Nov 9, 2018 in Business Essays

Strategic Warehouse Management

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A warehouse is a large building that provides a storage space for goods and materials waiting to be delivered to consumers. It provides a better environment for storing goods and materials that require protection from certain elements. Importers and exporters, wholesalers, manufacturers, and transport businesses use warehouses to store their products and services. Goods stored can be either finished goods or raw materials. Warehouses are found in railway stations, seaport, or airports, as well as near industries and factories.

Warehouses are important modern supply chains that take part in determining success and failure of businesses. Direct supply chain supply by companies has examined possibilities of supplying goods to their customers (Emmett, 2005). However, in many instances it is not appropriate because some goods have to be stored in order to satisfy subsequent distribution demand. In addition, it is important to hold strategic inventory at certain points in the supply chain to separate lean manufacturing activities, which provides a smooth flow of goods downstream.

Depending on the type of goods handled, warehouses can be classified into various groups, which include an unheated and heated general warehouse, a refrigerated warehouse, and a controlled humidity (CH) warehouse. There are also specially designed warehouses to meet strict requirements providing storage for goods that require special conditions and great care.

Requirements for Warehouse Design and an Organization Structure

A warehouse must be designed to accommodate the bulk of goods to be stored, equipment and machinery used for handling and shipping operations, as well as to satisfy needs of the operating staff. In the design of a warehouse, space should be planned in the best way to accommodate requirements of a business service and those of goods being handled. For a modern warehouse to be economical, goods should be processed at a minimal turnaround time. (Van Hoek, 2001). In designing a warehouse, special focus should be placed on utilization of space. Warehouse space should be utilized efficiently to maximize production and at the same time provide conducive working environment for workers. This may improve quality and increase performance relating to services offered, while cutting down the operating cost. Space should be designed to provide for storage areas, place for loading and unloading, place for receiving and shipping, and office space.

A warehouse should be designed to meet current and future needs such as change in business and growth of the agency. It should have fire protection to allow storage of materials with high fire hazard. It should also be durable, functional, and power efficient. Health, comfort, and safety should be considered. A warehouse should be designed to meet all local building, fire, and life-safety codes stipulated by the Australian government. Proper warehouse design can prevent future problems. Hence, the initial design stage should include consideration of many factors.

Arrangement of a warehouse should include a storage area for storing goods, a warehouse door, and an allocation zone used for storing goods for a short time that will be transported soon. The shipping point and Transport Planning Point handle transportation logistics.

Considerations for Workforce Management

Workforce represents between 50-75% of non-inventory costs in a warehouse. Well-planned and managed workforce is important in achieving efficient and lean operations. This workforce needs uniformity and control over what duties are assigned and how they are carried out. Workforce management transforms the workplace into an accountable and performance-driven culture through a process that incorporates culture-altering change management and project management programs.

Workforce management includes workplace planning and scheduling. This planning ensures that the right number of employees with right skills is available at all times to carry out various processes in a warehouse (Mahamani & Rao, 2010). A warehouse should employ an adequate number of employees who specialize in various fields. Availability of enough skilled labor increases productivity and reduces the cost of operation.


Schedule and task optimization are other aspects to be considered. Schedule optimization is the ability to quickly assign and reassign employees to work in areas that are of top priority, depending on deadlines, cost considerations, flow of orders, and skills. Task optimization implies that a manager ensures that required duties assigned are carried out in a proper manner, balancing workflows at the same time. This will maximize efficiency and quality of service offered. (Van Hoek, 2001). Management should also include a learning management program. This program consists in providing employees with learning capabilities in classrooms and via online courses. Such programs ensure that employees receive proper training for their jobs. Performance is compared with the training given to assess effectiveness of training programs.

Compliance and measurement should be taken into consideration as well. Performance of the workers should be measured. A manager should make ensure employees comply with regulations and workplace rules. Performance measurement is achieved by tracking indirectly time, attendance, safety, and quality. Visibility of performance across a warehouse makes it possible to carry out an analysis of trends, provide immediate reaction to events, and develop the ability to discover causes of problems quickly.

Key Regulations and Other Key Issues

In Australia, both domestic and foreign companies, as well as persons are equal before the law. The government has realized necessity of a regulatory framework to manage financial market development. In 2001, the Australian government implemented a huge reform of Australia`s Corporations Law (ACL) with the aim of streamlining regulation, as well as protecting investors and maintaining integrity of the market. Terms of regulation are considered on a case-by-case basis to avoid potential exposure.

Australia is one of the strongest, most competitive, and flexible open economies in the world. The government promotes the system of open markets by reducing tariff rates on imports, which has been by more than a half in the last few years. This means low operating cost and increased efficiency and productivity of businesses. Tax system changes have led to high reductions in the cost of business, especially for exporters. Australia has real cost advantages for every business category’s needs. Because of a strong tradition of democracy, regulatory frameworks and the rule of law prevail. In addition, Australia has a highly educated and skilled workforce.

The government promotes foreign investors that act in line with the interests of the community. The approval process for foreign investment is free and fair. The government has powers to cancel investments that are not in line with its interests. The FIRB (The Foreign Investment Review Board) analyzes investment proposals and advises the government accordingly. It also provides information on guidelines for foreign investments and guides foreign investors in order to make sure that they follow the government’s policy.

The FIRB believes that the investment proposal has to be approved. Concerning development of the commercial real estate segment, which includes warehouses, approval will be needed if the total value amounts to more than fifty-four million dollars. The threshold of $1,078 million is applicable to American citizens wishing to invest in Australia. There are no other conditions for the proposals to be approved.

In order to promote foreign investments, the government provides a number of incentives to the industry. These incentives vary from tax relief, taxable grants, and infrastructure service at discounted rates.

Availability of labor is constant. Over 50% of the Australian population is employed. Between 70%-75% of the employed population have a tertiary form of education minimum. The country has an educated and highly skilled workforce.

Procedures for Import and Export in the U.S

For the import of goods and materials into the United States to be successful, many processes and conditions have to be fulfilled. These processes include certifications, permits, regulations, and guidelines, as well as payment of related user fees. The CBP (United States Customs and Border Protection) is the primary agency that is mandated to enforce laws governing import, export, and collection of taxes. The FDA (Food and Drug Administration) is responsible for determining whether materials to be imported comply with or violate acts enforced by the FDA. To accomplish their respective responsibilities, the FDA and the CBP must work in cooperation. For instance, destruction of materials found to be in violation of acts enforced by the FDA or refusal for admission is done under instructions provided by the CBP.

All materials and goods entering the U.S. with a value of more than $2,000 automatically qualify as formal entries by the CBP. Goods submitted for importation call for a number of different charges, depending on the type of goods. All these charge are payable after the customs approve the import.

A person or a company aspiring to carry out importation applies to the CBP through the ACS (Automated Commercial System). The application is passed on to the FDA through the same process. The FDA will then analyze the entry and give further direction. Electronic entries should have all the information needed in the CBP entry form, including date of entry and details of the importing person or company. The entry should also have details of a ship, a port where goods will be received, a tariff code, an exporting country, quantity, and value of the goods. The FDA can decide to order samples of the goods for inspection or may indicate that importation may proceed without further inspection. If the goods are found to be in compliance after inspection, the importer and the CBP are notified by a Notice of Release that the goods may be admitted. Afterwards, the importer can pay related charges and the goods will be released to him/her.

The Risks of Supply Chain and Possible Mitigation

The SCRM (Supply Chain Risk Management) puts in place plans to manage both daily and outstanding risks relating to the supply chain through constant assessment of risks with the aim of lowering vulnerability and ensuring continuity. This can be accomplished through a coordinated approach with all the concerned parties in the supply chain (Kushawa & Barman, 2010).

Despite the recovery of the economy worldwide, supply chain risks remain high. There are many reasons why a supply chain can fail. Natural disaster, political instability, last minute customer changes, and machine breakdown can cause a supply chain failure. All these factors come at different magnitudes with different impacts. Supply failure has more effect on commodity prices than any other event. Internal supply chain disruption reduces shareholder value, suppliers, and customer gaffes (Becker, 2000).

Although a firm cannot foresee an internal failure or supply risks, it raises its vulnerability by concentrating its operations on few facilities, suppliers, and routes. Firms also deal with external factors like commodity future and currency rates, which are beyond their control. Many organizations increase the impact of these factors by putting high proportion assets into one supply chain element.

Firms should identify risk elements. This can be done by identifying where a large proportion of company operations are concentrated in a single flow, organization, or location and by capturing the true cost and capacity of risk. Firms should also filter out high-contingency risks.

It is vital to determine the probability of each risk occurring. This can be achieved by employing industry watchdogs and economic forecasters. By assessing the impact relating to each risk, a firm can define associated impacts (Van Hoek, 2001). Reducing risks improves performance although not every risk in the supply chain can be mitigated. In some instances, the total cost of mitigating the risk can be higher than the impact of the risk.

Operations to Be Outsourced and Operations to Be directly Managed by SWM

Outsourcing is a good business strategy because assigning non-core functions to external suppliers allows the company to balance resources, focus on critical issues of management, and spread risks. Many firms opt to go for logistic outsourcing as a way of gaining competitive advantages and restructuring their distribution networks (Mason, Ribcra, Farris, & Kirk, 2002). Application of a third party logistics (3pL) provider for a part of operations in a firm has gained popularity over the past few years. In addition, it is a convenient way of spreading risks and cutting down operating costs. Statistics shows that about 60% of firms have at least one contract with a 3PLprovider and the market for logistics outsourcing has grown significantly (Van Hoek, 2001).

Strategic Warehouse Management Inc. will apply the strategy of outsourcing logistics. Services to be outsourced will include transportation. The firm will transfer 80% of its transportation system to an external company. It will reduce the cost of purchasing vehicles and at the same time will spread the risk of transport breakdown (Mason et al., 2002). SWM Inc. will also outsource other services, including security, insurance services, banking, and human resource recruitment.

SWM Inc. will retain the management service. Long-term employees of the company will occupy all levels of management positions. The Australian nationals will fill all other vacancies with the assistance of the Human Resource Consultancy firm. It will be more economical to recruit employees in Australia than to export American labor. This will also give the company an Australian face.

Budget Line Items

The budget line items that need to be considered include:

A. Labor

1. Direct payments in $

a. Wages – 200

b. Overtime – 700

2. Development costs

a. Training – 600

b. Education allowances – 400

c. Other – 400

B. Handling equipment

1. Lift trucks and attachments

a. Rental – 5000

b. Maintenance – 900

c. Motor fuel or electricity – 2000

2. Conveyors

a. Maintenance – 1200

B. Electric power – 700

3. Pallets

a. Purchase or replacement costs – 2000

b. Repair – 500

3. Recouping damaged products – 800

4. Maintenance of loading docks and related equipment – 500


A. Facility

1. Rent or depreciation and interest – 1100

2. Taxes – 800

3. Insurance – 500

4. Building maintenance – 400

D. Utilities

1. Heat and/or temperature control – 800

2. Lighting – 250

E. Security

1. Sprinkler and other fire protection systems – 300

2. Guard service – 200


A. Executive salaries – 2000

B. Executive office expenses – 800

C. Selling and advert – 300

The Metrics

To measure the total supply chain and success of the warehouse, metrics should be applied.

There are metrics that are both common to all industries and industry specific, which should be considered in measuring performance of a supply chain. It is significant to recognize that there is no standard operation in the supply chain. As a result, a constant improvement approach is important in any supply chain. The SCM (Supply Chain Management) is a major aspect of a competitive strategy to improve production and profits.

In measuring performance of a supply chain, four elements are considered in terms of a supply being on time and a delivery being full. This is the ratio of orders met by the supplier on time with the correct quantity, quality, and price as quoted to the number of total purchases in a given period.

Manufacturing schedule attainment should be taken into account as well. A fraction of schedules is attained as per the plan on time and in full in a given period. It is calculated as follows: warehouse on time and in full shipment in addition to the ratio of the number of deliveries delivered to the warehouse or to the customer before a deadline to the total number of customer orders per period.

Transportation provider on-time delivery is another metric element to be considered. Furthermore, it is necessary to calculate the ratio of the number of times a transportation provider placed vehicles on time to the total number of times transportation is requested. In addition, supply chain performance is measured by using the logistic scoreboard. It is recommended to use grouped performance measures. These groups include (I) logistic, financial performance measures, (II) logistics productivity measures, (III) logistic quality measures, and (IV) logistics cycle time measures (Sheffi, 2005).

The SCOR (The Supply Chain Council`s Score sheet) model outlines types of metrics used to assess overall performance of a supply chain. It concerns performance measures, including cycle time metrics, service quality metrics, asset metrics, and cost metrics. This model focuses on needs of the supply chain management with balanced measurements.

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