A warehouse is typically viewed as a place to store inventory. However, in many logistical system designs, the role of the warehouse is more properly viewed as a switching facility as contrasted to a storage facility.
Benefits of warehousing
Consolidation – Shipment consolidation is an economic benefit of warehousing. With this arrangement, the consolidating warehouse receives and consolidates materials from a number of manufacturing plants destined to a specific customer on a single transportation shipment. The benefits are the realization of the lowest possible transportation rate and reduced congestion at a customer’s receiving dock.
The primary benefit of consolidation is that it combines the logistical flow of several small shipments to a specific market area. Consolidation warehousing may be used by a single firm, or a number of firms may join together and use a for-hire consolidation service. Through the use of such a program, each individua1 manufacturer or shipper can enjoy lower total distribution cost than could be realized on a direct shipment basis individually.
Break bulk warehouses – Break bulk warehouse operations are similar to consolidation except that no storage is performed. A break bulk operation receives combined customer orders from manufacturers and ships them to individual customers. The break bulk warehouse sorts or splits individual orders and arranges for local delivery. Because the long-distance transportation movement is a large shipment, transport costs are lower and there is less difficulty in tracking.
Processing/Postponement – Warehouses can also be used to postpone, or delay, production by performing processing and light manufacturing activities. A warehouse with packaging or labeling capability allows postponement of final production until actual demand is known. For example, vegetables can be processed and canned in “brights” at the manufacturer. Brights are cans with no pre-attached labels. The use of brights for a private label product means that the item does not have to be committed to a specific customer or package configuration at the manufacturer’s plant.
Once a specific customer order is received, the warehouse can complete final processing by adding the label and finalizing the packaging. Processing and postponement provide two economic benefits: First, risk is minimized because final packaging is not completed until an order for a specific label and package has been received. Second, the required level of total inventory can be reduced by using the basic product (brights) for a variety of labeling and packaging configurations.
Stockpiling – The economic benefit of stockpiling comes from the need of seasonal storage. For example, lawn furniture and toys are produced year-round and primarily sold during a very short marketing period. In contrast, agricultural products are harvested at specific times with subsequent consumption occurring throughout the year. Both situations require warehouse stockpiling to support marketing efforts. Stockpiling provides an inventory buffer, which allows production efficiencies within the constraints imposed by material sources and the customer.
Service Benefits of warehousing
Five basic service benefits are achieved through warehousing are spot stock, assortment, mixing, production support, and market presence.
Spot Stock – Under spot stocking, a selected amount of a firm’s product line is placed or “spot stocked” in a warehouse to fill customer orders during a critical marketing period. In particular, manufacturers with limited or highly seasonal product lines are partial to this service.
Rather than placing inventories in warehouse facilities on a year-round basis or shipping directly from manufacturing plants, delivery time can be substantially reduced by advanced inventory commitment to strategic markets.
Utilizing warehouse facilities for stock spotting allows inventories to be placed in a variety of markets adjacent to key customers just prior to a maximum period of seasonal sales. Suppliers of agricultural products to farmers often use spot stocking to position their products closer to a service-sensitive market during the growing season. Following the sales season, the remaining inventory is withdrawn to a central warehouse.
Assortment – An assortment warehouse stocks product combinations in anticipation of customer orders. The assortments may represent multiple products from different manufacturers or special assortments as specified by customers. In the first case, for example, an athletic wholesaler would stock products from a number of clothing suppliers so that customers can be offered assortments. In the second case, the wholesaler would create a specific team uniform including shirt, pants, and shoes. The differential between stock spotting and complete line assortment is the degree and duration of warehouse utilization.
A firm following a stock spotting would typically warehouse a narrow product assortment and place stocks in a large number of small warehouses dedicated to specific markets for a limited time period.
Distribution assortment warehouse usually has a broad product line, is limited to a few strategic locations, and is functional year-round. The combined assortments also allow larger shipment quantities, which in turn reduce transportation cost.
Mixing – In a typical mixing situation, truckloads of products are shipped from manufacturing plants to warehouses. Each large shipment enjoys the lowest possible transportation rate. Upon arrival at the mixing warehouse, factory shipments are unloaded and the desired combination of each product for each customer or market is selected. When plants are geographically separated, overall transportation charges and warehouse requirements can be reduced by mixing.
Production support – Production support warehousing provides a steady supply of components and materials to assembly plants. Safety stocks on items purchased from outside vendors may be justified because of long lead times or significant variations in usage. The operation of a production support warehouse is to supply or “feed” processed materials, components, and subassemblies into the assembly plant in an economic and timely manner.
Market presence – While a market presence benefit may not be so obvious, it is often cited by marketing managers as a major advantage of local warehouses. The market presence factor is based on the perception or belief that local warehouses can be more responsive to customer needs and offer quicker delivery than more distant warehouses. As a result, it is also thought that a local warehouse will enhance market share and potentially increase profitability.
Elements of warehousing
- Location
- Layout
- Identification
- Material Handling
Warehouses are generally long halls located in the industrial areas where labor and other factors are available cheap.
Layout
While setting the layout principally following points should be taken into account:-
- There should be ease of receipts, storage and issues.
- Uninterrupted movement of material, men and equipment will make the operations smooth.
- Optimum utilization of space, ease of locating the material, proper safety and security can help in better supervision.
- The building should be preferably single storied, enough height, proper lighting and ventilation, protection against hazards like fire lightening etc.
- Also rodents and pilferage could be a risk to the stored materials which has to be checked.
- Identification of material is very important to save time and energy. Thus ways like labeling, tagging, writing, painting, engraving, stamping, etching, color coding on the part, case or box are used. The most evolved way of identification is bar coding but since being expensive not all companies or warehouses can use.
Features of a good warehouse include place for everything and in the right place. FMFO-First manufactures and First Out principle to maintain prompt and correct records is essential. Minimum damages to the materials and protection against pilferage is must. Regular verification and inspection of the warehouse, inventory checking and reconciliation will ensure fast and good services to the customers.
