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Warehousing

Warehousing

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Published by Arvind Elle
A breif introduction about Warehousing, including its types, advantages, and its core-functions
A breif introduction about Warehousing, including its types, advantages, and its core-functions

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Published by: Arvind Elle on Nov 19, 2010
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05/03/2013

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WAREHOUSINGDEFINITIONA warehouse is a commercial building for storage of goods. Warehouses are used bymanufacturers, importers, exporters, wholesalers, transport businesses, customs, etc.They are usually large plain buildings in industrial parts of towns. They come equippedwith loading docks to load and unload trucks; or sometimes are loaded directly fromrailways, airports, or seaports. They also often have cranes and forklifts for movinggoods, which are usually placed on ISO standard palletsINTRODUCTIONWarehouse can play a key role in the integrated logistics strategy and its building andmaintaining good relationships between supply chain partners. Warehousing affectscustomer service stock-out rates and firm’s sales and marketing success. A warehousesmoothens out market supply and demand fluctuations. When supply exceeds demand, ademand warehouse stores products in anticipation of customers requirements whenDemand exceeds supply the warehouse can speed product movement to the customer by performing additional services like marking prices, packaging products or finalassembling etc.Warehousing can be defined as a location with adequate facilities where volumeshipments are received from production center, which are then broken down into particular order and shipped onwards to the customer.Warehousing is an integral part of any logistics system. The warehouse is a link between producer and customer.Out-bound warehouse help consumers buy on demand without a near4by production plant warehousing cost are about 10% of total integrated logistics costs for mostcompanies.TYPES OF WAREHOUSES1. Private Warehousing2. Public Warehousing3. Contract WarehousingPrivate WarehousingA firm producing or owning the goods owns private warehouses. The goods are storeduntil they are delivered to a retail outlet or sold. Potential advantage of using a privatewarehouse is the ability to maintain physical control over the facility, which allowsmangers to address loss, damage, and theft. When not in use they can rent it out.
 
The construction and maintenance of private warehousing can be extremely costly. Allthe expenses have to be carefully analyzed and evaluated. These are:i. Fixed expenses and building and land acquisition costs which are high;ii. Expenses incurred on ensuring that warehouses are properly equipped with material-handling equipment like conveyors, fork lifts, hand trucks, racks and bins, and dock levelers;iii. The costs of salaries of staff required for peak activity periods which can be very highsince retrenchment during slack periods may not be possible;iv. Extra payment to be made for work on Saturday and Sundays and holidays;v. Generator and other services charges are required to be taken into account.vi. The office and record-keeping equipment necessary for successful warehousingoperations has to be budgeted for;vii. To this must be added the cost of such item as fuel, air-conditioning, power and light.viii. The cost of maintaining insurance records and of the premiums paid for fire, theft,and also for workmen’s compensation.AdvantagesThe advantages and disadvantages of private warehousing as against those of publicwarehousing are:a. Private warehousing offers better control over the movement and storage of products asrequired by the management from time to time. b. There is less likelihood of error in the case of private warehousing since the company’s products are handled by its own employees who are able to identify the products of their own company better.c. If there is sufficient volume of goods to be warehoused, the costs of privatewarehousing compares favourably with that of public warehousing. But privatewarehouse may not be expected to be packed upto the brim all the while. Therefore thecosts of private warehousing per unit may actually be higher.Public WarehousingA public warehouse rents space to individuals or firm needing storage, some providewide array of services including packaging, labeling, testing, inventory, maintenance,local delivery, data processing and pricing.All the foregoing cost factors operate in public warehousing as well. But in publicwarehousing, the expenses are distributed over several other consignments of other clients. In most instances therefore can render better service with greater flexibility for the user. A company running a private warehouse will have to compare costs incurredwith the total figure for the complete service through public warehousing.Advantagesa. It is generally less expensive and more efficient. b. Public warehouses are usually strategically located and immediately available.c. Public warehousing is sufficiently flexible to meet most space requirements, for several plans are available for the requirement of different users.
 
d. Fixed costs of a warehouse are distributed among many users. Therefore the overallcost of warehousing per unit works out to a lower figure.e. Public warehousing facilities can be given up as soon as necessary without anyadditional liability on the part of the user.f. The costs of public warehousing can be easily and exactly ascertained, and the user  pays only for the space and services he use.Contract WarehousingContract warehousing is a specialized form of public warehousing. In addition towarehousing activities such warehousing provides a combination of integrated logisticsservices. Thus allowing the leasing firm to concentrate on its specialty. They providecustomized services, eg. Value Added Services.FUNCTIONS OF WAREHOUSESWarehouses are basically intermediate storage points in the logistics system where rawmaterial, work in process, finished goods and good in transit are held for varying durationof times for a variety of purposes. The warehousing functionality today is much morethan the traditional function of storage. The following are main function that warehousingserves today:1. ConsolidationThis helps to provide for the customer requirement of a combination of products fromdifferent supply or manufacturing sources. Instead of transporting the products as smallshipments from different sources, it would be more economical to have a consolidationwarehouse. This warehouse will receive these products from various sources andconsolidate these into shipments, which are economical for transportation or as required by the customers.2. Break Bulk As the name suggests, the warehouse in this case serves the purpose of receiving bulk shipments through economical long distance transportation and breaking of these intosmall shipments for local delivery. This enables small shipments in place of long distancesmall shipments.3. Cross DockingThis type of facility enables receipt of full shipments from a number of suppliers,generally manufacturers, and direct distribution to different customers without storage.As soon as the shipments are received, these are allocated to the respective customers andare moved across to the vehicle for the onwards shipments to the respective customers atthese facilities. Smaller shipments accompanying these full shipments are moved to thetemporary storage in these facilities awaiting shipments to the respective customers alongwith other full shipments.

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