Inventory and Private Warehousing

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1. Distinguish between warehouses and distribution centers.

Warehouses emphasize the storage of products, and their primary purpose is to maximize the use of storage space. In contrast, distribution centers emphasize the rapid movement of products through a facility, and thus attempt to maximize throughput (the amount of product entering and leaving a facility in a given time period.

2. Explain the four ways that warehousing facilitates the regrouping function.

Regrouping takes four forms: accumulating (also referred to as bulk-making), allocating (also referred to as bulk-breaking), assorting, and sorting. Accumulating involves bringing together similar stocks from different sources, while allocating involves breaking larger quantities into smaller quantities. Assorting refers to building up a variety of different products for resale to particular customers, while sorting out refers to separating products into grades and qualities desired by different target markets.

3. Discuss some of the value-added activities that can be performed by warehouses and distribution centers.

These value-added activities include assembly, light manufacturing, product testing, and affixing state tax stamps. Some goods are labeled prior to distribution to retail outlets. In addition, warehousing facilities are increasingly the places where retail point-of-sale displays are created and produced.

4. What are the advantages and disadvantages of private warehousing?

One disadvantage to private warehousing is that they are characterized by high fixed costs—which necessitates high and steady demand volumes. In addition, a high fixed cost alternative becomes less attractive in times of high interest rates because it is more costly to secure the necessary financing. Private warehousing may also reduce an organization’s flexibility with respect to responding to changes in the external environment.

As for advantages, private warehousing offers users a great deal of control over their storage needs. More specifically, private warehouses can be constructed to meet user specifications and companies can also control product placement within a facility. In addition, private warehousing offers access to products when an organization needs or wants them.

5. Distinguish between bonded storage and field warehousing.

There are several types of bonded storage. U.S. Customs-bonded warehouses hold goods until import duties are collected. Internal Revenue service-bonded warehouses hold goods until other federal taxes and fees are collected. A field warehouse is a facility temporarily established at the site of an inventory of goods, often the premises of the goods’ owner. The warehouser assumes custody of the goods and issues a receipt for them, which can then be used as collateral for a loan.

6. Explain how common sense can be helpful in terms of warehousing design and operations.

One common sense piece of advice is that prior to designing a warehousing facility, the quantity and character of goods to be handled must be known. For example, online orders tend to be much smaller than those going to retail stores; as a consequence, picking and assembling one or two items is much different than picking and assembling a pallet-load of items.

Another common sense piece of advice is that it’s important for an organization to know the purpose to be served by a particular facility because the relative emphasis placed on the storage and distribution functions affects space layout. For instance, a distribution-oriented facility attempts to maximize throughput rather than storage.

7. What is cross-docking? How might it affect warehousing design?

Cross-docking can be defined as a process where a product is received in a facility, occasionally married with product going to the same destination, then shipped...
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