WAREHOUSING & INVENTORY

MANAGEMENT
ABHIJEET SINGH
 DEFINITION

• A simple definition: „A WH is a planned

space for the storage and handling of
goods and material.‟
• In general, WHs are focal points for product
and information flow between sources of supply
and beneficiaries.
• However, in humanitarian supply chains, WHs
vary greatly in terms of their role and their
characteristics.
 IS WH ONLY A STORAGE FACILITY ?

• A WH is typically viewed as a place to

store inventory.

• However, in many logistical system

designs, the role of the WH is more
properly viewed as a switching facility
as contrasted to a storage facility.

3
 GLOBAL WH
• Global WH concept has gained popularity over last
decade as stock pre-positioning becomes one of the
strategies for ensuring a timely response to
emergencies.
• Usually purpose built or purpose designed facilities.
• Operated by permanent staff that has been trained in
all the skills necessary to run an efficient facility or
utilising 3PL staff and facilities.
• For such operations, organisations use, information
systems that are computer based, with sophisticated
software to help in the planning and management of the
WH.
• The operating situation is relatively stable and
management attention is focused on the efficient and
cost effective running of the WH operation.
 NEED FOR WH

• Seasonal Production.
• Seasonal Demand.
• Large-scale Production.
• Quick Supply.
• Continuous Production
• Price Stabilization.
 ISSUES AFFECTING WH
• Market and product base stability
• Type of materials to be handled
• WH Facility: type, size and location.
• Inventory and Inventory Location
• Level of technology.
• The decision can be influenced by
– Company-wide strategic marketing or employment
policies,
– Financial considerations,
– Ability to achieve specified degree of throughput,
and
– Required customer service level.
 SEQUENCE OF WAREHOUSING DECISION

• Should WH be used?
• What forms of WH should be used (public or
private)?
• What should be the size and number of WH
utilized?
• Where should WH be located?
• What WH layout and design approach should be
followed?
 CHARACTERISTICS OF IDEAL WH
• Located at a convenient place near HWs, railway stations,
airports and seaports where goods can be loaded and unloaded
easily.
• Mechanical appliances for loading and unloading the goods to
reduce wastages in handling and also minimises handling
costs.
• Adequate space inside the building to keep the goods in proper
order.
• WH meant for preservation of perishable items like fruits,
vegetables, eggs and butter etc should have cold storage
facilities.
• Proper arrangement to protect the goods from sunlight, rain,
wind, dust, moisture and pests.
• Sufficient parking space inside the premises to facilitate easy
and quick loading and unloading of goods.
• Round the clock security arrangement to avoid theft.
• Building should be fitted with latest fire-fighting equipments to
avoid loss of goods due to fire.
 TYPES OF WH
• Private WH:
– Owned and managed by manufacturers or traders to
store, exclusively, their own stock of goods.
– Generally constructed by farmers near their fields, by
wholesalers and retailers near their business centres and
by manufacturers near their factories.
– Design and facilities provided are according to the nature
of products to be stored.
• Public WH:
– To store goods of the general public : any one can store
his goods on payment of rent.
– An individual, a partnership firm or a company may own
these WHs with a license from the government.
– Government also regulates functions and operations.
– Mostly used by manufacturers, wholesalers, exporters,
importers, government agencies, etc.
 TYPES OF WH
• Government WH :
– owned, managed and controlled by central or state
governments or public corporations or local authorities.
– Both government and private enterprise may use these.
– CWC of India, SWC and FCI are examples of agencies
maintaining government WH.
• Bonded WH:
– owned, managed and controlled by government as well as
private agencies. Private bonded WH require govt license.
– used to store imported goods for which import duty is yet to
be paid because importers not allowed to take away goods
from ports till duty is paid.
– generally owned by dock authorities and found near ports.
• Co-operative WH :
– Owned, managed and controlled by co-op societies.
– Provide facilities at most economical rates to members.
 COST OF STORAGE
• Fixed Costs :cost of space per square/cubic meter.
• Variable costs in the shape of cost per unit
processed or handled (Staff, MHE, ITES, Storage
Devices and Internal Transportation), added to fixed
costs.
• Interest on the capital used/ borrowed.
• Interest on the funds used to buy furniture/
fitment.
• Periodic repairs and maintenance
• Depreciation on building and equipment
• Insurance
• Max efficiency is achieved by processing a larger
number of units through the WH space: larger the
number of processed units, lesser the cost per unit.
 PUBLIC WH: ADVT & DISADVT
Advantages
• Less expensive and more efficient and effective.
• Usually strategically positioned and easily available.
• Adequately flexible to meet most space requirements, for
several plans are available to suit the requirements of
different users.
• Fixed costs of WH are distributed among many users.
Therefore, overall cost of WHPU works out to a lower
figure.
• Facilities can be given up as soon as necessary without
any additional liability on part of the user.
• Cost can be easily and exactly ascertained, and the user
pays only for the space and services he uses.
 PUBLIC WH: ADVT & DISADVT
Advantages (contd)
• Conservation of capital is more in public WH.
• It has got enough space to handle peak requirements.
• Reduced risk in their operations.
• Good economies of scale
• Give Tax advantages for end users.
• Exact storage and handling costs are known to end
users.
• It is insulated from labor disputes.
 PUBLIC WH : ADVT & DISADVT

Disadvantages
 Problems in communication due to system
incompatibility
 Specialized services may not always be available
whenever it is needed.
 Adequate space may not always be available for end
users.
 PRIVATE WH: ADVT & DISADVT
Advantages
• Better monitoring systems over handling and
storage of products by management :enhances
performance.
• Less likelihood of error as products handled by
company‟s own employees who can identify
different products.
• Cost of private WH comparatively less than
that of public WH, provided volume of goods to
be WH is sufficient.
• Best choice for some of the locations and
products handled because of the non-
availability of the public WH.
 PRIVATE WH: ADVT & DISADVT
Advantages (contd)
• Has opportunity to specially design its
facilities for automatic MHE where as public
WH may not have same.
• Enabling end user to increase their efficiency
by means of better design and structured
lay-out.
• Efficient use of human resources in WH
operation improves end users‟ overall
performance.
• Intangible benefits in form of cost reduction
in all WH operations.
 PRIVATE WH: ADVT & DISADVT

Disadvantages
• Lack of Corporate flexibility which increases
the complexity in the operation.
• Financial issues
• Low rate of return.
• Tax issues are complicated
 DECIDING ON TYPE OF WH
• Impact of fixed costs with reference to volume of goods
handled in public WH as well as in private WH.
• A strategic decision : type of WH which would suit its
corporate goal.
• Ascertain volume of goods to be handled as per business
plan to decide on type of WH.
• Desirable to use both private and public WH according to the
products and customer base.
• Private WH need not be owned: may be rented or leased with
or without MHE and other office equipments.
• In a public WH, WH man’s integrity is only security for owner;
– Of goods (protection of quality and quantity of the goods).
– He is responsible for goods only as a bailee.
– He is expected to take care of the goods as a man of normal
prudence.
– He is an ideal third party between the buyer and the seller,
between the borrower and the lender.
 DECIDING ON TYPE OF WH
• WH renders physical support to trading as WH receipt
for goods is accepted for sale or for borrowing.
• Goods stored in WH, can be used as collateral for
borrowing (goods in the godown of a trader or a private
WH of a firm are a part of the general assets of the trader
and not a separate entity).
• As borrower has no control over these goods, they cannot
be used, sold or even handled by the borrower without
the previous and written permission of the bank. Thus, a
perfect security for a loan.
• It is specifically insured beyond the reach of attachment
or legal process.
• Less risk of fire in a WH than in a factory: accordingly,
lower insurance rates for goods in a WH.
 LOCATION PROBLEM OF WH

• locating a WH system at the production facility

itself;
• locating a single central distribution WH system
away from the production plant
• Locating WH system at more than one place.
CONSIDERATIONS THAT DETERMINE LOCATION OF A WH

• Market service area and cost of distribution from the

WH to the market service area.
• Satisfaction of transport requirements and facilities
available in the form of rail, link roads and road
vehicles.
• Transportation rates prevailing in the area and
distribution costs per unit.
• Competition by rival companies and whether they have
WH in the same area.
• Availability of power, water, gas sewage disposal and
their cost.
• Labour supply and labour costs in the area.
• Industrial relations climate and labour productivity..
 CONSIDERATIONS THAT DETERMINE
LOCATION OF A WH (contd)
• Pricing arrangements and the level of service desired to
be rendered in terms of availability of the product to the
customer.
• Individual company requirements and constraints.
• Real estate, excise and government taxes assessed in
the area.
• Attitudes of local residents and govet towards
establishment of WH.
• Restrictions associated with WH.
• Potential for later expansion.
• Cost of land for the WH and other costs.
• Possibility of change in the use of the facility at a later
date if the company so desires, and lease or sale of the
land and buildings.
FACTORS AFFECTING THE NUMBER OF WHS

– Inventory costs
– Warehousing costs
– Transportation costs
– Cost of lost sales
– Maintenance of customer service levels
– Service small quantity buyers
 FUNCTIONS OF THE WH
• Receiving
• Inspection
• Repackaging
• Put away
• Storage
• Order-Order picking / selection
• Sortation
• Packing and shipping
• Cross-docking
• Replenishing
WH OPERATIONS – DECENTRALIZED & CENTRALIZED
Decentralized WH Operations
• Each WH considered as a separate entity. Thus each
WH will have a separate safety stock, there will be
orders from lower to upper WH and there will be in-
transit stocks.
• Consumption centres are located at different and
distant places. The transaction of goods is very high.
• Each WH will optimize inventory individually .
• Advantages;
– Prevents obsolescence and accumulation of surplus
materials,
– Offers service where it is needed.
• Disadvantages of having high running cost due to;
– Increased stock and personnel in each WH
– Due to handling of more information.
WH OPS – CENTRALIZED & DE-CENTRALIZED (Contd)
Centralized System of WH Operations;
• Order processing, storing of safety stocks and control stock
movements done centrally.
• A well established IS: an important prerequisite
• Advantages:
– Orders for multiple items on a single source can be
bunched together.
– Reduction in safety stock and thus total inventory cost is
also reduced (justifies the cost of information system)
• In centralized system, the central WH will;
– Do additional record keeping and decision making required in
a branch WH operation.
– Keep track of each branch‟s current stock of each item, rate of
sale at each branch, amount currently on order and in transit.
– Make decisions about when and how much to reorder from the
factory.
 STORAGE
Factors Influencing the Choice of a Storage System;
• The nature and characteristics of the goods and unit loads
held;
• The effective utilization of building volume-horizontal and
vertical:
• Good access to stock;
• Compatibility with IS requirements;
• Maintenance of stock condition and integrity;
• Personal safety;
• Overall system cost: Need to consider following in
addition to Storage Equipment;
– Space-land, building and building services;
– Fire protection;
– Handling equipment including maintenance;
– Staff;
– IMS
 STORAGE SYSTEMS CLASSIFICATION

• Bulk storage for solids, such as silos,

bunkers and stockpiles;
• Loose item storage, ex casting and
fabrications held loose on the floor;
• Pallet storage systems;
• Small item storage for individual items or
small unit loads;
• Non-standard unit loads such as long loads.
 INVENTORY
• An itemized catalog or list of tangible goods or property
or the intangible attributes or qualities.
• Value of materials and goods held by an organization;
– To support production (raw materials, sub
assemblies, WIP).
– For support activities (repair, maintenance,
consumables) or
– For sale or customer service (merchandise, finished
goods, spare parts).
• Inventory is often the largest item in the current
asset category, and must be accurately counted
and valued at the end of each accounting period to
determine a company‟s profit or loss.
 INVENTORY
• Organisations whose inventory items have a large unit
cost generally keep a day to day record of changes in inventory
(perpetual inventory method) to ensure accurate and on-going
control.
• Organisations with inventory items of small unit cost generally
update their inventory records at the end of an accounting period or
when financial statements are prepared (called periodic inventory
method) ).
• The value of an inventory depends on the valuation method used,
such as FIFO or LIFO method .
• "FIFO" stands for first-in, first-out, meaning that the oldest inventory items are
recorded as sold first
• "LIFO" stands for last-in, first-out, meaning that the most recently produced items
are recorded as sold first
• GAAP require that inventory should be valued on the basis of either
its cost price or its current market price, whichever is lower to
prevent overstating of assets and earnings due to sharp increase
in the inventory's value in inflationary periods.
 ROLE OF INVENTORY IN THE SUPPLY CHAIN
• Inventory exists in the entire supply chain because of
disparity between supply and demand.
• To increase the quantity of demand that can be satisfied by
having product ready and available when customer wants it.
• Optimize cost by exploiting economies of scale that may exist
during both production and distribution
• It is spread across entire supply chain from raw materials to
work in process to finished goods that supplier, manufactures,
distributors, and retailers hold.
• Inventory is a most important source of cost in any supply
chain and it has an enormous impact on responsiveness.
• Inventory also has a major impact on the material flow time
in a supply chain.
• Inventory has a significant impact on throughput (is the rate
at which sales occur). Little‟s law ;
I (inventory) = D (throughput) x T (flow time)
ROLE OF INVENTORY IN COMPETITIVE STRATEGY
• STRATAGEY INVENTORY TRADEOFF

Very high level Locating large Between the

of amounts of responsiven-
responsiveness inventory close ess ( more
to the customer inventories)
and
Low-cost Optimizing efficiency
producer inventory (fewer
through inventories)
centralized
stocking
 FUNCTIONS OF INVENTORY
• Minimize costs at acceptable inventory levels:
Small inventories result in low investments but
high ordering costs. Need to identify total
inventory carrying cost is bare minimum but
the level of inventory does not effect production
or customer base.
• Provide desired customer service level:
Inventories enable satisfying customer demand
and influences time & costs of service. Location
determines time while company policies
concerning EOQ, safety stocks, placement
procedures and time determine cost at which
customer is served.
 FUNCTIONS OF INVENTORY (contd)
• Couple successive operations or functions: A
demand by a customer triggers a chain reaction
of demand at each preceding level, i.e.
manufacturing and purchasing, whereas,
customer does not have time or patience to wait
for chain reaction. Instant response from and
cost of transport system becomes an issue.

• Stabilize production and the labor force,

thereby trying to reduce capital
requirements: Associated to manufacturing
process, though it influences the distribution
function as well.
 TYPES OF INVENTORY :
• RAW Material Inventory
• WIP Inventory
• Finished Goods Inventory
• MRO Inventory
 TYPES OF INVENTORY :
RAW MATERIAL INVENTORY
• From which the final product is made and does not
include material that supports production ( indirect
materials).
• Limited to the direct material (or) component that
actually becomes a part of the final product.
• Raw material of one industry is usually the finished
product of another, eg Steel & automobile.
• Some RM available seasonally, eg cotton, sugar cane
etc.
• Certain RM are governed by govt control and quota
system, like newsprint, coke etc.
 TYPES OF INVENTORY :
WORK-IN-PROCESS(WIP) INVENTORY
• Materials that have been transformed from RM stage by
some manufacturing process but are not final products.
• It is in-process until it is in the form that can leave the
plant. WIP can be found on the conveyors, trucks,
pallets, in and around the machines and in temporary
areas of storage waiting to be worked upon or
assembled.
• The reason for keeping In-Process inventory is;
– As liquid stock to cater for variety and shorten the
manufacturing cycle.
– As protective buffer against production breakdowns,
rejections etc.
– For economic lot production.
TYPES OF INVENTORY: FINISHED GOODS INVENTORY
• Stock that is ready for dispatch, eg, the bottles of
beverages that are in their cartons or cases and are ready
for shipment in a bottling plant are finished products.
• Acts as a buffer between the production and marketing
department.
• Higher the stock of finished goods, higher the cost of
inventory.
• If the stock level is low or nil then the customer service
shall be affected, damaging the goodwill of the company
and the product.
• Aims to reach market by constant supply through
distribution channels, which is controlled by marketing
department
• Reasons for holding this inventory are
– To protective buffer against sales rate changes.
– To absorb economic production lots.
– To stabilize the level of production and employment when
the sales is of a seasonal variety.
 TYPES OF INVENTORY:
MRO INVENTORIES

– Maintenance, repairs & operating

supplies which are consumed during
the production process and generally do
not form part of the product itself (e.g.
oils and lubricants, machinery and
plant spares, tools and fixtures, etc) are
referred to as MRO inventories
 INVENTORY COSTS

– Order or Procurement Cost

– Carrying or Holding Cost
– Storage Cost
– Out Of Stock Cost
– Over Stock Cost
 NEED TO HOLD INVENTORY
• To keep down productions costs: It is essential, however,
to balance these costs with the costs of holding stock.
• To accommodate variations in demand: To avoid
stockouts, therefore, some level of safety stock must be held.
• To take account of variable supply leads: Additional safety
stock to cover any delivery delays from suppliers.
• Buying costs: For this the EOQ is used.
• To take advantage of quantity discounts:
• To account for seasonal fluctuations
• To allow for price fluctuations/speculations
• To help the production and distribution operations run
more smoothly: To „decouple‟ the two different activities.
• To Provide Customers with immediate service
• To minimize production delays due to lack of spare parts.
• WIP: Facilities production process by providing semifinished
stocks between different processes.
 INVENTORY MANAGEMENT

• IM can be defined as sum total of those

related activities essential for the
procurement, storage, sale, disposal or
use of material.
• Utilities are created in goods when the
right product is available at the right
place, at the right time, at the right
quantity and is available to the right
customer.
 MECHANICS OF INVENTORY CONTROL

Consists of finding answers to three

questions
• Should this item be stocked at all?
• If so, when to order it?
• How much to order?
 SHOULD THIS ITEM BE STOCKED AT ALL?
LIKELY ERRORS

• Increased order and acquisition cost.

• Increased cost of transportation and packaging.
• Increased receiving and inspection cost.
• Increased risk of obsolescence and deterioration.
 WHEN TO ORDER?
The various levels of stocks;
• Deficiency Level: Indicates actual/potential out-of-stock situ .
Orders are placed through faster alternative source of supply.
• Exhaust bin level: Out of stock where storage bin is empty.
Emergency measures are taken to stock the bin.
• Buffer stock or MSL (Min) : Level at which any further
demands will necessitate withdrawals from the reserve or
buffer stock. Usually goods are ordered through normal
channels as soon as inventory reaches this level.
• Danger warning level: It is the point of no return. After this
point, a stock – out is inevitable if delay occurs.
• A computer program can readily include warning levels, and
manager should take one of following actions if delay envisaged:
– Find an alternative source of supply
– Request sales department to warn their customers of possible
delay in supplies.
– Put extra pressure on the supplier
 SELECTIVE INVENTORY CONTROL
Classif Stands for Criteria
ication
ABC Always Better Control Annual value of consumption
of the items concerned
HML High, Medium & Low Unit price of material
(opposite of ABC)
VED Vital, Essential, Desirable Critical nature of component
in respect to production
SDE Scare, Difficult to obtain Purchasing problem in
and easy to obtain regard to Availability.
GOLF Government, Ordinary, Source of material
Local, Foreign
FSN Fast moving, slow moving Issues from stores
or non moving
XYZ ---------------------- Inventory value of items
stored
 REORDER LEVEL
• It determines when a re supply shipment be initiated;
– If set too low, stock out position might occur ,
– If set too high over stock costs will be high and will lead to
increased investment and increased inventory carrying cost
• The basic reorder point formula is : R = D x T
Where
• R = Reorder point, D = Average daily demand
• T= Average Performance Cycle Length
• Eg: ABC industry has a demand rate of approx100 u/day
and its performance cycle of 20 days.
Then, R = 100 x 20= 2000 Units
• This approach is satisfactory as long as both D and T are
certain. But when there is an element of uncertainty in
any of these elements, then an inventory buffer is
necessary ie R = D x T + Safety Stock (SS)
 EOQ
• EOQ is the order quantity that minimizes
the total inventory holding costs and
ordering costs.
• It is one of the oldest classical production
scheduling models.
• The framework used to determine this order
quantity is also known as Wilson EOQ
Model, Wilson Formula or Andler Formula.
 EOQ: HOW MUCH TO ORDER?
• EOQ concept tries to balance inventory and ordering cost.
• Practically, the two costs have inverse relationship: If the
order quantity is larger, the order cost will be low but the
inventory carrying cost will be high.
• Point at which two costs are minimum is the optimum point.
• EOQ is the most useful techniques for determining “how much
to order”: aims at determining the right quantity so as to
ensure that the sum total of the two costs, i.e carrying cost
and procurement cost are minimum possible.
• Result of this effort is “purchase of right quantity‟ by Company.
• Mathematically, EOQ is represented by the equation:
EOQ = √2AP/UC
• Where
A = Annual Consumption in units.
P = Procurement cost per order.
C= Inventory carrying cost expressed as percentage (of value)
U = Unit price
GRAPHICAL REPRESENTATION
 EOQ CALCULATION
•Purchasing cost: Rs.150 Per order and inventory carrying
cost @ 30 per cent and unit value of one rupee, Working
this out we have,
Annual Consumption EOQ per No of orders Period
In U/Year per year
Order
1000 1000 1 1 Year
9000 3000 3 4 months
16000 4000 4 3 months
49000 7000 7 7.5 weeks
80000 9000 9 6 weeks
100000 10000 10 5.5 weeks
400000 20000 20 18 weeks

Q = √2AP/UC =√2 x 80,000 x 150/1x100/30 = 8944.3 (9000 APPROX)

Therefore, Requirement = 80,000/9000 = 9 orders per year.
 CONCEPT OF EOQ: IS IT FOOLPROOF?
Most helpful in establishing optimum inventory levels and
effectively conserving working capital invested in
inventories; yet in actual application EOQ faces objections;

– Often the inventory holding costs & ordering costs

cannot be identified accurately and sometimes cannot be
even identified properly.
– EOQ as calculated is often an inconvenient number.
– Use of EOQ usually leads to orders at random points in
time so that suppliers receive an irregular stream of
orders.
– EOQ applied without due regard to the possibility of falling
demand can lead to high value of obsolescent inventory.
– EOQ may not be applicable when the requirements
are irregular, or where there is impending price rise.

Therefore, every decision has to be taken in

consideration of variables like volume, transportation
rates, quantity discount, production lot size, capital
limitation and so on.
 METHODS OF CONTROLLING STOCK LEVELS

• Re-order level system

• Optimum Order Quantity
• Optimum Order interval
• Fixed Time System
• Imprest stock control
• Open access bin
• Two Bin Systems (Clerical method of
inventory control)
• JIT System
 REORDER LEVEL SYSTEM

• It represents a smooth average rate of consumption say100 U/M.

• Supplies are obtained once in a quarter, i.e 300 units.
• Min SS (buffer ) is fixed at 100 units or one month‟s consumption.
• The lead time, lets assume, in this case is 45 days.
• Thus, logically a company should re order the stock as soon as it
reaches the level where the stock in the bin is equal to 45 days in
other words, 250 units and is called reorder level.
• The maximum stock held by the company, according to this figure
will be 400 units or, reorder level quantity (300) plus SS (100).
 OPTIMUM ORDER QUANTITY
• Two major influences on the decision regarding quantity
to order: Ordering Cost & Inventory Carrying Cost (ICC).
• Because of the fixed nature of the ordering cost, it
keeps on decreasing per unit as order size increases.
But this increases the time of storage for the quantity, ie
it will increase the inventory conversion period (assuming
constant rate of depletion).
• Point X, at which point, inventory carrying cost per unit
purchased (IC) and order cost curve (S) intersect, is equal
to S/Q (order cost/ unit of quantity purchased).
• Average annual unit inventory cost at point X = ICQ/2,
Where
X = Average annual unit inventory cost.
I = ICC as a percentage of unit cost.
C= Price per unit.
Q= Order Quantity in units.
• The order cost (s) at point Q over the period of time
comparable to inventory carrying cost for one year will
be equal to; D x S/Q, Where
– D = Annual rate of inventory depletion.
– S= Order cost per order.
• Because two levels are equal at point X, we have,
ICQ/2 = DS/Q (ie (IC)Q2 =2(DS) Multiplying both sides by 2Q)
or Q2 = 2(DS) IC
or Q* (Optimum order quantity = √2 (DS)/IC
• A manufactured item ZB. Manufacturing cost of this
item is Rs.600, carrying cost in the stock is 25 %, ie
Rs150 and cost of placing an order is Rs 100. Assume
demand to be constant at 2/3 units per day, based on a
lot size day week. The order quantity will be;
– Q* =√2(DS) IC
– or =√2 (208) (100)/.25(600) Where DS = 2/3 x6 x 52
– = 16.7 Units (approx 17 Units)
 OPTIMUM ORDER INTERVAL
• The optimum length of the order interval, for any
item in an inventory is a function of demand rate,
ordering cost, and inventory holding cost for the unit.
• Mathematically it can be presented as,
Q* = √2DS/IC
N* = D/Q* (Where N* is optimum number of order
placements in a time).
• Therefore, Q* = D/N* (as also Q* = √2DS/IC)
• Thus N* = √DIC/2S
• Expanding the example,
• N* = √ 208 (.25) (600)/2(100) = 12.5 units.
• ie orders should be placed every 313/12.5 =25 business
days. (313 working days as six days a week)
FIXED TIME SYSTEM (CONSTANT CYCLE SYSTEM)
• In this case, instead of considering the
stock level we give more importance to time.
• Orders are placed at constant intervals
to time.
• The quantities orders can change.
• Eg: In re-order level figure, the axis is
showing the months in which the order was
placed.
• Let‟s say the orders were placed on the
fifteenth of February or May.
• Then it would be a fixed time system.
• The time of placement of order is 100 %
motivated by administrative convenience or
the EOQ.
 IMPREST STOCK CONTROL
• Simplest method of inventory control and involves
determination of a maximum level for the bin and
a periodical inspection of stock levels in the bin.
• Bin is then filled up as required immediately to
maximum level.
• Usually this system is restricted only to
classification “c” materials – materials with
relatively low value- whose lead time is minimum.
• Eg: Post Offices are supposed to maintain a certain
level of stamps for a fixed time period. After a week,
the stocks are checked and the remaining items are
ordered, so as to bring inventory back to maximum
levels again.
 OPEN ACCESS BINS
• It would be a waste of time and other resources if
the same accounting procedure was maintained
for nuts and bolts as is for tyres or engines in a
Car Company.
• In the factory, the optimum procedure would be
where the employees have accounted for access
to engines and tyres but a free work point
access to nuts and bolts.
• This is called open access bin.
• This is used in combination with the Imprest
system. The quantity replenished in this case is
simply equal to quantity used
 TWO BIN SYSTEMS
(CLERICAL METHOD OF INVENTORY CONTROL)
• In this system, two bins are maintained by
the companies which have different levels.
When the first bin is exhausted, it indicated
the time for replenishment. The second bin
is like a reserve stock.
• The concept is similar to the petrol needle of
a car. When the needle reaches the red
segment of the gauge, the driver knows that
the car is operating on reserve stock and it is
time to replenish it.
 JIT SYSTEM
Features;
• Focuses on minimizing the holding costs of stock.
• Stocks are brought into the production process at
the time they are needed
• Attempts to operate production with minimal /
zero buffer stocks
• Production and purchasing are closely linked to
sales demand on a week to week basis.
• Continuous flow of raw materials into stock.
• When work in progress is completed, it goes
straight to the customer
 REQUIREMENTS FOR JIT SYSTEM
Flexibility
• Suppliers and internal workforce need to be able to
expand and contract output at short notice
• Need to be able to deliver supplies quickly and reliably.
High quality
• Raw materials must be of guaranteed quality
• Whole production process must focus on quality
• There are no/minimal buffer stocks should a batch of
raw materials from a particular supplier prove faulty, or
if they are damaged during the production process.
Close working relationship with suppliers
• Often geographically close
• Joint approach to ensuring quality
• Systems need to be able to share information (e.g. sales
data, purchasing requirements, delivery times).
 POTENTIAL BENEFITS OF JIT

• Lower levels of cash tied up in stocks (ie lower

Working capital)
• Reduction in stock holding costs
• Reduced manufacturing lead times
• Improved labour productivity
• Reduced scrap and warranty costs
• Price reductions on purchased materials
• Reduction in the time and cost of purchasing
/accounting.
 PITFALLS/ PROBLEMS WITH JIT
Not suitable for many industries / organizations
• Higher risk of stock outs E.g. critical medical supplies
Lots of potential problems for suppliers
• Break in supply causes immediate problem for supplier
to solve.
• May require new systems.
• Potential loss of reputation if supplier responsible for
stopping whole of customer‟s production.
Not something that can be done easily
• Requires careful planning.
• Cannot be done overnight – production needs to move
gradually towards minimal / zero buffer stocks.
• Often requires a substantial change in production
culture.
INDEPENDENT & DEPENDENT
DEMAND SYSTEM
(IDS & DDS)
 INDEP & DEPENDENT DEMAND SYSTEM (IDS & DDS)
• Independent demand is demand for a finished
product, such as a computer, a bicycle, or a pizza
normally based on confirmed Customer orders,
forecasts, estimates and past historical data.
• Dependent demand, is demand for component parts
or subassemblies, eg, the microchips in the computer,
the wheel on the bicycle, or the cheese on the pizza.
• Quantities for dependent demand are derived from
independent demand, which we call the “parent.”
• Eg:
– A company plans to produce 200 cars in a day; it would
need 800 wheels, 400 windshield wipers, and 200 braking
systems.
– Number of wheels, windshield wipers, braking systems,
and other component parts is dependent upon the quantity
of the independent demand item from which it is derived.
WHY DIFFERENTIATION IDS & DDS
• The inventory management systems and process
are different for both categories.
• Finished Goods inventories (Independent
demand) are managed with sales order process
and SCM processes and are based on sales
forecasts.
• Dependant demand for raw materials and
components to manufacture the finished goods is
managed through MRP or ERP using models such
as JIT, Kanban and other concepts.
• MRP as well as ERP planning depends upon the
sales forecast released for finished goods as the
starting point for further action.
 RELATIONSHIP : IDS & DDS)
•Item A is the independent demand item.
•All the other items are dependent demand items.
PARTIES WITHIN DDS: CUSTOMERS & DEALERS
Customers
• They are beginning and the end of material process flow.
• They as part of the supply chain select the products that
are going to enter the assembly line.
• Manufacturing industry allows product customization;
therefore they have the option to do small changes (only
permitted for finishing because the layout and structure is
standard) to the original product.
Dealers
• Intermediates between the Manufacturing factory and
the customers.
• Does not work directly with customers. All products that
enter the production line are already sold, therefore the
dealers are the ones who work with customers to
define specific characteristics and then transmit
this information to the Manufacturing factory.
 PARTIES WITHIN DDS : DRPD
Distribution Resource Planning (DRP) Department
• DRPD functions can be fulfilled by sales department
and is responsible for the logistic part of the process.
• They select the different dealers with whom the
factory is willing to work.
• Information flow between these two parties must be
efficient and a constant relationship between them
needs to be created.
• DRPD shares information on the range of products
offered by the factory with the dealer so the latter can
show them to the customers.
• DRPD receives the requirements from the dealers
and transmits them to the production department in
order to accomplish these demands.
 PARTIES WITHIN DDS : MPSD
Master Production Schedule (MPS) Department
• Production Deptt, is responsible for developing
the MPS.
• MPS department must consider the requirement
defined by the DRP department during the
schedule development and then define when
the product is going to be ready.
• MPS is shared with MRP Deptt in order for them
to estimate material requirements to support
production demand.
 PARTIES WITHIN DDS : MRPD
Material Requirement Planning (MRP) Department
• Purchasing department does this responsibilities.
• MRPD is responsible for selecting the different
suppliers with whom the factory is going to work, keep
track of the goods inside the factory, and order the
different materials to support the production schedule.
• It uses the master production schedule by transforming
it into a material need schedule.
• Material Need Schedule and Inventory Records are
used to develop the material purchasing schedule.
• Purchasing schedule defines different material
quantities and times when materials need to be ordered.
• Finally, material orders are sent to the proper supplier.
• The MRP department is formed by material handlers,
head receivers, and the purchasing manager.
 PARTIES WITHIN DDS : SUPPLIERS
Suppliers
• The suppliers are the ones who produce or
supply the different materials used by
Manufacturing factories, and send them to the
facility.
• The relationship between suppliers and the
MRPD must be strong in order to develop an
efficient material delivery and control system.
• Suppliers must be involved in the inventory
control system, and share the responsibility for
keeping track of the material levels at the
factories.
 COMPARISON :
DEPENDENT & INDEPENDENT DEMAND SYSTEM
DDS presents many advantages over IDS; These are ;
• DDS can be qualified as a pull system that uses
backward scheduling as the primary tool by relating
material requirement to the master production
schedule.
• DDS eliminates the need of historical data for
material requirement estimation. Instead the
material requirement is estimated directly from the
products that the facility is producing.
• DDS system provides more accurate values and
therefore it reduces wastage of material.
 COMPARISON : DEPENDENT & INDEPENDENT
DEMAND SYSTEM (contd)
• DDS replaces a weekly order process with a daily
ordering process, leading to lower levels of
inventory at the facility, therefore improving the use of
space at manufacturing factory.
• DDS eliminates unnecessary processes and
redundant information making the system leaner.
• DDS introduces inventory control and SCM
concepts to manufacturing industry opening a new
frontier for further application.
• DDS solves the drawbacks detected in current
practices by optimizing the use of information and
available resources, and by radically reducing the
process time of material requirement estimation.
 DEPENDENT DEMAND ORDER QUANTITIES
• Dependent Demand Order Quantities are computed
using material requirements planning (MRP).
• MRP considers not only the quantities of each of the
component parts needed, but also the lead times
needed to produce and receive the items.
• Eg, 20 units of A means that 20 units of B are needed,
as are 40 units of C; similarly, 40 units of D and 20
units of E are needed.
• However, the system must also take into account
differences in lead times, as receiving D may have a
different lead time than receiving E.
• This means that orders should be placed at different
times.
• This system can also be tied to costs of goods and can
link internal and external members of the supply chain.
WAREHOUSING MANAGEMENT SYSTEM
(WMS)
 WMS
• WMS is group of computer programs designed to help
a distributor perform WH operations more quickly and
consistently with fewer errors employing wireless
technology (RF or wireless network based).
• WMS ranges in complexity from very basic tools to
assist WH employees in performing daily operations to
highly sophisticated systems that replace workers.
• Two Key Elements;
– Use of Portable Computer Terminals (connected to host
computer and could be RF or a Palm Pilot like device
operating over a wireless network) to record work
performed in real time.
– Bar Codes are used to reduce amount of information to be
entered directly into terminal. Each terminal contains a
scanner, to scan labels that contain a bar coded
representation of bin, item & lot numbers, quantities,
and more whenever possible to eliminate keystrokes.
WMS CAN PROVIDE AN ORGANIZATION
WITH TANGIBLE BENEFITS
• Improving WH operations and increasing
efficiencies without adding headcount.
• Directed put-away and directed order
picking
• WH capacity management
• RF capability for data capture
• Load planning
• Cross docking
• Picking optimization
• ABC stratification
• Interleaving of work
 COMMON CAPABILITIES OF A WMS
Receiving Inventory
• Objective is to record the receipt of goods accurately.
• Operator records the receipt of goods against a pur/ Tfr
order, customer return authorization, or a kitting or
production work order in the simplest form of receiving
• Advanced capabilities include receiving against packing
list or advanced ship notice and receiving by container.

Kitting: Process in which individually separate but related items are grouped,
packaged, and supplied together as one unit. For example, in ordering a PC online, a
customer may select memory, drives, peripherals, and software from several
alternatives. The supplier then creates a customized kit that is assembled and
shipped as one unit.
COMMON CAPABILITIES OF A WMS (contd)
Inventory allocation
• Process of determining the bin from which inventory is
to be picked to satisfy a demand
• Operator performs inventory allocation by choosing bin
from which to pick inventory from a list of available
bins shown on a pick list
• WMS performs inventory allocation when an order is
released for picking
Picking inventory to satisfy sales, transfer, kitting, or
production/rework orders
• Basically operator uses a printed pick list and records
the results on the portable terminal.
• There are quite a variety of picking methods including
pick by order, wave picking, pick and pass, and batch
picking .
COMMON CAPABILITIES OF A WMS (contd)
Replenishment
• Process of refilling forward pick bins (sometimes called
dedicated or primary bins) for an item from reserve
inventory.

Shipping confirmation
• This function is often left in the enterprise software at
the most basic level
• Can be performed within the WMS or performed by
special shipping software that operates along with the
WMS or a combination of both.
COMMON CAPABILITIES OF A WMS (contd)
Cycle counting and physical inventory
• In the most basic form the operator counts inventory
and records the results using the portable terminal.
• More advanced systems determine the number of counts
that need to be performed each day, determine which
items to count each day, assign items to count to a
queue, and guide the operator around the warehouse in
an efficient manner to perform the counts

WH operations
• such as relocating inventory and recording inventory
gains and losses (adjustments) – an operator generally
performs these activities as required and records the
results using a portable terminal
 ADVANTAGES OF WMS
A WMS helps improve customer service and
resource utilization by eliminating errors. The
result of eliminating errors can be measured by;

– Inventory accuracy – greater than 99% at the

item and bin level.
– Zero returns due to warehouse errors
– Checking operations are eliminated
– Improved order shipment completion
– Shortened order lead time and improved on-time
delivery performance
 TANGIBLE COSTS
CATEGORY
Inventory reduction of up to 10% (one-
time savings)
Reduced inventory carrying costs up to
35% (industry average)
Reduced investment based on cost of
money @ 8%
Premium shipping costs
Personnel handling paper - potential
headcount reduction or resource
redeployment
Personnel handling order picking –
potential headcount reduction or resource
redeployment
Personnel handling shipping paperwork
and confirmation - potential headcount
reduction or resource redeployment
REASONS
Inventory visibility and accuracy
Lower inventory levels; higher space
utilization
Reduced inventory
Reduced shipping errors
WMS automates the management of
order and priorities, eliminating paper
RF based picking productivity increases
efficiencies
Eliminate preparation work for shipping
documents and ERP ship confirmations
 IS WMS REALLY NEEDED?
• Is the benefit great enough to justify the initial
and ongoing costs associated with WMS: big,
complex, data intensive, and applications?

• The Claims:
– WMS will reduce inventory!
– WMS will reduce labor costs!
– WMS will increase storage capacity!
– WMS will increase customer service!
– WMS will increase inventory accuracy!
 IS WMS REALLY NEEDED: REALITY
• Expectations of inventory reduction and increased
storage capacity are less likely: increased accuracy and
efficiencies in receiving process may reduce level of safety
stock required, impact of this reduction will be negligible
in comparison to overall inventory levels.
• Lot sizing, lead times, and demand variability control
inventory levels: WMS not likely to have a significant
impact on any of these factors.
• WMS certainly provides tools for more organized storage
resulting in increased storage capacity, it shall be relative
to just how sloppy pre -WMS processes were.
• Determining factors to implement a WMS is associated
with the need to do something to service your customers
that your current system does not support (or does not
support well) such as FIFO, cross-docking, automated
pick replenishment, wave picking, lot tracking, yard
 PRINCIPLES AND PERFORMANCE
MEASURES OF
MATERIAL HANDLING SYSTEMS (MHS)
 PRINCIPLES AND PERFORMANCE MEASURES
OF MATERIAL HANDLING SYSTEMS
• A performance measure may be defined as a metric for
quantifying efficiency and/ or effectiveness.
• Effectiveness of a MHS describes to what extent the
system performs the required handling tasks.
• Efficiency describes how economically (in terms of
resource utilization) these tasks are performed.
• Thus, it is possible for an effective system to be
inefficient; it is also possible for an efficient system to
be ineffective.

• WCS: Warehouse control system

• SMT: Surface mount tech…
 DESIGN & OPERATION OF MHS
• MHS in any manufacturing setting plays an important part in
the performance of the entire manufacturing system.
• Research in the design of MHS has primarily studied system
performance as a function of:
– Guide path design or layout
– Type of flow path
– Number of lanes in each aisle,
– Location of pick-up/delivery points,
– Fleet size,
– Unit load size,
– Vehicle speed and
– Queue capacity at each workstation.
• Research in the operation of these systems has primarily
studied performance as a function of
– Vehicle dispatching rules and scheduling,
– Idle vehicle positioning,
– Vehicle routeing, and
– Zone definitions.
 CHARACTERISTICS OF EFFECTIVE
PERFORMANCE SYSTEMS
Performance measure selection is process of defining a set of
measures that possess certain characteristics, found in any
effective performance measurement system (PMS);
• Inclusiveness: PMS should measure all pertinent aspects of the
MHS. In this way, good performance of one particular component of
the system would not be possible without similar performance of
other system components.
• Universality: PMS should allow for comparison under a wide range
of operating conditions, ie if two competing MHS designs must be
compared, then PMS should allow for this comparison, even if
system characteristics differ significantly.
• Measurability: All data required by PMS should be readily
measurable. Furthermore, the process of measuring the performance
of MHS should occur with a minimum of measurement errors and at
a reasonable expense.
• Consistency: PMS Should be consistent with overall goals of org.
The value of performance measure should therefore provide
meaningful insights into overall MHS performance wrt org objectives.
 PRINCIPLES & PERFORMANCE MEASURES OF MHS:
VEHICLE TRAVEL DISTANCE (VTD OR TRAVEL TIME)
• VT is measured as actual path and not rectilinear/ Euclidean
distances.
• Total VTD consists of loaded and empty vehicle travel.
• Material flow can then be characterized as either: departmental
(within deptt) or intra-deptt (between deptts).
• Material flow within deptt is usually not modelled in MHS analysis.
• Measurement of VT may include loaded /empty vehicle travel, or
both.
• VTD is easily calculated when the flow volumes (trips required per
unit time) and distances between stations are known.
• VT time directly corresponds to vehicle distance when:
– The vehicle speed is constant or may be assumed to be constant,
– The acceleration and deceleration effects are negligible, and
– There are no delays due to blocking, queues or other congestion effects.
• A measure is also taken of vehicle travel using the ratio (RLE) of
empty versus loaded vehicle travel, ie RLE = TL/ TE, where;
TL total loaded travel time, & TE total empty travel time.
 PRINCIPLES & PERFORMANCE MEASURES OF MHS:
Vehicle Travel Proportions
• A vehicle may be in one of three states at any given time: viz
Travelling Loaded, Travelling Empty or Idle.
• Idle time spent in parking area is used as a performance
measure.
• Then, travel time percentages may be calculated as the
fraction of time that a device is travelling loaded, travelling
empty, and waiting in an idle state; ie, T =TL + TE + TI, where
– T total time, TI total idle time, TL/ TE total loaded/empty travel time
Vehicle Travel: Response Time
• Response time as performance measure, is the time from when
pick-up request is made until vehicle (starting from an idle and
empty condition) arrives at pick-up location) for a pick-up call.
• This measure differs from total empty vehicle transportation
time in that it consists of only empty vehicle travel when the
vehicle starts from an idle position and does not include empty
vehicle travel from a drop-off station to a pick-up station.
 PRINCIPLES & PERFORMANCE MEASURES OF MHS:
Vehicle utilization
• Vehicle utilization may be used to determine the vehicle fleet
size requirements for a system.
• Vehicle utilization may be based on:
– Total vehicle mission time (including loaded and/or empty
vehicle travel),
– The loaded vehicle time and
– The average of the time-averaged loads carried by all
vehicles in the system.
Note: when the vehicles are able to carry multiple loads, the utilization value may be larger than one.

Number of loads completed

• It is defined as the number of loads (or deliveries) completed
over a period of time by all of the material handling vehicles.
• It is considered as a performance measure.
• Some industry measure the time required for the material
handling system to deliver a specified set of loads.
 PRINCIPLES & PERFORMANCE MEASURES OF MHS:
Station Queues: Mean Load Waiting Times
• The mean load waiting time is defined as the mean time
loads wait in queues for material handling transportation.
• These queues are located either at processing stations or at
separate load transfer stations.
Station Queues: Mean Queue Lengths
• The mean queue length is the mean number of loads
waiting for a material handling vehicle over a specific length
of time.
• It is a means of examining the adequacy of the physical
space provided for the queue.
• Blocking occurs when a workstation‟s output queue (or
buffer) is full and the Workstation can no longer place
completed parts into this queue.
• Starvation occurs when a workstation‟s input queue is
empty.
 PRINCIPLES & PERFORMANCE MEASURES OF MHS:
MHS Cost
• MHS costs may be comprised of variable and fixed costs.
• Variable Costs:
– Generally the operating costs of MHS.
– Can include the cost of power, lubricants, and maintenance.
– May also include the routeing or travel expenses, which are
proportional to the distance travelled.
– may also be includ Costs associated with idle or waiting vehicles
• Fixed Costs: include such costs as the construction and
purchase of equipment and hardware.
• In addition to the use of total cost as a performance measure,
cost ratio (C) is also used as a performance measure which is
defined as: C= C in/ c out, Where
– C in moving cost of one unit load and one unit distance within a
department,
– C out moving cost of one unit load and one unit distance between
departments.
 PRINCIPLES & PERFORMANCE MEASURES OF MHS:
MHS Flexibility
• MHS flexibility is system‟s ability to reconfigure (to handle new
material flows) and the material flow capacity.
• Range and Response are defined as dimensions of flexibility.
• Range :how much the system can change.
• Response :how rapidly and cheaply system can change.
Congestion
• Prevents vehicles from travelling freely on a guide path resulting into
travel at reduced speeds/stoppage/blocking.
• Congestion levels may be measured by following quantities;
– Vehicle Blocking Time: Time where vehicles are unable to move due to
other vehicles
– Track Blocking Percentage: Blocking time (as a percentage) for track
segments due to vehicle interference.
– Track Utilization by averaging the utilization of all track segments and
then dividing by the number of AGVs. AGV- Automated Guided Vehicles
– Vehicle Waiting Time at Intersections .
Congestion Index : It(Ic) is defined as: Ic =TA/TS; where,
TA actual travel time, TS shortest travel time if there were no congestion.
THE FUNDAMENTALS OF VARIOUS TYPES
OF
MATERIAL HANDLING EQUIPMENT (MHE)

MHE is mechanical equipment used for the movement,

storage, control and protection of materials, goods and
products throughout the process of manufacturing,
distribution, consumption and disposal.
MATERIAL HANDLING SYSTEMS/EQUIPMENT (MHS/ MHE)
• MHS defined “the set of all pieces of equipment that
make possible the physical movement within the
distribution chain – including the production chain
and WH– of raw material, work in progress and
finished goods”.
• MH refers to the necessary tasks to be performed in
order to move a load around the factory floor as well
as to store and freight it. MH takes place one way or
another along all the links of supply chain including
production, distribution, and storage and retail
functions.
• MHE eases manual handling chores and enhances
operational efficiency.
• MHE can be capital intensive, and act of movement
can be labour intensive.
 TYPES OF MHE : TPT EQPT
Transport Equipment
• Used to move material from one location to another (eg
between workplaces, between a loading dock and a storage
area, etc
• Major subcategories : conveyors, cranes, and industrial
trucks. Difference between use of are wrt their path and area
of operation.
• Conveyors: used when material is to be moved frequently
between specific points over a fixed path and when there is a
sufficient flow volume to justify the fixed conveyor
investment.
• Cranes: used to transport loads over variable (horizontal and
vertical) paths within a restricted area and when there is
insufficient (or intermittent) flow volume such that the use of
a conveyor cannot be justified.
• Industrial trucks: Industrial trucks are trucks that are not
licensed to travel on public roads.
 TYPES OF MHE: POSITIONING EQPT

Positioning equipment
• Eg; lift/tilt/turn tables, hoists, balancers,
manipulators, and industrial robots.
• Used to handle material at a single location.
• It can be used at a workplace to feed, orient,
load/unload, or otherwise manipulate materials so
that are in the correct position for subsequent
handling, machining, transport, or storage.
• Use of positioning equipment vis-a–vis manual
handling, can raise the productivity of each worker.
 Hoists Balancers
Lift/tilt/turn tables

Manipulators
 TYPES OF MHE: UNIT LOAD FMN EQPT
Unit load formation equipment
• Used to restrict materials to maintain their integrity when
handled a single load during transport and storage.
• If materials are self-restraining (e.g., a single part or
interlocking parts), then they can be formed into a unit
load with no equipment; eg pallets, skids, tote pans,
bins/baskets, cartons, bags, and crates.
• A Pallet is a platform made of wood, paper, plastic,
rubber, or metal with enough clearance beneath its top
surface to enable the insertion of forks for subsequent
lifting purposes.
• A Slipsheet is a thick piece of paper, corrugated fiber, or
plastic upon which a load is placed and has tabs that can
be grabbed by special push/pull lift truck attachments.
They are used in place of a pallet to reduce weight and
volume, but loading/unloading is slower.
Pallet Skid

Tote Pans Slipsheet

 TYPES OF MHE: STORAGE EQPT
Storage Equipment
• Used for holding or buffering materials over a period of
time.
• Design of each type of storage equipment, along with
its use in WH design, represents a trade-off between
minimizing handling costs, by making material easily
accessible, and maximizing the utilization of space (or
cube).
• An AS/RS is an integrated computer-controlled
storage system that combines storage medium,
transport mechanism, and controls with various levels
of automation for fast and accurate random storage of
products and materials.
TYPES OF POWERED TRUCKS USED IN WH
AND STOCK YARD OPERATIONS
• Powered pallet trucks;
• Counterbalanced fork-lift trucks;
• Reach trucks including double reach and four –directional reach
variants;
• Stacker trucks;
• High rack stacker trucks-very narrow aisle;
• Side loaders;
• Order picking trucks;
• Tugs and tractors;
• Straddle carriers-container handling
Non-powered Hand Trucks
• Made of Al/Mg, steel, and wood, they have diverse and specific
applications.
• Designed for specific MH functions.
• Al or Mg trucks carry 150-250 Kgs of material, while steel or
wooden trucks can carry approx 500- 1000 kgs respectively.
Non-powered HPT(hand pallet truck)
• Designed to carry unit loads on pallets from one location to another
in indoor settings.
• Since loads can be heavy, distances are generally short.
• They supplement motorized truck fleets and are extremely efficient
for transporting unit loads short distances when high lifting is not
required.
• Non powered HPT cannot be used to lift >4-5000 and cannot lift a
unit load to a height more than 8 inches.
• For HD(heavy duty) applications, steel wheels are required while
lighter duty applications require only nylon or PU(polyurethane)
construction.
• These trucks can range in weight from 100 to 200 Kgs.
 PALLET TRUCKS
• It is economical way for one
person to move heavy pallet loads
w/o the use of a FLT( Fork lift
truck- Slide 136 ).
• Pallet truck includes two
articulating steering wheels and
two front load rollers.
• Ergonomic design requires only 40
Kgs of pulling force when fully
loaded.
• Steering wheels include bearing
dust covers for added life.
• Nose wheels are located on the
front edge of each fork to assist in
clean pallet entrance & exit.
• Reinforced triple formed steel forks
provide twice the strength of
standard single-formed forks.
COUNTER SCALE PALLET TRUCK
 POWERED PALLET TRUCKS
• HPT( Hand Pallet Truck)
with capacities 2 Tonnes
(max), are most commonly
used for the horizontal
movement of pallets. It could
be vehicle towed.
• For frequent movements
and inclined movement
battery –powered trucks are
preferable in terms of
operator effort and safety,
and these can be pedestrian
– or rider- controlled.
 COUNTER BALANCED FORK-LIFT TRUCKS
• Counterbalanced FLT
carry the payload
forward of the front
wheels, so there is
always a turning
moment lending to tip
forward.
• To balance this, a
counter balance weight
is built into the rear of
the machine-hence the
name. These machines
capacity varies from
1000 to 45,000 kgs
with a lift height of up
to 6/7 Metres.
 REACH TRUCKS
• Reach trucks are designed to be
smaller and lighter than counter-
balanced trucks and to operate
in a smaller area.
• Its capacity varies from 1000kgs
to 3,500 kgs with a max fork-lift
up to about 11 Metres, achieved
by having a mast that can move
forward or back in channels in
the outrigger truck legs.
• Then picking up or setting down
a load, the truck is turned
through 90 deg to face the load
location; the mast reaches
forward, places or retrieves the
load, and is retracted back into
the area enclosed by the wheels.
 DOUBLE REACH TRUCKS
• A conventional reach truck
can only reach one pallet
deep into racking.
• For accessing double deep
racking a double reach truck
has to be used
• Double reach can also be
achieved on some lighter
trucks by the use of
telescopic forks.
• Double reach machines are
also used for side-loading
pallets on to road vehicles,
working only from one side of
vehicle.
 FOUR-DIRECTIONAL REACH TRUCKS
• On a conventional reach truck,
front wheels always face forward,
and steering is from the rear
wheels.
• 4D truck has an additional option
of being able to turn front wheels
through 90 deg and lock them in
this mode.
• This effectively converts truck into
a side loader and is especially
useful in stores and WHs where
stock range consists of long loads.
• For access to say cantilever
storage, very wide aisles would be
necessary if this option were not
available.
MULTI-ECHELON INVENTORY SYSTEMS
 ECHELON INVENTORY SYSTEMS
• Echelon Inventory: All inventories between a stage
and final customer.
• Echelon inventory at a retailer is just the inventory at
retailer or in the pipeline coming to retailer.
• Echelon inventory at a distributor, however, includes
inventory at distributor and all retailers served by
him/her.
• In a Multi-echelon setting, reorder points and order
up to levels at any stage should be based on echelon
inventory and not local inventory.
• Thus, a distributor should decide his safety inventory
levels based on the level of safety inventory carried by all
retailers supplied by him.
• The more safety inventory retailers carry the less safety
inventory the distributor will need to carry.
 ECHELON INVENTORY SYSTEMS (contd)
• As retailers decrease the level of safety inventory they
carry, the distributor will have to increase his or her
inventory to insure regular replenishment at the retailers.
• The level of safety inventory at all stages in a multi-
echelon supply chain should be related.
• In a multi-echelon supply chain a decision must be made
with regard to the level of safety inventory carried at
different stages.
• If inventory is very expensive to hold and customers
are willing to tolerate a delay, it is better to increase the
amount of safety inventory carried upstream, far from the
final customer, to exploit the benefits of aggregation.
• If inventory is inexpensive to hold and customers are
very time sensitive, it is better to carry more safety
inventory downstream, closer to the final customer.
MAJOR PITFALLS OF MANAGING INVENTORY
IN A MULTI-ECHELON NETWORK
• Failure to achieve true network inventory optimization,
because replenishment strategies are applied to one
echelon without regard to its impact on other echelons.
• Base upper-echelon replenishment decisions on
specious demand forecasts.
• Negative consequences of pitfalls;
– Network carries excess inventory in form of redundant SS.
– End customer service failures occur even when adequate
inventory exists in the network.
– Customer-facing locations experience undesirable stock outs,
while service between echelons is more than acceptable.
– External suppliers deliver unreliable performance, because
they have received unsatisfactory demand projections.
– Short-sighted internal allocation decisions are made for
products with limited availability.
AUTOMATED STORAGE & RETRIEVAL
SYSTEMS (AS/RS)
 AS/RS : GENERAL
• It consists of a variety of computer-controlled
systems for automatically placing and retrieving
loads from defined storage locations.
• They are typically used in applications where;
– There is a very high volume of loads being moved
into and out of storage;
– Storage density is important because of space
constraints;
– No value adding content is present in this
process;
– Accuracy is critical because of potential expensive
damages to the load.
• AS/RS can be used with standard loads as well as
nonstandard loads.
 WHAT IS AS/RS ?
• AS/RS are means to high density hands free
buffering of materials in distribution and
manufacturing environments.
• AS/RS is a complete system designed to transport,
stage/store, retrieve, and report on every item in
any industrial inventory with up-to-the minute
accuracy.
• These automated storage and mechanized systems
eliminate human intervention in performing
basic sets of operations that includes :
– Removal of an item from a storage location
automatically
– Transferring the above item to a specific processing
or interface point
– After receiving an item from a processing or interface
point, it is automatically stored at a predetermined
location.
OBJECTIVES FOR INSTALLING AN AUTOMATED
STORAGE SYSTEM IN A FACTORY
• Increasing the storage capacity
• Increasing the stock rotation
• Utilization of maximum floor space
• Recovering the space for manufacturing facilities
• Customer service to be improved
• Control over inventories to be improved
• Ensuring safety in storage function
• Increasing the labour productivity in storage
function
• Reducing labour cost in storage operation
• Reducing pilferage and improving security
 DEFINITION AS/RS
• AS/RS can be defined as a storage system under
which a defined degree of automation is to be
implemented to ensure precision, accuracy and
speed in performing storage and retrieval
operations.
• These automated storage and mechanized
systems eliminate human intervention in
performing basic sets of operations to include;
– Removal of an item from a storage location
automatically
– Transferring the above item to a specific processing
or interface point
– After receiving an item from a processing or
interface point, it is automatically stored at a
predetermined location.
GENERIC STRUCTURE OF AS /RS
 PRINCIPLE TYPES OF AS/RS
• Unit Load AS/RS: It is the generic AS/RS
– It is used to store and retrieve loads that are
palletized or stored in standard-sized
containers.
– The system is computer controlled.
– The S/R machines are automated and designed
to handle the unit load containers.
– Usually, a mechanical clamp mechanism on the
S/R machine handles the load.
– However, there are other mechanisms such as
magnet-based mechanism for handling sheet
metal.
– The loads are generally over 200 Kgs per unit.
 PRINCIPLE TYPES OF AS/RS (contd)
• Mini Load AS/RS :
– This system is designed to handle small
loads such as individual parts, tools, and
supplies that are contained in bins or
drawers in the storage system.
– This system is applicable where the
availability of space is limited.
– Also useful where the volume is too low for a
full-scale unit load system and too high for
a manual system.
– A mini load AS/RS is generally smaller than
a unit load AS/RS and is often enclosed for
security of items stored.
 PRINCIPLE TYPES OF AS/RS (contd)
• Deep-lane AS/RS :
– This is a high-density unit load storage system that
is appropriate for storing large quantities of stock.
– The items are stored in multi deep storage with up
to 10 items in a single rack, one load behind the
next.
– Each rack is designed for flow-through, with input
and output on the opposite side.
– Machine is used on the entry side of the rack for
input load and loads are retrieved from other side
by an S/R- type machine.
– The S/R machines are similar to unit load S/R
machine except that it has specialized functions
such as controlling rack-entry vehicles.
 PRINCIPLE TYPES OF AS/RS (contd)
• Man-on-board AS/RS :
– This system allows storage of items in less than
unit load quantities.
– Human operator rides on the carriage of the S/R
machine to pick up individual items from a bin or
drawer.
– The system permits individual items to be picked
directly at their storage locations.
– This provides an opportunity to increase system
throughput.
– The operator can select the items and place them in
a module.
– It is then carried by the S/R machine to the end of
the aisle or to a conveyor to reach its destination.
 PRINCIPLE TYPES OF AS/RS (contd)
• Automated Item Retrieval System :
– This system is designed for retrieval of individual
items or small product cartons.
– The items are stored in lanes rather than bins or
drawers.
– When an item is retrieved from the front by use of a
rear-mounted pusher bar, it is delivered to the
pickup station by pushing it from its lane and
dropping onto a conveyor.
– The supply of items in each lane is periodically
replenished and thus permitting first-in/first-out
inventory rotation.
– After moving itself to the correct lane, the picking
head activates
 ADVANTAGES
An effective AS/RS provides benefits for SCM;
• Helps companies cut expenses by minimizing the
amount of unnecessary parts and products in
storage, and improving organization of the
contents of a WH.
• Due to automated processes, it also allows for
more storage space due to high-density storage,
narrower aisles, etc.
• Reduces labor costs while lowering workforce
requirements and increasing safety.
• Modelling and managing the logical
representation of the physical storage facilities
(e.g. racking, etc) eg, if certain products are often
sold together or are more popular than others,
those products can be grouped together or placed
near the delivery area to speed up the process of
picking, packing and shipping to customers.
 ADVANTAGES (contd)
Enabling a seamless link to order processing
and logistics management in order to pick, pack,
and ship product out of the facility.
• Tracking where products are stocked, which
suppliers they come from, and the length of time
they are stored.
• By analyzing such data, companies can control
inventory levels and maximize the use of WH
space.
• Firms are better prepared for the demands and
supplies of the market, especially during special
circumstances such as a peak season on a
particular month.
• Through the reports generated by an AS/RS
system, firms are also able to gather important
data that may be put in a model for it to be
analyzed.
 BAR CODING TECHNOLOGY &
APPLICATIONS IN LOGISTICS INDUSTRY
 BAR CODE
• A Bar code does not change how a business
operates, but makes procedures faster and more
accurate, providing useful Mgt Info in a timely
manner.
• Bar code can be employed in virtually all orgs and
all professions to increase productivity, efficiency
and accuracy of specific business processes.
• A Bar code is a set of symbols used to represent
alpha-numeric information. Basically, instead of
seeing the number "1” or letter "A", one sees a series
of bars, both fat and thin, used to represent that
number.
• It's much quicker and much more accurate for a
mechanical device to decode a series of black
and white lines than it is to read human text.
 VARITIES OF Bar code
• Linear: A linear Bar code symbology consists of a single
row of dark lines and white spaces of varying but
specified width and height

• 2-Dimensional: 2-Dimensional symbology can be

configured into a stacked or matrix format. These are
special rectangular codes which „stack‟ information in a
manner allowing for more information storage in a
smaller amount of space.
• The amount of data that can be encoded: A one inch
2-D matrix, can encode thousands of characters of data,
whereas a comparable linear bar code would have to be
several feet long to hold the same amount of information.
 COMPONENTS OF BAR CODING
• Bar code systems come in different sizes and shapes.
• The complexity of system required is determined by the
application.
• A basic scanning system comprises of four components:
 COMPONENTS OF BAR CODING (contd)
• Component1:The Bar code Printer to print Bar code Labels.
• Component2-The Bar code Label to be attached to a box or an
asset for tracking. An item label can contain any combination of text,
graphic or bar code information.
• Component3-Scanning Equipment for Data Collection to
instantly and accurately read, capture and decipher the information
contained in the Bar code label. Scanners are much faster and more
reliable than humans. Thus, significantly reducing rate or likelihood
of error.
• Types:
– Contact scanners required physical contact to scan.
– non-contact scanners which can be several inches to feet away.
– Of these two types of scanners, there is also one other major
attribute; they are either decoded or non-decoded. Decoded
scanners have built in hardware decoders that interpret the
meaning of a Bar code before sending the data to the computer.
Undecoded scanners simply have light sources that capture the
encrypted data and sends them to a decoder of some sort.
 COMPONENTS OF BAR CODING (contd)
• Component4 – Capturing the Data to an External Database:
The final component to establishing a simple Bar coding system is
the database.
• To effectively use the codes created and scanned, A database is
required to relay and update information.
• Many Bar coding can be tied to item numbers , which can then, in
turn, be linked to information about the item, such as product
description, price, inventory quantity, acctg etc.
• Eg, let's say there is widget A, with a corresponding bar code that
has the value of 1234. When widget A is sold, the Bar coding is
scanned.
• This, in turn, causes a chain reaction that tells database that now
one less widget A in stock, that charge Rs 200 for widget A, that
this information be passed onto accounting etc. All of these
actions were caused by scanning the Bar coding representing
Widget A.
ADVTS OF Bar coding & AUTOMATIC DATA
COLLECTION
• Accuracy: By reducing the likelihood of human
errors from manual entry or miscommunication
from misread or mislabeled items.
• Ease-of-Use : Bar coding are easy-to-use provided
appropriate hardware & software aspects are in
place to maximize process of automatic data
collection as compared to accounting for all the
inventory by hand.
• Uniform Data Collection: Diverse compliance
standards and standardized Bar coding
symbologies ensure that Bar coding information is
captured and relayed in a fashion that is universally
understood and accepted.
ADVTS OF Bar coding& AUTOMATIC DATA
COLLECTION (contd)
• Timely Feedback: Bar coding promotes timely
feedback in that data is captured in real-time as
it occurs enabling decisions to be made from
current information.
• Improved Productivity: Bar coding improve
many activities that streamline workflows
throughout a business.
• Increased Profitability: Through increased
efficiencies .
 PRIMARY FUNCTIONS OF Bar coding
Tracking TECHNOLOGY
• Anything that can be identified with numbers &/or
letters can be tracked using Bar coding technology.
• Apart from greater accuracy, Bar coding help speed
process of recording where and what an item is, or what
service is provided.
• To track product through out supply chain/ workflow.
• Bar coding numbers also can be used to track a
particular item back to the manufacturer, eg , if a user
discovers a defective supply item, Bar coding can help
track the item back through materials management and
purchasing to the distributor and/or OEM(Original
equipment manufacturer) so the organisation can obtain
a refund, the same thing done manually, the amount of
time involved would make the process too cumbersome.
PRIMARY FUNCTIONS OF Bar coding TECHNOLOGY
(contd)
Inventory Management
• Maintaining accurate inventory: a very complex process,
requires knowing;
– what is,
– how much of it,
– who has it,
– where it is,
– how much it is worth, and
– when to reorder it.
• Bar coding helps manage these inventories wherever
they are located, so that the right materials are available
when and where you need them.
• Using a Bar coding also can help monitor usage
patterns throughout supply chain.
PRIMARY FUNCTIONS OF Bar coding TECHNOLOGY
(contd)
Validation
• The validating function of Bar coding is an
effective method of ensuring quality.
• Validation assures that an action has taken
place or that the item required is on hand.
• The ability to validate an action by a Bar coding
scan helps reduce errors and waste, provides
check on productivity, and helps construct the
necessary documentation.
RADIO FREQUENCY IDENTIFICATION
(RFID)
TECHNOLOGY & APPLICATIONS IN
LOGISTICS INDUSTRY

RFID is the wireless use of EM Fields to

transfer data, for the purposes of
automatically identifying and tracking tags
attached to objects
THE ARCHITECTURE OF RFID
 THE ARCHITECTURE OF RFID
1. A passive RFID tag,
• which, when exposed to the EMW of the reader,
broadcasts its Electronic Product Code (EPC) info.
• Tags are attached to all objects to be identified in an
RFID system.
• A tag is typically composed of an antenna or coupling
element, and integrated circuitry.
• Often tags carry no on-board power source and must
passively harvest all energy from an RF signal.
• There are many types of tags that offer different
functionalities, have different power sources, or operate
at different radio frequencies. Each of these variables
helps determine which applications a particular tag
may be appropriate for and what the costs of a tag may
be.
 THE ARCHITECTURE OF RFID (contd)
2. An RFID Reader;
• RFID readers communicate with tags through an RF
channel to obtain identifying information.
• In environments with many tags, a reader may have to
perform an anti-collision protocol to ensure that
communication conflicts to not occur.
• Anti-collision protocols permit readers to rapidly
communicate with many tags in serial order.
• Readers often power what are called passive tags
through their RF communication channel.
• These types of tags carry no on-board power and rely
solely on a reader to operate. Since
• these tags are so limited, may subsequently rely on a
reader to perform computation as well.
 THE ARCHITECTURE OF RFID (contd)
3.Databases
• RFID databases associate tag-identifying data
with arbitrary records.
• These records may contain product information,
tracking logs, sales data, or expiration dates.
• Independent databases may be built throughout
a supply chain by unrelated users, or may be
integrated in a centralized or federated database
system.
• Databases are assumed to have a secure
connection to readers.
.
 THE ARCHITECTURE OF RFID (contd)
4.Power Sources
• Tags may obtain their power in several different ways.
• Power source is an essential property of a tag-potential read
range, lifetime, cost, and what kind of functionalities it may
offer depends on it.
• Power source will also be important in determining how a tag
may be oriented and what physical forms it may take.
• There are three main classes of tag power sources: active,
semi-passive, and passive.
• Active tags;
– Have their own source of power, such as a battery, and may
initiate communication to a reader or other active tags.
– Active tags typically have a much longer operating range than
passive-tags.
– Large asset and livestock tracking applications often use active
tags, since the items they are attached to (e.G. Railcars, shipping
or cattle) are high in value and have physical space for a bulkier,
rugged tag.
 THE ARCHITECTURE OF RFID (contd)
• RFID tag responds to reader broadcasting its
EPC, a 96bit code:
– 8 bits of header information.
– 28bits identifying the organization that
assigned the code
– 24 bits identifying the type of product.
– 36 bits representing serialization information
for the product
 RFID VS BARCODE
• Cost of a tag is higher than cost of a printed
Bar coding label.
• Bar coding labels must be positioned to be
directly visible to Bar coding reader. RFID tags
need to be within RFID reader’s radio reach
(about 10 ft).
• Bar coding cannot be read inside other
containers, RFID tags can be read through most
materials. Thus, contents can be verified easily
without the costly overhead of an “Open Box
Inspection” and manual counts.
 RFID VS BARCODE (contd)
• Bar code provide only limited amounts of
information –even two-dimensional Bar code
are limited in the amount of data they can carry.
The Auto ID center‟s definition of a product
information server allows us to tie unlimited
amounts of dynamic information to each tag.
• Bar code identify classes of products –RFID
tags identify individual products.
• Migration of supply chains from Bar code to
RFID will require significant investments and
will not happen overnight, RFID and Bar code
will co exist.
 BENEFITS OF RFID
• RFID tag can be affixed to an object and used to track and
manage inventory, assets, people, etc, eg, it can be affixed
to cars, computer equipment, books, mobile etc.
• Increased Labour Productivity: Spec in receiving area of
WH as RFID eliminates manual operations allowing
product‟s faster move to storage/outbound dock.
• Inventory Reduction:
• With RFID in WH, it provide more visibility to the
products so their location is more easily determined
and it reduces likelihood of a stock-out occurring
because of misplaced inventory or inaccurate inventory
levels.
• Cycle service levels will also improve due to lower safety
stock levels and the overall faster throughput of
product at a WH.
• RFID shall reduce total system inventory by approx 5%.
 BENEFITS OF RFID (contd)
• Facility/Equipment productivity :
– RFID allows more data to be processed faster through
a WMS which uses the acquired information to
improve the operations of WH.
– eg, vehicles scanning at inbound gates of WH,
improves dock utilization because the WMS can more
effectively assign vehicles to unloading doors based on
order priority.
 OTHER BENEFITS OF RFID
• Shrinkage: Product stolen by employees along with
misplaced items, shall reduce as WH will have a better
understanding of product‟s location and difficulty to move
products out of WH.
• Forecast accuracy will also increase due to higher levels
of visibility of product throughout supply chain, positively
affecting overall efficiency and effectiveness of WH in areas
such as:
– Order cycle times;
– Safety stock levels;
– Fulfillment accuracy; and,
– Cycle service levels.
• Despite individual tag being expensive as compared to
Bar code and inappropriate for the tagging of low-cost items
but; tags are reusable and have very long lives, saving on
manpower and other costs associated with label production
and fixing.
 RFID IN RETAILING SECTOR
• RFID is an automatic identification and data
capture (AIDC) technology ie non-contact reading
to track and monitor physical objects.
• A key benefit of RFID is automatic identification of
individual objects coupled with automatic data
capture.
• Automatic electronic identity contributes
significantly to enhance supply chain visibility,
and automation brings in data capture and has a
direct bearing on operational efficiency in labor
intensive Retail Logistics.
 RFID IN RETAILING SECTOR (contd)

Supply Chain Visibility

• Visibility into merchandise pipeline within
enterprise is extremely critical to ensure that an
optimal level of inventory is maintained – not too
much to lock in excess working capital, and not
too less to cause stock-outs.
• Lack of visibility results in insufficient coord
between material flow and information flow often
causing a magnification of demand variability in
each level up in the supply chain –the bullwhip
effect.
.
 RFID IN RETAILING SECTOR (contd)
Operational Efficiency
• Logistics Management- a key element of cost in a retail enterprise
encompasse all activities that enable the movement of merchandise
from vendor/mfr to PoS(Point of sale).
• About 25-30% of supply chain costs can be attributed to labor costs
in the process of distributing merchandise.
• Retailers extensively use Software tools for WH, Yard &
transportation management.
• Industrial automation systems like conveyors, carousels, unit sorters
enable enhanced operational efficiency within the distribution
center.
• Business process innovations like multi-order picking, pick-to-light,
use of voice and wireless technologies have all contributed
significantly to higher productivity in warehouse operations.
 RFID IN RETAILING SECTOR (contd)
Potential Benefits of RFID to Retail Enterprises
• A viable option for pallet and case level tagging.
• Retailers stand to gain when individual items are tagged, with
significant opportunities in enterprise inventory management and
retail store operations.
• Pallet and Case level tagging also has the potential to enhance
operational efficiency for the Retailer.
• The likely return on investment from RFID tagging varies largely, and
is an inverse function of the current level of process optimization.
 RFID IN WAREHOUSING
Receiving
• RFID allows improvements in Throughput Speed of
product at the receiving dock.
• RFID scanner reads the shipment within seconds as it
passes through the portal readers.
• RFID eliminates need to physically check the bill of
lading and/ or the packing slip.
• RFID will connect with the WMS to indicate if a product
needs a cross-dock movement.
• RFID system will help manage flow of damaged goods
into the WH. The damaged goods set aside can be read
by RFID as received as damaged; significantly reduce
labor hours spent on managing the damaged goods
process.
• An RFID system also offers greater efficiencies in WH
systems that rely on conveyors.
 RFID IN WAREHOUSING (contd)
Storage
• RFID provides benefits in put-away accuracy and
efficiency.
• RFID system can eliminate the need to scan bar coding
on the pallet and at the slot location in the racks, eg, if
the pallet and slot location read by the RFID scanner
do not match the WMS specification, the system
notifies the driver that the product has been placed in
the wrong location.
• RFID has potential to improve temporary storage at
WH.
• Since the RFID tags can be read from anywhere,
products and pallets do not have to be placed in
specific or assigned locations.
 RFID IN WAREHOUSING (contd)
Pick / Pack
• RFID readers can integrate with the WMS and OMS to
ensure that the correct items and amounts are picked.
• RFID helps to measure productivity in WH.

Shipping
• RFID reader can confirm that each item is placed onto
the correct outbound vehicle, which can improve the
accuracy of the shipping process.
• The processes allow for an automatic double check of
the items loaded into the trailer against the bill of
lading