WAREHOUSING AND WAREHOUSE
MANAGEMENT

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Photo by: Acik

Warehousing is the storage of goods for profit. The physical location, the warehouse, is a storage facility that receives goods and products for the eventual distribution to consumers or other businesses. A warehouse is also called a distribution center. Warehouse management is the process of coordinating the incoming goods, the subsequent storage and tracking of the goods, and finally, the distribution of the goods to their proper destinations.

HISTORY

Warehousing's roots go back to the creation of granaries to store food, which was historically available for purchase during times of famine. As European explorers began to create shipping-trade routes with other nations, warehouses grew in importance for the storage of products and commodities from afar. Ports were the major location for warehouses.

As railroads began to expand travel and transportation, the creation of rail depots for the storage of materials became necessary. In 1891 the American Warehousemen's Association was organized to challenge the railroad companies' control over freight depots. President Theodore Roosevelt significantly strengthened the Interstate Commerce Commission with passage of the Hepburn Act in 1906. Commercial warehousing began to grow after the government placed more restrictions on railroads.

World War II impacted warehousing in several ways, including the need to increase the size of warehouses and the need for more mechanized methods of storing and retrieving the products and materials. As mass production grew throughout manufacturing, the needs of efficient and effective warehousing capabilities grew with it.

MODERN ISSUES

The warehouse industry found itself recovering from a recession at the start of the twenty-first century, partially brought on by the hype of the dot-com bubble and the excess production created after it burst. It also coped with new methods of distribution, such as just-in-time (JIT) manufacturing—where warehousing is unnecessary because products are shipped directly to customers.

Warehousing companies are now striving to become more than simply storage facilities. They are transforming themselves into "third-party logistics providers" or "3PLs" that provide a wide array of services and functions. In addition to packing and staging pallets, contemporary warehousing facilities offer light manufacturing, call centers, labeling, and other non-storage options.

WAREHOUSE FUNCTIONS

Warehousing is a key component of the overall business supply chain. The supply chain consists of the facilities and distribution options for the procurement of materials from manufacturer to customer and all points in between. It includes the production of materials into components and finished products and then the distribution to customers.

Warehouse functions include:

• the storage of goods to permit managing product flow or to accommodate longer production runs;
  

  Growth of Warehousing 1997–2002
  Warehousing and Storage
  

  Source: U.S. Department of Commerce: Department of the Census: Economic Census

  	Establishments	Revenue	Annual Payroll($,000)	Paid employees
  1997	6,497	10,657,925	2,926,119	109,760
  2002	12,637	17,924,787	18,689,122	639,174

• serving as a mixing point where products from different suppliers are mixed and then distributed to fulfill customer orders;
• a sales branch and customer service location;
• a source of supplies for production;
• a staging area for final packaging or finishing.

WAREHOUSE OPERATIONS

Warehouses are operated in several ways. Public warehousing involves the client paying a standard fee for the storage of merchandise. Private warehousing is storage and operations controlled completely by a single manufacturer. Leased warehousing is an option for more stable inventory. Contract warehousing clients pay fees regardless of whether they are using the space or not; the space is always there for them to use, however. According to Overview of Warehousing in North America, contract warehousing accounts for more than 60 percent of the U.S. commercial market.

A warehouse stands empty without some form of product. Delivery of goods and materials takes place either by truck, rail, or boat on a dock or loading area. The goods are received, processed, and then sent into the warehouse for storage.

The storage of goods has been the primary function for warehouses. Once the goods have been received from the manufacturer and/or shipper, they are compactly stored to maximize space within the facility. Products are placed on pallets, which allow for more consistent stacking and moving within the facility.

Contract and public warehouses receive goods and products from a multitude of manufacturers and shippers. A crucial aspect of warehouse management is inventory control. Inventory control is the ability to locate and track a given product within the warehouse to facilitate quick selection and loading for order fulfillment. It is also the process of maintaining sufficient amounts of product to meet customer demands, while at the same time balancing the expense of keeping product in storage. Perpetual, annual, physical, and cycle counting are all methods of keeping track of inventory.

Order picking is the process of selecting products to fulfill an order. There are several types of picking methods:

• Discrete or pick-by-order: Specific products are selected on a per order basis.
• Batch or pick-by-article: Multiples of a product are selected to fulfill multiple orders. The products are sorted in the staging area and combined with other products to fulfill the orders.
• Wave: Involves gathering products based on specific routing or shipping criteria.
• Reverse-order: Used when part of an order is held to be combined with another order.

Reverse-order picking is related to cross-docking, another function of warehouses. Cross-docking is a direct flow of goods from receiving to shipping, with little if any storage. Cross-docking is contingent on the timely delivery of products, accurate management on the loading dock, and effective ordering by the customer.

Warehousing is also involved in the packaging and labeling of a product as it moves through the facility. Proper packaging is necessary for effective storage and to guard against damage. Labeling, or tagging, is an important element of the packaging. Proper labeling improves the ability to identify, track, store, and select the correct product for order fulfillment.

Once the product has been selected, or picked, it is brought to a staging area for final processing and shipment. The loading dock is a hub of activity as products are arriving for storage and being staged for distribution. Effective management of this area is crucial for warehouse success. It is here that cross-docking takes place.

The final stage of warehousing is the transportation facet of delivering and shipping goods.

WAREHOUSE MANAGEMENT

In the past warehouse management was very paper-intensive in its coordination of a multitude of activities. This has changed with the introduction of warehouse management system software.

Warehouse management systems (WMS) assist managers in tracking products throughout the entire storage and distribution process. These systems span from simple computer automation systems to high-end, feature-rich management programs that improve order picking, facilitate better dock logistics, and monitor inventory management.

TRENDS

According to a Warehousing Management survey, competition in warehousing has become extremely tight because businesses seek warehouse firms with extremely thin margins. Companies are succeeding by remaining flexible and investing in technology. The main issues or trends in warehousing include radio frequency identification (RFID), transportation management systems, pick-to-light technology, and voice-activated receiving and packaging.

Voice-activated receiving and packaging allows for warehouse personnel to speak requests into the WMS, thus speeding the entire process. Transportation management systems provide an advanced level of detail on goods prior to their arrival and also provide a more specific time of delivery. RFID has dramatically improved the ability to effectively manage inventory and track the location of specific goods within the warehouse. Pick-to-light technology improves order picking along warehouse conveyor belts by monitoring and identifying products for specific shipments.

A significant trend is the continuing growth of 3PL providers as companies try to cut costs and management issues by outsourcing their warehouse and distribution functions. An outcome of increased 3PL activity is a wave of mergers that are consolidating the industry. Customer demands for one-stop shopping and new technologies are a driving force behind this consolidation.

Warehousing is a mature industry seeking methods to maximize profits and striving to add services to compete for customers. The warehousing industry is a key component of the supply chain and will likely remain so as long as there are manufacturers and consumers.