Warehousing and Inventory Management
A simple definition of a warehouse is:
‘A warehouse is a planned space for the storage and handling of goods and material.’
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.
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 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.
Policies and Procedures
The policies contain hard and fast rules and regulations that define the general conduct of the warehouse operation. Examples of the types of policies that organisations will define are as follows:
- Organisational specific warehouse management policy and procedures guideline outline
- Health and safety
- Human resources management
- Pest control
- Warehouse maintenance and cleaning
- Quality control
- Record keeping and reporting
- Reverse logistics – Return of goods and exit strategy in the event of downscaling or shutting down operations
- Disposal of obsolete and damaged goods.
The procedures’ document defines step by step how the activities in the warehouse should be carried out and clearly defines the processes to be adopted. These can be adopted as ‘best practice’.
The procedures provide visibility of the operations for managers and donors.
However, in creating such procedures, care must be taken to avoid constraining the use of local initiative which might be required to deal with local conditions. Procedures should be considered as streamlining the business processes and providing checks and balances. They provide guidance to warehouse managers and must have some level of flexibility to cater to unique situations. This can be achieved by limiting the level of detail that the procedures document defines, allowing more flexibility and/or by arranging ‘dispensations’ to allow departure from the procedures in order to optimise local performance, especially in emergencies.
The procedures will normally provide the step by step guidance on how to manage each aspect of warehousing and may cover:
- Receiving and issuing of supplies;
- Quality control or verification;
- Storage of goods;
- How to control stock movement (stock control);
- Documentation flow;
- How to detect and deal with stock losses;
- How rejected material will be managed; and
- How to deal with unwanted material, obsolete and scrap, disposal.
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.
How to Select and Set-Up a Warehouse
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
- The context
- Site condition
- Land size available
- Purpose of warehouse
- Previous use of the facility
- Floor weight
- Access to labour
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.
Aspects to consider when managing Warehouse Operations
- Planning the workload
- Allocating resources
- Space utilization & handling,
- Receiving goods;
- Storing goods.
- Assembling consignments
- Despatching consignments
- Disposal of goods
- Pest control
- Inventory management
- Handling and stacking techniques
- occupational health and safety
Managing Inventory Levels
It has been established that the role of inventory management is to ensure that stock is available to meet the needs of the beneficiaries as and when required.
Inventory represents a large cost to the humanitarian supply chain. This is made up of the cost of the inventory itself, plus the cost of transporting the goods, cost of managing the goods (labor, fumigation, repackaging, etc) and keeping the goods in warehouses. The inventory manager’s job is to make inventory available at the lowest possible cost.
In order to achieve this, the inventory manager must ensure a balance between supply and demand by establishing minimum holding stocks to cover lead-times. To achieve this, the inventory manager must constantly liaise with the programs to keep abreast of changing needs and priorities. The warehouse must always have sufficient stocks to cover the lead-time for replacement stocks to avoid stock-outs.
There are two methods of inventory control that are applicable to emergency situations:
- Reorder level policy
- Reorder cycle policy.
Both are applicable to humanitarian situations and have associated pros and cons. Note that economic order quantity (EOQ) in practice only works in a fairly stable environment where demand variability and replenishment lead-time are reasonably stable and predictable. This is not the case in an emergency. Economic order quantity is applicable in more stable environments such as refugee camps and perhaps later in a relief/recovery phase.
Inventory management in an emergency is more ‘project based’, matching supply with demand in a rapidly changing environment. This requires building a supply chain that has a high level of flexibility and adaptability, with rapid identification of need and rapid fulfilment of that need through the supply chain.
In managing this sort of system, inventory should be considered in relatively small quantities (inventory packages of associated relief items) that are attached (pegged) to an identified need then moved (and tracked) through from source to the identified need (the user).
Optimisation comes from having logistics systems that can configure, procure and consolidate these packages quickly and a distribution chain that is flexible and can adapt to changing requirements quickly and at least cost.
Information systems that facilitate transparency of the supply chain inventory levels, location, and demand provide the necessary visibility to facilitate good planning and effective decisions that maximise services and reduce costs.
Stock control and movements
The warehouse/inventory manager is responsible for monitoring the movement of goods as they are transported from the supplier and for the control of stock movement in the warehouse facility.
The vital stock control measurements include:
- Establish levels of operating stocks based on consumption/rate of usage. The stock levels shall be reviewed from time to time depending on current needs.
- Ensure that weekly and monthly stock balances reports of each stock item and the total value are prepared;
- Maintain monthly stock usage report of each item kept in the store and the overall in the usage trend in last six months;
- Review and report on six monthly basis slow moving items indicating the last movement date the unit value and total value and liaise with user department;
- Establish quantity, lead -time and availability of each item supplied on the market;
- Keep a record of all non- stock items received from suppliers, returned to suppliers and issued out to users.
Monitoring Goods in Transit
- Order lead time
- Tracking orders for goods
- Controlling stock movements:
- Establishing minimum stock levels and monitoring the same;
- Goods receipt quality inspections;
- Physical stock control in the warehouse;
- Controlling Specialised Items; and
- releasing stock from storage and goods despatch.
To facilitate and account for movement of stocks the following documents could be used:
- Delivery notesor waybill
- Goods received notes
- Stock card;
- Bin card; and
- Consignment notes.
Stock Records – Documentation
- Stock identification
- Stack cards
- Bin cards
- Stock Checks: see inventory section for different samples or in the Annexes
- Stock loss reporting
- Reporting of stock levels.