Question

In: Operations Management

Provide an example of each stock location system and explain how each example represents the respective...

  • Provide an example of each stock location system and explain how each example represents the respective stock location system.
  • Fixed location
  • Random location
  • Zone random location
  • Point-of-use storage
  • Central Storage

Solutions

Expert Solution

1. Fixed Location Storage System : It is an organized method of storage that places a product in a specific, predefined location that does not change. Fixed location storage dictates that a given stock-keeping unit (SKU) must always be stored in its assigned space even if there is available storage space elsewhere in the warehouse. The relevance between shelves and goods and the position is clear, so the advantages are that goods are easy to find and lack of inventory can be seen at a glance.

Example: A fixed location storage system is like a supermarket where each product is allocated to a specific shelf, pallet racking or an area on the floor. The supermarket has to be large enough to accommodate the maximum possible level of stock for every item including safety stock. As the stock is used up, the storage location is emptied and left vacant until a new shipment of the item is received. With a fixed location system, stock administration is relatively easy. Goods can always be found in the same place.

2. Random Location Storage System - It is also called a Floating location. The goods are stored wherever there is an appropriate space. It improves the cube utilization. The stored good needs to be accurate and up to date information of where it is stored. Warehouse using random location systems are usually computer-based.

Example: Inventory in Pharmaceuticals warehouse adopts a Random location storage system. As they follow the concept of First In First Out due to less shelf life. All the products will have a unique bar code and help the user to identify the location stored in the warehouse, quantity in hand details, etc about a specific product.

3. Zone Random Location: The zoned storage method used in warehousing is a variation of fixed bin storage. In a warehouse that used fixed bins, the items are always stored in the same locations within a warehouse. This allows the warehouse staff to know where the items will be stored. In zoned storage, the items are stored in the same location, but in a specific zone which is determined by characteristics of the item.

Example: An industry may use a specific item that needs to be stored and maintained at a particular temperature. The item may be food or chemical. The refrigerated zones usually keep the item at a constant temperature. This area will store materials that have the requirements to be maintained at a particular temperature.

4. Point of Use Storage System: It is the place where the raw material is stored at the place where it is been used.

Example: In Hotel the Groceries are stored in the garages even though their location is closer to the truck when arriving at the hotel from the market. The groceries are kept in the kitchen where they are found readily to prepare a meal.

5. Central Storage System: It is a place where all the finished goods / raw materials for manufacturing are stored at one common place and from this place the goods are distributed to the authorized factory personnel or wholesalers or retailers.

Example: If you take any FMCG products, for example, a cookies manufacturing company after the process stores all the manufactured cookies at its central warehouse and from this destination its distributes to all its retailers and wholesalers based in the purchase order.


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