What are the Functions of Warehouse ? A Detailed Guide
Traditionally, warehouses were simply used for storing goods. They were typically large buildings located near railroad hubs, ports, or business centers.
These warehouses were leased in whole or in part to store goods, machinery, and other items. The client was responsible for arranging all activities, such as unloading, loading, and packaging the goods.
The era when warehouses were merely storage space is long gone. Most modern warehouses are architectural and technological marvels, capable of meeting virtually all the needs of a client’s supply chain.
The supply chain encompasses all stages a product goes through from production to the end customer. Warehousing is an integral part of modern supply chain and logistics operations; most of these operations take place here.
According to 2020 data from the World Trade Organization, the value of goods exported between countries was $17.5 trillion (a decrease of $2 trillion from 2019 due to the trade slowdown caused by the COVID-19 pandemic). As we can see, this figure does not include goods sold domestically.
The supply chain of traded goods inevitably includes warehousing. Imagine the sheer scale of the warehousing infrastructure required to store and handle such a massive volume of goods!
The Functions of Warehouses
Are warehouses necessary?
The answer is simple: yes. Because of the time lag between production and demand, storing goods becomes essential.
Even goods produced on demand require short-term storage. Warehousing facilities enable companies to produce or manufacture products in advance to meet future demand.
For goods with seasonal demand, storage is crucial. They need to be produced in advance and stored to meet future demand.
Economies of scale require the production of large, predetermined quantities of goods that cannot all be sold at once. These goods must be stored until demand increases. Temperature-controlled warehouses can meet the storage needs of general merchandise, refrigerated goods, or frozen goods.
Warehouse Classification
Warehouses can generally be classified as state-owned warehouses, private warehouses, and cooperative-owned warehouses.
Bonded warehouses are managed by the government or operated by private enterprises authorized by the government. These warehouses allow goods to be exempt from customs duties before leaving the warehouse.
Bonded warehouses are typically used to store high-value imported goods, such as alcohol, tobacco, and certain electronic devices.
Requirements for Modern Warehouses
Besides a convenient location, easy access, ample space, and advanced material handling equipment, warehouse design should facilitate the receiving, inspection, storage, release, and other operations of goods.
To avoid bottlenecks within the warehouse, Material Flow Planning (MFP) must be optimized. MFP can be planned based on U-shaped or drive-in flow models.
In a U-shaped flow warehouse model, goods flow in a U-shape within the warehouse. Goods are received and dispatched on the same side of the warehouse building, using the same loading and unloading platforms.
In a drive-in warehouse, goods flow from one end of the warehouse building to the other, typically in a straight line. For simplicity, goods are received and stored at one end of the warehouse, and then retrieved and dispatched from the other end.
Warehouse design must be meticulously planned before construction, considering the following key factors:
- Fire protection equipment
- Ample space – aisles, corridors, etc.
- Sufficient space to accommodate modern material handling equipment
- Ventilation and lighting
- Heating and cooling systems
- Office space
- Future expansion possibilities
- A well-designed warehouse is crucial for maximizing efficiency and space utilization.
Main Functions of a Warehouse
Storage is a fundamental element of any supply chain. Let’s look at the main functions of a warehouse, typically starting with receiving goods.
Unloading
Goods are typically transported to the warehouse by road. These goods are called inbound goods. Regardless of whether the goods arrive by sea, air, or freight train, they must be transported to the warehouse using trucks or other suitable vehicles, depending on their distance from the dock, runway, or train station.
The warehouse operations manager must plan ahead and ensure that the necessary resources and arrangements are in place to receive these goods. This plan is called the “Inbound Goods Plan.”
The warehouse may need to arrange vehicles to transport goods from the seaport, airport, or train station. Personnel must be arranged for unloading, and the necessary material handling equipment must be provided.
Inbound goods are unloaded and inspected at the warehouse.
Inspection
Warehouse operations personnel must verify that the goods listed on the packing list match the actual goods received. The packing list must also match the invoice. Receiving inspection includes, but is not limited to, checking the accuracy of quantity and price, and whether there is any damage or deterioration in quality upon receipt.
Any errors or other problems must be documented and reported to the operations supervisor, who will then forward the report to the inventory management department. Inventory management personnel will inform the shipper, carrier, or insurance representative of these issues.
After unloading and inspection, warehouse operations personnel prepare an Inventory Receiving Report (IRR) for each shipment. This report details the received goods, including information on incomplete, surplus, expired, or damaged items, as well as other relevant information.
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Storage
At this stage, the received and inspected goods are moved to designated locations on warehouse shelves. Stacking is rarely used in warehouses today.
In block stacking systems, goods are placed on the warehouse floor and then stacked layer by layer until a fixed height is reached. While this method saves space, it can be cumbersome.
The Warehouse Management System (IMS) assigns locations to incoming goods according to storage rules established by the warehouse management department. Goods awaiting storage are typically identified using barcodes. These barcodes are computer-readable. Barcode scanners convert the data into readable information, such as product and packaging details, location, etc.
An Inventory Management System (IMS) defines a storage model based on principles such as First-In, First-Out (FIFO), First-Complete, First-Out (FEFO), and Last-In, First-Out (LIFO) to facilitate subsequent access to stored goods.
Some warehouses employ lighting technology, using system-controlled lights to guide operators to designated storage locations. Storage reports display received goods, their details, and their location within the warehouse.
System Receiving
After goods are received, the quantity is entered into the Inventory Management System (IMS). Warehouse inventory clerks are typically responsible for accurately recording the received quantity and agreed-upon price, while considering incomplete receipts, damaged inventory, and other relevant factors.
The final result is usually a Goods Receiving Note (GRN). After the GRN is issued, the identified goods are typically available for reallocation or sale in the computer system.
Inventory Issuance
The warehouse issues inventory based on received customer orders (including internal and external customers). Issued inventory is called “outbound goods.”
Most warehouse inventory management systems are designed to automatically upload orders to the system for processing. After an order is uploaded, the system detects out-of-stock items and generates a picking list (PL) for the remaining items, indicating the operator’s pickup location.
Similar to warehouse technology, lighting can be used to guide operators to the designated pickup location. Based on the final picking list, the system prints an invoice or Goods Release Order (GIR).
Goods collected in this way are transported to the loading area according to the loading plan. The operations manager develops a daily loading plan (DLP) based on the total number of orders pending shipment that day and the priority of each order. The necessary trucks or trailers for transporting these goods must be prepared, and personnel must be scheduled to perform the loading tasks.
Documentation
Goods released from the warehouse for delivery or transport must be accompanied by necessary documentation. This includes invoices, packing lists, transport documents (for export goods), and in some cases, road transport permits. These documents must be collected in full and readily available to the truck drivers transporting the goods.
Peak-to-Peak Transportation
Peak-to-peak transportation, also known as “peak-to-peak” shipping, is an efficient method of transporting goods without intermediate warehousing. In this method, goods are inspected and immediately loaded onto transport vehicles for direct delivery to the customer.
Peak-to-peak transportation begins at the warehouse’s receiving area, where goods are temporarily consolidated, awaiting receipt or shipment. In some cases, it may also begin at a port, airport, or railway yard, directly delivering to the customer. Peak-to-peak transportation is commonly used to transport goods from suppliers to distributors. It can save time, effort, and costs.
Inventory Counting
Warehouse inventory counting helps ensure the accuracy of inventory. In other words, it verifies whether the actual inventory at a specific point in time matches the inventory recorded in the system.
Annual inventory counting is often a legal requirement for registered businesses. Inventory counts can also be conducted quarterly or semi-annually. Regular inventory counts help identify errors or problems, such as theft. Any discrepancies discovered during the count process are corrected or written off after approval by the authorized manager.
Pest Control
Pests cause billions of dollars in inventory losses annually. All warehouses must be fumigated regularly to prevent damage from insects, rodents, and other pests. Damage caused by these organisms can lead to significant losses of inventory and warehouse infrastructure.
For example, rodents may gnaw on machine wiring or plastic and wooden parts, causing fires or other serious accidents. Pest control methods include fumigation, traps, and poison bait.
Other Value-Added Services
Warehouses often offer value-added services to retain existing customers and attract new ones. These services include packaging, labeling, document processing, and more.
Warehouse Security
The goods stored in warehouses and their infrastructure can be worth millions of dollars, requiring measures to prevent damage, theft, arson, and other threats. Warehouses are committed to protecting the goods entrusted to them by customers.
Surveillance cameras, motion sensors, alarms, and effective patrols inside and outside warehouses are crucial for ensuring the safety of property and goods. Large warehouses may employ a security manager to oversee these matters and maintain good communication and relationships with local police, fire departments, and other local authorities.
Insurance
Warehouse management typically encompasses stored goods, infrastructure, and all other equipment. Warehouse insurance is diverse, including partial and comprehensive coverage for incidents such as fire, flood, and other losses.
However, it must be proven that the loss occurred after the warehouse had taken all possible mitigation measures. Customers can also insure their goods.
Warehouse Machinery and Equipment
Warehouses and storage yards use machinery and equipment to safely and efficiently handle goods and materials, regardless of quantity. This equipment is called material handling equipment (MHE). They are used to assist in loading and unloading goods (from outside to inside), moving heavy objects between different locations, and so on.
Examples of material handling equipment include forklifts, cranes, pallets, heavy-duty pallets for covering goods, and more. Warehouse managers must ensure that all material handling equipment is maintained according to prescribed maintenance schedules and that maintenance contracts are in place.
Modern warehouses are designed to ensure maximum operational efficiency. They are equipped with advanced equipment and software, such as Inventory Management Systems (IMS), to optimize inventory-related processes. IMS is often integrated with Enterprise Resource Planning (ERP) systems to unify different functional departments, thereby improving the organization’s overall capabilities.
However, a skilled and efficient workforce remains crucial for the success of any logistics operation. Despite ongoing efforts in modern automation and digitalization, having professionals capable of managing operations remains essential.
In a highly competitive industry, warehouses that leverage the latest technological trends and possess excellent management and staff will always remain at the forefront of development.
It is worth noting that this article explores some key characteristics and functions of modern warehouses.
Some warehouses may be equipped with state-of-the-art specialized equipment. They may also offer customers additional facilities and services not mentioned in this article.
