PHYSICAL INVENTORY & WAREHOUSE LAYOUT

PLANNINGBy:-

Chinmaya Kumar Sahu

Aswini Kumar Nayak

INDIAN INSTITUTE OF TOURISM & TRAVEL MANAGEMENT

INVENTORY DEFINITION

A stock of items held to meet future demand

Inventory is a list for goods and materials, or those goods and materials themselves, held available in stock by a business

Introduction

Constitute significant part of current assets

On an average approximately 60% of current assets in Public Limited Companies in India

A considerable amount of fund is required

Improper inventory affects long term profitability and may fail management ultimately

10 to 20% of inventory can be reduced without anyadverse effect on production and sales by usingsimple inventory planning and control techniques

Types of Inventory

Work in

process

Work in

process

Work in

process

Finished

goods

Raw

Materials

Vendors Customer

Nature of Inventories

Raw Materials – Basic inputs that are converted into finished product through the manufacturing process.

Work-in-progress – Semi-manufactured products need some more works before they become finished goods for sale.

Finished Goods – Completely manufactured products ready for sale.

Supplies – Office and plant cleaning materials not directly enter production but are necessary for production process and do not involve significant investment.

Reasons To Hold Inventory

Meet variations in customer demand:

Meet unexpected demand

Smooth seasonal or cyclical demand

Pricing related:

Temporary price discounts

Hedge against price increases

Take advantage of quantity discounts

Process & supply surprises

Internal – upsets in parts of or our own processes

External – delays in incoming goods

An optimum inventory level involves three types

of costsOrdering costs:-

Quotation or tendering

Requisitioning

Order placing

Transportation

Receiving, inspecting and storing

Quality control

Clerical and staff

Stock-out cost

Loss of sale

Failure to meet delivery commitments

Carrying costs:-

Warehousing or storage

Handling

Clerical and staff

Insurance

Interest

Deterioration, shrinkage,

evaporation and obsolescence

Taxes

Cost of capital

Dangers of Over investment

Unnecessary tie-up of firm’s fund and loss of profit – involves opportunity cost

Excessive carrying cost

Risk of liquidity- difficult to convert into cash

Physical deterioration of inventories while in storage due to mishandling and improper storage facilities

Dangers of under-investment

Production hold-ups – loss of labor hours

Failure to meet delivery commitments

Customers may shift to competitors which will amount to a permanent loss to the firm

May affect the goodwill and image of the firm

Functions of Inventory Management

-Track inventory

–How much to order

–When to order

FACTORS INFLUENCING EFFECTIVE USE OF WAREHOUSES

• Cube utilization and accessibility

• Stock location

• Order picking and assembly

• Physical Control & Security - Elements

12

Design Criteria

•Warehouse design criteria address physical facility characteristics and product movement.

•Three factors to be considered in the design process are:•the number of store's in the facility,

•height utilization, and

•product flow.

PRINCIPLES OF WAREHOUSE LAYOUT DESIGN

Use one-story

facilities

Move goods in a

straight line

Use efficient

materials-handling

equipment

Use an effective

storage plan

Minimize aisle space

Use maximum height

of the building

DESIGN CONSIDERATION

Ideal Facility for Pure Supplier

Consolidation

(Full Pallet Movement)

Warehouse Space

Requirements

Cube utilization and accessibility

• Goods stored not just on the floor, but in the cubic

space of the warehouse; warehouse capacity

depends on how high goods can be stored

• Accessibility means being able to get at the goods

wanted with a minimum amount of work

Cube utilization and accessibility continued…

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Height utilization

•Regardless of facility size, the design should maximize the usage of the available cubic space by allowing for the greatest use of height on each floor.

•Most warehouses have 20- to 30-feet ceilings (1 foot = 12 inch; 1 inch = 2.54 cm), although modern automated and high-rise facilities can effectively use ceiling heights up to 100 feet.

•Through the use of racking or other hardware, it should be possible to store products up to the building's ceiling.

•Maximum effective warehouse height is limited by the safe lifting capabilities of material-handling equipment, such as forklifts.

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Storage Plan

•According to the third principle, a warehouse design should consider product characteristics, particularly those pertaining to volume, weight, and storage.

•Product volume is the major concern when defining a warehouse storage plan.

•High-volume sales or throughput product should be stored in a location that minimizes the distance it is moved, such as near primary aisles and in low storage racks.

•Such a location minimizes travel distance and the need for extended lifting.

•Conversely, low-volume product can be assigned locations that

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A Sample Storage Area

Thank You!!