What’s the definition of warehousing and warehouse?
Well, I asked Colin Airdrie, one of our warehousing experts, exactly that question!
I hope his answers help you if you’re new to supply chain management, or are just trying to gain a better understanding of how warehousing fits in.
The Warehouse Defined
A good definition of a warehouse is “a planned space for the efficient storage and handling of goods and materials”. In that sense, we can use the words “warehouse” and “distribution centre” interchangeably. What’s important to note in the definition is the use of the words “planned” and “efficient”.
Check out our related warehousing pages below:
This means going further than some companies still do, which is to have a “place” where they put “stuff”, without the planning and therefore losing out on the efficiency.
With goods and materials coming in and going out, the warehouse is also a vital hub in the centre of the supply chain.
Raw materials from suppliers or finished goods from manufacturers come into the warehouse, the information has to be available to say where these goods have to go, and they then get passed down the distribution chain to the customer.
A warehouse is a dynamic operation and can deliver a more profitable return on investment than many people realise.
Some goods move slowly. Others may move very quickly, but it all has to move. The different goods have to be planned, laid out, and handled according to how they are expected to move through the system.
The Warehouse Contribution to Companies’ Profits
There are at least three ways in which the warehouse can contribute to profitability.
The first is to house buffer inventory to smooth out fluctuations in supply and demand. This is essential for companies to maintain good customer service. Happy customers bring repeat business with lower costs and more profit.
The second is in building up investment stocks. Examples include commodities like coffee, where prices fluctuate on a global scale, and stock can be held to be sold when the price is favourable.
When inventory is accumulated like this on a large scale, it’s usually held in a specialised storage warehouse (see the next section of this article), rather than in a distribution centre.
Thirdly, inside the organisation a warehouse assists in the most effective use of capital and labour within the manufacturing and supply units. It helps keep overtime charges down and allows a company to buy and stock more supplies when prices from the supplier are more favourable.
These are the most important reasons for companies to utilise fulfillment warehouses or “distribution centres,” but there are also a few specialist warehouse types which you might come across in some supply chain operations.
Specialised Warehouse Types
In addition to distribution centre warehouses, some companies may also have production warehouses, which are used purely to even out the flow of inbound materials in manufacturing. In certain industries, storage warehouses are also used.
Unlike the fulfillment warehouse, storage warehouses typically host no value-adding activities and as the name suggests, are purely used to store inventory, often for long periods of time.
In a storage warehouse, inventory will occasionally be received in bulk and put away, eventually to be dispatched (probably in bulk also) to more dynamic warehouse facilities to enter the supply chain proper.
Warehousing: A Supply Chain Necessity
In a perfect supply chain, warehouses would have no place. As yet though, the perfect supply chain doesn’t exist, so warehousing is essential to maintain an efficient, uninterrupted flow of materials and goods from source to point-of-use.
Because it’s such a critical activity, warehousing knowledge is an essential for anyone involved in supply chain operations or management.
Colin’s answers in this article provide an excellent introduction to the basics, but if you’d like to learn more about warehousing, keep visiting our blog here at Logistics Bureau, as we regularly post articles on the topic, along with the many other activities which make supply chain management such a fascinating profession.