WAREHOUSING OPERATIONS AND STOCK CONTROL STUDY NOTES
CONTENTS
1. Introduction To Warehousing
2. Receiving and Issuing Goods
3. Classification and coding materials
4. Stock location
5. Stores layout.
6. Materials preservation
7. Packaging
8. Materials Handling
9. Inventory Management / Stock Control
10. Stock Recording
11. Stock Taking
12. Safety and Security
INTRODUCTION TO WAREHOUSING
- A warehouse is a commercial building for storage of goods and materials
- A warehouse facilities goods / materials as received stored and later moved to the plant for
production process or to the ultimate consumer.
- Warehouses are used by manufactures, importers, exporters, wholesalers, transport businesses
customs departmentsetc.
- They are usually large plain buildings of in industrial areas of cities and towns.
Common Terms
1. Stores
Store means unworked materials, materials not processed.
2. Store Room
This is the place where stores are housed.
3. Storage
This is the physical holding of stocks or supplies awaiting issues or supplies to customers.
4. Store Keeping
This is the aspect of materials control concerned with the physical storage of goods.
5. Store management
Some deals with planning, coordinating and control of various activities pertaining to efficient and
economic storage and store keeping.
6. Stocks
Stocks are items held in the storehouse pending use or issue
7. Supplies
Supplies are all materials goods and services used in an enterprise regardless of weather they are
purchased outside transferred from another branch of manufactured inside.
8. Customer
Customer is a term applied to internal and external purchasers and users of stocks and supplies.
WAREHOUSING OPERATION NOTES 2 Prepared by Mr. Antony Ambia Page 1
,SUPPLY FUNCTION
- The control of inventory and management of supply is a specialist activity
- The supply function has a responsibility for;
i) Receipt – goods must conform to specifications
ii) Custody – ensure security and safety.
iii) Distribution of very large sums of money worth of goods.
iv) Determination of appropriate quantity of materials to be held in order to ensure operational
needs are met in the most economic manner possible.
ROLES / USE / FUNCTION OF A WAREHOUSE
The primary objective of a warehouse, is to provide services to user departments which include;
1. Making available as balance flow of materials as and when needed so as to meet operational
requirements.
2. Account for all receipts, issues and goods in store.
3. Safe custody of all materials working progress and finished goods and safeguard them
against theft & deterioration.
4. Cost reduction. An organization is able to take advantage on economies of scale ( benefits of
buying in bulks)
5. Receives inspects and stores the materials
6. Serves the purpose of stock control
HOW WAREHOUSING ADDS VALUE TO AN ORGANISATION
1. Breaking bulk
- Breaking bulk is where goods are supplied in large quantities because of economies of scale.
- This saves the organization money as they enjoy huge discounts and then issuing the goods in
small quantities to customers and users.
- The warehouse therefore assists in a more efficient matching of demand and supply
2. Creating bulk
- It may be in a case of certain product produced in certain small quantities at different locations
and need to be brought together into larger loads for economic shipment to the market or user.
- The accumulation of small quantities into large quantities to be processed or transported is a way
that a warehouse adds value to an organization.
3. Smoothing
- In manufacturing supply and demand of finished products is never the same and so a
warehouse smooths the fluctuating demand and supply by ensuring that manufactures always
produce to capacity but keep away the excess to supplies to meet the demand when it will
outstrip supply.
4. Combining
- Materials are sold in retail outlets from different sources.
- A warehouse acts as a store for these items from different sources and hence meets the tastes
and preferences of all customers, consumers and users.
- Raw materials for manufacturing process may be from different sources and a warehouse
brings them all together to be used in the manufacturing plant (process).
- This is combining as a way of adding value
WAREHOUSING OPERATION NOTES 2 Prepared by Mr. Antony Ambia Page 2
, 5. Cutting down cost
- Through proper storage, materials handling & classification
standardization, proper specifications etc.
- A warehouse helps an organization cut costs.
ADVANTAGES OF WAREHOUSING
1. Goods can be prepared for sale when in the warehouse (in bond)
2. Importers can look for market before paying duty
3. Goods sold on bond, the duty passes to the buyer.
4. Warehouses enable the government to check on prohibited goods and smuggling
5. Duty paid for goods in the warehouse is revenue for the government
6. Some goods lose weight while in the warehouse and so if duty is paid according to
weight then the duty paid becomes less.
Logistic – system of moving an item
7. Buys goods at low prices and when prices shoot up they sell them at high prices making a lot
of profit.
DISADVANTAGES
1. A warehouse holds a lot of capital in the form of raw material work in progress (WIP) stock in
finished goods which may affect the other operations of the firm.
A firm may run into cash flow problems.
2. Theft is common via warehousing since the staff may not make regular checks to some
parts of the warehouse
3. Initial capital investment in the construction or leasing of a warehouse is very high and add to the
expenses of the firm.
4. When goods are procured at a high price and then the price falls in the market it becomes hard to sell
them.
5. Hold – holding goods in warehouse to create artificial shortage and price.
METHODS OF WAREHOUSING
There are three methods of warehousing
1. Centralized w/h
2. Decentralize w/h
3. Combined w/h
CENTRALIZED WAREHOUSE
A centralized warehouse is a warehouse that is set up to take care of all the needs of an enterprise
together with all departmental needs.
The warehouse is located at one central place where all departments visit for all their requisitions.
ADVANTAGES (BENEFITS)
a. Improvement in handling procedures via training of warehousing staff.
b. Avoids duplication of records and activities.
c. Use of modern technology, inventory software and equipment is possible.
d. Easy co-ordination btwn warehouse departments
e. Consistence in quality isassured.
f. Enterprise can benefit from economies of scale via buying in bulk.
g. Storage costs are low due to the economies of scale in storage
WAREHOUSING OPERATION NOTES 2 Prepared by Mr. Antony Ambia Page 3
, h. Overheads are shared btwn departments.
DISADVANTAGES
a. Rate of material deteriolization is likely to be high.
b. Distance btwn warehouse and departments may be so far hence time is wasted in making
requisitions and collecting issues.
c. Cost of the inventory tends to be high due to the fact that the warehouse staff is not close to the
department to know the rate of turnover.
d. Procurement procedures are lengthy and hence stock-outs are common.
For manufacturing firms a warehouse main function is to provide service to the operating departments. This service
can be divided into five parts namely:
a) To make available a balanced flow of materials components, tools, equipment and any other materials
necessary to meet operational requirements.
b) To provide maintenance repair and operational (M.R.O) Material requirements as well as spare parts
and general stores requirements.
c) To receive and issue work in progress (WIP) and finished products
d) To accept and store scrap and other discarded material as it arises.
e) To account for all receipts, issues and goods in stock.
A warehouse is therefore not a subsiding of other departments but is currently
considered a department in its own might considering the cost implication it carries to the overall
performance of an organization
DECENTRALISED WAREHOUSE
This is where each department stocks it s won materials in a warehouse where receipts to receive goods
and issues are made.
ADVANTAGES OF DECENTRALISED WAREHOUSE (BENEFITS)
i) Individual needs of departments are well taken care of due to the small staff and the
inventory in question.
ii) Issuing is easy as there is little beurocracy for departments and warehouse
iii) There is closer relationship with suppliers.
iv) Local suppliers and consequent lower transportation costs.
DISADVANTAGES.
1. Capital investment of constructing or leasing on each warehouse is very high.
2. The overheads for each warehouse add up to the big overall expenditure for enterprise.
3. Warehouse staff report to many live manager that there is confusion.
4. Co-ordination btwn department doesn’t exist in procurement procedure and so a lot is spent
o repeat purchasing.
5. Decentralized warehouse increases the cost of production thus making the
products not competitive into the market.
COMBINED WAREHOUSE
- This is where an organization has a main warehouse where productions of every department
WAREHOUSING OPERATION NOTES 2 Prepared by Mr. Antony Ambia Page 4
CONTENTS
1. Introduction To Warehousing
2. Receiving and Issuing Goods
3. Classification and coding materials
4. Stock location
5. Stores layout.
6. Materials preservation
7. Packaging
8. Materials Handling
9. Inventory Management / Stock Control
10. Stock Recording
11. Stock Taking
12. Safety and Security
INTRODUCTION TO WAREHOUSING
- A warehouse is a commercial building for storage of goods and materials
- A warehouse facilities goods / materials as received stored and later moved to the plant for
production process or to the ultimate consumer.
- Warehouses are used by manufactures, importers, exporters, wholesalers, transport businesses
customs departmentsetc.
- They are usually large plain buildings of in industrial areas of cities and towns.
Common Terms
1. Stores
Store means unworked materials, materials not processed.
2. Store Room
This is the place where stores are housed.
3. Storage
This is the physical holding of stocks or supplies awaiting issues or supplies to customers.
4. Store Keeping
This is the aspect of materials control concerned with the physical storage of goods.
5. Store management
Some deals with planning, coordinating and control of various activities pertaining to efficient and
economic storage and store keeping.
6. Stocks
Stocks are items held in the storehouse pending use or issue
7. Supplies
Supplies are all materials goods and services used in an enterprise regardless of weather they are
purchased outside transferred from another branch of manufactured inside.
8. Customer
Customer is a term applied to internal and external purchasers and users of stocks and supplies.
WAREHOUSING OPERATION NOTES 2 Prepared by Mr. Antony Ambia Page 1
,SUPPLY FUNCTION
- The control of inventory and management of supply is a specialist activity
- The supply function has a responsibility for;
i) Receipt – goods must conform to specifications
ii) Custody – ensure security and safety.
iii) Distribution of very large sums of money worth of goods.
iv) Determination of appropriate quantity of materials to be held in order to ensure operational
needs are met in the most economic manner possible.
ROLES / USE / FUNCTION OF A WAREHOUSE
The primary objective of a warehouse, is to provide services to user departments which include;
1. Making available as balance flow of materials as and when needed so as to meet operational
requirements.
2. Account for all receipts, issues and goods in store.
3. Safe custody of all materials working progress and finished goods and safeguard them
against theft & deterioration.
4. Cost reduction. An organization is able to take advantage on economies of scale ( benefits of
buying in bulks)
5. Receives inspects and stores the materials
6. Serves the purpose of stock control
HOW WAREHOUSING ADDS VALUE TO AN ORGANISATION
1. Breaking bulk
- Breaking bulk is where goods are supplied in large quantities because of economies of scale.
- This saves the organization money as they enjoy huge discounts and then issuing the goods in
small quantities to customers and users.
- The warehouse therefore assists in a more efficient matching of demand and supply
2. Creating bulk
- It may be in a case of certain product produced in certain small quantities at different locations
and need to be brought together into larger loads for economic shipment to the market or user.
- The accumulation of small quantities into large quantities to be processed or transported is a way
that a warehouse adds value to an organization.
3. Smoothing
- In manufacturing supply and demand of finished products is never the same and so a
warehouse smooths the fluctuating demand and supply by ensuring that manufactures always
produce to capacity but keep away the excess to supplies to meet the demand when it will
outstrip supply.
4. Combining
- Materials are sold in retail outlets from different sources.
- A warehouse acts as a store for these items from different sources and hence meets the tastes
and preferences of all customers, consumers and users.
- Raw materials for manufacturing process may be from different sources and a warehouse
brings them all together to be used in the manufacturing plant (process).
- This is combining as a way of adding value
WAREHOUSING OPERATION NOTES 2 Prepared by Mr. Antony Ambia Page 2
, 5. Cutting down cost
- Through proper storage, materials handling & classification
standardization, proper specifications etc.
- A warehouse helps an organization cut costs.
ADVANTAGES OF WAREHOUSING
1. Goods can be prepared for sale when in the warehouse (in bond)
2. Importers can look for market before paying duty
3. Goods sold on bond, the duty passes to the buyer.
4. Warehouses enable the government to check on prohibited goods and smuggling
5. Duty paid for goods in the warehouse is revenue for the government
6. Some goods lose weight while in the warehouse and so if duty is paid according to
weight then the duty paid becomes less.
Logistic – system of moving an item
7. Buys goods at low prices and when prices shoot up they sell them at high prices making a lot
of profit.
DISADVANTAGES
1. A warehouse holds a lot of capital in the form of raw material work in progress (WIP) stock in
finished goods which may affect the other operations of the firm.
A firm may run into cash flow problems.
2. Theft is common via warehousing since the staff may not make regular checks to some
parts of the warehouse
3. Initial capital investment in the construction or leasing of a warehouse is very high and add to the
expenses of the firm.
4. When goods are procured at a high price and then the price falls in the market it becomes hard to sell
them.
5. Hold – holding goods in warehouse to create artificial shortage and price.
METHODS OF WAREHOUSING
There are three methods of warehousing
1. Centralized w/h
2. Decentralize w/h
3. Combined w/h
CENTRALIZED WAREHOUSE
A centralized warehouse is a warehouse that is set up to take care of all the needs of an enterprise
together with all departmental needs.
The warehouse is located at one central place where all departments visit for all their requisitions.
ADVANTAGES (BENEFITS)
a. Improvement in handling procedures via training of warehousing staff.
b. Avoids duplication of records and activities.
c. Use of modern technology, inventory software and equipment is possible.
d. Easy co-ordination btwn warehouse departments
e. Consistence in quality isassured.
f. Enterprise can benefit from economies of scale via buying in bulk.
g. Storage costs are low due to the economies of scale in storage
WAREHOUSING OPERATION NOTES 2 Prepared by Mr. Antony Ambia Page 3
, h. Overheads are shared btwn departments.
DISADVANTAGES
a. Rate of material deteriolization is likely to be high.
b. Distance btwn warehouse and departments may be so far hence time is wasted in making
requisitions and collecting issues.
c. Cost of the inventory tends to be high due to the fact that the warehouse staff is not close to the
department to know the rate of turnover.
d. Procurement procedures are lengthy and hence stock-outs are common.
For manufacturing firms a warehouse main function is to provide service to the operating departments. This service
can be divided into five parts namely:
a) To make available a balanced flow of materials components, tools, equipment and any other materials
necessary to meet operational requirements.
b) To provide maintenance repair and operational (M.R.O) Material requirements as well as spare parts
and general stores requirements.
c) To receive and issue work in progress (WIP) and finished products
d) To accept and store scrap and other discarded material as it arises.
e) To account for all receipts, issues and goods in stock.
A warehouse is therefore not a subsiding of other departments but is currently
considered a department in its own might considering the cost implication it carries to the overall
performance of an organization
DECENTRALISED WAREHOUSE
This is where each department stocks it s won materials in a warehouse where receipts to receive goods
and issues are made.
ADVANTAGES OF DECENTRALISED WAREHOUSE (BENEFITS)
i) Individual needs of departments are well taken care of due to the small staff and the
inventory in question.
ii) Issuing is easy as there is little beurocracy for departments and warehouse
iii) There is closer relationship with suppliers.
iv) Local suppliers and consequent lower transportation costs.
DISADVANTAGES.
1. Capital investment of constructing or leasing on each warehouse is very high.
2. The overheads for each warehouse add up to the big overall expenditure for enterprise.
3. Warehouse staff report to many live manager that there is confusion.
4. Co-ordination btwn department doesn’t exist in procurement procedure and so a lot is spent
o repeat purchasing.
5. Decentralized warehouse increases the cost of production thus making the
products not competitive into the market.
COMBINED WAREHOUSE
- This is where an organization has a main warehouse where productions of every department
WAREHOUSING OPERATION NOTES 2 Prepared by Mr. Antony Ambia Page 4
