The Importance of Warehousing and Distribution in Supply Chain Management

Supply chain management is the area of business administration that directly concerns the consumers. It is essential in ensuring customer satisfaction and loyalty. This area covers several business operations such as warehousing and distribution. To succeed in supply chain management, it is important to excel in those aforementioned business operations.

Warehousing

A warehouse is a large, spacious and secured building intended for commerce and government use. It functions as a storage place for large quantities of goods. Warehousing is not simply about storage though. It also covers the administration and manual labor required in storage such as delivery, documentation, examination and certification.

There are three types of warehouses: public, owned by third party logistics (3PL) and company-owned. The government through its arm uses public warehouses to store shipments and contrabands they confiscated temporarily. The business sector usually resorts to company-owned or 3PL-owned warehouses to meet their storage needs. Wholesalers, exporters, importers and manufacturers are the common clients of warehousing service providers. Raw materials and finished goods alike are kept in warehouses.

There are different reasons for warehousing. The cheese making and wine-making (also known as viniculture) industries require an extensive time to produce their products. Warehouses are good places for their products to mature.

This business operation also ensures the sufficiency of supply. As a result, the prices of the goods involved are less likely to fluctuate.

Warehousing may also cover the completion of goods before distribution. The components and packing materials are just delivered to the building. The assembly and packing of the goods will be done in the warehouse. By doing so, the product cover will still look new and enticing upon delivery to distribution centers. If you pack the goods before bringing them to the warehouse, the packaging may be damaged while on the way.

Distribution

In the business language, distribution refers to the delivery of finished goods to buying centers such as shopping centres, markets and retailer stores. Some manufacturers deliver their goods directly to their accredited retailers. This is advantageous if the retailers’ business establishments are just nearby the manufacturers’ places.

Direct delivery of goods to retailers can save you from warehousing costs. However, if you are far from distribution centers, you have to deal with trucking costs and inventory frequently.

Thus, it is safe to say that warehousing and distribution go hand-in-hand in providing a more cost-effective way of delivering goods. There are even businesses that literally combined these two business operations.

Some warehouses are also utilized as a buying or retailing center while maintaining its original function. In fact, the Germans still have warehouse-like department stores. The architecture of some of these buildings is one of the causes for their dual functions. Excessive beautification of warehouses makes them appealing for shopping.

Impact of Improper warehousing and distribution

Major and minor mistakes alike in warehousing and distribution can result to high losses. Incorrect storage can damage the goods. If the damaged goods are sold, they will either be sold in a much lower price or not be sold at all. The manufacturers will not be able to get back their investments.

Failure to deliver the goods to the right destinations will cause the business to cover another round of delivery costs to do two things: to bring back the wrong goods and to deliver the right ones. Due to delays, goods can get damaged and intended recipients may not want to accept and pay for the delivery.

Another adverse effect of wrong warehousing and distribution is that it can destabilize the prices of goods. If there is not enough supply due to the incompetence of the warehousing management, the prices of goods may rise to meet the unchanged demand of the consumers.

So above you can see the importance of putting an effective supply chain management process in place. You can read our article about configuring an end to end supply chain solution here.