Significance of Warehouse Management

Significance of Warehouse Management

Before we begin our training course on SAP Warehouse Management lets understand some
important concepts related to supply chain ,warehouse and why the science of warehouse
management is so important and relevant in today’ s world.

Lets understand first what is a Supply Chain ,where does a warehouse fit in a supply chain and
what is its role in a supply chain.

A supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer
request. The supply chain not only includes the manufacturer and suppliers, but also
transporters, warehouses, retailers, and customers themselves.

Example:

Consider a customer walking into a Wal-Mart store to purchase detergent. The

supply chain begins with the customer and their need for detergent. The next stage of
this supply chain is the Wal-Mart retail store that the customer visits. Wal-Mart stocks its
shelves using inventory that may have been supplied from a finished-goods warehouse
that Wal-Mart manages or from some distributor using trucks supplied by a third party.

The distributor in turn is stocked by the manufacturer (say Procter & Gamble [P&G] in this
case). The P&G manufacturing plant receives raw material from a variety of suppliers
who may themselves have been supplied by lower tier suppliers. For example, packaging
material may come from Tenneco packaging while Tenneco receives raw materials to

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manufacture the packaging from other suppliers and so on.

So within each organization, such as the manufacturer, the supply chain includes all functions
involved in receiving and filling a customer request. And all the organizations involved in
fulfilling the customers requests are part of the supply chain.

So a typical supply chain may involve a variety of stages. These supply chain stages include:

 Customers

 Retailers

 Wholesalers/Distributors

 Manufacturers

 Component/Raw material suppliers

Organizations will always focus on being cost effective by using different methods as
applicable.for eg.

1)By looking for alternate methods or materials so that manufacturing costs are low.

2) By reducing cycle time of operations.

3)By blocking less capital in inventory.Keeping inventory under control.

4)By reducing turn around time for delivery against a customer order so that their product is
available on time to customer.

And many such other ways.

With organizations wanting to become more and more cost effective and also to reduce the turn
around time for delivery, among other ways , improving the way inventory is managed is very
crucial . Reducing delivery time to customer by stocking goods in an orderly way to enable
efficient picking and dispatch ,keeping a check on money blocked in inventory by scrutinizing
inventory reports and minimizing cost of warehousing operation ultimately help to maximize
company profits.

So now we are ready to understand what is a warehouse and its significance.

 A warehouse is a commercial building for storing of goods.

 The principal operation of a warehouse is receiving –i.e getting in products, and

shipping out products already stored.

 Another important part of maintaining a good warehouse is keeping inventory of what

products are presently in the warehouse, what has been shipped and what has been
received.

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Significance of Warehouse Management

Warehouse Management refers to the science of operating a warehouse in general. The need
for good warehouse management stems from the need of organizations to be able to

1)Receive and store goods in the best possible order to be able to ship them as required .

2)Manage inventory effectively such that there is always a record of what is available in the
warehouse and where it is available.

With companies stocking thousands and thousands of different materials that are needed to be
shipped to customers on time ,warehouse management has got a lot of importance in a supply
chain.

SAP R/3 offers Warehouse management solution to manage inventory.The warehouse

management is a part of Logistics execution* component of SAP R/3 .

The SAP warehouse management solution offers many standard inbuilt functionalities that
represent the industry best practices of stocking goods and picking them. The design of the
SAP WM solution is such that it caters to the standard client business needs of stocking goods,
interfacing with production process, interfacing with quality management etc. Offcourse for
some special cases there is a need to do a custom development which SAP has given a
provision for.

There are other warehouse management products in the market as well like Red Prairie or
Manhattan Associates. These solutions are equally good . But for those clients who have SAP
implemented for other modules , considering other solutions for warehousing needs is a big
decision especially when there is additional cost associated with it (while SAP WM is already
available in the system) and also the third party solution needs to be interfaced to SAP. If the
benefits of implementing a third party warehouse solution out weigh the costs and complexities
involved then the client may go for it. Or it is best to implement SAP WM as it is integrated with
other SAP modules like SAP MM,SAP PP,SAP QM and SAP SD . We will study about these
functionalities in detail in the course.

Let us understand what is SAP Logistics Execution :

 Logistics Execution is a component of Logistics in SAP R/3. This area includes Materials
Management, Sales and Distribution, Logistics Execution, and Production, which control
the logistics processes.

 In SAP R/3 4.5A, Logistics Execution was included in SAP R/3 in order to group together
the existing sub functions for logistics execution and to further develop this group of
Functions.

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 Warehouse Management was taken from Materials Management (MM),Shipping, and

Transportation from Sales and Distribution (SD). These organizational changes are
reflected in both the application menu and the structure of customizing

 Logistics Execution provides all of the functions (for the most part,cross-industry)
required to map the execution of logistics processes.Essentially, it always deals with
goods issue and goods receipt processes of various degrees of complexity.

With this background on supply chain , logistics execution and warehouse management , we
are now ready to understand the different functions offered by SAP Warehouse management in
a better way.

Let us now proceed with the SAP warehouse management training course.

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