Warehouse Operations: An Examination of Traditional and Automated Approaches in Supply Chain Management

Abstract

This paper explores the different approaches to warehouse operations within a supply chain context. It highlights the significance of warehouses in efficiently and effectively meeting customer demands while minimizing costs. The study examines various types of warehouses and analyzes the activities involved in warehouse operations. Furthermore, this paper discusses the challenges and benefits of warehouse operations in developed and developing countries. It emphasizes the need for efficient warehouse management to enhance customer satisfaction, reduce costs, and improve overall productivity. The integration of warehouses into the supply chain process is also emphasized, emphasizing their critical role in facilitating the flow of goods. This paper introduces the Warehouse Management System (WMS) concept as a technological solution for controlling the inflow and outflow of goods. It delves into WMS functions and highlights its importance in inventory control, order management, and system reliability. Additionally, this paper examines the differences between traditional manual warehousing and automated approaches, taking into account factors such as cost, efficiency, and suitability for different types of organizations. In conclusion, the study suggests that automated warehousing is more suitable for larger companies operating in countries with limited manual labor availability. On the other hand, traditional warehousing may be more applicable in developing countries with higher unemployment rates.

1. Introduction

The growing interconnectedness of nations, the progressive evolution of the global economy, and the rise of consumer-driven industrialism have fostered a heightened need for logistics, transportation, and warehousing solutions. Within the supply chain, warehouses play a pivotal role by substantially facilitating the storage of goods from their production phase until they are delivered to consumers upon request [1]. A warehouse is not just a simple room or space; it is a purpose-built facility created by suppliers or manufacturers to store goods quickly before they are supplied to customers. According to Kolinski and Sliwczynski [2], in the fiercely competitive landscape of modern business, a warehouse serves not only as a mere storage facility for inventory but also as a hub for the efficient execution of value-added services. Its primary purpose, as defined by suppliers or manufacturers, is to temporarily store goods until they are ready to be delivered to customers. This setup enables businesses to promptly fulfill customer demands as they arise. The fundamental objective of warehousing is to enhance the efficient and effective flow of goods from sellers to buyers, ultimately eliminating additional costs that may be incurred when urgent needs for goods arise on the supplier’s side [3]. Furthermore, warehouses give suppliers the advantage of making large-volume purchases, resulting in cost savings and enhanced economies of scale [4]. Warehousing addresses the dichotomy between the inflow and outflow of goods in organizations that adopt it. This is achieved through the coordinated efforts of various components such as storage racks, material handlers, warehouse workers, and specialists. These elements work together to ensure the smooth and efficient functioning of the warehouse, allowing for the timely receipt, storage, and distribution of goods.

Goods stored in a warehouse have not yet reached their final destination. However, they are subsequently distributed optimally from the warehouse itself, which can also be referred to as a distribution house [5]. This facility is strategically designed to accept new orders, implement them efficiently, and ensure the timely distribution of goods through the appropriate channels. In order to keep up with evolving industry trends, modern warehousing practices have embraced new technologies that enhance distribution processes and enable effective management of available resources. Historically, warehousing has primarily been perceived as minimizing costs without necessarily adding value to existing products. However, it also serves the critical function of preserving the original quality of goods [6]. The warehouse now plays an integral role in enhancing the movement of goods from one location to another, effectively functioning as a dispensation supply chain [7, 8].

Some businesses previously viewed Distribution Control Systems (DCS) and warehouses as standardized supply chain components solely focused on cost management. However, there is now an increasing recognition that warehouses have transformed into indispensable elements rather than mere cost centers [9, 10]. This shift in perspective is motivated by several factors, such as heightened market volatility, capacity limitations, evolving regulations, substantial shifts in consumer demographics and purchasing behavior, and stricter requirements imposed by customers and suppliers [11]. With the rapid advancements in technology, warehouses possess the capacity to foster competitive differentiation and facilitate profitable growth for enterprises [12]. A comprehensive review of the literature on smart warehouse operations management was carried out by Zhen and Li [13]. The authors identified several research gaps and challenges. They discovered that the previous studies on smart warehouses were fragmented and lacked a comprehensive perspective. They also observed a dearth of empirical studies assessing the effectiveness and efficiency of smart warehouse technologies. The researchers recommended that future research should concentrate on developing a unified framework for managing smart warehouse operations and conducting more empirical studies to evaluate the performance of such technologies. A recent study conducted by Kembro and Norrman [14] examined the transition from manual to smart warehousing, specifically focusing on Swedish retailers. This study aimed to conceptualize and operationalize the concept of smart warehousing. The findings revealed that future smart warehouses will possess characteristics such as automation, autonomy, digitization, and connectivity. The research paper established two dimensions to operationalize smart warehousing: the level of automation and the level of digitalization and connectivity of information platforms. Building upon these insights, the study presented 16 theoretical propositions that elucidate various pathways for retailers to implement smart warehousing, considering contextual factors. The empirical findings and theoretical discussions offer valuable practical guidance, including trends and considerations for the selection and benchmarking of automation and complementary technologies in warehouse operations.

Based on the above-mentioned, this study aims to examine various types of warehouses and analyzes the activities involved in warehouse operations. Furthermore, this paper discusses the challenges and benefits of warehouse operations in developed and developing countries. The integration of warehouses into the supply chain process is also emphasized, emphasizing their critical role in facilitating the flow of goods. This paper delves into Warehouse Management System (WMS) functions. It highlights their importance in inventory control, order management, and system reliability. Additionally, this paper examines the differences between traditional manual warehousing and automated approaches, considering factors such as cost, efficiency, and suitability for different types of organizations.

2. Warehouse operations

Organizations typically establish three primary categories of warehouses: raw materials, semi-finished goods, and finished goods. Depending on the nature of their business, companies may also create other types of warehouses. When categorizing warehouses, common features are considered. Raw materials storage warehouses hold capital goods used in producing other items, specifically those needed by organizations, especially manufacturing companies, for their intended products [15]. Semi-finished product storage warehouses house goods in progress before they become consumer goods, serving purposes such as branding or acting as assembly points for multi-stage goods [16]. Finished goods storage warehouses store products ready for final consumers, serving as destinations for producers, wholesalers, retailers, and customers to collect their orders [17]. This storage is critical for companies to meet expected demand, prevent shortages from unforeseen orders, and store new products effectively.

Besides receiving new products, checking their quality, and accepting them, warehouses perform other activities. They play a crucial role in resource sharing among different departments, promoting efficient resource utilization and coordination. Additionally, warehouses provide secure storage for products, protecting them from damage caused by environmental factors and potential hazards [18]. They organize and arrange company products to optimize space and ensure efficient inventory management, making it easier to access and retrieve items when fulfilling orders. Warehouses also prepare products for shipment by packaging them appropriately and verifying order details to ensure accuracy. Overall, warehouses serve as integral components of effective operations, facilitating resource sharing, secure storage, and streamlined order preparation for different categories of goods.

Warehouse operations encompass the daily tasks involved in storing and transporting goods within a warehouse facility. These tasks comprise activities such as receiving, managing inventory, selecting orders, packing items, arranging shipments, and overseeing distribution. The primary objective of warehouse operations is to effectively utilize space, equipment, and labor while meeting the needs and demands of customers [19]. Figure 1 illustrates a diagram outlining warehouse design and operation planning classification. Designing and operating a warehouse involves addressing numerous challenges to fulfill specific requirements. These challenges include allocating resources like space, labor, and equipment to various warehouse functions. Each function must be implemented, operated, and coordinated effectively to meet system requirements, such as capacity, throughput, and service while minimizing resource costs.

Figure 1.

Classification diagram of warehouse design and operation planning [20].

Similarly in Saleheen, Miraz, Habib, and Hanafi [21], the challenges of warehouse operations were investigated. The work presented a case study focused on a retail supermarket in Bangladesh, examining the complexities of warehouse management practices and highlighting the impact of retail supply chain dynamics on the role of the warehouse. The study identified external factors, market trends, and potential barriers that influenced the overall performance of warehouse operations. Additionally, the paper identified opportunities to enhance warehouse performance in terms of planning, design, and operation. The authors offered recommendations to industry practitioners to achieve higher productivity levels in warehouse management.

Also, Gunasekaran, Marri, and Menci [22] focused on enhancing the effectiveness of warehousing operations. Authors developed a conceptual framework based on four main factors: inventory management, material handling, layout design, and information systems. This framework was then applied to a case study involving a warehouse responsible for managing spare parts for an automobile company. The authors collected data on the current state of the warehouse, identifying areas of concern such as excessive inventory levels, underutilized space, inefficient material handling, and inadequate information systems. To address these issues, the authors proposed solutions aimed at improving warehousing operations. These solutions included reducing inventory levels, redesigning the layout, implementing an automated storage and retrieval system (AS/RS), and adopting a WMS. The proposed solutions were evaluated through simulation and cost-benefit analysis, which revealed significant improvements. The results showed a 60% reduction in throughput time, a 40% increase in space utilization, and a 30% cost savings. In conclusion, the authors emphasized that the conceptual framework had the potential to assist warehouse managers in enhancing the effectiveness of their operations, ultimately leading to increased customer satisfaction.

Warehouse operations in both developed and developing countries offer various benefits and face specific challenges. The benefits of warehouse operations include the availability of goods on demand, reduced costs associated with emergency orders and unforeseen consequences, the promotion of well-structured storage spaces, and the facilitation of staff productivity through clear production and sales targets. However, there are challenges to overcome in ensuring successful warehouse operations. In some cases, the lack of necessary processes, staff, and programs can hinder efficiency, particularly in developing countries where resources may be scarce or expensive to acquire. Repetitive processes can lead to monotony in developing countries, while system failures may interrupt operations in technologically advanced developed countries. Accurately arranging goods for easy accessibility can be challenging, and the requirement for sufficient warehouse space may lead to congestion in both developed and developing countries. Furthermore, accessing specific goods within the warehouse may become time-consuming when maintaining designated spaces [14, 23, 24].

3. Warehouse management system (WMS)

A warehouse management system (WMS) is a software application or platform created to enhance and streamline the efficiency of warehouse operations. It equips businesses with the necessary tools to efficiently handle and monitor inventory, manage warehouse tasks, and enhance overall supply chain processes [25]. Khan, Huda, and Zaman [26] describes a WMS as a system that utilizes advanced technology (comprising both hardware and software components) to regulate the movement of goods throughout various stages, starting from the moment an order is placed, continuing through acquisition, quality inspection, processing, storage within the warehouse, and finally, dispatching them as per demand. It is also described as a database-driven computer application that improves the warehouse’s efficiency by directing cutaways and maintaining accurate inventory by recording warehouse transactions [27]. The systems also directed and optimized stock based on real-time information about the status of bin utilization. They often utilized Auto ID Data Capture (AIDC) technology, such as barcode scanners, mobile computers, wireless LANs (Local Area Networks), and potentially Radio-frequency identification (RFID) to monitor the flow of products efficiently. Once data had been collected, there was either batch synchronization or a real-time wireless transmission to a central database. The database could then provide useful reports about the status of goods in the warehouse.

Warehouse Management System (WMS) oversees the production and supply chain processes, ensuring a continuous flow of materials for production, minimizing the risk of stockouts, and facilitating the transformation of raw materials into finished products. The main objective is to enable efficient and effective transportation of goods from the warehouse to their intended destinations [28]. In addition to inventory control, order acceptance, and order response, WMS performs various other functions in addition to its primary roles. It assesses the need for expanding company capacity and evaluates the potential benefits of adopting advanced technology. This assessment takes into account factors such as increased efficiency, cost savings, and improved productivity. It also considers the long-term sustainability of the chosen technology, ensuring that it can support the organization’s growth and evolving needs [29]. WMS plays a crucial role in evaluating the reliability of the current system. It examines the existing warehouse management processes and identifies any outdated systems or practices that may hinder operational efficiency. When necessary, WMS helps implement necessary changes and upgrades to ensure that the system remains up-to-date and optimally functional [30]. Another significant function of WMS is analyzing warehouse capacity requirements. It considers factors such as market size, demand fluctuations, and available funds to determine the appropriate capacity needed to efficiently store and manage inventory [31]. WMS also provides flexibility for organizations in managing their warehouses. It allows companies to choose between managing their warehouse in-house or opting for larger warehouses. This flexibility is valuable for businesses as it accommodates their specific needs and growth plans. For instance, companies can start small and gradually expand their warehouse operations as required, thanks to the scalability offered by WMS [32, 33].

There are two primary types of WMS: on-premise and cloud-based. On-premise WMS refers to software hosted and maintained on-site using the warehouse’s own servers, while cloud-based WMS is hosted online in the cloud and accessible from any connected device. Cloud-based WMS offers advantages in terms of scalability, flexibility, and automatic updates compared to on-premise WMS [34, 35].

WMS software can integrate with various internal and external software systems, including ERP, OMS, TMS, barcode scanning, accounting, and e-commerce platforms. This integration enables the automation of billing, inventory management, receiving, shipping, and picking and packing through mobile barcode scanning. Distinctions can be made between WMS and OMS (Order Management System). While WMS software captures, records, and analyzes data on all day-to-day functions performed within a warehouse, OMS software specifically focuses on monitoring the movement of inventory and orders throughout the supply chain. While OMS do not replace WMS, it can complement it within a warehouse technology stack [36, 37, 38]. WMS software is valuable for both private and 3PL (third-party logistics) warehouses that handle various order fulfillment types, including pallet in/pallet out, B2B, B2C, e-commerce, and omnichannel. It caters to the needs of warehouses serving multiple industries such as retail, apparel, bulk goods, raw materials, cold storage, nutraceuticals & pharmaceuticals, wine & spirits, and hazardous materials [39, 40, 41].

4. Warehousing systems

There are two different warehousing systems, traditional and automated warehousing.

4.1 Traditional warehousing

Traditional warehousing refers to the conventional and established methods of storing and managing inventory in a warehouse facility. Kamali [42] stated that traditional warehouses are typically designed to effectively utilize a limited amount of space due to specific limitations or constraints while simultaneously meeting all the essential requirements for day-to-day operations within the facility. They typically involve manual processes and equipment without extensive automation or advanced technology. Richards [10] suggested that traditional warehousing is a manual system in which staff within an organization manually handle order picking and deployment and brand and rebrand the company’s products. Although some machinery may be involved, it is operated solely by humans. Despite the repetition and increased labor costs, growing companies still adopt this warehousing system regardless of the number of orders they receive. However, this approach poses risks for the employees. In developing countries, companies with products that experience seasonal demand also employ this method. They hire additional labor during peak periods while retaining their core staff [43]. Nonetheless, the use of machinery can increase operational costs, regardless of whether the machine is active or inactive. Traditional warehouses are typically organized using standardized storage systems such as pallet racking, shelving, and bins. The layout is designed to accommodate manual movement of goods and optimize space utilization [44]. Material handling in traditional warehousing relies heavily on manual labor. Workers use equipment such as forklifts, pallet jacks, and hand carts to move goods within the warehouse. Loading and unloading of trucks and containers are also done manually [45].

Van Geest, Tekinerdogan, and Catal [46, 47] mentioned that inventory management in traditional warehousing is often performed through manual tracking and recording systems. Paper-based or basic computer systems may record inventory levels, receipts, and shipments. Order picking in traditional warehouses is typically done manually. Workers physically locate and retrieve items from their storage locations based on paper pick lists or basic technology aids like handheld scanners [46, 47, 48]. While traditional warehouses may use basic technology for inventory management and order processing, they often lack advanced automation and integration capabilities. WMS may be utilized for basic inventory tracking and control. Traditional warehousing may have minimal automation, especially when compared to modern, highly automated facilities. Manual processes and equipment are the primary means of handling goods, with little or no use of automated storage and retrieval systems (AS/RS), conveyor systems, or robotics. Traditional warehousing may also offer limited flexibility and scalability due to the reliance on manual labor and fixed storage systems. Adapting to changing operational needs or accommodating growth may require physical layout modifications and additional labor. While traditional warehousing may lack some of the efficiency and speed advantages of more modern approaches, it can still be effective for certain businesses with lower throughput volumes or unique product requirements. However, many warehouses are now adopting elements of modern warehousing, such as incorporating automation, advanced technology, and data-driven optimization, to improve operational efficiency and meet evolving customer demands [47].

Kamali [42] used a Bahraini company as a case study to illustrate the characteristics and disadvantages of traditional warehousing. The paper described the layout as shown in Figure 2 and the design of the traditional warehouse, which consists of different areas for loading, unloading, receiving, storing, picking, assembling, dispatching, and value-added logistics. Kamali [42] identified some disadvantages of traditional warehousings, such as high material handling costs, inefficient operations and workflow bottlenecks, negligence and damaged materials, inefficient space management, and inefficient materials handling equipment. These problems could reduce the revenues and profitability of the company in the long term. Dukic and Opetuk [49] reviewed the literature on the optimal layout design of a traditional warehouse, which aims to minimize the total warehousing costs, such as material handling, storage, and fixed costs. Their study classified the layout design problem into two categories: single-block and multi-block layout design. The single-block layout design problem is considered a rectangular storage area with one or more aisles. The multi-block layout design problem considered a storage area divided into several blocks, each with its own aisles and cross-aisles. They also discussed various models’ assumptions, objectives, constraints, and solution methods for single-block and multi-block layout design. The authors identified some limitations and challenges of traditional warehouse layout design, such as the difficulty of incorporating stochastic factors, the complexity of solving large-scale problems, and the lack of integration with other warehouse functions.

Figure 2.

The layout of a traditional warehouse [42].

4.2 Automated warehousing

Automated warehousing encompasses the utilization of advanced technology and automation systems to enhance the efficiency and optimization of warehouse operations. It involves integrating diverse automated equipment, robotics, and software systems to improve productivity, accuracy, and overall effectiveness [50]. Key components of automated warehousing include AS/RS. These systems comprise tall racking structures equipped with automated cranes or robotic systems that retrieve and store goods from specified locations. AS/RS efficiently handles substantial inventory volumes and enables high-density storage [10]. Automated conveyor systems are used to transport goods within the warehouse. They can move items between workstations, sort and merge products, and connect processing areas, such as picking, packing, and shipping zones. Conveyor systems enhance material flow and reduce manual handling [51]. Robots and Robotics and Automated Guided Vehicles (AGVs) are used for tasks such as picking, sorting, and palletizing goods. These automated systems can operate autonomously or be guided by sensors, cameras, or magnetic strips on the warehouse floor. They can perform repetitive tasks quickly and accurately, reducing labor requirements and improving productivity [52, 53].

WMS software is crucial in automated warehousing to manage and control inventory, orders, and workflows [54]. It integrates with various automation systems and provides real-time inventory levels, order status, and operational performance data. WMS optimizes processes, improves inventory accuracy, and enables efficient order fulfillment [55]. Pick-to-Light and Put-to-Light Systems use visual cues, such as lights or displays, to guide warehouse operators through the picking and putting processes [10]. They help reduce errors, increase picking speed, and enhance order accuracy. Automatic Identification and Data Capture (AIDC) technologies, such as barcode scanners, RFID (Radio Frequency Identification) systems, and voice recognition devices, automate data collection and capture [56]. They enable accurate inventory tracking, reduce manual data entry, and enhance order visibility. Automated warehouses may incorporate energy-efficient technologies, such as LED lighting, automated climate control systems, and smart energy management solutions [57]. Sustainability practices, such as recycling and waste reduction, can also be integrated. Automated warehousing offers benefits such as increased throughput, improved order accuracy, reduced labor costs, and enhanced operational efficiency [58]. However, implementing automation requires careful planning, significant investment, and consideration of factors like product characteristics, order profiles, and ROI calculations. Additionally, proper training and maintenance are essential to ensure the smooth operation of automated systems.

4.3 Discussion

Various studies have outlined the outlined different research imperatives. For example, Zhen and Li [13] discussed the challenges and opportunities associated with smart warehouse operations management and proposed potential areas for future research. These areas included performance evaluation, coordination and collaboration, human factors, and social responsibility. The authors concluded that smart warehouse operations management held significant promise as a research field that could make valuable contributions to the advancement of logistics and supply chain management. Similarly, Kamali [42] outlined the benefits of automated warehouses, such as better warehouse optimization, reduced labor costs, improved accuracy and reliability, enhanced customer service, and faster shipping. However, it also identified some challenges and limitations of smart warehouses, such as high initial costs, complex integration, skill requirements, maintenance issues, and software glitches. The research suggested some possible solutions and recommendations to overcome these challenges and maximize the potential of smart warehouses, such as WMS, Artificial Intelligence (AI), cloud computing, robotics, and blockchain. In the study “Robotized and Automated Warehouse Systems: Review and Recent Developments”, Azadeh, De Koster, and Roy [59] reviewed new categories of automated and robotized handling systems, such as shuttle-based storage and retrieval systems, shuttle-based compact storage systems, and robotic mobile fulfillment systems. The research revealed that despite the growing utilization of various robotic systems and applications, there was a lack of academic literature comprehensively investigating them. These systems possessed unique characteristics, such as autonomous control and dynamic operation within a networked environment. As a result, novel models and approaches were needed to address the design and operational control challenges associated with these systems, particularly in terms of integrating subsystems. The future trend in warehousing was expected to involve integrated robotized warehouse systems, which would require a reassessment of crucial aspects of warehouse design, planning, and control. This entailed revisiting methodologies for designing layouts, selecting storage and order picking systems, determining storage slotting strategies, optimizing order batching, defining picker routing paths, and assigning pickers to orders within the context of the new robotized warehouse paradigm. Custodio and Machado [60] did a review and an innovative framework for a flexible automated warehouse. The researchers reviewed published papers in the last 10 years that were related to flexible automation in warehouses. They constructed a framework that could guide future researchers in developing an innovative conceptual model for application in future warehouses. They concluded that the crucial aspect of achieving a flexible automated warehouse was the integration of automated equipment, data collection technologies, and management solutions.

5. Conclusion and recommendations

5.1 Conclusion

This work highlights the crucial role of warehouses in the global supply chain. It has been posited that warehouses are no longer just storage facilities but essential components for efficient value-added services and meeting customer demands. They play a significant role in storing, managing, and distributing goods, contributing to the smooth flow of products and eliminating unnecessary costs. They have become integrated into the supply chain, embracing modern technologies for enhanced distribution processes and resource management. Warehouse operations involve various activities such as inventory management, order selection, packing, shipping, and distribution. Challenges in warehouse operations include resource allocation, market trends, inventory management, layout design, and information systems. Overcoming these challenges is crucial for higher productivity and customer satisfaction. Effective warehouse operations are vital for companies to meet customer demands, optimize space utilization, and ensure timely distribution. WMS are software applications that streamline warehouse operations, including inventory management and task management. They evaluate the current system’s reliability, identify outdated practices, and implement necessary changes. WMS also helps determine the appropriate capacity needed for efficient inventory management.

Warehouse management can be accomplished through traditional methods or modern systems that employ automation to control the flow of goods. Traditional warehousing systems rely primarily on manual processes for order picking and deployment. They heavily rely on human labor and retain only essential staff members, hiring additional labor during peak periods. While traditional methods are user-friendly, they are prone to human errors. On the other hand, automated warehouse operations involve the use of technology to reduce manual work and streamline processes such as ordering, inventory control, and storage. Although automation brings operational ease, the installation and maintenance costs are high, making it feasible mainly for larger organizations. More so, automated warehousing is better suited for large companies, particularly in countries where manual labor for warehouse operations is scarce and expensive to hire. Traditional warehouse operations find more applicability in developing countries grappling with high unemployment rates. They are advantageous for small companies that cannot afford the expenses associated with deploying modern automation technology in their warehouses.

Potential areas of further research have also been outlined from the different literatures reviewed. These areas included performance evaluation, coordination and collaboration, human factors, and social responsibility of smart warehouse management systems, integration of artificial intelligence and robotics in warehouse systems, extension of design of warehouse systems and many more.

5.2 Recommendation

Based on the findings of this study, the following recommendations have been made:

• Businesses should consider implementing a WMS to enhance the efficiency of their warehouse operations and improve overall supply chain processes.

• When choosing a WMS, organizations should evaluate their specific needs, scalability requirements, and integration capabilities with other software systems.

• Regular evaluation and assessment of the warehouse management system should be conducted to identify areas for improvement and implement necessary changes or upgrades.

• Organizations should assess the costs, benefits, and feasibility of implementing automated warehousing systems, considering factors such as product characteristics, order profiles, and return on investment calculations.

• Training and maintenance programs should be established to ensure the smooth operation of the implemented WMS and automated warehousing systems.