topic5-warehousing and physical inventory-290212_022429

Course Name: Inventory Management Topic 5: Warehouse Management and Physical Inventory

© UNITAR 2005 of 31

Objectives At the end of this topic, you will be able to:

• explain the three different types of warehousing activities that are commonly used in

businesses;

• describe the three basic functions of warehouse, which are, movement, storage and

information transfer;

• describe and show how the warehouse functions impact the supply chain and ultimately the

customer;

• make a comparative analysis of the advantages and disadvantages of using third party

logistics providers over a

company�s own logistics department; and

• identify the activities on how to manage the physical inventory.

Abstract

Warehouses play an important role in the inventory management. Warehousing is used for the

storage of inventory during all phases of the logistics process that includes the four major type of

inventory. This is including raw material, WIP spare parts and finish goods.

Being an integral part of every logistics system, successful warehousing provides a high level of

customer service at the lowest possible cost.

5.1. What is Warehousing?

Warehouses are used in many ways and the decision on the kind of warehouse activities to use

greatly depends of a firm�s business model. Generally, there are 3 different types of warehousing

activities that commonly used in business.

These types are explained in details in the graphic below.



Types of Warehousing Activities

Click on each Type for more information.

Manufacturing Support Warehouse:

A warehouse is most commonly used to support production. In this capacity, the suppliers would

ship materials directly to the manufacturing plant. Such materials include raw materials, parts,

components, or maintenance/repair/operating (MRO) supplies from various suppliers.

The materials are then temporarily stored in the warehouse before being transferred to the

manufacturing floor. The warehouse can either be in the manufacturing facility or outside the

plant.

Break Bulk Warehouse:

Manufacturing Support Warehouse

Break Bulk Warehouse

Mixing/Consolidation Warehouse

Supplier A

Supplier B

Supplier C

Warehouse Plant

Customer X

Customer Y

Customer Z

WarehousePlant



A break bulk warehouse is a facility that receives a large shipment from a manufacturing plant.

The shipment can be made up of a few small customer orders. The shipment is then broken

down or subdivided into smaller shipments and rerouted to customers within the geographical

area served by the warehouse. As break bulk warehouses are usually located near to customers,

transportation costs from warehouse to customers will be reduced as opposed to direct

shipments from manufacturer to customers.

Mixing / Consolidation Warehouse:

Product mixing involves different plants from multiple locations shipping their products to a mixing

warehouse. Each plant manufactures only a small portion of offering of the firm. The shipments

will then be consolidated or mixed and made into larger quantities to meet the customer orders.

For many companies, holding inventory in warehouse may be necessary in order to maintain a

source of supply. Changing market conditions may also make it vital to warehouse product in the

field primarily because it is very difficult to successfully forecast the consumer demand.

By keeping some excess inventory in the field warehouse, companies can respond quicker to

unanticipated demand and achieve higher customer service levels. But it will cause the high

inventory cost in the operation. However, the firm's management must always review and

minimize all related inventory holding cost while providing the desired levels of customer service.

5.2. Warehouse Functions Inventory is a firm�s asset. Every inventory movement in or out of the warehouse is actually a

financial transaction. Mishandling of inventory will result in financial losses and impact customer

service. Warehouses have three basic functions, which are:

Plant A

Plant B

Plant C

Warehouse

Customer 1 (A, B, C)

Customer 2 (A, B)

Customer 3 (B, C)



1. Movement

2. Storage

3. Information transfer

5.2.1. Movement The movement function of warehouses has been receiving the most attention in recent times as

organizations focus on improving inventory turns and reducing lead-time from customer order to

final delivery.

The movement function can be broken down into 5 activities, as shown by the table below:

5 Activities of Movement

1. Receiving Flow Chart of Receiving:

Receiving Layout:

The receiving area is usually located next to the receiving bay so that goods can be transferred from the bay

in the shortest possible time. In addition to the receiving bay, the receiving area also consists of designated



spaces such as:

• A temporary drop area for goods to "park" prior to transferring to other locations.

• A receiving compound whereby the goods are inspected and verified against the shipping

documents.

• A MRB (material review board) or hold area for temporary storage of problematic or defective

merchandise before deciding on the next course of action.

Good Receipt Note (GRN): One important document in the receiving area is the Goods Receipt Note (GRN). It is used for recording

critical information on the merchandise received.

The information includes:

• part number;

• quantity and unit of measurement;

• date of receipt;

• supplier name;

• purchase order number (PO); and

• delivery or invoice number (DO).

To ensure that the merchandise conforms to requested specification, the GRN must be signed by incoming

quality control for all direct materials and by the end user for all indirect materials.

2. Transfer Transfer involves the physical movement of the inventory into the warehouse for storage, movement to

specialized area such as the consolidation or sorting warehouse, and movement to the shipping dock.

3. Picking / Issuance Flow Chart on Issuance Activity:

In a manufacturing support warehouse, issuance or order picking is a major movement activity and involves

regrouping raw materials/components to issue for production use.



Forms of Issuance Instruction:

The primary objectives of issuance are:

• Accurate and efficient processing of issuance request.

• Timely and accurate processing of issuance transactions.

• Fast transfer of issuance materials to the requesting party.

The issuance instruction comes in many different forms and it varies from company to company. Some of

the most commonly used forms include:

Types of Issuance Instruction Forms 1. Materials Requisition Form (MR) This is perhaps the most frequently used form. The materials requisition is a pick list that contains relevant information on the requested items, which include part number, description, quantity and required time.

2. Material Requirement Planning (MRP) Pick List Containing the same kind of information as in MR forms, this MRP pick list is generated from MRP while MR is prepared manually.

3. Special Requisition Form Unlike MR and MRP forms that are preplanned to support production, this form is

4. Kanban Card For warehouses that practice the Kanban Pull issuance, a Kanban card can also be used to



used for unplanned and unscheduled issuance activity. For example, when there is quality problem for a certain component in the production line, additional parts may be requested to compensate for the problematic parts.

activate issuance. Details regarding the Kanban card have been discussed in topic of JIT.

In a distribution or finished goods warehouse, order picking simply means to get ready the products for

shipping. The instructions come from a pick list similar to the material requisition form or MRP pick list.

4. Cross Docking Cross docking means bypasses the storing activity by processing them as they are received. In a

manufacturing facility that practices JIT, raw components are received directly at the assembly line. In a

distribution center, products are transferred to a sorting area where they are sorted and regrouped before

they are transferred to the shipping dock.

Cross docking has gained recognition because of its impact on cost and customer service. Wal-Mart, a giant

retailer in the U.S is an early advocate of cross docking and has used this technique to drive down costs.

Although cross docking reduces product handling, inventory, and storage costs, it requires close

coordination and tight schedules to ensure effectiveness.

5. Shipping Shipping activity consists of staging the product and physically moving the customer orders onto

transportation carriers. Products are normally placed in boxes, cartons, or pallets and identified with

information necessary for shipment.



5.2.2. Storage The other very important function of warehouses is the storage or holding of goods. In some

warehouses where JIT delivery is practiced, the storage or holding function is of a very temporary

nature and can be as short as 6-12 hours. The holding of goods for longer periods of time (over

30 days) is often associated with materials with seasonality supply/demand or products with very

long delivery lead-time. While there are no standard rules as to how long the goods should be

stored, there should be a conscious effort to reduce the storage time in order to reduce the

holding costs.

Details on storage are explained below.

Storage Layout:

The storage area is usually the largest single area in the warehouse. In a warehouse it is

essential to use the full volume of the cubic storage space as efficiently as possible. The storage

area should always be properly identified and labeled so that goods are easily stored and

retrievable. In addition, it prevents unusable items from mixing with usable items. The following

lists are the different types of storage area within a warehouse:

• Main storage - raw material, semi-finished, and finished goods

• On hold - inventory on hold due to questionable quality specification

• Rejects/Return to vendor (RTV) - inventory that is confirmed unusable and pending return

to vendor.

• Scraps - confirmed unusable materials, usually line fallout or due to handling problems.

• Drop area - pending issuance to production or delivery to customer

Placement of Stocks

How should the inventory be organized and stocked depends on the types of inventory,

availability of the material storage equipments, and the frequency of inventory movement

transactions. When deciding on the kinds of stock placement, one should always keep in mind

that the type of placement should maximize the space utilization and efficiencies of both storage

and retrieval activities.

Generally, there are two types of storage methods.



Types of Storage Methods 1. Randomized Storage Randomized storage is also called floating slot storage. This type of storage does not have a dedicated slot but the items' locations are determined as and when items need to be stored. This approach maximizes space utilization although sometimes it may require a longer traveling time between order picking locations. Randomized storage often employs automated storage equipments like carousel and automated storage and retrieval system (ASRS) to achieve efficiency and productivity improvement. The features of automated storage equipments will be discussed in further detail in the following sections under materials handling equipments.

2. Dedicated Storage In dedicated or fixed slot storage, items' locations are predetermined and usually do not change over an extended period of time. When the items are not available, the slots are left empty until the next batch of shipments arrives.

Inventory Aging Control

Aging control is another important aspect of warehousing as efficient control of inventory with

shelf life can save the organization money. A shelf life item is an item with limited life span. In

simple terms, the item has an expiry date beyond which the item is not usable. It is therefore very

important to track the shelf life and issuance strictly base on first-in-first-out (FIFO) sequence to

flush out the "older" materials first. In addition, the warehouse must have a system, whether

automated or manual, to highlight the expiration date of the inventory. Appropriate action can

then be taken to reduce or eliminate the obsolescence.

Materials Handling Equipments:

Materials handling is important to the efficient operation of the warehouse, both in storing and in

transferring goods in and out of the warehouse or to other points in the warehouse. Manual

materials handling equipment has been the mainstay of the traditional warehouse and will likely

continue to be important even with the move towards automated warehouse. Automated systems

such as ASRS and carousel have, over the recent years, gained recognition as many firm have

been able to achieve substantial productivity improvements and warehouse space saving.

Materials handling equipments can be categorized based on the basic functions that they

perform:



1. Storage and order picking

2. Transportation

The table below lists some of the more commonly used storage systems, the types of loads they

carry, and the benefits of each system.

Storage Racks Type Of Loads Benefits Other Considerations

Manual Selective Pallet Racks Double Deep Racks Narrow Aisle Racks Drive-In Racks Drive-Through Racks Cantilever Racks Drawers Shelving

Pallet loads Pallet loads Pallet loads Pallet loads Pallet loads Long loads Small parts, tools Small parts, loose loads

• Low cost, provides good

visibility of items. • High storage density (2X

selective).

• High storage density increases floor space utilization and throughput speed.

• High storage density, low

capital investment.

• Same as drive-in, FIFO enabled.

• Suitable for long or awkward

size items.

• Good accessibility, good security.

• Inexpensive.

• Low space utilization. • 50% pallet accessibility. • Requires equipment guidance

system and special handling equipment.

• Forklift access from only one direction.

• Forklift access from two directions.

• Requires special handling equipments.

• Items can be compartmentalized.

• Can be combined with drawers for flexibility.

Automated ASRS Carousels

Pallet loads and small parts Small parts and tools

• High floor space utilization,

random storage can maximize storage capacity

• High floor space utilization,

random storage can maximize storage capacity.

• High initial capital outlay, downtime

of equipment.

• High initial capital outlay although less expensive than ASRS, downtime of equipment.



Storage Methods

There are several storage methods that can be used. Below are the names and the pictures of

storage methods available.

Selective Pallet Racks:

Double Deep Racks:

Narrow Aisle Racks:



Drive-in Racks:

Drive-through Racks:



Cantilever Racks:

Automated Storage and Retrieval System (ASRS):

Carousels:



Materials Handling Trucks:

There are several handling trucks available, which are shown below:

Counterbalanced Lift Truck:

Counterbalanced lift truck is one of the most commonly used forklift truck and can come with 3 or 4 wheels.

Its biggest advantage is its versatility and the variety of ways it can be used in a warehouse loading and

unloading and in moving goods.

Pallet Truck: Pallet truck is available in the form of manual or electric powered and can handle loads of up to 10,000 lbs.

Hand Pallet Truck

Power Pallet Truck



Reach Truck & Stacker:

For operating in narrow aisles, reach truck and stacker are very useful in handling, storing and retrieving

pallets.

Narrow Aisle Trucks: In very narrow aisles warehouses, special forklifts call narrow aisle trucks are used. These narrow aisle

trucks have rotating forks so the truck can stack pallet without turning and can reach a height as high as 25

feet or higher. The narrow aisle truck is usually used in conjunction with special aisle railing so the truck can

move in and out of the aisle at a high speed.

Reach Truck

Stacker



Order Picking Truck:

The order picking truck is most useful for stock checking or for picking many small orders from different

pallets. In an order picking truck, the operator is able to raise or descend standing on a platform along with

the forks.

Warehouse Capacity Planning

a. Storage capacity:

To obtain maximum warehouse efficiency, the management must constantly review

storage capacity, manpower capacity, and equipment capacity to determine if current

resources are adequate to cover current operations or additional capacity is needed.

The storage capacity should not be over or underutilized. In an over utilized warehouse,

there is often not enough space for proper organization of the stock and may result in

misplace or mix up of stock.

As space constraints may result in inventory placed in an unorganized manner, employee

safety is also a concern. On the other hand, too much unutilized space in a warehouse

results in poor space utilization and high storage costs.

Management's task is therefore to maximize the utilization of the cubic space of the

warehouse. As a general rule, the cubic space utilization for a warehouse should always

be planned around 75-85%, with 15-25 allowances for potential upside.



How much storage space do I need?

Storage capacity planning should be carried out periodically as the storage loads and

requirements changes from time to time. Below figure is the flow chart on how to

calculate the storage space.

b. Manpower Capacity Planning:

Other than storage, manpower planning is also equally important to ensure adequate

manpower resources. Every warehousing activity should be scrutinized and sufficient

manpower resources be allocated to perform the activities. The materials management

department always looks into the flowing areas:

! Do I have enough manpower? Excess? Short?

! Is the manpower short in certain hours/days and idle at other times?

! Should I arrange for staggered shifts or overtime during the peak hours?

1. Forecast quantity of items stored.(What and how much of every item?)

2. Convert to number of Standard Packs.

(Quantity divides by standards packing)

3. Convert to number of pallets(Number of standards packs divides by number of standard packs in a pallet)

4. Sum up total Pallets required(How many pallets in total?)

5. Convert to cubic space requirement

(How much total cubic space?)

The planning process starts with a forecast quantity of individual items to be stored. This can be obtained either from the corporate materials planning group or from customers.

Since the forecast usually comes in raw quantity form and not in terms of number of boxes per item, we have to take the forecast quantity and divide it by the standard pack quantity to determine the number of standard packs.

After determining the number of standard packs, the next step is to calculate how many pallets of each item in total. This can be done by taking the number of standard packs divided by the number of standard packs in a pallet.

Adding up all the pallets for all items will provide the total pallets required to be stored.

The final step is to convert the number of pallets into cubic space. This can be done by taking the length of the pallet and multiplying it by the width and the height of the goods that need to be stored.



! Do I provide enough machines for the manpower scheduled to perform the tasks?

For example, I have 2 forklifts but scheduled 4 men to transfer the pallets. Do I need

to add equipments to eliminate the waiting time for equipments or transfer the men to

perform other activities?

c. Equipment Capacity:

Equipment capacity is another important area that should be reviewed from time to time

to ensure maximum utilization of the available equipments, replacement of the older

equipment, or purchase new equipments. Areas to review include the following:

! Do I provide enough equipment for the manpower scheduled to perform the tasks?

! Is any equipment operating at more than the suggested usage? For example, a

forklift that is running 24 hours a day and leaves no time for preventive maintenance.

! What kind of equipment do I need? Do I need an order picking truck or a ladder will

do? A hand pallet truck or a forklift?

Packaging

Packaging is an important warehousing and materials management concern. The best package

optimizes service, costs, and convenience. Packaging serves two basic functions: marketing and

logistics. In the marketing function, the package provides information about the product and

promotes the image of the product through the use of color, pictures and sizing.

In the logistics function, the package organizes, protects, and identifies the product. Good

packaging also facilities the material handling activities. For example, a carton box containing a

TV with two hand slots at the side. To fulfill legal requirements, certain special packaging is

required for hazardous materials. For example, specially designed drum for industrial chemical

prevent leakage and spillage. The package should be designed to provide the most efficient

storage. Good packaging interfaces well with the warehouse�s materials handling equipment and

allow effective utilization of storage space.



5.2.3. Information Transfer Information transfer, the third major function of warehousing, occurs simultaneously with the

movement and storage functions. Managers always need timely and accurate information to

make important decisions. The information includes inventory levels, storage locations, inbound

and outbound shipment, customer order status (showing how much ordered and how much ship

to date), space utilization, and others. Since this information is vital to the successful operation of

the warehouse, there are numerous efforts to improve the speed and accuracy of the information.

Over the last two decades, bar coding has gained popularity as a result of its ease of use and

effectiveness.



5.3. Third Party Logistics

The use of third party logistics (3PL) providers to take over some or all of a company�s logistics

responsibilities is becoming more prevalent. Third party logistics is simply employing an outside

company to perform all or part of the company�s materials management and product distribution

function. In order to make the right decision from cost and service perspectives, the company

must understand the advantages and disadvantages, as well as financial implication of both

alternatives.

The table below shows the advantages and disadvantages of third party logistics.



5.4. Physical Control and Security

Because inventory consists of tangible things, items have a nasty habit of becoming lost, strayed,

or stolen, or of disappearing in the night. It is not that people are dishonest, rather that they are

forgetful. What is needed is a system that makes it difficult for people to make mistakes or be

dishonest. There are several elements that help, as explained in the graphic below.

Elements of Physical Control and Security

A good numbering system: Every item will be given a number as an identification. This system will help to physical inventory

control.

A simple, well-documented transaction system: When goods are received, issued, or moved in any way, a transaction occurs. There are four

steps in any transaction, which are:

1. Identify the item

Many errors occur because of incorrect identification. When receiving an item,

the purchase order, part number, and quantity must be properly identified. When

goods are stored, the location must be accurately specified. When issued, the

quantity, location, and part number must be recorded.

2. Verify the quantity

Quantity is verified by a physical count of the item by weighing or by measuring.

Sometimes standard sized containers are useful in counting.

1. A good 2. A simple, well-numbering system documented transaction system 3. Limited Access 4. A well-trained workforce



3. Record the transaction

Before any transaction is physically carried out, all information about the

transaction must be recorded.

4. Physically execute the transaction

Move the goods in, about, or out of the storage area.

Limited access: Inventory must be kept in a safe, secure place with limited general access. It should be locked

except during normal working hours. This is less to prevent theft than to ensure people do not

take things without completing the transaction steps. If people can wander into the stores area at

any time and take something, the transaction system fails.

A well-trained workforce: Not only should the stores staff be well trained in handling and storing material and in recording

transactions, but also other personnel who interact with stores must be trained to ensure

transactions are recorded properly.

5.5. Inventory Record Accuracy

The usefulness of inventory record is directly related to its accuracy. Based on the inventory

record, a company determines net requirements for an item, releases orders based on material

availability, and performs inventory analysis. If the records are not accurate, there will be

shortages of material, disrupted schedules, late deliveries, lost sales, low productivity, and excess

inventory.

These three pieces of information must be accurate: part description (part number), quantity, and

location. Accurate inventory records enable firms to:

• Operate an effective materials management system.

If inventory records are inaccurate, gross-to-net calculations will be in error.

• Maintain satisfactory customer service.

If records show the item is in inventory when it is not, any order promising it will be in

error.



• Operate effectively and efficiently.

Planners can plan, confident that the parts will be available.

• Analyze inventory. Any analysis of inventory is only as good as the data it is based on.

Inaccurate inventory records will result in:

• Lost sales.

• Shortages and disrupted schedules.

• Excess inventory (of the wrong things).

• Low productivity.

• Poor delivery performance.

• Excessive expediting, since people will always be reacting to a bad situation rather than

planning for the future.

5.5.1. Causes of Inventory Record Errors Poor inventory record accuracy can be caused by many things, but they all result from poor

record-keeping systems and poorly trained personnel. Some examples of causes of inventory

record error are:

• Unauthorized withdrawal of material.

• Unsecured stockroom.

• Poorly trained personnel.

• Inaccurate transaction recording. Errors can occur because of inaccurate piece counts,

unrecorded transactions, delay in recording transactions, inaccurate material location,

and incorrectly identified parts.

• Poor transaction recording systems. Most systems today are computer based and can

provide the means to record transactions properly. Errors, when they occur, are usually

the fault of human input to the system. The documentation reporting system should be

designed to reduce the likelihood of human error.

• Lack of audit capability. Some program of verifying the inventory counts and locations is

necessary. The most popular one today is cycle counting, discussed in the next section.



5.5.2. Auditing Inventory Records Errors occur, and they must be detected so inventory accuracy is maintained. There are two

basic methods of checking the accuracy of inventory records: periodic (usually annual) counts of

all items and cyclic (usually daily) counts of specified items. It is important to audit record

accuracy, but it is more important to audit the system to find the causes of record inaccuracy and

eliminate them. Cycle counting does this; periodic audits tend not to.

5.5.3. Periodic (Annual) Inventory The primary purpose of an annual physical inventory is to satisfy the financial auditors that the

inventory records represent the value of the inventory. To planners, the physical inventory

represents an opportunity to correct any inaccuracies in the records. Whereas financial auditors

are concerned with the total value of the inventory, planners are concerned with item detail.

The responsibility for taking the physical inventory usually rests with the materials manager who

should ensure that a good plan exists and it is followed. George Plossl once said that taking a

physical inventory was like painting; the results depend on good preparation.

There are three factors in good preparation: housekeeping, identification, and training. These

factors are explained in detail in the table below.



Taking a physical inventory is a time-honored practice in many companies mainly because it has

been required for an "accurate" appraisal of inventory value for the annual financial statements.

However, taking an annual physical inventory has several problems. Usually the factory has to be

shut down, thus losing production; labor and paperwork are expensive; the job is often done

hurriedly and poorly since there is much pressure to get it done and the factory running again. In

addition, the people doing the inventory are not used to the job and are prone to making errors.

As a result, more errors often are introduced into the records than are eliminated.

5.5.4. Cycle Counting This is a system of counting inventory continually throughout the year. Physical inventory counts

are scheduled so that each item is counted on a predetermined schedule. Depending on their

importance, some items are counted frequently throughout the year whereas others are not. The

idea is to count selected items each day. The advantages to cycle counting are:

• Timely detection and correction of problems. The purpose of the count is first to find the

cause of error and to correct the cause so the error is less likely to happen again.

• Complete or partial reduction of lost production.

• Use of personnel trained and dedicated to cycle counting. This provides experienced

inventory takers who will not make the errors "once-a-year" personnel do. Cycle counters

are also trained to identify problems and to correct them.

The basic idea is to count some items each day so all items are counted a predetermined number

of times each year. The number of times an item is counted in a year is called its count frequency. For an item, the count frequency should increase as the value of the item and

number of transactions (chance of error) increase.

Several methods can be used to determine the frequency. Three common ones are the ABC

method, zone method, and location audit method. Details of these methods are explained in the

table below.



A cycle counting program may include all these methods. The zone method is ideal for fast-

moving items. If a floating-location system is used, a combination of ABC and location audit is

appropriate. Cycle counts can be scheduled at regular intervals or on special occasions.

In order to choose which method to use, below are the criteria that must be looked into:

• When an order is placed.

Items are counted just before an order is placed. This has the advantage of detecting

errors before the order is placed and reducing the amount of work by counting at a time

when stock is low.

• When an order is received.

Inventory is at its lowest level.

• When the inventory record reaches zero.

Again, this method has the advantage of reducing work.



• When a specific number of transactions have occurred.

Errors occur when transactions occur. Fast moving items have more transactions and are

more prone to error.

• When an error occur. A special count is appropriate when an obvious error is detected. This may be a negative

balance on the stock record or when no items can be found. Summary

In this topic, you have learnt:

• There are three types of warehousing activities, which are:

o Manufacturing support warehouse;

o Break bulk warehouse; and

o Mixing / consolidation warehouse.

• There are three basic functions of warehouse, which are:

o Movement;

o Storage; and

o Information transfer.

• The movement function can be broken down into 5 activities, which are:

o Receiving;

o Transfer

o Picking / issuance;

o Cross docking; and

o Shipping

• In storage, there are seven issues to look into, they are:

o Storage layout;

o Placement of stocks;

o Inventory aging control;

o Materials handling equipment;

o Storage methods;

o Materials handling trucks; and

o Warehouse capacity planning.



• Bar code, bar code scanner and bar code printing are the equipments used in information

transfer.

• Below are the advantages and disadvantages of third party logistics:

• The usefulness of inventory record is directly related to its accuracy. Based on the

inventory record, a company determines net requirements for an item, releases orders

based on material availability, and performs inventory analysis.

• Accurate inventory records enable firms to:

o Operate an effective materials management system;

o Maintain satisfactory customer service;

o Operate effectively and efficiently; and

o Analyze inventory.

• There are three factors in good preparation, which are:



o Housekeeping;

o Identification; and

o Training.

• There are three methods that can be used in cycle counting, which are:

o ABC method;

o Zone method; and

o Location audit method.



Additional Readings Links: • Material Handling Equipment

http://www.ie.ncsu.edu/kay/mhetax/index.htm • Warehouse Layout and Design: Transactions, Inventory & Technology

http://www.strategosinc.com/warehouse.htm

• Warehouse Management System http://www.inventoryops.com/warehouse_management_systems.htm • Guide to Inventory Accuracy

http://www.inventoryops.com/guide_inv_acc.htm • Cycle Counting and Physical Inventories http://www.inventoryops.com/cycle_counting_and_physical_inventories.htm



CROSSWORD PUZZLE:

TOPIC 5: WAREHOUSE MANAGEMENT AND PHYSICAL INVENTORY

AIREQUISITIONCSPTRCONSOLIDATIONDUUARERACSTAGINGRANEHNCCMIGYRECEIPTAP

ANPBULKOHANDTITW

DNSTORAGEFLOATINGTMR

MAAZIDENTIFICATIONZKENEXPERTISEDEDR

1 2 3 4 5

6

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8

9 10 11

12

13

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18

ACROSS 3 Special _____ form is

one form of issuance instruction.

7 This type of warehouse indicates that each plant manufactures only a small portion of offering of the firm.

8 Shipping activity consists of _____ the product and physically moving the customer orders onto transportation carriers.

9 Goods _____ Note is used for recording critical information on the merchandise received.

12 A break _____ warehouse is a facility that receives a large shipment from a manufacturing plant.

13 The graphic refers to _____ pallet truck. images/hand_pallet_tr-uck.gif

14 Warehouses have three basic functions, which are, movement, _____ and information transfer.

15 If a _____ location system is used in a cycle counting program, a combination of ABC and location audit is appropriate.

17 In a good numbering system, every item will be given a number as an _____.

18 One of the advantages of third party logistics is professional _____.

DOWN 1 The usefulness of

inventory record is directly related to its _____.

2 _____ is a major movement activity and involves regrouping raw materials to issue for

production use. 4 Cross docking means

bypasses the _____ activity by processing them as they are received.

5 The _____ picking truck is most useful for stock checking or for picking many small orders from different pallets.

6 How the inventory should be organized and stocked is the activity of _____ of stocks.

8 There are 5 activities of movement, which are, receiving, transfer, picking, cross docking and _____.

9 _____ storage, a storage method, is also called floating slot storage.

10 ASRS refers to _____ storage rack.

11 The graphic shows a _____ pallet truck.

14 The graphic shows a _______.

16 There are several methods that can be used to determine frequency in cycle counting, which are, ABC method, _____ method and location audit method.

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