UNIT 5.
STORAGE
Introduction:
Store or Warehouse: The space, room and the building where
various types of materials are kept temporarily or for sufficient
time till they are removed to supply for production and sale or
used for consumption
5.1. Storage functions and responsibilities
1.Planning the stores for its optimum utilization.
2.Receiving all supplied materials, checking, inspection and
recording them.
3. Storing proper materials in proper place, maintaining bin cards
and stock cards and periodically checking them.
4.Receiving the requisitions from various facilities and departments
and sending them to purchase department to order before
shortages may arise.
Cont…
6. Receiving indents, scrutinizing, dispatching and forwarding
materials.
7. To prevent theft, unauthorized entry in the stores. Disposal of
wastages, obsolete and unuseful materials. Return of bad quality
materials supplied by the supplier.
8.Co-ordinate and correspond to all the departments so that they
will have proper materials to maintain continuity in production
processes.
9. Assist in inventory planning and inventory control
Cont…
10. The storekeeper is responsible for all the materials received in the
stores, kept there and issued to various other departments. He should
receive these materials of proper quantity after verification and proper
authorization as per specifications.
11. To store the materials at proper place. Codification and classification
of these materials is the responsibility of the storekeeper.
12. Proper issue of materials to various facility and production centers,
to prevent thefts and damages, disposal of scraps, obsolete and unuseful
materials, preservation and maintenance of materials is the
responsibility of storekeeper.
Cont….
13. It is the responsibility of storekeeper to correspond and supervise the
stores workers co-ordinate the working in stores department and co-
operate with purchase, production and all other departments of the
organization.
14. To keep up-to-date records, checking and maintaining quality of
materials is done by the storekeeper
15. The stock valuation, verification, stock disposal and sales record
keeping is also the responsibility of the storekeeper.
Factors Influence Effective Use Of
Warehouses.
1. Cube utilization and accessibility.
2. Stock location.
3. Order picking and assembly.
4. Packaging
cont…
1.Cube utilization and accessibility.
Goods are stored not just on the floor, but also in the cubic space of the warehouse.
Although the size of a warehouse can be described as so many square feet,
warehouse capacity depends on how high goods can be stored and the density of the
storage.
Space is also required for aisles, receiving and shipping docks, offices, and order
picking and assembly
Cont….
2. Stock location.
Stock location, or warehouse layout, is concerned with the location of
individual items the warehouse
system used depends on the type of goods stored, the type of
storage facilities needed, the throughput, and the size of orders.
must maintain enough inventory of safety and working stock to
provide the required level of customer service, keep track of
items so they can be found easily, and reduce the total effort
required to receive goods, store them, and retrieve them for
shipment
The following are some basic systems of locating
stock:
Group functionally related items together. Group together items similar in
their use (functionally related).
Group fast-moving items together. If fast-moving items are placed close to
the receiving and shipping area, the work of moving them in and out of storage
is reduced. Slower-moving items can be placed in more remote areas of the
warehouse.
Group physically similar items together. Physically similar items often
require their own particular storage facilities and handling equipment..
Locate working stock and reserve stock separately
Assigning Specific Locations To Individual Stock Items
1. Fixed location In a fixed-location system, an item is assigned a
permanent location or locations, and no other items are stored
there.
2. Random location (sometimes called floating location) goods
are stored wherever there is appropriate space for them. The same
item may be stored in several locations at the same time and
different locations at different times.
3. Zone random storage a hybrid system of the two basic systems.
First, zones are established in the warehouse where closely related
products are stored. Then within each zone, the material can be
randomly located as in a floating location system.
3. Order Picking and Assembly
Once an order is received, the items on the order must be
retrieved from the warehouse, assembled, and prepared for
shipment.
5.2. Location and layout
‘Warehousing and Storage Layouts
Objective is to optimize trade-offs
between handling costs and costs
associated with warehouse space
Maximize the total “cube” of the
warehouse – utilize its full volume
while maintaining low material
handling costs
operations management 9-1
Warehousing and Storage
Layouts
Material Handling Costs
All costs associated with the transaction
Incoming transport
Storage
Finding and moving material
Outgoing transport
Equipment, people, material, supervision,
insurance, depreciation
Minimize damage and spoilage
operations management 9-2
Warehousing and Storage
Layouts
Warehouse density tends to vary
inversely with the number of different
items stored
Dock location is a key
design element
operations management 9-3
Cross-Docking
Materials are moved directly from
receiving to shipping and are not placed
in storage in the warehouse
Requires tight
scheduling and
accurate shipments,
bar code or RFID
identification used for
advanced shipment
notification as
materials
are unloaded
operations management 9-4
Random Stocking
Typically requires automatic identification
systems (AISs) and effective information
systems
Random assignment of stocking locations
allows more efficient use of space
Key tasks
1. Maintain list of open locations
2. Maintain accurate records
3. Sequence items to minimize travel, pick time
4. Combine picking orders
5. Assign classes of items to particular areas
operations management 9-5
Customizing
Value-added activities performed at
the warehouse
Enable low cost and rapid response
strategies
Assembly of components
Loading software
Repairs
Customized labeling and packaging
operations management 9-6
Warehouse Layout
Traditional Layout
Storage racks
Customization
Conveyor
Staging
Office
Shipping and receiving docks
operations management 9-7
Warehouse Layout
Cross-Docking Layout
Shipping and receiving docks
Office
Shipping and receiving docks
operations management 9-8
Location choice
Center-of-Gravity Method
Finds location of distribution
center that minimizes distribution
costs
Considers
Location of markets
Volume of goods shipped to those
markets
Shipping cost (or distance)
location choices 8-1
Center-of-Gravity Method
Place existing locations on a
coordinate grid
Grid origin and scale is arbitrary
Maintain relative distances
Calculate X and Y coordinates for
‘center of gravity’
Assumes cost is directly
proportional to distance and
volume shipped
location choices 8-2
Center-of-Gravity Method
∑dixQi
i
x - coordinate =
∑Qi
i
∑diyQi
i
y - coordinate =
∑Qi
i
where dix = x-coordinate of location i
diy = y-coordinate of location i
Qi = Quantity of goods moved to
or from location i
location choices 8-3
Center-of-Gravity Method
North-South
New York (130, 130)
Chicago (30, 120)
120 –
Pittsburgh (90, 110)
90 –
60 –
30 –
Atlanta (60, 40)
–
| | | | | |
East-West
30 60 90 120 150
Arbitrary
origin
Figure 8.3
location choices 8-4
Center-of-Gravity Method
Number of Containers
Store Location Shipped per Month
Chicago (30, 120) 2,000
Pittsburgh (90, 110) 1,000
New York (130, 130) 1,000
Atlanta (60, 40) 2,000
(30)(2000) + (90)(1000) + (130)(1000) + (60)(2000)
x-coordinate =
2000 + 1000 + 1000 + 2000
= 66.7
(120)(2000) + (110)(1000) + (130)(1000) + (40)(2000)
y-coordinate =
2000 + 1000 + 1000 + 2000
= 93.3
location choices 8-5
Center-of-Gravity Method
North-South
New York (130, 130)
Chicago (30, 120)
120 –
Pittsburgh (90, 110)
90 – + Center of gravity (66.7, 93.3)
60 –
30 –
Atlanta (60, 40)
–| | | | | |
East-West
30 60 90 120 150
Arbitrary
origin
Figure 8.3
location choices 8-6
Transportation Model
Finds amount to be shipped from
several points of supply to several
points of demand
Solution will minimize total
production and shipping costs
A special class of linear
programming problems
location choices 8-7
5.3. Stores system and procedures
Warehousing involves the following procedures:
1. Receive goods. The warehouse accepts goods
from outside transportation or an attached factory
and accepts responsibility for them. This means the
warehouse must:
a. Check the goods against an order and the bill of
lading.
b. Check the quantities.
c. Check for damage and fill out damage reports if
necessary.
d. Inspect goods if required.
8-8
Cont…
2. Identify the goods. Items are identified with the
appropriate stock-keeping unit (SKU) number
(part number) and the quantity received is
recorded.
A SKU is a unique code consisting of letters and numbers that
identify characteristics about each product, such as manufacturer,
brand, style, color, and size
UPC- universal product code VS SKU
A UPC,, is a universally unique 12-digit numerical code and
corresponding barcode assigned to a product that remains constant,
regardless of who is selling the product, where it is sold, or how it is
sold.
location choices 8-9
Cont…
3. Dispatch goods to storage. Goods
are sorted and put away.
4. Hold goods. Goods are kept in
storage and under proper protection
until needed.
5. Pick goods. Items required from
stock must be selected from storage
and brought to a marshalling area.
location choices 8 - 10
Cont…
6. Marshal ( arrange) the shipment. Goods making
up a single order are brought together and
checked for omissions or errors. Order records
are updated.
7. Dispatch the shipment. Orders are packaged,
shipping documents prepared, and goods loaded
on the right vehicle.
8. Operate an information system. A record must
be maintained for each item in stock showing the
quantity on hand, quantity received, quantity
issued, and location in the warehouse. The
system can be very simple, depending on a
minimum of written information and human
memory, or it may be a sophisticated computer-
based system.
location choices 8 - 11
5.4. Cost aspects and productivity
To maximize productivity and minimize cost,
warehouse management must work with
the following:
1. Maximum use of space. Usually the
largest capital cost is for space. This
means not only floor space but cubic
space as well since goods are stored in
the space above the floor as well as on it.
location choices 8 - 12
Cont…
2. Effective use of labor and equipment. Materials handling
equipment represents the second-largest capital cost and labor the
largest operating cost.
There is a trade-off between the two in that labor costs can be
reduced by using more materials handling equipment. Warehouse
management will need to:
• Select the best mix of labor and equipment to maximize the overall
productivity of the operation.
• Provide ready access to all SKUs. The SKUs should be easy to identify
and find. This requires a good stock location system and layout.
• Move goods efficiently. Most of the activity that goes on in a
warehouse is materials handling: the movement of goods into and out
of stock locations.
location choices 8 - 13
Several factors influence effective use of
warehouses. Some are: (discussed above)
• Cube utilization and accessibility.
• Stock location.
• Order picking and assembly.
• Packaging.
location choices 8 - 14
5.5. Stock receipt, issue and dispatch
Receiving procedures:
1. After checking the materials supplied, the
delivery note is signed and checked in
receipt section, stamped, its one copy is
retained by receipt section and entered in
Goods Receipt Register, also called Goods
Inward Register
location choices 8 - 15
Goods Receipt Register
Date of receipt...................
Date...................................
location choices 8 - 16
Inspection and Verification
After receiving and counting the items received in
the store they are to be inspected for correct quantity
and quality as per specifications in the inspection
department or laboratories
location choices 8 - 17
Storing and Issue of Materials
The storing and issue comprises the following activities.
1. After inspection transfer the materials directly to the
storing places.
2. Transfer of materials to production facilities as per their
requisitions.
3. Transferring the items to the departments requiring them.
4. Finished parts are directly sent to assembly section or for
selling
location choices 8 - 18
The methods used for storing and issue of materials are mainly classified in two
ways.
(a) First In First Out (FIFO) method
(b) Last In First Out (LIFO) method
location choices 8 - 19
Methods of Storing the Materials
The materials will be stored depending upon its size,
shape and weight. They are usually
stored in
(a) Bins
(b) Shelves or racks
(c) Pallets
(d) Heavy lifts
(e) Containers
location choices 8 - 20
Bins:
The small items which can be handled easily are stored in bins. The items
stored in bins are fast moving. The various types of bins are used
depending upon the size of materials, the
movable bins are also used. The loading and unloading the materials in the
bins is normally done manually. The bin card is used to record the
materials in bins
location choices 8 - 21
b) Shelves or Racks
The items which are large in size and heavy to be
stored are kept in shelves or racks. Manual handling
is not possible for large items, therefore, mechanical
handling is used for storage and removal of items
from racks. Shelves or racks are made either from
wooden materials or metal plates.
location choices 8 - 22
(c) Pallets: They are specially designed platforms for
stacking loads which can be moved by fork lift. The
pallets are most suitable for stacking the small number of
items which are frequently moved
location choices 8 - 23
d. Containers: Various types of containers are used to
store the various types of materials. Particularly liquids
and gases are stored in these containers. They may be
closed or open containers.
location choices 8 - 24
Issue/ release of Materials
location choices 8 - 25
materials return
location choices 8 - 26
5.6. Stores accounting and stock
verification
A, Records of Store
1. Receipt and Issue Register
These registers are of loose pages. All the materials
received daily is entered in receipt register, inspected
and than entered in the stock book. The material
issued daily is entered in issue register. These
registers are used for preparing stores ledger.
2.
location choices 8 - 27
Cont…
2, Stock Register
They are of two types
1. Consumable materials register
2. Non-consumable or permanent stock register
1. Consumable materials register: The materials which will be consumed and will not
remain in store are entered in this register. One item will be recorded on one page. Its all the
transactions are entered on the same page. The consumable materials are raw materials, coal,
diesel, kerosene, lubricants, paints, varnishes, grease, cotton waste, screw, nails and nut and
bolt etc.
2. Non-consumable or permanent stock register: All those items which will not be
consumed and will remain in records till it is scraped or written off is entered in this type of
register. They remain for permanent record. These items are machines and its accessaries,
equipment, furniture, fittings, machine tools and hand tools etc. Each item is written on each
page with all its specifications, costs etc. Some items which are used for some time say 2 to
3 years. After that they become surplus. Such items are removed from stock register and
entered in the separate register called Surplus Items Register.
location choices 8 - 28
3. Suspense and Condemned Articles Register
The defective or excess items are entered in suspence register. The waste,
obsolete and unrepealable and unuseful articles are entered in condemned
article register. Such items will remain in these registers till they are not
disposed off. After that they are removed from these registers.
4. Loan Register
The materials which are not consumables are issued on loan temporarily
after getting authorised slip. These materials are issued after recording in
loan register and signature of receiver is taken in it. After receiving the
materials back given on loan, the issue slip is returned.
5. Packages Register
The record of packages, empty containers and boxes are kept in this
register. In this way, the records of all the items received in the store, kept
as inventory and issued as per requisition from the store are to be
maintained correctly and efficiently.
location choices 8 - 29
Valuation of Stock and Materials
The stock and materials stored as
inventories in the store are having money
value. They are the assets and working
capital of the organisation. The materials
and parts are purchased at different cost
in the books of accounts. They are
valued according to some method so that
all the items have same price.
location choices 8 - 30
The various methods used for valuation of various
types of materials are given as follows
(1) First In First Out (FIFO)
(2) Last In First Out (LIFO)
(3) Simple average method and weighted average method
(4) Fixed price method and standard price method
(5) Base stock method
(6) Actual cost method
(7) Current-value method
(8) Inflated-price method
(9) Replacement price method
location choices 8 - 31
Verification of Materials
The physical verification of materials
will be done by two methods:
1. Periodic counting the items
2. Continuous counting the materials
location choices 8 - 32
5.7. Sores security
The security of stores is very important against theft, pilferage and
accidents. The security arrangement will depend upon types of
materials and their costs. Security requirements vary from
organization to organization. The system of security arrangement is
decided on location of stores and value of materials stored there.
Hazardous and inflammable materials must be kept away from
other materials and protected against fire. These materials should
have proper containers to store them, so that they should not leak
and pollute the atmosphere
location choices 8 - 33
Elements helping materials
security
Limited access. Inventory must be kept in a safe,
secure place with limited general access. It
should be locked except during normal working
hours. This is less to prevent theft than to ensure
people do not take things without completing
the transaction steps. If people can wander into
the stores area at any time and take something,
the transaction system fails.
A well-trained workforce. Not only should the
stores staff be well trained in handling and
storing material and in recording transactions,
but other personnel 'who interact with stores
must be trained to ensure transactions are
recorded 'properly. 8 - 34
End of chapter 5
location choices 8 - 35
5.5. Stock receipt, issue and dispatch
location choices 8 - 36
