Function of storing goods between the time they are produced and the time they are needed

Useful for the storage of inventories during all phases

WHY WAREHOUSING?

-transportation economies

-quantity purchase discounts

-to maintain sources of supply

-to support customer service policies

-to meet changing market conditions (eg., seasonality, demand  fluctuations, competition, etc.)

-to overcome time differentials between production and consumption

-to accomplish least total cost physical distribution commensurate with a desired level of customer service

BASIC OPERATIONS OF WAREHOUSING

                MOVEMENT

                               Receiving

                               Transferring       

                               Order Selection

                               Shipping

                STORAGE

                               Temporary
(for basic inv. replenishment)

                               Permanent

                                                (Seasonal demand, Erratic demand, Product               conditioning, Speculation, Special deals, etc.)


INFORMATION TRANSFER

                               Need timely and accurate information on

-Inventory levels, throughput levels, stock keeping locations, inbound and outbound shipments, customer data, facility utilization, personnel

TYPES OF WAREHOUSING

                PUBLIC (Lower or no fixed costs, higher var. costs)

                PRIVATE (Higher fixed costs, lower variable costs, higher service levels)
-owned
-leased

                Throughput>>>

TYPES OF PUBLIC WAREHOUSING ARRANGEMENTS

                Commodity warehouses

                Bulk storage warehouses

                Cold storage warehouses

                Household goods warehouses

                General merchandise warehouses

                CONTRACT WAREHOUSING:  a growing public warehousing trend which uses third-party warehousing.  Provides some of the benefits of private warehousing

                DISTRIBUTION CENTERS:  Major centralized private warehousing operations which are primarily established for movement

ADVANTAGES OF USING PUBLIC WAREHOUSING

                -conservation of capital
-ability to increase warehouse space quickly
(seasonality, peak requirements, etc.)
-flexibility
-reduced investment risk
-benefit from economies of scale
-some tax advantages (eg., no property taxes)
-knowledge of costs for storage and handling
-minimize labor disputes

DISADVANTAGES OF USING PUBLIC WAREHOUSING

                -administrative problems
-lack of control
-communication problems
-availability of space and specialized services

ADVANTAGES OF USING PRIVATE WAREHOUSING

                -greater flexibility in design to meet the specific needs of  the owner
-greater control of the operation to insure that warehousing is conducted efficiently
-lower cost per unit, provided that the volume of throughput is consistent and large
-some tax advantages (eg., depreciation)
-possibility of using the warehouse to house a local field  sales office or field purchasing office    resulting in lower costs for the combined facility
-in-the-field contact with the customers; a visible presence in the marketplace
-greater use of present manpower

DISADVANTAGES OF USING PRIVATE WAREHOUSING

                -lower flexibility in investment and location
-capital requirement
-high initial costs
-increased strain on management

HOW MANY WAREHOUSES SHOULD A COMPANY HAVE?

                -customer service needs
-transportation needs
-small quantity buyers
-customer buying policies
-stockout level expectations
-lead time expectations
-competition
-cost (the square root model)

When the number of warehouses in the system is doubled, it is likely to result in the multiplication of the total inventory in the system by the square root of two.  Similarly when you triple, quadruple, etc.

                                                                       WAREHOUSE SITE SELECTION

                Marketing aspects
Traffic (transportation economics)
Location or consolidation objectives

WAREHOUSING IN A JIT ENVIRONMENT

Low inventory levels, responsive logistics, efficiency and effectiveness

1. A total commitment to quality
2. Reduced production lot sizes
3. Elimination of non-value-added activities