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Introduction
Lecture 01
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The role of the warehouse

Shuaib Ahmed
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 The Warehouse
• Definition (APICS):The activities related to
receiving, storing, and shipping materials to
and from production or distribution location.
They serve as static units matching product
availability to consumer demand and, as such,
have a primary aim, which is to facilitate the
movement of goods from suppliers to
customers, meeting demand in a timely and
cost-effective manner”.
• Primarily, a warehouse should be a trans-
shipment area where all goods received are
dispatched as quickly, effectively, and
efficiently as possible.

• Advantages: Centralized location for product

consolidation, quality control, and shipment
preparation.
• Disadvantages: Can be costly due to size,
maintenance, and required technology.
Photo: red and white labeled cans on shelf
Photo by Eduardo Soares
Powered by Unsplash
 The storage
Definition (APICS): The retention
of parts or products for future
use or shipments. In other
words, Storage refers to parking
goods for a limited period.

storage is typically referred to

hold anything less than three
months. It acts as a stop-gap or
temporary measure that allows
you a bit more space when you
need it. Many people choose short
term storage units as it offers a
simple and affordable solution to
keep things safe and dry for a
short amount of time.
 TYPES OF WAREHOUSES

PRIVATE PUBLIC GOVERNMENT CO-

WAREHOUSE WAREHOUSE WAREHUOSES OPERATIVE
S S WAREHOUSES

DISRIBUTION EXPORT
BONDED
CENTERS OR COLD AND
WAREHOUSES
WAREHOUSE STORAGE IMPORT
S

CLIMATE – FIELD AGRICULTURAL

CONTROLLED WAREHOUS WAREHOUSES
Types of Warehouse w.r.t. Operation
● Public Warehouses: A public warehouse is a
large warehouse that allows businesses to rent
space to store and fulfill their products. Space is
usually rented according to the amount of
square footage occupied by the product, and
fulfillment services are provided for an
additional fee by the warehouse. Offer storage
and handling services to the public. Operated
by third parties, offering flexibility and
scalability.
● Advantage: Flexibility and scalability.
● Disadvantage: Less control over operations.

Private Warehouses: Owned by companies for

their own storage needs.
● Advantage: Greater control and security.
● Disadvantage: High fixed costs and inflexibility.
● Photo: people sitting on brown wooden chairs inside building
● Photo by Eduardo Soares
● Powered by Unsplash
 Public Warehouses Private Warehouses
 Public warehouses, also known as commercial  Suppliers and resellers own and operate a private
inventory spaces, are third-party companies offering warehouse exclusively for their use.
business storage and distribution services.

 Public warehouses allow businesses to adjust their  Private warehouses give businesses total control
storage and distribution needs as demand fluctuates. over their storage space but need more flexibility to
adjust to shifting demand easily.

 Businesses can use public warehouses on a lease  Private warehouses require a hefty capital
basis without any capital investment or property tax investment from businesses and involve property
obligations. tax obligations.
 Public warehouses can be a great option for  Private warehouses may better fit businesses with
businesses seeking short-term or long-term storage steady, predictable demand and long-term storage
solutions, especially those that experience seasonal needs.
fluctuations.

 Beyond storage, public warehouses often offer  While private warehouses allow for more control
additional services, such as product fulfillment, which and customization, they may offer, for an additional
can be cost-effective for businesses. fee, a different range of additional services.

 Public warehouse costs are based on the total space  The cost of maintaining a private warehouse can be
the materials or products occupy, making them a higher, particularly for smaller businesses or those
cost-effective solution for many businesses. with fluctuating inventory levels.
Types of Warehouse w.r.t. Operation

Bonded Warehouses:
Government-licensed for
storing imported goods before
duties are paid.
Smart Warehouses: Utilize
automation and IoT for
enhanced efficiency and
accuracy.
Types of Warehouse w.r.t. Operation
GOVERNMENT WAREHOUSES
OWNED, MANAGED & CONTROLLED State Governments or
public corporations or local authorities
EXAMPLES- Pakistan custom warehouses(PCW), State
warehouse corporation (SWC),Pakistan Agriculture storage and
services corporation (PASSCO), Dry ports, National logistics cell.
If customer cannot pay rent within specified time authority can
recover rent disposing of goods
CO-OPERATIVE WAREHOUSES
Owned, Managed and Controlled – Co-operative societies
Facilities at most economical rates to members
Types of Warehouse w.r.t. Operation
BONDED WAREHOUSES
Licensed to accept imported goods for storage
before payment of customs duty
Imported merchandise is stored and released
only after payment of appropriate taxes
Cigarettes, Liquor, Other products are stored
Owned and Operated – PORT TRUSTS
Acts in two capacities viz LANDLORD and
BAILEE OF GOODS
As landlord provides storage facilities on rent
Types of Warehouse w.r.t. Operation
DISTRIBUTION CENTERS / WAREHOUSES
Designed to move goods
Large and highly automated
Receive goods from various plants and suppliers, take
orders, fill them efficiently deliver to customers quickly
Located near the market owned or leased by
manufacturers
Access to transport networks
COLD STORAGE
Preserve perishability of goods against payment of a
storage charge
Temperature variation is controlled to degree necessary for
certain sensitive items
Types of Warehouse w.r.t. Operation
EXPORT AND IMPORT WAREHOUSES
• LOCATION –near ports where international trade is undertaken
• Storage facilities for goods awaiting onward movements
• Facilities- packaging , inspection, marking etc.

CLIMATE-CONTROLLED WAREHOUSE
• Handle storage of many products including need special handling conditions
• Freezers for frozen products, humidity-controlled environment for delicate products, produce or flowers, etc.

AGRICULTURAL WAREHOUSES
• Store agricultural produce grown in a certain area
• Location – Assembling or regulated markets
• Receive agricultural commodities either directly from farmers or through their commission agents or from
wholesalers
• Encourage speculative trading
 The Role of the Warehouse
●Introduction to the significance of
warehouses in logistics.
●Warehouses serve as critical nodes in
the supply chain, facilitating the
storage, handling, and movement of
goods.
To facilitate getting the product to the customer:
●On time (OT)
●In Full (IF)
●To the right place
●In the right condition
●With the right paperwork
●At the right cost
●As environmentally friendly as possible
Photo: red and white labeled cans on shelf
Photo by Eduardo Soares
Powered by Unsplash
 The Objectives of Warehousing

 The primary objective of warehousing is to

maximize the effective use of operational
resources while satisfying customer
requirements.
 Match product availability to customer demand
 Maximum customer satisfaction at Minimum cost
 Ensure visibility and accuracy of stock
 SIX BASIC PRINCIPLES
 Accuracy, Cost Control, Cleanliness,
Efficiency, Safety & Security
 Why Do We Hold Stock?
• Maintaining inventory to manage supply
chain efficiency and meet customer
demand.
• Stock holding is essential for managing
supply and demand fluctuations,
ensuring product availability, and
supporting production processes.
• Examples include safety stock to buffer
against demand variability, and cycle
stock for regular replenishment.
• Advantages: Ensures product
availability and buffers against supply
chain disruptions.
• Disadvantages: High holding costs and
risk of obsolescence.
 Why do we need to hold stock?

 Lower unit cost if bought in large quantities and if

transported in large quantities
 Production breakdown
 Ripening products, cheese, meats, whiskies
 Ripening Agents Ethylene Gas, Calcium Carbide,
Ripening Chambers, Climacteric Fruits, Ethephon,
Ripening with Temperature Control, Ethylene-
Producing Sachets.
 Delay taxation payments
 Why do we need
to hold stock?
 Holding stock in numerous locations
 Ability to increase production runs
 Humanitarian storage(These supplies are
typically stockpiled in strategically located
warehouses or storage facilities to ensure
rapid response to a crisis.)
 Archive storage
 Smooth the flow of goods
 Packaging material
 Store returns
 Promotions and Product launch
 Cover for production shutdowns
Why do we need to hold stock?
 Buffer in the supply chain or manufacturing
process
 Satisfy demand – can be erratic
 Buy low sell high – precious metals, oil,
coffee etc.
 Shortage or unreliability in supply
 Cope with peak demand - seasonality
 Maintenance parts
 Quality control cover
 Customer and supplier lead times
 Sub assembly
 Warehouse trade-offs

• Accuracy
Speed
• Space
Time

Cost • Service

Cost Vs • Accuracy

Efficiency • Responsiveness

Volume purchases • Storage costs

 Key Warehouse Challenges (Adapted from Dematic)
Challenge Operational Requirements

Increase productivity, improve utilisation of

Cost reduction
space, staff and equipment

Improve productivity, increase accuracy,

Achieve the Perfect Order
improve handling and invest in systems

Improve processes and increase

Shorter order lead times
productivity

Sales via multiple channels Improved picking strategies such as bulk

and increase in smaller orders picking and greater use of technology

Flexible working hours and improved

Fluctuations in demand
forecasting
 Key Warehouse Challenges (Adapted from Dematic)
Challenge Operational Requirements

Improved use of equipment such as

Proliferation of SKU
carousels, A Frames and flow racks

Staff retention through excellent working

Labour cost and availability conditions, flexible hours, training and
improved productivity

Increasing cost of energy and Manage energy more efficiently, better use
environmental challenges of waste

Data accuracy and speed of Introduce Warehouse management system

transfer and real time data transfer
Warehouses in the supply chain
Raw materials
Disposal

Re-process Component manufacture Direct sales

Product assembly /manufacture

Retur
ns
centr Wholesalers/Dealerships Retailers
es

Consumers

- Warehouse requirement
 Production Strategy and
Inventory Holding

Make to Stock
A production environment where a good or
service can be and usually are finished before
receipt of a customer’s order.
Holds inventory in the form of finished goods
instead of Raw material
Assemble-to-order (ATO)
A production environment where a good or
service can be assembled after receipt of a
customer’s order. This practice is called configure-to-
order (CTO) or finish-to-order (FTO). Option of
accessories is stocked (component commonality)
Holds inventory in the form of components instead
of Raw material
 Production strategy and Inventory
Holding

Make-to-order or Build-to-order
A production environment where a good or service can be
assembled after receipt of a customer’s order. The final
product is the combination of standard items and items
custom designed to meet the special needs of customers
(Blue of the product is available)
It holds inventory in the form of raw materials.

Engineer to order or Design to order

A product whose customer specifications require unique
engineering design and significant customization, and each
order results in a unique set of designs.
Holds no specific inventory
The need for retailer warehouses?
To better match supply with customer demand
To consolidate deliveries and reduce shipping costs
To reduce store deliveries

Warehouse

Retail stores Vendors Retail stores

Vendors
 Warehouse Location
● Strategic placement of warehouses in a
supply chain.
● Choosing a warehouse location involves
considering factors like proximity to
customers, transportation links, labor
availability, and cost.
● Example: A warehouse located near
major highways and ports can reduce
transportation costs and improve delivery
times.
● Advantages: Improved logistics
efficiency and reduced transportation costs.
● Disadvantages: Fixed location limits
flexibility and high initial investment.
● Photo: yellow and black fork lift
● Photo by Pickawood
● Powered by Unsplash
 Number of Warehouses
• The strategic decision regarding the
quantity and location of storage facilities.
• Determining the number of warehouses
involves balancing between wider market
reach and the costs of operation and
inventory.
• Example: A company may choose
multiple small warehouses to be closer to
customers or a few large ones for
economies of scale.
• Advantages: Closer proximity to
customers, reduced delivery times.
• Disadvantages: Increased complexity
and higher operational costs.
 Supply Chain Trends Affecting
Warehouses
● Trends: Current trends include the rise of
e-commerce, demand for faster delivery,
and the integration of advanced
technologies like AI and robotics.
● These trends are leading to changes in
warehouse designs, such as smaller urban
warehouses for faster delivery.
● Advantages: Improved efficiency and
accuracy, better customer service.
● Disadvantages: Need for constant
technological upgrades and increased
complexity.
● Photo: assorted-color filed intermodal containers
● Photo by frank mckenna
● Powered by Unsplash
 The Growth of E-fulfillment and Its
Effect on the Warehouse
• Definition (APICS): The process of
receiving, processing, and delivering online
orders. E-fulfillment requires warehouses to
adapt to high-volume, fast-paced operations,
often with a focus on small parcel shipments.
• Example: Amazon's fulfillment centers are
equipped with advanced automation to handle
large volumes of online orders efficiently.
• Advantages: Enables handling of high-
volume online orders and faster processing
times.
• Disadvantages: Requires advanced
technology and can be labor-intensive.

Photo: yellow driving forklift

Photo by National Cancer Institute
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 Specialized Warehousing
● Definition (APICS): Warehouses
designed for specific types of goods or
operations. Specialized warehouses cater to
particular types of goods or industries, such as
cold storage for perishables or secure storage
for high-value items.
● Example: A pharmaceutical warehouse
with temperature control and security systems
to store sensitive medical products.
● Advantages: Tailored storage solutions
and improved handling of specialized
products.
● Disadvantages: Limited flexibility for
other product types and higher setup costs.
● Photo: brown labeled box l
● Photo by Curology
● Powered by Unsplash
 Summary and Conclusion

• Warehousing is a critical component in supply

chain management, balancing efficiency and
cost.
• Warehousing is a dynamic field integral to
supply chain efficiency. Future challenges
include adapting to technological
advancements and evolving consumer
demands.
• Effective warehouse management involves
strategic planning, understanding of current
trends, and continuous improvement.
• Future challenges include adapting to market
changes and technological advancements.

Photo: white panel

Photo by Airam Dato-on
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