goods get piled up and then worked out to achieve economies of scale but Buffer stock is completely separate set of storage that is reserved for unforeseen event. Inventory Inventory is the stock of all the material whether raw, work in process or finished goods, held available for by the business for the present and future use. Inventory is held by a business i. To avoid the delays in time, and keep the production at its optimal level. ii. To eliminate the uncertainty, and keep the things at the consistent pace. iii. To achieve economies of scale by keeping, moving and manufacturing in bulk is the idea here for the cost cutting. Traceability Some years back, one of the major problems faced by warehouse management were about the traceability of the stored product and ensuring the safety and theft prevention. These problems are being completed eliminated by different technologies and internet enabled networks. Now, the technologies are available that can completely track the product, its placement in the storing compound and the numbers stored by the help of RFIDs and scanners. Moreover, Internet enabled networks among the suppliers have made easy to place the order automatically if shortfall of a material arises and track the shipments along with it. Moreover, theft and misplacing can be decreased to a significant level. These technologies are not optimal for all the warehouses as these technologies are expensive. Before investing into this technology, one should understand the objective of these technologies and to see whether the material stored and location make it feasible this for the investor or it is just technology for the sack of it. Economies of scale can play important roles as well. Consignment stocks This concept is bit different from warehousing itself. In the consignment stock business, the material is stored by one party but has no use of that product in its own business. The main business is only to store the product. The ownership is transferred to the concerned business when the stock is being used otherwise if the respective business needs no more than the stock is return back to the manufacturer. It is beneficial for the business to outsource the warehousing as consignment and minimize costs and risk. It also created business opportunities for the warehouse owners. Many businesses can store in one warehouse in order to achieve economies of scale. The flip side of consignment stocks is that business loses the control over the inventory and become open for the risks of quality, delaying in shipment and transportation. Warehouse owner has the disadvantage of being vulnerable to the business whether the business consume its stored material or not and all the costs of storage may went in vain if business advise otherwise. Just In Time (JIT) System Just in Time inventory system is initiated by Japanese business and operations management in order to maximize the return on investment of the business and eliminating non value adding steps. This technique is derived and depended on a Japanese Technique Kanban that literally means signaling. Kanban is the communication tool about the condition and need of more inventories or not. JIT works on its bases and is supposed to produce as demands and eliminate costs of storing and piles. The basic philosophy of JIT is that the inventory is the waste of time, money and space. There are measures that can be followed to avoid the waste of space and make the process and efficient to improve the overall effectiveness of the Process. Storing, not only, costs huge space and facility, but other utility and fixed costs along with the delays that are faced in shifts nonetheless. If going to a process flow to follow JIT can eliminate the non value added costs but also improve operations process to increase the production and decrease the costs and time hence improve in return of investment. HP gives a pattern to shift from conventional process to JIT enable process to optimize the value chain efficiencies. This process has following basic steps: 1) F Design Flow Process F Redesign/relay out for flow Reduce lot sizes O Link operations W Balance workstation capacity M Preventive maintenance S Reduce Setup Times 2) Q Total quality control C worker compliance I Automatic inspection M quality measures M fail-safe methods W Worker participation 3) S Stabilize Schedule S Level Schedule W establish freeze windows UC Underutilize Capacity 4) K Kanban Pull System D Demand pull B Backflush L Reduce lot sizes 5) V Work with vendors L Reduce lead time D Frequent deliveries U Project usage requirements Q Quality Expectations 6) I Further reduce inventory in other areas S Stores T Transit C Implement Carrousel to reduce motion waste C Implement Conveyor belts to reduce motion waste 7) P Improve Product Design P Standard Production Configuration P Standardize and reduce the number of parts P Process design with product design Q Quality Expectations Benefit of JIT I. It helps to reduce the set up of the process. Cutting the setup time reduces the needs of the inventory and its costs. II. The flow of goods throughout the process from the production to the shelf improves and remains consistent. III. Employees with multiple skills can be more effective and play their roles. IV. It increased the relationship with the supplier and other value chain member because all of them then work on JIT or remains efficient in their process to keep the flow going. A company with JIT never wants a supplier with supplying issues. The compatible partners will work and value the relationship to the mutual benefit. V. Supplies will be produced and reach where it will be consumed to manufacturing of other. This increase synchronization and consumed at the spot helping reducing the importance of storage facility. Problems I. Some call it just a bug of the process other call it the risk of JIT that is it becomes dependent to each other and any shock can have trickling effects among the partners of value chain. Any large supply or demand change can lead the process to crisis or at least a timely emergency situation. II. Very low stock levels can also leads to the multiple delivery trips from one place to another making the efforts useless and redundant. III. It wants the whole chain of logistics and distribution to be JIT compatible that may not be so feasible to adapt. Moreover, partners may not like to spend efforts because other is doing it. One partner left with non JIT system can make the process tumble. Read More