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Techniques in Supply Chain Management

“Warehousing is an integral part of the logistics supply chain and it is important that it is seen as such, and that the planning of warehouse design and operations should be within the overall context and objectives of the total supply chain. Unless this happens, there is the risk of sub-optimizing warehouse operations, at the overall supply chain.”

Warehousing is generally defined as “the storage of goods before their use”1. That was just the warehouse’s role up to fifteen years ago when the logistics supply chain philosophies arrived. Since then the warehouse has obtained a strategic role, and has become an integral part of the logistics supply chain. As for the planning of warehouse design and operations they have become one with the overall context and objectives of the total supply chain and the logistic goals. These objectives are:

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  • Shorter cycle times
  • Lower costs
  • Better customer services

The warehouse today is focused in speed, since a product may be only stored for a few days or even hours.

What is also important is that by looking warehousing from a macroeconomic angle it creates time utility for raw materials, industrial goods and finished products. Time availability of goods is broadened and customers receive the goods when and where they need them most.

Taking a closer look at the role of warehousing in the logistics system we observe that the warehouse serves certain value-adding roles. One of them is transportation consolidation.

This is the moving of small amounts of goods2 to or from a warehouse in order to consolidate these small shipments into a large one, with significant transportation savings that save further cost and don’t add value to the goods. Another warehousing function is the product mixing of the customer. Customers may sometimes order for a different amount of goods in type, size e.t.c. . This can be deled with the development of mixing warehouses nearby, so small vehicles can gather the goods and avoid further cost and delay3.

A warehouse also provides customer services. Having the goods available when the order is made and shipped directly leads to customer satisfaction. Also, warehousing can play the role of protection against contingencies4. This is very important because it is crucial to have a defence to the case of not being able to deliver the raw materials, otherwise, there will be a delay in the production of finished goods. Finally, warehousing can smooth operations in the manufacturing process allowing the company to reduce its manufacturing capacity investment.

Concerning warehousing decisions and operations, the general warehousing decisions have to do with the subjects of ownership, design and layout, centralization versus decentralization number, location, size, items stocked and employee safety. However, the primary warehouse operations are two:



Movement is vital to the proper function of the warehouse system and is divided into four sub-categories:

  • Receiving goods into the warehouse from the transport network
  • Transferring goods into a particular location in the warehouse
  • Selecting particular combinations of goods for customer orders or raw materials for production
  • Loading goods for shipping to the customer or to the production line5

In the movement function we have a distribution and cross-docking activity for finished goods. The reason for the rapid movement of the finished goods stock is the high cost of holding them at the warehouse.

As far for the storage of goods especially in cross-docking warehouses the time of holding the goods is short. The only goods that the company has an interest in holding for further time are the raw materials because of their lower value. Raw materials also involve less risk and require plain storage facilities and also there are cases that involve large quantity purchase discounts.

One of the most common reasons to hold to finished goods is the seasonal demand. This includes goods associated with Christmas or Easter or Halloween e.t.c. .

Determining the warehouse space requirements a demand forecast for the company’s products must first be developed. After calculating all parameters end estimate all data the warehouse planning is complete. The warehouse must have the following elements to be complete:

  • Receiving space
  • Shipping space
  • Order assembly facility
  • Storage space
  • Space for offices
  • Space for miscellaneous activities

A very important point in warehouse planning is flexibility. Flexibility is the key customer requirement, because it involves the response to customer needs, and therefore gives a competitive advantage. Another point are the 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 the maximum height of the building

Something that also helps is the automization6. Automatic handling and storage should only be used when the following occur:

  • Low product range
  • High throughput
  • High labour costs
  • High transport costs
  • Bar code
  • High profit margins

The final point has to do with the number of warehouses7. The greater the number of warehouses in a logistic system, the lower the transportation and sales cost, but higher the warehousing and inventory cost.



1. “Remote controlled distribution center”, by Mario K. Broggi

2. “Designing the warehouse for flexibility’, by Ian Thomson.

3. Business Operation notes.

4. “The Management of Business Logistics”, by Coyle-Bardi-Langley 6th edition

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Techniques in Supply Chain Management. (2021, Feb 02). Retrieved July 9, 2021, from