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Physical Inventory and Warehouse Management. Chapter 12. Warehouse Functions. Provide timely customer service Keep track of items Minimize physical effort and goods moving costs Provide a communication link with customer. Pick goods Marshall the shipment Dispatch the shipment

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warehouse functions
Warehouse Functions
  • Provide timely customer service
  • Keep track of items
  • Minimize physical effort and goods moving costs
  • Provide a communication link with customer
warehouse activities
Pick goods

Marshall the shipment

Dispatch the shipment

Operate an Information System

Warehouse Activities
  • Receive goods
  • Identify goods (SKU or P/N)
  • Dispatch goods
  • Hold goods
maximize productivity minimize cost
Maximize Productivity & Minimize Cost
  • Maximum use of space
    • Space is usually the largest capital cost
  • Efficient use of labor
    • The largest operating cost
  • Efficient use of equipment
    • Equipment is usually the second largest capital cost
cube utilization accessibility
Cube Utilization & Accessibility
  • Factors influencing effective use of warehouses
    • Cube utilization and accessibility
    • Stock location
    • Order picking and assembly
pallet position example
Pallet Position Example
  • Cube utilization and accessibility
    • Goods stored on floor and in racks above to utilize all available space
    • Accessibility means being able to get at the goods wanted with minimal effort
stock locations
Stock Locations
  • Stock Location
    • Items grouped functionally
    • Items grouped by sales volume (fast-moving together)
    • Items grouped by similarity (i.e. size, container, special storage requirements, etc.)
    • Separate working stock and safety stock
stock locations1
Stock Locations
  • Fixed location
  • Floating location
  • Point-of-use storage (POUS)
    • Close to where it’s needed
    • Found in JIT and lean environments
  • Central storage
    • Inventory contained in central location (Tool cribs)
order picking systems
Order Picking Systems
  • Area
  • Zone
  • Multi-Order
inventory record accuracy
Inventory Record Accuracy
  • Accurate inventory records enable firms to:
    • Operate effective materials management systems
    • Maintain satisfactory customer service
    • Operate effectively & efficiently
    • Analyze inventory
inventory record accuracy1
Inventory Record Accuracy
  • Inaccurate inventory records will result in:
    • Lost sales, shortages, & disrupted schedules
    • Excess inventory (of the wrong things)
    • Ineffective MRP / MRPII / ERP
inventory record accuracy2
Inventory Record Accuracy
  • Causes of Inaccuracy
    • Unauthorized withdrawal of material
    • Unsecured stockrooms
    • Poorly trained personnel
    • Inaccurate transaction recording
    • Poor transaction recording system
    • Lack of audit capability
inventory record accuracy3
Inventory Record Accuracy
  • Measuring Inventory Record Accuracy
    • 100% is not practical
    • Tolerance
      • Permissible variation (record vs count)
      • Set based on
        • Unit value
        • Criticality
        • Availability
        • Lead Time
        • Etc.
auditing inventory records
Auditing Inventory Records
  • Periodic Counts (typically annual)
    • Process

1. Count items & record count on a ticket

2. Verify count by recounting or sampling

3. When verification is finished, collect tickets and list items in each department

4. Reconcile inventory records for differences

(physical count vs inventory dollars)

auditing inventory records1
Auditing Inventory Records
  • Cycle Counts
    • Takes place throughout the year
    • Advantages
      • Timely detection and correction of errors
      • Complete or partial reduction of lost production
      • Uses personnel trained & dedicated therefore minimizing “once-a-year” errors
    • Count Frequency
      • Number of times item is counted annually
cycle counting methods
Cycle Counting Methods
  • ABC Method
    • Based upon part activity, Reference Chapter 10
  • Zone Method
    • Typically employed on fixed location or WIP inventory
  • Location Audit System
    • Typically used in floating inventory settings