Warehouse Strategic Management


 Strategic Warehouse Management, Inc. (SWM) is a company based in the U.S that deals with the construction and management of warehouses. An opportunity has come up in Sydney, Australia to open a new warehouse that would work with various businesses. There already have been requests from clients in Australia who would like to establish business links with SWM.SWM would observe the imports of goods from U.S to Australia. Therefore, there is need for the design of a supply chain that would incorporate all the warehouse operations in Sydney. Some of the requirements for this design are discussed below:


 Warehouse Design and Organization Structure

 The first step in designing a warehouse is the collection of data. This data can be receipts, stock turn over and future and present orders. From this information, SWM will be able to determine the space of the warehouse, the number of docks and the size of the storage area. External factors like the location of the warehouse should be considered next. For example, Wal-Mart has established most of its in rural regions due to the availability of cheap labor. Before the storage units are determined, the nature of the products to be stored should be assessed. This is in terms of size, shape and weight. The storage method and the type of equipment needed like forklifts, and their costs should be put into consideration. Weekly, monthly and seasonal patterns should be assessed next in order to determine how much stock can be stored during the peak season. The outside environment of the warehouse should also be assessed. Factors like parking in front of the warehouse should be considered in order to avoid congestion. Lastly, a warehouse design tool should be used in order to bring the 2D design model to life. This helps to bring out faults that would have been discovered after the construction of the warehouse.

 Organization refers to the planning and running methods used on the warehouse. Warehouse managers should be employed to supervise the day-to-day activities in the warehouse. The storage type and section should be clearly marked. This is in terms of picking area, storage bin and quant (Korpela, 2006).

 Considerations for Workforce Management

 In Australia, a national legislation was put forward for fatigue workers in order to consider their management. This ensures that a safe working environment has been provided. Fatigue management is usually for employees who have a working time session, like drivers. Driver scheduling needs to be reviewed and the time allocated to trucks for transporting and collecting goods for customers should be considered. If the warehouse is planning on running operations on a full week basis, then ways to combat and deal with fatigue should be put in place. This is in terms of staff doctors, alcohol and drug testing and monitoring the hours that an employee has already worked. The U.S has a trend where it keeps the distance between the client and the warehouse around 500 Kms (Zijm, 2007). This makes sure that the driver delivers the goods and is back to the station before the day ends. Costs for overnight stays and stops are saved upon. This ensures that the traffic in the warehouse moves smoothly.


 Employees should also be motivated and trained well in order to ensure that the operations in the warehouse are running without interruptions. Before employees are put through training, the nature of the work to be carried out should be well explained to them. Before taking the final step in documentation, warehouse associates should be asked their take on it. This ensures that the consultant’s understand how they are going to carry out their work and also to gain the co-operation of the employees. Custom training should also be made available for those who take on work during the peak season. Their training should be on a need-to –know basis only. For example, a seasonal worker who has several years of experience in operating forklifts has no need of taking the training all over again. For employees who have trouble in understanding the job, supervisors should provide them with positive feedback in order to encourage them (Ronald 2007).

 Key Regulations and Other Issues

 When setting up a warehouse in Australia, there are certain protocols that need to be followed. Warehouses are under Section 79 of the Customs Act 1901 (Zijm, 2007).When stock has been taken into the warehouse under the Nature 20 warehouse declaration; it may be stored indefinitely without the owner of the goods paying taxes on them until they are taken overseas. The individual who has taken the license of the warehouse under his/her name is answerable to the Customs and Border Protection since it is his/her responsibility to ensure that these goods are kept safe and accounted for satisfactorily. Contrary to this, the individual who owns the license would be forced to pay certain revenues. The activities that take place inside the warehouse should be put to a minimum level in order to ensure that goods inside are provided with the highest level of security. Storage, unpacking, blending, repacking and packaging are the only activities that should be allowed to go on inside the warehouse. Other activities that do not make profit for the warehouse should be discouraged.

 Goods manufactured in Australia like tobacco, fuel and alcohol would have to pay excise duty if they need to be imported. They are then kept in Excise equivalent goods (EEG) warehouses. An EEG license needs to be bought if the owner of the warehouse intends to store EEG goods in them or if he/she has one or more warehouses running or if one of the warehouses has EEG goods stored in it. However, businesses that are not charged duty; provider industries and catering bond are exempted from taking out an EEG license. Goods that are stored in the warehouse can act as lien under the warehouse lien and storage act 1990 (Zijm, 2007).. (Lien goods are used to secure that the debt the owner of the property has to another person).The Occupation Health and Safety Act 2004 also requires that all employers provide a working environment that is not hazardous to their employees’ health. Employers are required to remove any hazardous materials in order to ensure their safety (Zijm, 2007).

 Export and Import Procedures in the U.S

 In the U.S, the Customs and Border Protection (CBP) has the responsibility of ensuring that all the laws and regulations for importing and exporting are followed. This includes finding out and investigating fraud cases that wanted to avoid paying taxes, fees or duties or any other suspicious undertakings that meant to avoid following the regulations of the international trade. CPB also investigates, detects and arrests those who carry out import and export of illegal firearms, ammunition and terrorist acts at entry points of the U.S.CBP allows importers not to have a license. However, there are other agencies that also supervise the types of products that are going through the border. They also have their own rules and laws that may be different from those of the CPB (Mohd, 2007). Extensive research should be carried out to determine what jurisdiction they will possess on the goods you are interested in.

 In Australia, the Australians customs and border protection monitor the activities carried out across the border. Export of wildlife, goods that are harmful, items of heritage value and some weapons is not allowed. Goods may not be exported on an aircraft or ship if customs has not been notified they are being exported and they have given their approval by issuing the interested party with an Export Declaration Number(EDN).Contrary to this, the interested party may not leave Australia.

 Supply Chain Risks and Possible Mitigation

 In warehousing, one of risk is national disasters like natural floods and tsunamis that interrupt supply for weeks or even months. Many organizations lack the measures to assess future risks like this one. The end results would be paralysis. Risks should be evaluated with the business in mind. What makes the business successful should be considered first. Pitfalls should also be assessed like assuming that the more expensive an item is the more it will last or it will do a better job. Disasters like earthquakes and tsunamis can affect a whole region that is why suppliers have developed virtual vendor masters that include Tier-1 and Tier-2 suppliers who manage each other’s risks. The easiest mitigation strategies to apply would be to seek insurance solutions. Insuring the warehouse and the goods in it will ensure that the owner does not suffer from total loss once disaster strikes.

 In Australia, the warehouse industry experienced an economy slowdown in 2010.Warehouses reduced the number of staff and part-time staff replaced the permanent staff. Inventory levels were also reduced due to reduced sales. This led to the overall decrease in sales of logistic services, forklifts and pallets. The rising fuel prices have also affected the number of Kilometers that a truck has to travel in order to transport goods. For example, a semitrailer covers a distance of 2Km on a liter of fuel. The cost of fuelling a semitrailer was $1000.The truck would have to cover 500Kms in order to efficiently use this fuel. However, this has proven to be too expensive for warehousing businesses and others have been affected severely (Mohd, 2007).

 Operations to be outsourced and to be managed

 Some of the operations that SWM will have to outsource include distribution. This is important since the company is looking to penetrate a new market thus it is important to gain the competitive advantage. It is also advantageous to take the benefits that result from the best operators. Value added services like labeling, kitting and special packaging works are also met and changed according to the way you want them without too much work. Additionally, the distribution and warehouse wants are also adjusted flexibly according to demand. Labor should also be outsourced. Companies that manage their own labor have the additional costs of seeing that these workers are protected and they are offering quality work. These costs will be avoided if labor is outsourced. While entering a new market, it is also advisable to outsource to companies that provide facility logistic services in order to find the best option for start-ups. This provides the company with the right expertise to manage the warehouse. Transport, inventory management and freight management services should also be outsourced.

 Full time managers should be employed in order to ensure that the operations of the warehouse run smoothly. They also assess which changes in the warehouse would lead to maximum profit. Inventory should also be managed since they detail the nature and the location of the goods in the warehouse. Technology should also be managed since the IT team has information on shippers and yard management details. The task of hiring employees should be left to the supervisor in order to assess whether they possess the necessary skills and experience. Meetings with key staff like managers and supervisors should be left under the responsibility of SWM since important aspects that concern the business like new ideas, budgets, and merchandise availability would be discussed. It would not be a wise idea to let outside party to handle such sensitive matters (Payne, 2005)

 Budget Considerations

 When considering the budget for a warehouse facility, it is important to keep some parameters in mind. These include: salaries for workers, employees’ medical insurance, utilities like gas for heating, water and power, purchase/leasing of vehicles, fuel costs, training for employees costs, office equipment, and costs for leasing equipment like forklifts.

 Success Measurement Metrics

 In 2010, the warehouse education research center based in the USA made information available on the cost metrics. The best was 2.5% in sales, medium was 4.5% and the last one was 5.5% (Payne, 2005).In order to outsource various operations for warehouses; logistic companies need to refer to the provided information. In Australia, the importers and exporters pay for better cost structures because importing from Asia is relatively cheap. In North America, 54% of the market has been employed to do warehouse contracts (Payne, 2005). As the matter of fact, the operating margin is 12-20% and has been witnessed in the majority cases (34%).The expected modal margin is 16-19% (Payne, 2005). However; these margins may fluctuate according to the nature of the business carried out by the company. Companies that deal with chemicals and clothing have high margins while companies that deal with food have the lowest margin. If the manufacturer of these goods enjoys high margins then it directly translates to the warehouse enjoying high margins and vice versa.


 Australia has an advantage since it has ideal located import and export shipping routes. This coupled with its large market make is the optimum site for opening a new warehouse in the warehouse and logistics operation market. The laws and regulations in Australia are also not too bottle-necked to make the establishment of a new company hard. It is therefore recommendable for SWM to establish their new warehouse in Australia.