Warehousing and Distribution

Warehousing

• Warehousing allows firms to store purchases, work-in-progress, and finished goods, and perform services like break bulk and assessment.
• It provides faster and more frequent deliveries and better customer service.

Private Warehouses

• Owned by the firm storing goods.
• Pros: reduces costs, offers greater control, provides better workforce utilization, and can generate income and tax advantages.
• Cons: owning a private warehouse represents a financial risk and loss of flexibility.

Public Warehouses

• Owned by for-profit organizations and contracted out.
• Breakbulk: shipments are broken down and items are combined into specific customer orders.
• Services: repackaging, assembly, incoming and outgoing quality inspections, material handling, equipment maintenance, and documentation.
• Pros: provides flexibility and investment cost savings.
• Cons: lack of control.

Risk Pooling and Warehouse Location

• As the number of warehouses increases, the system becomes more decentralized.
• Responsiveness and delivery service increase, but warehousing operating and inventory costs also increase.
• Trade-off between costs and customer service must be considered.
• Risk pooling describes the relationship between the number of warehouses, inventory, and customer service.
• Estimated by square-root rule.

Warehouse Location Strategies

• Market-positioned strategy: warehouses close to customers to maximize distribution services and improve transportation economies of scale.
• Product-positioned strategy: close to supply source for firm to collect goods and consolidate.
• Intermediately positioned strategy: midway between supply source and customers when distribution requirements are high and product comes from various locations.

Lean Warehousing

• Emphasis on warehousing to support responsive operations.
• Commitment to customers and service quality.
• Reduced lot sizes and shipping quantities.
• Emphasis on cross docking.
• Increased automation.
• Increased assembly operations.

Third-Party Logistics (3PL)

• Provide reliable and timely delivery required by Supply Chain Management.
• Used to a significant degree by international logistics.
• Favored by small businesses.

Other Intermediaries

• Freight forwarder: consolidate LTL shipments into FTL Load.
• Transportation brokers: bring shippers and carriers together.
• Shippers’ associations: nonprofit cooperatives which arrange for members’ shipping.
• Intermodal marketing companies: purchase blocks of rail capacity and sell it to shippers.

Environmental Sustainability in Logistics

• Reverse logistics aka backhauling: a response to the need for reducing carbon emissions by ensuring trucks move loaded rather than empty.

Logistics Management Software Applications

• Transportation management systems: used to select the best mix of transportation services and pricing.
• Warehouse management: track and control the flow of goods from receiving dock to outbound shipment.
• Global trade management systems: provide global visibility, standardization, and documentation of product returns, while minimizing reverse logistics costs.

Global Logistics Intermediaries

• Customs Brokers: move through customs and handle documentation.
• International Freight Forwarders: move goods to foreign destinations.
• Trading Companies: put buyers and sellers together and handle export/import arrangements.
• Non-Vessel-Operating Common Carriers: operate like freight forwarders but use scheduled ocean liners.

Learn about the functions and benefits of warehousing, including storage, break bulk, and assessment services. Understand the difference between private warehouses and distribution centers, and their impact on customer service and cost.