Storage of products come in various forms such as silos, tanks, garages, and stock yards. The warehouse, however, is the most visible of all forms of storage facilities. It is in this respect that many firms equate storage management with warehouse management.
Warehouses, to the minds of some managers, do not offer any added value. Whereas a factory adds value via the conversion of raw materials to finished goods, the warehouse is simply seen as added cost for storage, handling, and delivery. It is a point in the supply chain where much to the chagrin of finance executives, it is perceived as a source of negative cash-flow. Some executives would prefer to outright eliminate warehouses and untie cash from inventories and save on non-value-adding expenses.
These executives underestimate the strategic value of warehouse management. The warehouse is after all a key link in the supply chain. The warehouse or storage facility is where raw materials first arrive or where finished goods are kept, staged, and dispatched to customers. In many cases, it is both.
Trends in the business world are driving executives to rethink the warehouse as a key supply chain component that offers competitive value:
Price and demand volatility
The unpredictability of demand and supply has placed much importance on keeping inventories. Investing in storage provides the firm flexibility to buffer against fluctuations in demand. It also allows purchasing managers to buy in bulk to cushion against volatile commodity prices. The challenge for managers is determining how much space to have although the benefits of reduced purchase costs from bulk discounts or having steady product availability for customers may far outweigh the storage expenses.
The rise of multi-branch/multiple-location customers
Firms are seeing a more complex trade network in their customers. For instance, fast-moving-consumer-goods (FMCG) firms face a growing market in convenience stores and warehouse clubs which translate to more delivery drop points. The straightforward answer to serving a complex customer network starts with setting up distribution centres that not only are multiple in number but also have the resources to customize delivery quantities.
Regional and global product sourcing
As supply chains have become global, firms have increased purchases of cheaper merchandise from international sources. While this has reduced product costs,the trade-off in longer lead times necessitates higher stock levels and additional warehousing requirements. And as the risk of supply disruptions loom large in international trade, firms have made it an obligation to have available storage space to ensure continuous operations.
As more companies see the need to have storage space, the management of such has become an opportunity for competitive advantage. The following are some of the areas where opportunity can become reality:
The Distribution Network
It can be a network of depots or a network of just one warehouse; whatever the case, the firm should know what best network would serve his customers or optimize the inventories of purchased merchandise. A network, by the way, is not just a location map ofdepots. It is a schematic of storage and transport assets that facilitate the efficient exchange of goods between suppliers, factories, depots, freight transporters, and customers.
Storage Design & Capacity
Many executives decide based solely on warehouse size in managing storage facilities. Storage facilities are characterized by their structure and their surroundings. A warehouse that is high in height may offer a more protected environment for environmentally-sensitive merchandise. A facility that has available parking space may enable faster turnaround of freight deliveries. Multiple-level storage facilities may duplicate capacity at reduced cost but they can also increase handling expenses.
Facilities Planning
Will the warehouse be solely for storage or will it be a multi-tasking distribution centre? Answering this question determines how a storage facility will be laid out and its operations planned. If it's just for storage, then aisle space and labour overhead becomes a target for reduction. If it's a distribution centre aimed to respond to customer needs with value-added services, then investing in space and facilities becomes a need. Planning in this regard would take into account not only space utilization but also material handling equipment and ergonomic conditions for assigned workers.
Warehouse management which formerly was seen as a non-value activity has become an opportunity of competitive advantage. Having storage facilities tailored to meet customer demand and lower purchasing costs is a no-brainer for the firm seeking a more profitable value chain.
