Working Notes on Warehouse

& Inventory Management

- Discussion and Progressive Analysis
 Alignment of co’s warehouse and inventory
strategy with overall business strategy

01 02 03
UNDERSTAND ANALYZE MONITOR
BUSINESS
OBJECTIVE
 TYPES OF INVENTORY
! 1. Based on stages of production: Raw materials – Direct, Indirect; WIP, Finished
goods
! 2. Based on function – MRO, safety stock, Pipeline inventory
! 3. Miscellaneous – Consignment (owned by supplier held in the retailers’ premises),
Excess inventory, Cycle stock
 COSTS ASSOCIATED WITH INVENTORY
! 1. ORDERING COST – admin/clerical costs (PO making), id the suppliers,
negotiating & contracting
! 2. CARRYING COST – Holding cost – refrigeration, rentals, etc.
! 3. SHORTAGE/STOCKOUT COSTS
! 4. SPOILAGE COSTS (damaged goods)
 IMPACT OF INVENTORY ON BUSINESS
PERFORMANCE
! 1. Impact on competitive advantage
! 2. Customer Satisfaction
! 3. Impact on financial performance – cost reduction, better cash flow, more
profitability, enhanced ROA
! 4. Operational performance – production efficiency, warehouse optimization
! 5. Inventory management care – demand forecasting, Inventory tracking
 EOQ Model – Optimal Order Policy
! 1. Assumptions – Constant demand, Known demand, constant lead time, constant
ordering costs, constant holding costs, no quantity discount, instantaneous
replacement
! 2. Limitations – Unrealistic expectations, Data inaccuracy, Static model (does not
account for sudden business changes)
! 3. Formula: EOQ = sqrt (2KD/h); K – set up cost = 200 per order; D – annual
estimated demand = 35,000 units; h – holding cost = 20% of unit price = 20% * 20=
Rs 4. Hence, EOQ = 1,871 UNITS
THE STRATEGIC ROLE OF WAREHOUSING
& INVENTORY
! 1. Understand your business objectives – profitability, increase productivity, sales/revenue, market
share, CSAT, Brand awareness, automation
! - KPI: Inventory Turnover: Inventory turnover is one of the warehouse KPI metrics that measures how
often inventory is sold and replaced over a specific period. High inventory turnover indicates efficient inventory
management and strong sales, while low turnover might signify overstocking or slow-moving items.
! Formula: Cost of Goods Sold / Average Inventory Value
! 2. Gap analysis of your current warehouse and inventory processes: SWOT
! 3. Detailed implementation plan – steps – timelines – resources
RACI MATRIX => SCRUM MASTER (Sprints) – communicate with stakeholders – monitor progress, feedback + continuously improve
(have the best in class technologies) + collaboration
THE STRATEGIC ROLE OF WAREHOUSING
& INVENTORY
! Order Picking Accuracy: This metric measures the accuracy of the picking process through the percentage
of items picked correctly in an order. It helps assess the accuracy of the picking process and identify
opportunities to reduce errors and improve efficiency.
Formula: (Number of Accurately Picked Orders / Total Number of Orders Picked) * 100%
! Cycle time refers to the total time from the moment an order is received to when it's shipped. This metric
encompasses several processes, including picking, packing, and shipping. Lower order cycle
times mean orders are fulfilled faster, improving customer satisfaction and potentially leading to higher
sales.
Formula: Sum of Total Order Processing Time / Number of Orders
! Receiving Efficiency
! This warehouse efficiency metrics measures the effectiveness of the goods receiving process. Receiving
efficiency measures how effectively items are received and inspected upon arrival at the warehouse.
! A higher warehouse receiving efficiency indicates less time spent on the receiving process, which can lead
to higher productivity and cost savings.
! Formula: Number of Items (inventory) Received and Inspected / Total Time Taken
! 2. Put-away Time
! Put-away time is one of the key warehouse productivity metrics measures the duration between an item's
arrival and its storage in the warehouse. A shorter putaway time signifies more efficient operations,
reducing storage and labor costs.
! High put-away times may indicate inefficiencies in storage allocation or warehouse layout, necessitating
process improvements or physical changes.
! Formula: Total Time from Receiving to Storage / Number of Items
 JUST IN TIME (people, process, technology)
! 1. Identify Key Areas: Determine the areas in your warehouse that are used for receiving,
storage, picking, packing, and shipping.
! 2. Streamline Flow to minimize distance and time from one step to another
! 3. Implement IMS – Track, demand forecasting, automated ordering,
! 4. Train your employees – attitude orientation
! 5. Supplier Relationship Management (preferred suppliers or tier-1 suppliers – train them,
workshops, invite to conferences, joint initiatives, resources -> long-term partnership)
! 6. Lean Principles
 ABC Analysis
! A-category - > Most valuable -> Tighter control
! B-category -> Moderately valuable -> Medium level
! C-category -> Less valuable -> Automated
! The Lean Transformation at [Manufacturing Company Name] (JIT Focus)
• Company: Choose a real-world manufacturing company (e.g., in automotive, electronics, or consumer goods) that has publicly documented its journey to
implement Lean manufacturing principles, including Just-In-Time (JIT) inventory. Look for companies like Toyota (the classic example), or other companies that
have shared their experiences through annual reports, case studies, or press releases.
• Case Study Focus:
• The "Before" Picture: Describe the company's initial situation – their inventory challenges, production bottlenecks, lead times, and financial performance
before implementing JIT. Include quantifiable data where possible (e.g., inventory turnover, production cycle time, defect rates).
• The JIT Implementation: Detail the steps the company took to implement JIT. This should cover changes in:
• Supplier relationships (e.g., moving to fewer, more reliable suppliers, establishing long-term contracts).
• Production processes (e.g., cellular manufacturing, Kanban systems, 5S methodology).
• Inventory management (e.g., reducing lot sizes, frequent deliveries, point-of-use storage).
• Information systems (e.g., ERP integration, real-time data visibility).
• Organizational culture (e.g., empowering employees, cross-functional teams).
• The "After" Picture: Analyze the results of the JIT implementation. What were the improvements in key metrics like inventory levels, lead times, quality,
customer satisfaction, and profitability? Quantify the benefits wherever possible.
• Challenges and Lessons Learned: What obstacles did the company encounter during the JIT implementation? How did they overcome these challenges?
What lessons can other companies learn from their experience?
• QUESTIONS:
• A) ANALYZE THE COMPANY’S JIT IMPLEMENTATION STRATEGY.
• PROVIDE RECOMMENDATIONS TO IMPROVE THE PROCESS FROM JIT PERSPECTIVE
• ASSESS RISKS ASSOCIATED WITH JIT AND SUGGEST WAYS TO MITIGATE THEM
 Distribution Strategies
! 1. DIRECT
! 2. INDIRECT
! 3. CROSS-DOCKING
 DIRECT STRATEGY (D2C)
! BENEFITS
! 1) Avoids the cost of distribution centers/warehouses
! 2) Lead Time is reduced
! 3) Perishable goods
! DISADVANTAGE
! 1) RISK POOLING (CENTRAL WAREHOUSE OT FULFILLMENT CENTERS) cannot
be done hence can be disadvantageous for some manufacturers
! 2) High transportation costs
! - Fully loaded trucks can offset the cost
 Direct strategy contd.
! 1) Fully loaded trucks
! 2) Large retailers compel the manufacturer to ship directly
! 3) Fragile/light/large products. Special handling goods
 CASE STUDY – DELHIVERY LOGISTICS
! Point to Point Networking
! Huge network of partners – 6000 partners
! 18000 pin codes
! 5 strategy – NETWORK, LOGISTICS, MODEL, ASSET LIGHT, ONE STOP
SOLUTION
Curiosity Project: FLIPKART VS DELHIVERY
! A) Revenue
! B) Market share
! C) Geographical scope
! D) Operations – people, processes, technology
! E) COST Management
 COMPARATIVE ANALYSIS
ATTRIBUTE DIRECT CROSS DOCKING INDIRECT
RISK POOLING NOT FEASIBLE NOT FEASIBLE YES - LEVERAGE
TRANSPORTATION Higher High Lower (Hub and Spoke
COSTS model and hence in the
long run, TCO would be
lower)
HOLDING COSTS No Very low Highest
ALLOCATION Delayed Delayed
CASE STUDY – MUMBAI DABBAWALLAHS
! 99.999999%
! Almost with no technology – Cycle, Trains, SMS, FREE INCOME
! Mission statement
! Employee
! Coding System –
! Distribution Strategy: X (Collecting – Milk-run) + Y (Hub and spoke model) + Z (Just in
time)
! Challenges – New generation may not be willing to work as hard; Technology; Operational
costs are rising; WFH culture
 Reverse Logistics
! 2020 - $550 bn worth goods were returned
! 20% of the goods are returned
! Reverse Logistics – a) Integrate into the forward distribution strategy; b) Implement a dedicated reverse logistics
strategy

! Differences:
! - Packing
! - Quality of returns needs to be checked; repairing cost might be involved
! - Returned goods can be sold in secondary markets
! - Decide if the returned goods need to be kept in a warehouse
Types of IMS Key Purpose Target Audience Features/Differentiators

Standalone IMS Focus on inventory Small-medium sized Cost effective, user-

Inventory Management Software
tracking and control businesses friendly, fast
implementation
Warehouse Manage all warehouse Businesses with Slotting optimisation,
Management System operations - receiving, dedicated warehouse, labour management, yard
put away, storage, distribution centres and management, integrate
picking, packing, logistics operations with MHE
shipping
ERP System Comprehensive software Large scale companies Eliminates silos, robust
suites - manages core analytics reporting,
process - connects streamlines cross
various domains like HR, departmental workflows;
Sales, Manufacturing, IT, cons: Expensive, time
Marketing, SC, consuming, complex
Inventory, etc. implementation, change
management
Supply Chain Focused on the entire Larger companies with Advanced demand
Management Systems flow of goods, info and complex global supply planning and forecasting,
finances from initial chains supplier collaboration
supplier to end consumer tools, logistics network
 IMS
! Automate stock management
! Track inventory levels, orders, sales, etc.
! Goal of IMS -> Right stock at right place, right time, right cost - minimise the
holding costs, prevent stockout or overstocking
 Selection criteria for IMS
! 1) Business size & complexity
! 2) Required functionality
! 3) Integration requirements
! 4) Scalability
! 5) Compliance reporting
! 6) Budget - TCO (total cost of ownership)- different costs like h/w, training, etc.
! 7) Ease of usage and training
! 8) Reputation of vendor
! 9) Deployment models - cloud based vs on premise
! 10) Reporting and analytics
 Future trends in WIM

a) The exponential growth of e-

commerce
b) Increased customer expectations
c) Labor shortage and costs
d) Increasing complexity of global
supply
e) Need for greater resilience
against disruptions
 Trends

! 1) Internet of Things: Creating

connected warehouses: pallets-
containers-MHE-shelves- connected
by IOT sensors -> Advantage : real
time and continuous visibility into
stocks, pallets, etc. IOT sensors are
better than previous generation
barcode scanners
 Trend 2
! Condition monitor - Temperature, humidity, light exposure, perishable items like
pharmaceutical, electronics, etc.
! Asset Tracking - Track location, usage patterns, MHE operational status, Robotic
carriers (number of vehicles (fleet size) and utilisation rates)
! Predictive maintenance : a) MHE sensors - how can they help in predictive
maintenance? b) Enhanced safety and security features e.g. geofencing
 Trend 3 - AI & ML
! A) Demand forecasting -> High customer satisfaction, right safety stock
! B) Detecting anomalies
! C) Operational efficiency - Cycle time drops significantly
! D) Labor dynamics - shortage of skilled labor in different markets especially in the
US
! Something to consider - the ROI analysis for mid-sized robotic systems versus
humans; TCO Analysis (TOTAL COST OF OWNERSHIP - BUY-MAINTAIN-
UPGRADE/software updates + Training programs (labour cost))
 Trend 4 - WMS with Cloud
! Modern WMS - cloud based, integrated with AI, IOT, Robotics
! Acc to a Gartner report, 60% of warehouses will be cloud-based by 2026
! Where WMS (cloud-based ) can integrate with ERPS AND E-COMMERCE
PLATFORMS
! Common payment model - subscription-based
! Benefits - High caste, Agility, Data centralisation (cross functional collaboration)
 Trend 5 - Sustainability & Greenhousing
! 1) How to bring energy-efficient systems - solar panels, LED lighting, etc.
! 2) Circular Logistics
! 3) Waste reduction - sustainable packaging - biodegradable materials reduce waste
but increases cost by 10-20%
! Points to consider - Cost vs benefit analysis, brand value, compliance risks
! Solutions - 1) Energy audits; 2) Integrate reverse logistics
 Trend 6 - Omnichannel and MFC
! MFC - small automated warehouses
! Hybrid models - Refer to Walmart (article/video link)
!
 Key Links 1
! Future Trends in Warehouse and inventory management
! - https://www.startus-insights.com/innovators-guide/warehouse-management-trends/#
! - https://www.bbmatrix.ai/blog/future-of-warehousing
! - https://omneelab.com/future-of-warehouse-management-trends-2025/
! - https://zayls.com/blog/inventory-management-future-powerful-trends-2025/
! - https://www.mckinsey.com/capabilities/operations/our-insights/improving-warehouse-operations-digitally
! - https://supplychaindigital.com/logistics/mckinsey-what-future-automation#
! https://www.gartner.com/en/newsroom/press-releases/2025-03-18-gartner-identifies-top-supply-chain-
technology-trends-for-2025
! https://moldstud.com/articles/p-optimizing-inventory-management-with-blockchain-based-supply-chain-
technologies
 Key Links 2
! MHE and types of MHE
! - https://www.fulfill.com/glossary/mhe-material-handling-equipment
! - https://nios.ac.in/media/documents/378_Inventory_Management/Lesson-20.pdf
! https://www.bing.com/videos/riverview/relatedvideo?
q=MHE+AND+TYPES+OF+MHE&mid=970FFE18CE90DE7DA1E1970FFE18C
E90DE7DA1E1&FORM=VIRE
! https://www.tpsupplyco.com/material-handling-equipment-types/
 Key Links 3
! Warehouse metrics
! - https://www.tryresponse.com/blog/warehousing-key-performance-indicator-cheatsheet/
#:~:text=Warehousing%20KPI%20Cheatsheet%20%7C%20Top%20Metrics%20%26%2
0Formulas,%23%20of%20items%20in%20each%20receiving%20line%20
! https://www.hopstack.io/blog/warehouse-metrics-kpis
! Inventory management software types
! - https://www.investopedia.com/terms/i/inventory-management.asp
!
 Inventory Management Software
There are di erent types of inventory management software, and they can be classi ed as follows:
Investopedia
+4
• Small businesses will often keep track of stock manually and determine the reorder points and quantities using
spreadsheet (Excel) formulas.
• Larger businesses will use specialized enterprise resource planning (ERP) software.
• The largest corporations use highly customized software as a service (SaaS) applications.
• There are 2 fundamental types of inventory management systems: Periodic Inventory Management System and
Perpetual Inventory Management System.
• There are 10 types of inventory management: Barcode Tracking, Radio Frequency Identi cation (RFID), Just-in-Tim
Inventory Management, ABC Analysis, Dropshipping, Cross-Docking, Bulk Shipment, Perpetual Inventory System,
and more.
• There are di erent inventory management software available, and the best ones are Cin7, Ordoro, inFlow, Katana,
Zoho Inventory, ShipBob Merchant Plus, and Fishbowl Inventory.
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 Key Links 4
! Reverse Logistics
! - https://benjamin-gordon.com/top-6-strategies-for-effective-reverse-logistics/
! https://eec-logistics.com/reverse-logistics/
! https://www.daguerlogistics.com/blog/what-is-reverse-logistics-processes-types-
and-strategic-approaches
! https://cyzerg.com/blog/warehouse-operations-optimizing-the-reverse-logistics-
process/
!