Warehousing and Warehouse Management

views updated May 11 2018

Warehousing and Warehouse Management

Warehousing is the storage of goods for profit. The physical location, the warehouse, is a storage facility that receives goods and products for the eventual distribution to consumers or other businesses. A warehouse is also called a distribution center. Warehouse management is the process of coordinating the incoming goods, the subsequent storage and tracking of the goods, and finally, the distribution of the goods to their proper destinations. Significant changes have taken place in this industry during the 1990s and 2000s as changing business conditions have forced warehousers into adapting new methods and dramatically improving their technologies.


Warehousing's roots go back to the creation of granaries to store food, which was historically available for purchase during times of famine. As European explorers began to create shipping-trade routes with other nations, warehouses grew in importance for the storage of products and commodities from afar. Ports were the major location for warehouses.

As railroads began to expand travel and transportation, the creation of rail depots for the storage of materials became necessary. In 1891 the American Warehousemen's Association was organized to challenge the railroad companies' control over freight depots. President Theodore Roosevelt significantly strengthened the Interstate Commerce Commission with passage of the Hepburn Act in 1906. Commercial warehousing began to grow after the government placed more restrictions on railroads.

World War II impacted warehousing in several ways, including the need to increase the size of warehouses and the need for more mechanized methods of storing and retrieving the products and materials. As mass production grew throughout manufacturing, the need for efficient and effective warehousing capabilities grew with it.


Warehousing is a key component of the overall business supply chain. The supply chain consists of the facilities and distribution options for the procurement of materials from manufacturer to customer and all points in between. It includes the production of materials into components and finished products and then the distribution to customers.

Warehouse functions include:

  • Storing goods to permit the management of product flow or to accommodate longer production runs
  • Serving as a mixing point where products from different suppliers are mixed and then distributed to fulfill customer orders
  • Serving as a sales branch and customer service location
  • Serving as a source of supplies for production
  • Serving as a staging area for final packaging or finishing


Warehouses operate in several ways. Public warehousing involves the client paying a standard fee for storing merchandise. Private warehousing is storage and operations

controlled completely by a single manufacturer. Leased warehousing is an option for more stable inventory. Contract warehousing clients pay fees regardless of whether they are using the space or not; this ensures the space is always available for them to use. According to Overview of Warehousing in North America, contract warehousing accounts for more than 60 percent of the U.S. commercial market.

A warehouse stands empty without some form of product. Delivery of goods and materials takes place either by truck, rail, or boat on a dock or loading area. The goods are received, processed, and then sent into the warehouse for storage.

The storage of goods has been the primary function for warehouses. Once the goods have been received from the manufacturer and/or shipper, they are compactly stored to maximize space within the facility. Products are placed on pallets, which allow for more consistent stacking and moving within the facility.

Contract and public warehouses receive goods and products from a multitude of manufacturers and shippers. A crucial aspect of warehouse management is inventory control. Inventory control is the ability to locate and track a given product within the warehouse to facilitate quick selection and loading for order fulfillment. It is also the process of maintaining sufficient amounts of product to meet customer demands, while at the same time balancing the expense of keeping product in storage. Perpetual, annual, physical, and cycle counting are all methods of keeping track of inventory.

Order picking is the process of selecting products to fulfill an order. There are several picking methods:

  • Discrete or pick-by-order: Specific products are selected on a per order basis.
  • Batch or pick-by-article: Multiples of a product are selected to fulfill multiple orders. The products are sorted in the staging area and combined with other products to fulfill the orders.
  • Wave: Products are gathered based on specific routing or shipping criteria.
  • Reverse-order: This is used when part of an order is held to be combined with another order.

Reverse-order picking is related to cross-docking, another function of warehouses. Cross-docking is a direct flow of goods from receiving to shipping, with little if any storage. Cross-docking is contingent on the timely delivery of products, accurate management on the loading dock, and effective ordering by the customer.

Warehousing is also involved in the packaging and labeling of a product as it moves through the facility. Proper packaging is necessary for effective storage and to guard against damage. Labeling, or tagging, is an important element of the packaging. Proper labeling improves the ability to identify, track, store, and select the correct product for order fulfillment.

Once the product has been selected, or picked, it is brought to a staging area for final processing and shipment. The loading dock is a hub of activity as products are arriving for storage and being staged for distribution. Effective management of this area is crucial for warehouse success. It is here that cross-docking takes place.

The final stage of warehousing is the transportation facet of delivering and shipping goods.


In the past, warehouse management was very paper-intensive in its coordination of a multitude of activities. This has changed with the introduction of warehouse management system software.

Warehouse management systems (WMS) assist managers in tracking products throughout the entire storage and distribution process. These systems span from simple computer automation systems to high-end, feature-rich management programs that improve order picking, facilitate better dock logistics, and monitor inventory management.


Since the mid-1990s, warehousing and distribution operations have faced a wide variety of emerging business trends, including the rise of the Internet, a large number of mergers and acquisitions, and an increase in global trade. The warehouse industry found itself recovering from a recession at the start of the twenty-first century, partially brought on by the hype of the dot-com bubble and the excess production created after it burst. It also coped with new methods of distribution, such as just-in-time (JIT) production, where warehousing is unnecessary because products are shipped directly to customers. Additionally, the buying habits of everyone from manufacturers to consumers have dramatically changed, partly in response to improved communications technology and greater global competition. According to a 2004 Warehousing Management survey, competition in warehousing has become extremely tight because businesses seek warehouse firms with extremely thin margins. Companies are succeeding by remaining flexible and investing in the technological advances that are required to improve product tracking and increase efficiency.

Warehousing companies are now striving to become more than simply storage facilities. They are transforming themselves into third-party logistics providers or 3PLs that provide a wide array of services and functions. In addition to packing and staging pallets, contemporary warehousing facilities offer light manufacturing, call centers,

labeling, and other non-storage options. An outcome of increased 3PL activity is a wave of mergers that are consolidating the industry. Customer demands for one-stop shopping and new technologies are a driving force behind this consolidation. A further development is the rise of fourth-party logistics providers (4PLs), who are essentially asset-less companies that use computer resources to supply 3PL services.

Other trends in warehousing include radio frequency identification (RFID) tags, transportation management systems, pick-to-light technology, and voice-activated receiving and packaging. Voice-activated receiving and packaging allows for warehouse personnel to speak requests into the WMS, thus speeding the entire process. Transportation management systems provide an advanced level of detail on goods prior to their arrival and also provide a more specific time of delivery. RFID has dramatically improved the ability to effectively manage inventory and track the location of specific goods within the warehouse. Pick-to-light technology improves order picking along warehouse conveyor belts by monitoring and identifying products for specific shipments. Continuous improvements are being made in these technologies. For example, in 2007 a Danish company introduced a passive RFID with privacy features that include encryption, a built-in firewall, and a silent mode. Also in 2007, Hitachi introduced an RFID device thin enough to be embedded in a sheet of paper.

Warehousing is a mature industry seeking methods to maximize profits and striving to add services to compete for customers. The warehousing industry is a key component of the supply chain and will likely remain so as long as there are manufacturers and consumers.

SEE ALSO Lean Manufacturing and Just-In-Time Production; Location Strategy; Logistics and Transportation; Supply Chain Management


Ackerman, K.B. Practical Handbook of Warehousing. 4th ed. New York: Van Nostrand Reinhold, 1997.

Albright, B. Recession Impacts Supply Chain Markets: WMS Growth Slows; Transportation and Events Software Picks Up Speed. Frontline Solutions 3, no. 6 (2002): 1012.

Bolten, E.F. Managing Time and Space in the Modern Warehouse. New York: American Management Association, 1997.

Emmet, Stuart. Excellence in Warehouse Management: How to Minimise Costs and Maximise Value. Hoboken, NJ: John Wiley & Sons, 2005.

Forger, G. Leading Trends in Manufacturing, Warehousing & Distribution. Modern Materials Handling 59, no. 13 (2004): 38.

Friedman, D. How to Select the Best Warehouse Management System. Material Handling Management 60, no. 1 (January 2005): 2829.

Harrington, L.H. How to Solve the Warehousing Puzzle.Logistics Today 44, no. 9 (2003): 3238.

Hertz, Susanne and Monica Alfredsson. Strategic development of third party logistics providers. Industrial Marketing Management, 32, no. 2 (2003): 139149.

Johnson, J.R. Warehousing's Crystal Ball. Warehousing Management 9, no. 6 (2002): 2428.

An Overview of Warehousing in North America-Market Size, Major 3PLs, Benchmarking Prices and Practices. North America Warehousing Market Report 2004. Stoughton, WI: Armstrong & Associates, Inc., 2004.

Rushton, Alan, Phil Croucher, and Peter Baker. The Handbook of Logistics and Distribution Management. 3rd ed. London: Kogan Page Limited, 2006.

Singer, T. Trends in Warehousing and Distribution. Industrial Maintenance & Plant Operation 65, no. 11 (2004): 1218.


views updated May 23 2018

ware·house • n. / ˈwe(ə)rˌhous/ a large building where raw materials or manufactured goods may be stored before their export or distribution for sale. ∎  a large wholesale or retail store: a discount warehouse.• v. / -ˌhous; -ˌhouz/ [tr.] store (goods) in a warehouse. ∎  place (imported goods) in a bonded warehouse pending the payment of import duty. ∎ inf. place (someone, typically a prisoner or a psychiatric patient) in a large, impersonal institution in which their problems are not satisfactorily addressed.


views updated May 23 2018

warehouse. Building for the storage of goods, e.g. alcoholic drink, grain, etc., often associated with canals and docks, and frequently of considerable interest structurally and architecturally.