Warehousing is the second major component of physical distribution. Warehousing management has two distinct and equally important parts:
1. The physical job of creating and running the network of storage points, and
2. The managerial task of controlling inventory levels without sacrificing service levels.
Role and Importance of Warehousing
Points below explain the role and importance of warehousing.
* Like transportation, warehousing too vests the product with time utility and place utility.
* In the case of some commodities, warehousing vests the product with â€˜form utilityâ€™ as well.
* It is common knowledge that a certain level of storage is inescapable in marketing of most products.
* For product with high seasonal storage is needed on a larger scale.
* In some cases, sub-distribution realities necessitate extra storage.
* Storage reduces the need for instant transportation, which is often difficult and costly.
* Storage is also a competitive advantage, as with better storage, better servicing of the channel and consumer is possible.
* Storage also helps in balancing demand and supply, and in establishing prices.
* In the case of some products, storage by itself acts as a stimulant of demand.
Designing a Warehousing System
In the most cases, products flow from the factory to the consumer through a long winding chain, consisting of multiple tiers of warehouses and multiple tiers of marketing intermediaries. In designing a warehousing system, the following basic considerations relating to this flow become significant.
* Number of warehouses required;
* Location of them;
* The size or capacity of each of them;
Warehousing to be tackled as part of the Physical distribution system
While designing a warehousing system, the fact that warehousing is a part of the overall distribution job should be borne in mind. The warehousing design fit smoothly into the overall distribution design, which includes physical distribution elements like transportation plus channel arrangements.
Warehousing a Partly Fixed and Partly Adjustable Entity
In most cases, it may be apt to view demand in a given territory as consisting of a constant component and a transient component, which is to be added to or subtracted from (mostly added to) the constant component. Past sale corresponds to the constant component. Changes occurring in demand in the current period correspond to the transient component. The transient component is related to change in market demand per se, or company demand (a company may lose or gain relative market share). Thus, in the nature of things warehousing will have a constant component plus a variables component. And there is some scope for adjustment in warehousing of products, depending on market behavior/companyâ€™s performance.