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Difference Between Warehousing and Inventory Management

Definition

A simple definition of a warehouse is:

‘A warehouse is a planned space for the storage and handling of goods and material.’ (Fritz Institute)

In general, warehouses are focal points for product and information flow between sources of supply and beneficiaries. However, in humanitarian supply chains, warehouses vary greatly in terms of their role and their characteristics.

Global Warehouses

The global warehousing concept has gained popularity over the last decade as stock pre-positioning becomes one of the strategies for ensuring a timely response to emergencies. They are 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 third party logistics (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 warehouse. The operating situation is relatively stable and management attention is focused on the efficient and cost effective running of the warehouse operation. Numerous organizations have centralized pre-positioning units strategically located globally. Some of these offer extended services to other humanitarian organizations on a cost plus operating charges basis. The United Nations Humanitarian Response Depot (UNHRD) Network.

Field Warehouses

Field Warehouses are usually temporary in nature. They may be housed in a buildings which was not designed to be used as a warehouse, in a temporary building/structures, and are often in mobile units (rub halls, Wiikhalls) that are little more than a tent in a field. The initial staff may be a casual workforce that has never worked in a warehouse before and the inventory system is more likely to be paper based. Often the situation is initially chaotic, sometimes dangerous and coupled with a humanitarian need which may be very urgent. The management style must therefore be practical and action oriented with a focus on making the humanitarian goods available as quickly and efficiently as possible, while being accountable at the same time.

What Is the Difference Between Warehouse and Store?

Before delving into warehouse management, warehouse inventory, as well as the difference between inventory management and inventory control, it’s important to explore the different between a warehouse and store. Mohamed Saleh, a warehouse manager, explains the difference in an article titled “What Is the difference between Warehouse & Store?” on the website, Bayt, an online job site located in the Middle East and North Africa.

Warehouses are “outside the industry,” Saleh explains, meaning that these facilities are outside and apart from any direct transactions involved in sales to consumers. Warehouses do assist customers indirectly, however, Saleh adds. Warehouses may be distribution channels, possibly located in other cities, that help get products delivered to customers quickly. Warehouses deal with finished goods—those that are ready to be shipped to the customer or end user.

Stores, by contrast, are in-house facilities that are involved with incoming and in some cases outgoing products, generally raw materials. The website, Difference Between, further explains:

“(Warehouse management involves) every step of the process, from beginning to end, and is usually overseen by warehouse managers. Starting from incoming freight and moving on to asset tracking and logistics, warehouse management encompasses everything that happens in a warehouse.”

A firm that has a solid grasp of – and tight control over – warehouse management is likely to decrease overhead and increase profits, according to SelectHub. While there is a difference between inventory management and inventory control, warehouse management is not synonymous with either, says Kerridge Commercial Systems, in an article titled “What Is Warehouse Management.”

Put another way, “warehouse management is the control of the day-to-day operations of a warehouse, such as the shipping, receiving, put-away and picking of goods,” according to Kerridge. Warehouse management involves six specific processes, according to Kerridge:

  • Inbound processing: where items are checked and logged as they are received and put away in the correct bins, or packed for dispatch without further storage.
  • Warehouse layout and slotting: where fast-moving items are placed near the front, items that are often bought together are located close to each other, and items that are easily mistaken for each other are separated.
  • Picking: where items are placed so that pickers (workers who grab items and make them ready or pack them for shipment) can easily find them, and their journey time between items and between orders is minimized.
  • Packing: where orders are packed in the right packaging, complete with an accurate contents slip and added to a delivery manifest for dispatch.
  • Shipping: where the correct orders are placed on the right vehicle at the right time, with the right delivery manifest.
  • Managing returns: where returned goods are unloaded quickly before the vehicle is available for loading again. These goods then need to be checked off against the original order and the information logged against the customer’s account.

The term warehouse management is also often used interchangeably with stock control or inventory control, but that is incorrect, Kerridge adds. Warehouse management aims to maximize the efficiency and effectiveness of warehouse operations, while stock control seeks to maximize profit by “getting inventory right,” says Kerridge.

Types of Warehouse Space

  • Commercial: in rented building used for business.
  • Government or state: such as at the ports or harbours. This is common in emergency situations.
  • Transit: for temporary storage of goods destined for different locations and need storage for a very short time.
  • Bonded warehouses: for storage of goods whose duty is unpaid and especially where the goods are destined to another country. Pre-positioned stock is often held in bonded warehouses so that export is quick and can sometimes be stored for long periods.
  • Open storage: not ideal for perishable products but in emergencies, sometimes the only alternative.
  • Space that is owned and managed by the organisation.
  • Pre-fabricated warehouses where there are no permanent structures available. This is common practice in emergencies.

Basic Principles of Warehouse and Inventory Management

  • Planning inbound receipt procedures.
  • Storage formalities e.g:
    • location management
    • inventory control
    • occupational health and safety
  • Outbound delivery procedures.

See Inventory Management Guidelines and refer to the Annexes for different samples: Perpetual Inventory formStock Count Report formIn/Out Stock Report form.

How to Select and Set-Up a Warehouse

Determining Needs

In determining needs, one should look beyond the basic need of a warehouse to store things. Whilst, this is correct there are also other considerations.

  • the volume of goods;
  • speed of through-put required;
  • as a transit point;
  • breaking bulk location;
  • an area for sorting and consolidating different goods;
  • to enhance the speed of the response;
  • to protect and account for inventor; and
  • as a buffer in the event of a break-down or delay in the supply pipeline.

Determining Storage Requirements

Selecting a Suitable Location

There are a range of factors to consider when deciding on the location of a new warehouse facility and these may vary depending on whether you are selecting a location for a temporary building or selecting from one of a number of existing buildings.

These may include:

  • proximity to ports of entry and beneficiaries
  • existing buildings
  • security
  • the context
  • site condition
  • access
  • services
  • land size available
  • purpose of warehouse
  • previous use of the facility
  • floor weight
  • access to labour

Warehouse Selection

Factors to consider:

  • nature and characteristics of goods to be stored;
  • nature of handling equipment available;
  • duration of storage needed i.e. short term or long term;
  • the need for other activities, e.g. repackaging, labelling, kitting, etc;
  • access and parking for vehicles;
  • number of loading docks required; and
  • secure compound.

Warehouse Preparation Planning

Space layout

The areas that should be planned are both the general storage areas and the areas for goods receipt, consignment picking and goods dispatch. It is also desirable that space should be set aside for the following activities:

  • equipment maintenance and parking;
  • charging of equipment batteries such as pallet trucks;
  • refuelling of trucks;
  • an area for garbage disposal e.g. empty packaging;
  • a quarantine area for keeping rejected goods, goods to be sent back or destroyed;
  • an employee rest area;
  • washroom; and
  • an administration office.

Planning

It is worth keeping these requirements in mind during the planning of the main operating areas. Planning consideration needs to be given to the following:

  • allocate space for each type of product and locating number;
  • allow sufficient space for easy access to the stacks for inspecting, loading and unloading. Stacks should be one meter from the walls and another meter between stacks;
  • sizing the goods receipt and despatch area;
  • allow space for storage of cleaning materials and supplies;
  • allocate areas for damaged items by consignment number;
  • allow sufficient space to repackage damaged items and place it in separate stacks;
  • sufficient free space is needed to operate a warehouse effectively. When planning the size of a warehouse consider:
    • planning on having about 70-80% utilisation of available space, whilst considering:
    • throughput rate
    • number of stock keeping units (SKU)
    • handling characteristics of items, etc.
  • See Stacking guide in the Annexes.

How to calculate warehouse storage space.

Special storage needs

Some relief items require special attention in terms of the type and security of the storage area. For example:

  • Medical supplies and drug shipments can contain a large number of small, highly-valued and, often, restricted items, many with a limited shelf-life. Thus, a secure area is required, as well as judicious attention to expiry dates.
  • Hazardous products such as fuels, compressed gases, insecticides, alcohol, ether and other flammable, toxic or corrosive substances must be stored separately, preferably in a cool, secure shed in the compound but outside the main warehouse.
  • Antibiotics and vaccines may require temperature-controlled cold storage arrangements, with sufficient capacity and a reliable, as well as a back-up, power source.
  • With combustible items, such as alcohol and ether, specific attention is required when storing and handling. Inventory management techniques need to be implemented to prevent wasteful surpluses and to ensure proper stock rotation to avoid costly losses due to expired goods. Procedures for controlling, preserving and releasing medical supplies and drugs should be established in consultation with the medical experts.

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