How does effective warehousing improve supply chain management?

Warehousing facilities play a vital role in the overall supply chain process. It is evident that continuing globalization and changes/challenges occurring in such areas as reverse logistics, environmental sustainability, information technology, and overall supply chain integration are further evolving the strategies, roles, and responsibilities for warehouses. The term "DC" which stands for distribution centre is more applicable for modern warehouses.

Having products stocked up in warehouses can add up cost but can also improve effectiveness of supply chain. Warehouse's add little or no value for products bought in bulk (e.g. raw materials, manufactured items) with little or no time sensitivity associated with their use. However, for few other products, warehouse provide a dual value-added role making supply chains more efficient and more effective. It adds efficiency by consolidating products for shipment to customers, reducing transportation costs, and performing a broad range of value added services (e.g. branding, labeling, assembly, packaging, kitting, reverse logistics). Thereby making the supply chain more effective.

Product type often determines the need for and specific role of Warehouse's in the supply chain. Characteristics to be considered include:

• Seasonality in either production or consumption
• Demand variability
• Manufacturing economics
• Marketing and promotional initiatives
• Transportation economics
• Service requirements
• Customizability and variants of product

There are various factors which determines the functioning of warehouses. In addition to transportation costs warehouse location is determined based on the the location of major markets and customers, the location of supply points, the volume of product moving to or from supply points and customers, transportation rates, the level of service required, and the product characteristics. Information is the critical driver for successful warehouse operations. Short term forecasts provide information to determine labor and space requirements over a short term planning horizon.  Longer term forecasts are used for capacity planning.The primary objectives of warehouse’s include providing the right product, at the right place, right time, and damage free – at a competitive cost. Fundamental to achieving and sustaining these objectives is measuring performance.  The most common warehouse performance measures include handling productivity, space utilization, accuracy, damage, service, cost, and inventory. 

Some of the giant online retailers like Amazon is on warehouse building spree to so it can keep rivals such as EBay and Wal-Mart Stores from peeling off customers. To help speed delivery, Amazon is building its warehouses bigger, though the company wouldn’t say how much bigger, and boosting its storage capacity with floor-to-ceiling shelves. According the top executives at Amazon, as the expansion of warehouses of Amazon continues, it will become more efficient. 

One of the question that comes to my mind while reading about the warehouse management in supply chain, what trade off does companies consider while making their judgement to stock which products in these warehouses?

Sources:

• http://www.scmr.com/article/warehousing_efficiency_and_effectiveness_in_the_supply_chain_process
• http://www.businessweek.com/articles/2013-08-29/why-amazon-is-on-a-warehouse-building-spree