ANALYSIS AND STUDY OF WAREHOUSE …

International Research Journal of Engineering and Technology (IRJET) e-ISSN: 2395-0056

Volume: 06 Issue: 10 | Oct 2019



p-ISSN: 2395-0072

ANALYSIS AND STUDY OF WAREHOUSE MANAGEMENT SYSTEMS

Divyendu1

1B. Tech Undergraduate, Delhi Technological University, New Delhi, India ---------------------------------------------------------------------***------------------------------------------------------------------Abstract - Inside the walls of the warehouse, the utilization of every component--space, people, inventory and

equipment--will impact the bottom line in profound ways over time. Warehouse Management enables us to analyze these components continually, so we can conserve effort, fill orders faster and more accurately, save space and reduce inventory. In this paper, a preliminary simplified layout of a warehouse using the quantities and sales data obtained from two frontrunners in shoe manufacturing is designed. The data has been analyzed and arranged in terms of the volumetric distribution of the goods, using extensive analysis through pivot tables, pie charts, tables and bar graphs. The proposed layout for the warehouse has been provided towards the end. The paper considers various theoretical considerations to keep in mind before designing a warehouse. It also looks at the need for warehousing, the functions performed by warehousing, and the principles required for designing the layout of a warehouse, with due considerations of the material handling principles for material movement inside the warehouse. In the second part of the analysis, simple linear regression models are utilized to analyze and organize data for effective determination of the future demand trends in the shoe manufacturing industry and determine the future scope of expansion for demand adjustment. In the final part of the analysis, inventory management policies are utilized, both Continuous Review Policy and Periodic Review Policy, to determine the average inventory level requirements for the warehouse. Finally, Review Policy most suitable for each product line is determined.

Key Words: warehouse management, continuous review policy, periodic review policy, inventory management, square root law, linear regression

1. INTRODUCTION

1.1 WAREHOUSE MANAGEMENT

Warehouse can play a key role in the integrated logistics strategy and its building and maintaining good relationships between supply chain partners. Warehousing affects customer service stock-out rates and firm's sales and marketing success. A warehouse smoothens out market supply and demand fluctuations. When supply exceeds demand, demand warehouse stores products in anticipation of customer's requirements and when demand exceeds supply the warehouse can speed product movement to the customer by performing additional services like marking prices, packaging products or final assemblies.

Warehousing can be defined as a location with adequate facilities where volume shipments are received from production center, which are then broken down in to particular order and shipped onwards to the customer. Warehousing is an integral part of any logistics system. The warehouse is a link between producer and customer. Warehouse Management provides the insight into your inventory and the warehouse management tools to help you increase customer satisfaction and reduce costs. Warehouse Management exchanges information with many other functional areas in the solution including Logistics, Production and Trade, to help improve your overall business performance. Warehouse Management is used to optimize Inventory, Labor, Physical Space, and Time.

1.2 FUNCTIONS OF WAREHOUSING

Warehouses are basically intermediate storage points in the logistics system where raw material, work in process, finished goods and good in transit are held for varying duration of times for a variety of purposes. The warehousing functionality today is much more than the traditional function of storage.

The following are the main functions that warehousing serves today:

Consolidation: This helps to provide for the customer requirement of a combination of products from different supply or manufacturing sources. Instead of transporting the products as small shipments from different sources, it would be more economical to have a consolidation warehouse. This warehouse will receive these products from various sources and consolidate these into shipments, which are economical for transportation or as required by the customers.

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International Research Journal of Engineering and Technology (IRJET) e-ISSN: 2395-0056

Volume: 06 Issue: 10 | Oct 2019



p-ISSN: 2395-0072

Fig. 1.1 Consolidation Block Diagram Break bulk: As the name suggests, the warehouse in this case serves the purpose of receiving bulk shipments through economical long-distance transportation and breaking of these into small shipments for local delivery. This enables transportation economies with combination of long-distance bulk transportation, break bulk warehousing, and short distance small shipments in place of long-distance small shipments.

Fig. 1.2 Break Bulk Block Diagram Cross docking: This type of facility enables receipt of full shipments from a number of suppliers, generally manufacturers, and direct distribution to different customers without storage. As soon as the shipments are received, these are allocated to the respective customers and are moved across to the vehicle for the onwards shipments to the respective customers at these facilities. Smaller shipments accompanying these full shipments are moved to the temporary storage in these facilities awaiting shipments to the respective customers along with other full shipments.

Fig. 1.3 Cross Docking Block Diagram Product mixing: Products of different types are received from different manufacturing plants or sources in full shipment sizes. These products are mixed at these warehouses into right combination for the relevant customers as per their requirements. Some products that are commonly required inmost product mixtures are kept in constant storage at these warehouses and continuously provided for the product mixture shipments requiring these.

Fig. 1.4 Product Mixing Block Diagram Stock piling: This function of warehousing is related to seasonal manufacturing or demand. In the case of seasonal manufacturing, certain raw materials are available during short periods of the year. Hence, manufacturing is possible only

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International Research Journal of Engineering and Technology (IRJET) e-ISSN: 2395-0056

Volume: 06 Issue: 10 | Oct 2019



p-ISSN: 2395-0072

during these periods of availability, while the demand is full year around. This requires stockpiling of the products manufactured from these raw materials. An example is mango pulp processing. On the other hand, certain products like woolens are required seasonally, but are produced throughout the year, and thus need to be stockpiled as such.

Postponement: This functionality of warehousing enables postponement of commitment of products to customers until orders are received from them. Manufacturers or distributors for storing products up to the packaging stage utilize this. These products are packaged and labeled for the particular customer only on receipt of the order.

Positioning: This permit positioning products or materials at strategic warehouses near the customers. These items are stored at the warehouse until ordered by the customers when these can be provided to the customers in the shortest leadtime. This function of warehousing is utilized for higher service levels to customers for critical items and during increased marketing activists and promotions.

Assortment: Assortment warehouse store a variety of products for satisfying the requirements of customers. For example, retailers may demand different brands of the same product in small quantities rather than larger quantities of the single brand.

Decoupling: During manufacturing, operation lead-times may differ in order to enable production economies. Thus, the batch size and the lead-time of production may differ in consecutive operations. This decoupling of operations requires intermediate storage of materials required for the subsequent operation.

Safety stocking: In order to cater to contingencies like stock outs, transportation delays, receipt of defective or damaged goods, and strikes, safety stocks have to be maintained. This ensures that, on the inbound side production stoppages do not occur, and, on the outbound side customers are fulfilled on time.

1.3

NEED FOR WAREHOUSING

Seasonal production: The 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, the 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 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 in the supply of goods, warehousing ensures price stabilization.

1.4 SQUARE ROOT LAW

The square root law states that:

"The total safety stock inventories in the future number of facilities can be approximated by multiplying the total amount of inventory at existing facilities by the square root of the number of future facilities divided by number of existing facilities."

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International Research Journal of Engineering and Technology (IRJET) e-ISSN: 2395-0056

Volume: 06 Issue: 10 | Oct 2019



p-ISSN: 2395-0072

In their aggressive effort to take cost out of logistics network, firms are searching for new ways to reduce levels of inventory without adversely effecting customer service. A currently popular approach is to consolidate inventories into fewer stoking location in order to reduce aggregate inventories and their associated cost. Correspondingly, this strategy requires the involvement of capable transportation and information resources to see that customer service is held at existing levels and is even improved whenever possible.

The square root law helps determine the extent to which inventories may be reduced through such strategy. Assuming the total customer demand remains the same, the SRL estimates the extent to which aggregate inventory needs will change as a firm increases or reduces the number of stocking location. In general, the greater the number of stoking locations, the greater the amount of inventory needed to maintain customer service levels. Conversely, as inventories are consolidated into fewer stocking locations, aggregate inventory levels will decrease. The extent to which these changes will occur is understood through application of the square root law.

Therefore

X2 = X1

(1.1)

Where:

N1= number of existing facilities N2= number of future facilities X1= total inventory in existing facility X2= total inventory in future facility

1.5 NUMBER OF WAREHOUSES

The number of warehouses is another decision parameter impacting a number of cost variables and customer service. If customer service is taken in cost terms as cost of customer dissatisfaction, the number of warehouses will affect transportation, inventory, warehousing and customer dissatisfaction costs.

Transportation costs initially decreases with increasing number of warehouses. This is due to the transportation economies obtained by having large-volume long-range transportation from consolidation warehouses and short-range small-volume transportation from break-bulk warehouses. However, as the number of warehouses increases beyond a certain value, the transportation cost starts increasing due to large number of transportation trips in ?between the larger numbers of warehouses. Inventory costs continuously increases with the increasing number of warehouses because the increased space available needs to be utilized and firms increase the commitment of inventory at these warehouses beyond those actually needed. Transit inventory costs continuously decrease with the increased number of warehouses due to the shorter transportation times between the larger number of warehouses. The warehousing costs increase with more warehouses due to the maintenance and facility costs associated with each warehouse. For the same space, a single warehouse incurs less warehousing cost than two warehouses. The increasing number of warehousing leads to increasing customer service levels, thus, decreasing customer dissatisfaction cost.

1.6 WAREHOUSE LOCATION

Warehousing is important to the firms since it improves service and reduces cost improvements in service are gained through rapid response to customer requests (time utility), which is a primary factor leading to increased sales. The manufacturing plant, and customer and market locations affect the location decision regarding warehouses. A traditional classification by Edgar Hoover classifies warehouse locations as market-positioned, manufacturing-positioned, or intermediately positioned.

Market positioned warehouses: Market-positioned warehouses are located near to the customers and markets (point of product consumption) with the objective of serving them. These generally have a large variety and low volume of items to service local requirements. Such warehouses reduce cost by providing place utility. A Market-positioned warehouses functions as a collection point for the products of distant firms with the resulting accumulations of product serving as the supply source for retail inventory replenishment. This approach allows large and cost-effective shipments from the manufacturer with lower-cost, local transportation providing service to individual retailers. Market-positioned warehouses may be owned by the firm or the retailer (private warehouses), or they may be an independent business providing warehouse service for profit (public).

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International Research Journal of Engineering and Technology (IRJET) e-ISSN: 2395-0056

Volume: 06 Issue: 10 | Oct 2019



p-ISSN: 2395-0072

Manufacturing positioned warehouse: Manufacturing positioned warehouse are located near to the manufacturing facilities in order to support manufacturing on the inbound side and to facilitate assortment-creation and shipping on the outbound side. Improve customer services and manufacturing support achieved through type of warehouse which acts as the collection point for products needed in filling customer orders and material needed for manufacturing.

Intermediately positioned warehouse: Intermediately- positioned warehouse are those located between manufacturing and market-position warehouses. These help in consolidation of assortments for shipments from different manufacturing facilities. A firm may have many manufacturing plants located, for economic reasons, near the sources of raw material. Under these conditions the cost-effective warehouse may be at some intermediate point.

1.7 WAREHOUSE LAYOUT AND DESIGN

To understand layout and design, some background information on a typical warehouse's base space requirements is necessary. This discussion of space requirements relates quite closely to the discussion of basic warehouse operations. Before looking specifically at eh types of space a firm need, we comment briefly about determining how much space a firm requires.

This first step in determining warehouse space requirements is to develop a demand forecast for a company's products. This means preparing an estimate in units for a relevant sales period (usually thirty days) by product category. Then the company will need to determine each item's order quantity, usually including some allowance for safety stock. The next step is to convert the units into cubic footage requirements, which may need to include pallets and which usually include an allowance of 10 to 15 percent for growth over the relevant period. At this point, the company has an estimate of basic storage space requirements. To this the company must add space needs for aisles and other needs such as lavatories and meeting rooms. Warehouse commonly devotes one-third of their total space to non-storage functions. Many companies make these spaces decision through computer simulation. The computer can consider a vast number of variables and can help product more requirements good software packages are available. One additional warehouse space requirements provide an interface with the transportation part of the logistics system- receiving and shipping. While this can be operating, efficiency usually requires two separate areas. In considering these space needs a firm must choose whether to use the dock area outside the building or to unload goods out of the vehicle directly into the warehouse. The firm has to allow or turnaround space and possibly for equipment and pallet storage. Also important are areas for staging goods before transportation and for unitizing consolidated shipments. In addition, this area may need space for checking, counting and inspecting. The volume and frequency of the throughput are critical in determining receiving and hipping space needs.

Another space requirement in physical distribution warehouses is for order packing and assembly. The amount of space these functions need depends upon order volume and the product's name along with the materials-handling equipment. This area's layout is critical to efficient operations and customer service.

A third type of space is the actual storage space. In a warehouse, a firm must use the full volume of the cubic storage space as efficiently as possible. A firm can derive the amount of storage space from the analysis described earlier in this section and it will largest single area in the warehouse. As with the order picking area, a firm has to consider storage area layout in detail. We cover this topic in a subsequent section.

Finally, a firm must consider three additional types of space. First, many physical distribution warehouses have space for recouping- that is, an area to salvage undamaged parts of damaged cartoons. Second administrative and clerical staff generally requires office space. Finally, rest rooms and, employee cafeteria, utilities and locker rooms require miscellaneous space. The amount of space these last three categories require depends upon a number of variables. For example, the average amount of damaged merchandise and the feasibility of repacking undamaged merchandise determine recouping space needs. The space requirement for a cafeteria and locker rooms depend on the number of employees.

Layout and design principles: While the discussion thus far has delineated a typical warehouse's various space needs, we need to consider layout in more details. We first consider some general layout design principles and then examine layout in the context of the space category previously. The most commonly accepted warehouse design and layout principles are as follows:

First, use a one-story facility wherever possible, since it usually provides more usable space per investment dollar and usually it is less expensive to construct.

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