Warehouse inventory mgmt slides v4-0

Warehousing & Inventory Management

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House Rules

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Methods of Learning

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Workshop Objectives

• Identify the various functions and responsibilities of the warehouse/stores function.

• Identify the various costs associated with holding or not holding inventory.

• Describe and contribute in the design of an effective warehouse

• Explain how to measure the performance of a warehouse

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Workshop Content

• Functions and Responsibilities of stores/warehouse

• Reasons for holding stock

• Cost of holding and not holding stock

• Stock replenishment systems

• Objectives of an Effective Warehouse

• Warehouse Performance Measures


Session 1:Warehouse Functions & Costs

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Session 1 Objectives



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Session 1 Content

• Functions and Responsibilities of stores/warehouse

• Reasons for holding stock

• Cost of holding and not holding stock

• Stock replenishment systems

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Definition of a Warehouse

• Part of firm’s logistics system that stores products at and between point of origin and point of consumption.

• Term “Warehousing” is referred as transportation at zero miles per hour

• Warehousing provides time and place utility for raw materials, industrial goods, and finished products

• Perform the same function as a warehouse for a factory• raw materials

• finished goods

• supplies

• repair parts

• The warehouse is where the supply chain holds or stores goods.

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Group Activity 1

• Describe the different functions and activities of a warehouse in your organisation

• Rank the functions according to importance to the organisation

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Warehouse Functions and Activities

Receive goods Identify goodsDispatch goods to storage

Hold goods Pick goodsMarshal the

shipment

Dispatch the shipment

Operate an information

system

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Receive Goods

• Acceptance of goods from outside transportation or an attached factory• Check the goods against an

order or bill of lading

• Check the quantities

• Check for any transit damage

• Inspect goods if required

Identify Goods

• With appropriate Stock Keeping Unit (SKU) number

• With part number

• Indicate the quantity

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Dispatch goods to Storage

• Goods are sorted

• Put away goods• record the location

Hold Goods

• Storage is meant to protect the goods from deteriorating • cold

• heated

• explosive

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Pick Goods

• Goods are picked from storage• must be accessible

• location records

• Brought to marshalling area

Marshal the Shipment

• All goods for an order are brought together• check for missing items

• check for correct items

• change order information if required

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Dispatch the Shipment

• The order is prepared for shipment and loaded on the right vehicle• protective packaging for

shipment

• documents prepared

• loaded and secured

Operate an Information System

• Need to know what is in the warehouse• quantity on hand

• quantity received

• quantity issued

• location of goods

• Computer based or manual system

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Types of Warehousing

• Supply Warehouse

• Distribution Warehouse

• Commercial Warehouse

• Government/State Warehouse

• Transit Warehouse

• Bonded Warehouses

• Open Storage

• Pre-fabricated Warehouses

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Group Activity 2

• Some organisations pride themselves in only holding minimal amounts of stock or not holding stock at all.

• List the different reasons why your organisation holds inventory/stock

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Reasons for Holding Inventory

To meet expected

demand

To guard against

shortages

To benefit from

discounts

To deal with

variations in usage

or demand

To facilitate the

production process

In times of high

inflation/ supply

shortages

Some processes

require holding

work in progress

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Cost of holding or not holding stock

• To manage your stock successfully, you need to find a balance between the costs and benefits of holding stock.

• The costs of holding stock include the money you have spent buying the stock as well as storage and insurance.

• Having too much stock equals extra expense as it can lead to a shortfall in cash flow and excess storage costs

• Having the wrong stock means lost income in the form of lost sales, write-downs and poor customer service.

Holding Stock Not holding Stock

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Group Activity 3

• Discuss Hand-out 1: “ To hold or not to Hold”

• Answer the questions at the end of the case study

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Stock Replenishment – ROP

• The reorder point ("ROP") is the level of inventory which triggers an action to replenish that particular inventory stock.

• Replenishment Lead Time (RLT) is the total period of time that elapses from the moment it is determined that a product should be reordered until the product is available for use.

• RLT is also known as the Reorder Cycle

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Stock Replenishment –EOQ

• At ROP a Replenishment Order matching the Economic Order Quantity (EOQ) is generated

• EOQ is the order quantity that minimizes total inventory holding costs and ordering costs.

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Session 1 Summary

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Session 2:Warehouse Design & Performance

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Session 2 Content

• Objectives of an Effective Warehouse

• Warehouse Performance Measures

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Objectives of Warehouse Management

• Maximum use of space• capital cost of space is very

high

• Effective use of labor and equipment• material handling equipment

is the second largest capital cost

• need best mix of equipment and labor

• all SKU’s should be easy to find

• move goods efficiently

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Warehouse Effectiveness – Concepts

Stock location

Cube utilization

and accessibility

Order picking

and assembly

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Warehouse Effectiveness - Space

• Goods are stored on the floor and in the space above

• Space also required for:• Aisles

• Offices

• Receiving

• Order picking

• Shipping docks

• Order assembly

• Need to know the maximum space required

Stock location

Cube utilization

and accessibility

Order picking

and assembly

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Warehouse Effectiveness - Storage

• Floor storage

• Pallets are stacked on each other

• Maximum stacking height• due to ceiling height/ weight restrictions

• Need to allow for side clearance

Stock location

Cube utilization

and accessibility

Order picking

and assembly

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Warehouse Effectiveness–Pallet Space

Stock location

Cube utilization

and accessibility

Order picking

and assembly

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Activity 4

• A company wants to store an SKU consisting of 13,000 cartons on pallets each containing 30 cartons. How many pallet positions are needed if the pallets are stored three high?

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Warehouse Effectiveness - Location

• Group functionally related items together

• Group fast moving items together

• Group physically similar items together

• Separate working from reserve stock

• Items that are similar in their use or characteristics• warehouse staff become familiar with

items

• similar order processing needs

• often ordered together

• hardware items

• bulk items

• security

Stock location

Cube utilization

and accessibility

Order picking

and assembly

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Warehouse Effectiveness - Location

• “A place for everything and everything in its place”

• Fixed Locations reduce record keeping

• Usually results in poor space utilization• space must be available for the

replenishment order quantity

• average of 50% utilization

Stock location

Cube utilization

and accessibility

Order picking

and assembly

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Warehouse Effectiveness– Accessibility

Stock location

Cube utilization

and accessibility

Order picking

and assembly

• The ability to get goods with a minimum of effort• without moving other goods

• can be a problem with multiple SKU’s in one area

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Warehouse Effectiveness– Utilization

Stock location

Cube utilization

and accessibility

Order picking

and assembly

• A measure of how well space is utilized

• Should also consider accessibility

• Racking allows accessibility to all goods while improving utilization

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Warehouse Effectiveness– Utilization %

Stock location

Cube utilization

and accessibility

Order picking

and assembly

(Space Used) x 100

(Total Space)Utilization % =

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Activity 5

• A warehouse has space for 14 pallets along its length and stacked 3 high.

• The following items (SKU) are stored in the warehouse

• What is the Utilisation?

Item Pallet Pallet Position

SKU A 4 2

SKU B 6 2

SKU C 14 5

SKU D 8 3

SKU E 5 2

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Warehouse Effectiveness–Order Picking

• Once an order is received it must be:• retrieved• assembled• prepared for shipment

• Involves labor and movement of goods to provide desired level of customer service

• Order Picking Systems• Area System• Zone System• Multi-Order System• Working & Reserve Stock

Stock location

Cube utilization

and accessibility

Order picking

and assembly

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Warehouse management for profit

• The purpose of companies is to gain competitive advantage.

• One way to achieve this is by lowering logistics costs.

• The reduction of logistics costs diminishes the total cost of goods sold and therefore it helps companies have a higher profit margin or a cost advantage in comparison with their competitors.

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Inventory Performance KPIs

MEASURE CALCULATION

Damaged Inventory (min.) Total Damage (GH₡) / Inventory Value

Days on Hand (min.) Avg. Month Inventory (GH₡) / Avg. Daily Sales/Month

Storage Utilisation (max.) Avg. Occupied Sq. m. / Total Storage Capacity

Dock to Stock Time (min.) Total Dock to Stock Hrs. / Total Receipts

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Warehouse Performance Indicators

MEASURE CALCULATIONOrders per Hour (max.) Orders Picked or Packed /

Total Warehouse Labor Hrs.

Items per Hour (max.) Items Picked/Packed / Total Warehouse Labor Hrs.

Cost per Order (min.) Total Warehouse Cost / Total Orders Shipped

Cost as % of Sales (min.) Total Warehouse Cost / Overall Sales

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Group Activity 6

• Discuss Hand-out 2: “Warehouse Performance Case Study”

• Answer the questions at the end of the case study

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Session 2 Summary

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Workshop Objectives





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Contact us

Contact: Margaret Jackson

Telephone: +233 244 363 387/ +233 303 308 659

Email: [email protected]

Website: www.rainbow-consult.com

mailto:[email protected]

Warehouse inventory mgmt slides v4-0

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