The Importance of Warehousing in a Logistics System
Warehousing and warehouse
management are part of a logistics management system, which is itself a
component in supply chain management. Although viewed by some as simply a place
to store finished goods, inbound functions that prepare items for storage and
outbound functions that consolidate, pack and ship orders provide important
economic and service benefits to both the business and its customers
Central Location
A warehouse
provides a central location for receiving, storing and distributing products.
As each inbound shipment arrives, responsibility for the goods transfers to
warehouse personnel, products are identified, sorted and dispatched to their
temporary storage location. Storage isn’t a static “thing” but rather a process
that includes security measures and maintaining an environment that preserves
the integrity and usefulness of the items. Once it’s time to move items, each
order is retrieved, grouped, packaged and checked for completeness before being
dispatched to their new destination.
Value-Adding Operation
The objective of
a logistics system is to reduce cycle times and overall inventories, lower
costs and most importantly, improve customer service. Warehousing increases the
utility value of goods by providing a means to have the right products
available at the right place in the right time. Operations such as order
consolidation, order assembly, product mixing and cross-docking that take place
within the warehouse structure also add value to the overall logistics system.
Economic Benefits
Warehouses
provide a economies of scale through efficient operations, storage capacity and
a central location. Economic benefits are realized, for example, through
consolidation and accumulation operations. Consolidation operations cut
outbound delivery costs for both the business and its customers. Instead of
shipping items individually from multiple sources, items are delivered to a
central warehouse, packaged together and shipped back out as a complete order.
Accumulation operations allow a warehouse to act as a buffer, balancing supply
and demand for seasonal and long-term storage. This can be vital to business
profitability when demand for a product is year-round but the product may only
be available at certain times of the year.
Service Benefits
Warehouses can
serve as part of a contingency plan to ensure outbound orders are filled in
full and on time. A practice called safety stocking allows businesses to
maintain a predetermined number of inventory items at its warehouse. On the
inbound side, safety stocking means that an emergency such as a transportation
delay or a shipment containing defective or damaged goods won’t delay filling
and shipping customers order. On the outbound side, safety stocking is
insurance against out-of-stock items.
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