WAREHOUSING OPERATIONS AND STOCK CONTROL

INTRODUCTION TO STORES/ WAREHOUSING

Definition of Stores
Every existing organization has a certain amount of materials that it handles,
covering the entire flow from suppliers to consumers. The raw materials received
from suppliers, the work in process, and the finished goods awaiting delivery to
consumers must be conveniently kept for as long as necessary. A store can thus be
defined as a place within an organization whereby materials are kept in a way that
they are well accounted for and are maintained safely. A typical store has a process
and a space within to receive incoming raw materials, work in progress, and
finished goods (receiving bay), keep them for as long as they are required for use
(custody), and then move them out of stores for use (issue).
The functions of a store
The basic responsibility of a store is to act as a safe custodian of all materials
moving in and out of an organization, and provide various services to the users of
the goods. The objective of storekeeping is to efficiently and economically provide
the right materials at the time which it is required and in the condition in which it is
required. The store manager is in-charge of the store and his basic job is to receive
the goods and act as a caretaker of the materials and issue them as and when
production or sales demands it. The basic functions/responsibilities carried out
within a store include:
1. Receipt of incoming goods/consignments
2. Inspection of all receipts
3. Storage and preservation
4. Identification of all materials stored
5. Materials handling
6. Packaging
7. Issue and dispatch
8. Maintenance of stock records
9. Stores accounting
10.Inventory control
11.Stock-taking
 Receipt of Incoming Goods
Receipt is the process of checking and accepting, from all sources (vendors,
production units, repair units etc), all materials and parts which are used within an
organization. These include supplies for manufacturing or operating processes,
plant maintenance, offices and capital installations.
 Inspection of all Receipts
This involves the examination of incoming consignments for quality. Very often
there is a separate Quality Control or Inspection department, which undertakes this
work for most materials. However, this is mainly found in large organizations.
Otherwise, goods are inspected by stores to ensure that the inspection procedures
laid down are carried out before materials are accepted into stock.
 Storage and Preservation
This involves items being binged and kept in storage bins and impounds; usually
indicated in the yard. The storage period may vary depending between one day and
one year or more, depending on recoupment procedures/safety stock (buffer stock)
required. Storage is basically the physical act of storing the materials. Preservation
involves the maintenance of materials to retain their quality, for example,
protection from extreme temperatures, humidity, dust and other factors that may
lead to the deterioration of materials.
 Identification of Materials Stored
Identification is the process of systematically defining and describing all items of
materials in stock. It includes the preparation of a stores code or vocabulary, the
adoption of materials specifications, and the introduction of a degree of
standardization. In some organizations, this function may be carried out by the
design, planning or standards departments or sometimes by the procurement
department.
 Materials Handling
It involves the movement and handling of materials within a store. This can be
done manually or mechanically (e.g. by use of forklifts). Heavy items, dangerous
or inflammable goods, and delicate items must be handled in different ways to
ensure that damage to the items of store personnel does not occur.
 Packaging
Materials dispatched from the finished goods store or from one store to another at a
different location require to be packed. Packaging of different materials depends
on their nature and this may vary from heavy wood crates to ordinary paper
cartons.
 Issue and Dispatch
This is the process of receiving demands, selecting the items required and handing
them over to the users, or dispatching them to customers.
 Maintaining Stock Records
Stock records are documents which record, from day to day, full particulars of
individual receipts, issues, and balances of materials in stock.
 Stores Accounting
This is the process of recording stock movements and balances in terms of
financial value. It can also be undertaken by the accounting department, but most is
handled by the stores. This reduces work duplication and makes store personnel
responsible for providing their own financial information, which they require for
the purpose of inventory control.
 Inventory Control
It is the operation of continuously arranging receipts and issues in such a way so as
to ensure that stock balances in quantity and/or value are adequate to support the
current rate of consumption at all times with due regard to economy. It involves the
related process of provisioning, which is the means whereby instructions are given
for the placing of orders to correspond with future estimated requirements. In some
companies, the production control department may have a large share in
provisioning; at least as far as production materials are concerned. Nevertheless,
this should ultimately be the function of the stores.
 Stock-taking
This is the process of physical verification of the quantity and condition of goods
in store.
Responsibilities of a Store Manager/Storekeeper
 Receive incoming goods
 Supervise the unloading of materials, and their tally or count
 Check for damages/shortage and prepare report
 Fill goods inward/ day book/ daily collection register
 Complete the vendor´s consignment note
 Arrange for inspection and complete the inspection
 Prepare goods receipt note
  Prepare goods rejection memo (in-case of goods rejected)
 Send goods to store
 Send other documents to respective departments
 Ensure all storage facilities are in proper working order e.g. check for loose
racks or broken pallets
 Ensure proper goods housekeeping i.e. check for spillage of oils, dirty walls
and obstructions
 Ensure all material handling equipment are in good condition
 Check and count goods before issue
 Make entry bins/stock cards promptly
 Ensure receipts and issues are correctly documented
 Ensure correct accounting of all stores
 Ensure that rules and regulations relating to physical custody and
preservation of stores are followed.
Relationship of Stores Department with Other Departments
Stores come into contact with other major functions within an organization such as
purchase, production, sales, accounts, and personnel departments. Stores serve all
departments, but the highest degree of relations is between purchase which feeds
the stores, and production to which the store supplies various materials.
1. Stores and Purchase Departments
Stores and purchase are complimentary to each other. Apart from the day to day
purchase of various items of stores, there are other important activities which can
be best done by close cooperation between the two departments. These include:
 Identification i.e. coding of materials
 Variety reduction
 Inventory control value analysis
 Stores sends indents to purchase based on inventory levels determined in
accordance with usage and delivery lead times
 Determination of lot sizes for purchase which should suit production
requirements, transport, handling and storage space.
 Purchase informs stores of orders placed and stores in turn informs purchase
of reipts, rejections, shortages, breakages, theft and loss if any
 Stores also inform purchase of any changes in production trends, slow or
non-moving stock, obsolete or surplus stock, scrap, etc.
2. Stores and Production Departments
The production or the user department happens to be the main customer of stores.
All materials needed by the user department are generally acquired from the stores.
The finished goods and all work in progress requiring storage are also submitted to
the stores. Any change in production schedule should be communicated to stores to
enable prompt corrective action.
3. Stores and Sales Departments
The finished goods store supplies all the necessary goods to the sales department in
a marketing scenario. The sales department always seeks to have readily available
stock regardless of the need to maintain an economical level of stock in the stores.
This means that the sales department and the stores must choose a cooperative and
integrative approach towards stock in order to maintain profitability.
4. Stores and Accounts Departments
Usually the accounting function does all the stores accounting, hence ensuring a
day-to-day working relationship.
5. Stores and Personnel/Human Resources Functions
The stores department requires competent workers that will ensure efficiency and
effective storage services. Selection of the right person for stores work and
adequate training in storage, preservation, and accounting techniques is vital. This
can only be achieved with full cooperation between the two departments.

WAREHOUSING OPERATIONS

Warehousing provides time and place utility for raw materials, industrial goods,
and finished products, allowing firms to use customer service as a dynamic value-
adding competitive tool.

A storage warehouse holds products for moderate to long-term periods in an

attempt to balance supply and demand for producers and purchasers. They are most
often used by businesses whose products’ supply and demand are seasonal. On the
other hand, a distribution warehouse assembles and redistributes products quickly,
keeping them on the move as much as possible. Modern warehouses are long, one-
story buildings located in suburban and semi-rural settings where land costs are
substantially less. These facilities are often located so that their users have easy
access to major highways or other transportation options. Single-story construction
eliminates the need for installing and maintaining freight elevators, and for
accommodating floor load limits. Furthermore, the internal flow of stock runs a
straight course rather than up and down multiple levels. The efficient movement of
goods involves entry on one side of the building, central storage and departure out
the other end. Computer technology for automating warehouses is dropping in
price, and thus is increasingly available for small business applications.
Sophisticated software translates orders into bar codes and determines the most
efficient inventory picking sequence. Order information is keyboarded only once,
while labels, bills and shipping documents are generated automatically.
Information reaches hand-held scanners, which warehouse staff members use to fill
orders. The advantages of automation include low inventory error rates and high
processing speeds.

Functions of warehouses
The main function of a warehouse is warehousing –that is the temporary storage of
goods. Warehouse also performs other functions:
 Provide temporary storage of goods
 Put together customer orders
 Serve as a customer service facility
 Protect goods
 Segregate hazardous or contaminated material
 Perform value-added services
 Inventory
Warehouse functional areas
 Receiving- receive incoming product
 Reserve- store products efficiently (pallets)
 Value-addition- transforming products (labeling, kitting)
 Pick-line- store product so that it can be picked efficiently (cases/items)
 Pack/ship- package and ship products

A typical warehouse consists of two main elements:

1. A storage medium
2. A material handling system
There is also a building enclosing the storage medium, the goods, and the
storage/retrieval (S/R) system. Warehouses come in different shapes, sizes, and
heights depending on such factors –goods stored, the volume, the type of S/R used.

Types of Storage Media

i) Stacking frames
ii) Cantilever racks
iii) Selective rack
iv) Flow rack
v) Racks for Automated Storage and Retrieval Systems

The Role of the Warehouse

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

• Functions of warehousing include

– Transportation consolidation

– Product mixing

– Docking

– Service

– Protection against contingencies

Type of warehousing

• Public Warehousing

• Private Warehousing

• Contract Warehousing

• Multi-client Warehousing

• Bonded warehouse

Objectives of efficient warehouse operations

• Provide timely customer service.

 • Keep track of items so they can be found readily & correctly.

• Minimize the total physical effort & thus the cost of moving goods into &
out of storage.

• Provide communication links with customers

• Benefits of Warehouse Management

• Provide a place to store & protect inventory

• Reduce transportation costs

• Improve customer service levels

• Complexity of warehouse operation depends on the number of SKUs

handled & the number of orders received & filled.

• Most activity in a warehouse is material handling.

WAREHOUSE ACTIVITIES

• Receive goods

• Identify the goods

• Dispatch goods to storage

• Hold goods

• Pick goods

• Marshal shipment

• Dispatch shipment

• Operate an information system

Receive goods

• Accepts goods from

• Outside transportation or attached factory & accepts responsibility

 • Check the goods against an order & the bill of loading

• Check the quantities

• Check for damage & fill out damage reports if necessary

• Inspect goods if required

Identify the goods

‒ items are identified with the appropriate stock-keeping unit (SKU)

number (part number) & the quantity received recorded

Dispatch goods to storage

‒ goods are sorted & put away

Hold goods

‒ goods are kept in storage & under proper protection until needed

Pick goods

‒ items required from stock must be selected from storage & brought to
a marshaling area

Marshal the shipment

‒ goods making up a single order are brought together & checked for
omissions or errors; order records are updated

Dispatch the shipment

‒ orders are packaged, shipping documents are prepared, & goods

loaded on the vehicle

Operate an information system

‒ a record must be maintained for each item in stock showing the

quantity on hand, quantity received, quantity issued, & location in the
warehouse
 RECEIPT AND INSPECTION OF GOODS

Introduction

Receipt is a store management function responsible of physical handling of goods

entering an organization from outside suppliers or within resources. The quantity
and quality of goods has to be checked before the items are handled over for
storage of any users.

Receipt from suppliers

Goods arrive by different modes of transport e.g. by hand, post, road, rail or air.
Receiving of shipments from outside source has two main aspects;

 Checking for quantity of goods delivered of which the store keeper has a
primary responsibility.

 Checking for quality inspection which is mostly the responsibility of the

technical personnel of the organization unless materials involved are
general where the store keeper can confirm the quality by use of samples.

Types of delivery

The suppliers would have been communicated the times during which deliveries
can be made. This can be through the order or a separate delivery schedule.

Checking of quantity

Before unloading or off-loading the goods from the vehicle or any other carrier, the
receiver must confirm that the consignment is for that point of receiving. That is
done by marring up the suppliers advice note or delivery note and the carrier’s
consignment note with the corresponding copy order to see that there is no
disagreement. The area allocated specifically for receiving goods within a
warehouse is referred to as a receiving bay.

When the documents are confirmed to be in agreement the receiver can then make
sure that the quantity and description correspond with what has been advised. That
is done by weighing, counting or measuring. Appropriate equipment such as
weighbridges, scales and tape measures are used. Where consignment consist of
 one or more full loads of lorries or railway wagons, the checking is best done over
a weighbridge.

The tare weight [weight of empty vehicle] is subtracted from gross weight [weight
of the vehicle plus its load] to get the weight of the load. The law requires all
railway truck and load carrying vehicles to have their tare weight painted upon
them.

The shortages found in weight, number of items and packages missing or damaged
goods have to be reported immediately to avoid claims being time-barred. The
carrier or representative of the suppliers has to endorse, witnessing the shortage or
damaged goods.

Goods-inward records or Receipt Register

This record is kept to record all receipt made in a day to avoid losing track whether
the transactions have been completed. Brief details contained for each consignment
are:

 Date

 Consignor

 Method of transport

 Vehicle number

 Brief description of goods

 Goods received note number [GRN]

These records can be keyed into the computer directly. If manually kept they are
referred to as log books.

Goods received information

Once goods have been checked for quantity and quality and have been accepted
then the information may be keyed directly the computer or a good received note
may be prepared for each delivery .Information given include:

 Date of the receipt

 Consignment

 Method of transport

 Consignor’s advice note number

 Order number

 Vocabulary number

 Description

 Quantity received, undamaged

 Number and type of packages

 Damaged/ shortage report number [if applicable]

 Any delivery in excess of quantity ordered

 Store keeper’s identity

 Inspector’s identity

The information is then forwarded to accounts payable section, purchasing

department, user’s department and inspection department.

Checking for quantity

Organizations which have adopted quality assurance schemes, quality circles,

‘right first time’ initiative have reduced time for inspection since it becomes every
one concern, to both suppliers and buyer firms.

Sampling inspection

Where large consignment are received and 100% checking for every batch will not
be possible during .receipt time, it can be arranged that a 10% sample is inspected
detected then the whole batch will be rejected. Acceptance by sampling is
appropriate where:

 Inspection involves destructive testing

 The cost of accepting a defective item are not prohibitive

 Material arrives in large batches

 It is possible to take a truly random sample

 It is economically feasible. Consistently to identify materials as accepted or not.

Inspection by store keepers

The receiving officer may himself carry out inspection for quality of items
involved is not of technical nature. Those of technical nature will need to be
handled over to the relevant technical expert for inspections. It is important that
appropriate instructions are issued making it clear to all concerned as to which
items are able to be inspected by store keepers and which ones are to be
inspected by technical staff.

Inspection by technical staff

Inspectors who are duly authorized to inspect technical items are fully empowered
to accept or reject materials and endorse inspection certificates accordingly. It is
important that goods requiring technical inspections are segregated in a separate
part of the warehouse and they are not issued or made available for issue until
they are cleared by technical department.

Rejection

For rejected items the inspecting officer may either sign the appropriate space on
goods receipt note or may state reasons for rejection certificate if there is one
normally prepared. In either case the receiving officer will inform the
purchasing department and may hold on the goods awaiting the outcome of
negotiations with the suppliers.

Reasons for rejection include:

 When goods are not of right quantity

 If goods do not meet the specification in the L.P.O

 If there is any defect e.g. breakage

 If goods are not properly labelled

 If the supplier has shipped the wrong goods

 If the goods are significantly delayed in delivery

Bonded or quarantine stores

These are materials subject to examination by government inspecting officers

before, during or after manufacture. Nothing should be issued from such a
storehouse without the permission of the appropriate inspector.

Receipt Inspection
During receipt inspection, the organization should ensure that special storage
Instructions have been addressed. Prior to final acceptance of an item, the
designated organization should ensure that the necessary purchase order
instructions and requirements are completed such as the following:

 The tickler file has been updated

 Appropriate inspection instructions are clearly defined
 Procurement information
 Establishment of critical parameters and their acceptance criteria
 Unique specifications or special testing requirements/methods
 Re-order instructions
 Suspect/counterfeit parts information
Non-conforming items should be:
i. Clearly defined
ii. Segregated from normal items to prevent inadvertent use
iii. Documented on a non-conformance report and/or a defective or substandard
material report
iv. Tracked and disposition as soon as practical by the applicable authority

Routine Inspections
Routine inspections performed by appropriate personnel should include:
i. Ensuring that packaging is proper (as designated on the purchase order when
specified), packaging is undamaged and/or not deteriorated
 ii. Color, count, shape, size, part number, model number, manufacturer/vendor
name, etc. are as specified on the purchase order
iii. Shelf-life and other time-environment requirements have not been violated –
date and time of receipt are logged for regular follow-up review during the
storage period
iv. Specified vendor documentation, in the quantities required by the purchase
order exist

Special Inspections
Special inspections should be performed on Safety Class Items and other items
when designated by the requisitioned. Special inspections should be performed by
the department specified on the requisition. Special inspection requirements for
items not involving engineering data sheets should be defined by the requisitioner.

Special inspections normally require:

 Formal quality records of all measured data
 Date inspection performed
 The identification of the individual and the organization performing the
inspection
 Accept/reject status identification
 The signature of the applicable authority to approve the status

Items receiving special inspection should be appropriately identified and

segregated from normal stock to indicate status and ensure proper application.
Stored items which are affected by time-environment should be regularly checked
by designated personnel, expired or otherwise jeopardized items should be
removed from normal storage until disposition by the proper authority.
An “acceptance tag” should be placed on the item after satisfactory receipt
inspection. The tag should be legibly marked to indicate whether an item has any
type of storage requirements. This provides the user, requester, or storeroom
personnel with an easy method to ensure special storage control requirements are
satisfied. The tag may cross-reference a particular entry in a file system (tickler
file) for further instructions.
Retrieval and Issuance
A system should exist to ensure that items are identified and stored to facilitate
ready retrieval request. Items should be selectively and judiciously controlled, on
the basis of their risk to safety and/or importance to reliable operations, during the
interval between stores issue and installation to ensure intended traceability and/or
integrity is not violated prior to installation. Safety class items should be clearly
defined in applicable documents.
Issuance documentation should be handled as quality records. A system should
exist which provides for current storage inventory status information to be
maintained, to be made available to and usable by authorized individuals upon
request. Information on storage inventory lists which may enhance usability should
include:
 Stores catalog number
 Noun name
 Manufacturer/vendor part number
 Application and contact for controlled item disposition
 Re-order criteria, when applicable
 Quantity on-hand
 Consideration for configuration managed items etc.

IDENTIFICATION OF MATERIALS AND CODING SYSTEMS

This is the process of systematically defining and describing all stocked items. It
includes the preparation of stores code, vocabulary, the adoption of material
specification and introduction of high degree of standardization. The term material
is general in the sense that it encompasses all the goods held by the organization. It
covers bulk of goods usually intended for use in connection with production and
also finished products awaiting dispatch to customers.

Coding of materials
Coding is a system of words, letters or combination of both that entails brief
information pertaining various materials. Coding is a logical way of describing
materials and it is used specifically to identify items exactness.
Advantages of a coding system:
(1) To avoid repetitive use of long description of items
(2) To ensure accuracy in the description and identification of all items

(3) Prevent duplication of items

(4) Provide a foundation for an efficient purchasing organization

(5) Convenient basis is formed for sorting and recording items

(6) Simplify manual recording

(7) Facilitate convenient central analysis of unit store house records.

(8) Simplify stock control accounting

(9) Simplify pricing and costing of materials

(10) May be used as storehouse location system

Disadvantages of stock coding:

(1)The process of preparing stock codes is tedious
(2) It requires a lot of memorizing
(3) It complicates the storage function further
(4) It may lead to a proliferation of jargon making it difficult for outsiders to
understand.

Characteristics of codes:
 Uniqueness: Each item should have one code

 Distinctiveness: To avoid errors, codes representing different items should be

distinctive.

 Clarity: Code should be entirely Alphabetical or Numerical

 Brevity: Codes should be brief but consistent with the requirement

 Expandable: codes should be able to cope with new additional items

 Unambiguous: Codes with similar letters should be avoided

 Significant: The code should signify something about the coded item

Types of codes:
(1) Numeric e.g. 05/09/2009

(2) Alphanumeric e.g. PE/0721

(3) Alphabetical e.g. M/N/Z

Methods of coding materials:

(1) By nature of item: This is coding of items according to their inherent
characteristics. Similar items into a series of main groups then each group is
further subdivided into sub groups or sections

(2) By the end use of the item: This is coding of items according to or to
correspond with the purposes for which the items will eventually be used.

(3) By the location of the item: This is the coding of materials on the basis of the
location within the store where the materials are to be found e.g. the gangways,
shelves, pallets etc.

4) By source of supply: Here materials are coded according to the supplier or

origin. If there are three suppliers the coding would be 1,2,3 or A, B,C. Coding of
materials may be in accordance to local or international sources

5) By the customer who will buy the end item: here materials are coded according
to the final consumer who will eventually buy the end product e.g. individual
consumer, industrial consumer, institutional consumers or resell government
bodies.
Organization of Stores Vocabulary
When a coding operation is complete, the list of code numbers,
description size etc are published in a document known as stores vocabulary. This
is an encyclopedia book containing details of stores items. There are two types of
stores vocabularies i.e. hard and soft vocabularies. Hard vocabulary is recorded in
books. It is original and requires manual access of information. Soft vocabulary on
the other hand is recorded in computer system and in other integral devices of
computers like Flash disc, CDR, memory cards etc. The information can only be
accessed by checking its content through a computer system. In some
organizations the information is available in the company’s intranet.

How to organize stores vocabulary:

The following stages can be used to organize stores vocabulary:
(1) Establish a catalogue library

(2) Inspect the present systems for stock identification

(3) Consult other interested departments like production, sales, purchasing, design
etc to get their views.

(4) Prepare originating sheets showing items proposed by each department

(5) Compiling the vocabulary after removing the unnecessary items, reducing
variety of materials etc.

(6) Distribute the vocabulary copies to the people (workforce) who need them.

(7) Amendments: Amendments are published at least quarterly in accordance with

the original distribution list.

Treatment of items not in the vocabulary:

Sometimes it may not be advisable to include every stock item in the vocabulary.
These items are described as NIVs (Not in the vocabulary). The NIVs include:
 Machine spares rarely required: these items should be kept out of the stores
vocabulary since they are only purchased when a need arises. They are described
as ONIS (Only when needed items).
 Items of non-repetitive nature: These are items which are needed at certain
prescribed intervals e.g. 1-5 years, 2-3 years etc.

Stock description:
This is the use of words to explain or identify a stock item. It may be simple or
complex depending on the item in question. Some descriptions are long and
complicated and may end up confusing stores staff. This reason makes the stores
personnel to prefer coding of the stock. Nevertheless description of stock eases
identification of stocks when it comes to the issuance of the goods to the user
departments. Also good description of stock enables the stores personnel to send
the right information to the purchasing function pertaining goods to be ordered.

STOCK LOCATION

Definition

This is the allocation of items of stock to different locations within the store. It
should be efficient to allow sufficient flow of items and easier accessibility.

Purpose of Stock Location

The main aim of stock location is to help in locating the products properly within a
warehouse. Store location consists of various systems for locating goods. These
systems depend upon the type of items to be stored, type of storage facilities
required for the item, and order size.

Warehousing Location Systems

Warehouse location: this is the site required to locate a warehouse to efficiently

meet the clients and customers delivery requirements.

Warehouse location systems: these are methods applied in arranging goods inside
the warehouse to ensure smooth and sufficient flow of materials in the warehouse.

Factor to consider when choosing a warehouse location

 Within close proximity of good communication network.

 Served with good entrance and exit route to the main road.
  Clear approach to the main road.

 On higher lands with good drainage system.

 Located close by and in the general area of the factory/industry location.

 Can be closer to rails heads/ sea ports or communication centers.

 Good radio/ wireless/telephone/cell phone communication coverage

available.

 Close to electricity and water provisions.

 Secured and hygienic location.

 Good provision for fire control.

 Suitable provision for rest and refit, food for warehouse staffs.

 Nature and characteristics of the products.

In order to be able to locate goods in a storehouse a certain system is needed to

allow fast retrieval of the goods.

Factors Considered in Selecting Stock Location Method

1. Accessibility of stock

A method selected would not be effective if the storekeeper and other store staff
cannot access the items required easily. The method selected should enhance easy
storage and retrieval of goods without time wastage or confusion being created.

2. Security

Prevention and detection of malpractices should be enhanced to ensure that there is

adequate protection of stock items in a warehouse. The method of stock location
chosen should not promote insecurity, theft and/or pilferage.

3. Space or size of the warehouse

The size or space provided in a warehouse plays a significant role in determining
what stock location method is to be used. A large warehouse may allow a stock
location method such as zoning to allow adequate usage of space.

4. Quantity of stock

If the quantity of materials is large, a stock location method such as random may
not be applicable. Other methods that may be applied are zoned and fixed may be
the most appropriate. This is to ensure that all materials are located and can be
accessed easily.

5. Skills/Expertise of the store staff

The staff of a warehouse may possess certain skills that limit their decision of a
stock location method. A method such as fixed and zoned may require a certain
skill set to determine where each item is to be located based on various factors
such as turn-over rate and nature of the item. If a worker does not possess the
necessary skills, they might opt for a method such as random.

6. Nature of stock

Items in a warehouse possess different physical and chemical characteristics.

Based on the type of materials being held in a warehouse, the storekeeper may
decide to group the materials and arrange them based on the different stock
location methods available.

There are three methods of stock location systems. Fixed location, random location
and zoned location systems.

 ZONED LOCATION.

In this system, groups of goods are allocated to particular areas or zones and in
those zones the location is either fixed or random. The storage area may be divided
in three zones such as bulk storage area, reserve stock area and picking stock area.

Main idea of this is to maximize use of space available. In bulk storage area, racks
may be 21m high while in picking area where goods may be picked manually,
height of racks may be 2m.maximum accessibility has to be allowed in the picking
area.
In a large warehouse, storage area is divided so that fast movers will be in front
zone close to the issuing and receiving bay to reduce time taken in receiving and
issuing them. Medium slow movers are in the center and slow movers at the back.

Other method of zoning is particular product zones where groups of similar bars
are stored together e.g. storage of steel bars.

 FIXED LOCATION.

In this method, a specific place is assigned to each item in store. In order to have
maximum benefits from this method; the following should be taken into
consideration.

Most frequently issued items should be kept nearest the issue point e.g. in a tool
store the most popular tools which are received and issued all the time should be
kept in bins under the issuing counter.

Materials issued together could be stored together. This cuts down walking time,
speeds up issuing and reduces queuing of users who need to be served.

Keep items which are similar to each other since deliveries of several similar items
are often made at the same time. Time is saved in putting goods away if like things
are kept adjacent.

Items are stored in issuing batches where possible. This is the principle of the unit
load. Location is changed when demand changes.

Advantages in fixed location

 The storekeeper becomes familiar with location of his items in the

warehouse and the general layout of the warehouse.

 Time is saved in locating and issuing items since they are kept in a fixed
location.

 Stocktaking exercise is made easier.

 Detection of malpractices within members of staff is also made easier.

Disadvantages
  There is no adequate utilization of storage space since space for an item
which is out of stock will be left vacant while waiting for stock
replenishment even when some items are out of space.

 RANDOM LOCATION/FLOATING INVENTORY LOCATION

SYSTEM

In random location materials are stored where there is space available. The
storekeeper relies on memory in locating items and when his memory fails he
makes a search. In-order to help in location of items, he may need to update the
location index whenever there is a change in location. This method is most suitable
in small stores and in organizations where there is general space shortage.

Advantage of random location

There is maximum use of storage space since every space is utilized irrespective of
what items were located in that space earlier.

Disadvantages of random location

 Storekeepers become unfamiliar to whereabouts of some items in the

storehouse especially if there is a lot of shifting and therefore need for
constant reference to location index which requires update whenever there is
change of location.

 Stocktaking is made difficult because of ever changing location of items and

fact that one item may be placed in more than one location in the storehouse.

 Delays are experienced in issuing materials because of time needed for

searching for items in the storehouse.

 Pilferage is encouraged as items can be placed in different locations in a way

of hiding them by dishonest staff to remove them from the storehouse
secretly.

NUMBERING OF LOCATIONS

To help personnel working in the warehouses remember locations of goods, a

systematic numbering is done. The storehouse area is divided into sections each of
which is given a letter or number. Each stock of storage fixtures in a section is also
lettered or numbered commencing from one end. Each bay of shelving or racking
forming a stock is similarly identified; finally each individual bin opening will
have a number.

e.g. A.24.3.17 could mean a particular item is found in section A stock number 24
bay number 3 and bin number 17.this information is stored in a location index
which is a list in vocabulary number order of all items held in their location. The
location index is updated when re-arrangement of items in the warehouse is done.

Features of a Good Stock Location Method

1. Inventory monitoring/management

An ideal stock location method will enable the store staff to monitor the optimised
inventory levels. This will ensure timely replenishments and elimination of surplus
and deficits in stock.

2. Customisation/flexible

An ideal stock location method should be customisable so as to fit all the specific
needs of an organization and the changes arising.

3. Maximum use of available space

The space within a warehouse allocated for material storage should be utilized to
the maximum. An ideal method of stock location should ensure that materials are
allocated appropriately and there is adequate use of space available.

4. Ease of stock accessibility

The main purpose of stock location methods is to enable easier access of materials
within a warehouse. Store staff should not struggle to access materials thereby
reducing time spent during physical search of the item and eliminating confusion.

5. Detection of malpractices

Materials in a warehouse should be kept safe from theft and pilferage of materials.
Thereby, an ideal stock location method should be one that does not expose
materials to malpractices by store staff and/or other employees in an organization.
Stores Location Index

Definition

Index- This is a list of words or phrases (headings) and associated pointers

(locators) to where useful material relating to that heading can be found in a certain
location e.g. a warehouse.

Stores Location Index- This is a list of names of stock within the warehouse and
associated locators or pointers to where the different items of stock can be found
within the warehouse.

Purpose

The main purpose of a stores location index is to aid in the locating items

Others include:

 Keeping a record of items that have been ordered, received, put away,
picked and shipped to enable proper management of inventory
 Enable the fulfilment of orders in a timely manner
 Save on time spent physically looking for inventory
 Increasing inventory turnover

Details Entered

 The names/nouns of the different items of stock within the store

 The name of the warehouse used to store the item
 Stock levels for the item at that warehouse: re-order, minimum and
maximum
 Bins- these allow you to specify a place in a warehouse where stock is stored
such as a shelf or aisle (Bin- a capacious receptacle for storing a specified
substance)
 STORES LAYOUT

A store layout is the design or arrangement in which a store's interior is set up.
Store layouts are well thought out to provide the best exposure possible. They are
designed to create an attractive image for consumers.
Methods of stores layout to optimize the use of space and minimize picking
costs:
There are five objectives of a good layout. These are:
 Straight-line flow of activity through the storage areas with minimum
backtracking
 Minimum handling and transportation of materials
 Minimum travel and waste motion for personnel
 Efficient use of space
 Provision for flexibility and expansion of layout

The main criteria used in laying out most stores are size, shape and type of
material to be stored.
Methods of stores layout
1) Inverted T warehouse flow: In regard to this layout:
 Goods in and goods out activities are on the same side of the building
 Shape allows the use of high, medium and low usage areas to minimise
materials handling by locating high and low usage areas respectively nearest to
and furthest from the goods received and goods outwards areas, thus
minimising materials handling for high usage items

Advantages
 Better utilisation of receiving and issue areas and the associated mechanical
handling equipment
 The total area required is less than where there are separate loading and
unloading areas
 Facility to extend the building (subject to site constraints) on one or more of
three sides
 Unified bay operations provide for better security control and easier
surveillance
The main disadvantage is that the centre aisle may become congested in high
throughput situations
2) Cross flow warehouse flow: The flow in this type of layout is a one way
system with an ‘in-feed’ aisle and a separate ‘out-flow’ from the other end of
the racks. Front entry and dispatches uses a common yard area and the layout
retains the benefits from the integration of bulk and picking stocks, but if bulk
stocks are a large proportion of total stock this may not be practical.
3) Corner warehouse flow: In the corner warehouse flow, inward and outward
flows are on the adjacent but different sides of the building. This layout helps to
reduce congestion of aisles in times of high throughput. The disadvantages are
that expansion is possible only on the two sides without doors. As the activities
in the yard and within the store are not visible from a single vantage point, there
are potential problems in security and surveillance.

4) Through flow warehouse (I-shaped and L-shaped layouts): This layout

happens when separate loading bay facilities for outbound and inbound
shipping are provided. In this layout goods inwards and outwards are on the
opposite sides of the building. All items must therefore travel the full length of
the store. Products flow in at receiving, move into storage, picking area and
then the marshalling and dispatch area in a straight line. The layout also
requires separate goods in and dispatch management with dual yard access and
doubles the internal bay areas. Items with a higher through put level are located
at the centre of the warehouse because the total distance travelled would be
shorter. The layout is useful where the goods in and out vehicle requirement is
different, such as in their platform height or where the nature of the unit load
warrants the separation of the two facilities. Disadvantages include the
limitation of future extensions of the building, the need to travel the full length
of the warehouse, even for goods that have a higher through put level. It is also
harder to control and less flexible.

When is it better to adopt a 'Through' flow?

 When there is a risk of interference or confusion between goods in and

goods out
 When goods inwards vehicles and dispatch vehicles are very different; for
example differences in platform height or nature of unit load
  When a warehouse is connected to a production plan

5) U-Flow Layout Design

A 'U' flow occurs when the goods receipt and dispatch functions are located at the
same end of a warehouse building. Products flow in at receiving, move in to
storage in the back of the warehouse, and then to shipping, which is located at the
adjacent to receiving on the same side of the building. Items with higher
throughput level are located closer to the loading bays.
Advantages of 'U' Flow

 Excellent utilization of dock resources because the receiving and shipping

processes can share dock doors
 Facilitating cross-docking because the receiving and shipping docks are
adjacent to one another and may be co-mingled
 Excellent lift truck utilization because put away and retrieval trips are easily
combined and because the storage locations closest to the receiving and
shipping docks are natural locations to house fast moving items
 Yields excellent security because there is a single side of the building used
for entry and exit

Analysing requirement with regard to storage facilities

The management of storage facilities is an essential task of the stores department.
For efficiency of operations a storage facility requires the following:
 Space: should be enough to accommodate large quantities of inventory
 Equipment: should have adequate storage equipment
 Handling: Handling equipment should be adequate and appropriate
 Power: There should be adequate and continuous source of power to facilitate
smooth operations.
 Sanitation: There should be adequate sanitation for proper hygiene
 Ventilation: Store house should be properly ventilated
 Drainage: There should be proper drainage to prevent dampness and wetness
 Special facilities: Like cold storage, strong room etc.
 Floors: Carries the weight of the stock held and provides surface for operation
of wheeled vehicles. It must be strong with a smooth hard finish level for items.
 Receipt and discharge docks
 Lighting: Natural lights should be utilised as possible
 Fire risk: To prevent the occurrence of fire, construction with timber materials
or other inflammable components should be avoided.
 Ancillary services: They should not be overlooked and should be sited in
appropriate locations. They include boiler room, electricity sub-station, garage
fuel pump depot, first aid centre etc.

MATERIALS PRESERVATION

In any stores, there is a time lag between the receipt and actual use of the material.
When materials remain idle in the store these materials should be taken care of and
looked after properly. Otherwise these materials may get perished due to natural
chemical reactions such as rusting by moisture, melting by heat etc. and also get
affected by insects, rats etc. Different materials get deteriorate to different extent
during storage period based on the nature of items. So, the items need to be
preserved to maintain their useful life.

 Preservation is the set procedures taken to prevent, stop, or neutralize

deterioration of materials through the administration of : storage techniques
and housing of materials, environment; security/prevention of theft; handling
practices; as well as through user and staff education or training
 The action taken to maintain the useful life of the material to avoid its
deterioration and maintaining its useful life is known as material
preservation.
 The useful life is also referred to as shelf life.

Items need to be initially preserved to avoid deterioration during storage and

subsequently they need to be verified for any change in their conditions and
corrective actions need to be taken to restore the preservation. Usually,
preservation of materials is done in the following manner:

1. Shelf life items monitoring

Some items have foxed life beyond which they become useless. Such items are
known as shelf life items and the period within which they continue to have their
useful life is known as shelf life. Some of the items having shelf life are:
medicines, chemicals, rubber items, chemicals and reagents etc.

The shelf life information of these items need to be maintained on the bin card or
the tags on them so that they can be issued for use before they get deteriorated.

2. Proper storage

For maintaining the useful life of the items stored for future use, proper storage
needs to be ensured. Different materials have different storage requirement for
ensuring their useful life and to avoid damage or loss. The items which gets
affected by keeping in open weather needs to be stored in the closed storage
spaces. Also, there has to be a customized storage for hazardous materials.

Environmental Conditions

Humidity, temperature, light and air pollutants all contribute to the deterioration of
materials. The most important factors are that the place of storage should be:

 Weather-tight - make sure windows and doors fit securely

 Watertight – do not store materials near plumbing pipes, sinks or toilets
 Cool and dry – there should be good air circulation
 Free from damp
 Clean and free of dust
 Not subject to fluctuating changes in temperature – do not store materials
near sources of heat or where temperatures are likely to fluctuate
dramatically
 Not exposed to natural or strong light – materials should be stored out direct
sunlight unless during drying

Importance of Preserving Materials

 Adherence to proper preservation procedures prevents deterioration of

materials
 Cost saving since there is no need to re-purchase materials that would have
otherwise been damaged if proper material preservation was not done
 The shelf life of an item is prolonged and thus its usage is maintained for a
future time
  Maintenance of quality of materials once deterioration is prevented
 To ensure smooth production and distribution
 To enable businessmen to make speculative gain, that is, to wait and sell at a
higher price
 It helps in preserving goods that are produced throughout the year but
demanded during a particular season (crackers, umbrellas etc.)
 It helps in ensuring that agricultural items that are produced seasonally are
available throughout the year

In order to protect the materials from various adverse effects, the following actions
should be taken:

 Materials should be stocked free from the ground. No material should be

stocked on the floor as it may be affected by dampness, white ants etc.
 Materials should be stocked in appropriate places according to the nature of
the items e.g. Stationary, electrical, civil engineering, cleaning and similar
items should be stocked in the steel racks, medicine items may be stocked in
the fridge, perishable items may be stored in the cold rooms, explosive, film,
fuse items may be stored in the AC room, Attractive items may be stored in
shelves under lock and keys
 Daily and periodical cleaning should be carried out
 Daily and periodical verification should be carried out to ensure correctness
of stock
 Proper method of handling should be followed to avoid damages to the
materials
 Preservation materials should be applied to protect the items e.g. grease
 Hazardous materials should be segregated and stocked in a separate store
house away from other store houses
 Safety precautions should be taken and safety appliances should be
provided.
 Ventilation: Air must be allowed to circulate freely throughout the storage
area, the only exception being in respect of rubber articles where ventilation
has to be restricted to a slow natural circulation of air. Free aeration helps in
keeping the stored materials and the storerooms dry and prevents
 accumulation of heat within the stacks, bundles and stores. Thus us helps to
reduce the chance of spontaneous combustion of materials

Factors to be considered when selecting a material preservation method

 Cost to be incurred (financial constraints). It must be in line with budget

allocations to avoid overspending of financial resources
 The storage environment. In order for a material preservation method to be
useful, the storage environment should allow its use, that is, the warehouse
external and internal environment determines what sort of material
preservation method can be used
 Nature of material. The physical and chemical characteristics of an item
determine to a large extent the type of material preservation method to be
used. For example, perishable goods are preserved in a cold room.
 Use of the materials. a material preservation method should enhance the use
of an item and not hinder it or lead to destruction of it.
 Technological advancements. Traditional methods such as smoking and
salting are still useful but newer and more advanced methods have come up
and thus the need to move with the changes for effective material
preservation
 Storage resources available. The storage facilities available in an
organization, determine what method of preservation to be used. For
example, presence or absence of a cold room, refrigerator etc.

PACKAGING
This is where a good is wrapped with a special material or is placed in a
container or both to preserve the quality of the product and prevent damage.
Packaging can also be a strategic action that aims to reduce cost, to manage
inventory and to market itself. Packaging is an internal function of an organization
and it is done by the internal employees. Actions undertaken during packaging can
be such as:

i. Considering the size of containers:

The size used to pack the products can have varying sizes with varying
prices e.g. Elianto cooking fry can range from as big as 4 kilogrammes to as small
as 50 grams. These varying sizes offer a variety to a customer according to their
preferences i.e. some customers may prefer the smaller size goods than the bigger
size or vice-versa. The size dimensions affect prices of the product with the largest
product being the most expensive and the smallest product being the cheapest. The
price ranges are convenient to different classes of consumers and it attracts a large
number of consumers.

ii. Physical appearance:

The design on the packages is also important as it markets the product and
builds a product image. A good design of the packages should be able to attract
and grasp the attention of the potential buyer and sell itself to him/her.

iii. Lot sizes

Most important of all is the cost saving factor of packaging. An organization
packs its goods in large lot sizes by arranging them through stacking or piling
inside larger containers e.g. trucks and carton boxes. Larger lot sizes are able to be
transported at one go saving transit costs and transit time (which results to better
responsiveness).

Purpose of Packaging

Packaging needs to be done for several reasons. The main reasons are:

1. Safety

Packaging is used to keep products safe from external factors. It also prevents
human tampering. If you want to sell fruit juice, you just can’t just hand it over to
customers. It should be packaged in something, like a stand up pouch.

2. Brand visibility

It is used by organizations to create awareness of their brand and enable

remembrance of the brand by customers.

3. Bundling it together

Packaging allows an organization to bundle more than one item together for easier
sale, transportation and savings on cost.

4. Theft prevention
If an organization sells its products loose, there is a possibility that a retailer may
sell lower quantities to end-consumers while keeping some for themselves. Other
cases of theft may occur during transportation, loading and off-loading of goods.

5. Marketing

A common use of packaging is marketing. The packaging and label scan be used
by marketers to encourage potential buyers to purchase the product. Packaging is
also used for convenience and information transmission.

6. Provision of usage directions

Packages and labels communicate how to use, transport, recycle, or dispose of the
package or product.

Factors Considered in Selecting Packages for Materials

 Flexibility
 Stacking and transportation requirements
 Capability and processes
 Cost effective
 Sustainability
 Recyclability
 Legal requirements/compliance
 Resiliency/Durability
 Shelf life
 Labelling and coding
 Retailer/customer needs/user friendly/simplicity of use
 Brand representation
 Availability of the packaging materials
 Security of materials packaged within
 Environmental considerations (eco-friendly)
 Distribution method
 Portion control
 Convenience
Types of Packaging

Primary packaging- this is the term used to designate the layer of packaging in
immediate contact with the product; in other words, it is the first packaging layer in
which the product is contained. As such, primary packaging is constructed both
with the product itself and nay existing secondary layers of packaging in mind. The
properties of the product (form, dimensions and consistency) evidently dictate the
main priorities of primary packaging. Examples: unit dose packs, paperboard
packaging etc.

Secondary packaging- this is the packaging used to group various pre-packaged

products together. As secondary packaging is not in direct contact with the actual
product, its use and application usually differ distinctly from those of primary
packaging, although the purpose of both types may at times converge. Secondary
packaging has two main functions:

 Branding and display

 Logistics/transportation

Secondary packaging is intended to protect not only the product, but also the
primary packaging, which often is the packaging most visible to the consumer in
retail displays. The most common examples of secondary packaging include:
cardboard cartons, cardboard boxes, and cardboard/plastic crates.

Tertiary or transit packaging- used for bulk handling, warehouse storage and
transport shipping. The most common form is a palletized unit load that packs
tightly into containers.

Modern Packaging Methods

 Tinning
 Canning
 Paper-based packaging
 Wooden-based packaging

Types of Packages (Read further on their advantages and disadvantages)

 Drums
 Boxes/cartons
 Crates
 Sacks/bags
 Containers
 Wrappers