Warehousing

Abhijeet Pratap

December 24, 2023

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Warehousing, function, benefits and best practices

Demand for certain products can vary from season to season. It is why companies may need to maintain a certain amount of safety stock in their warehouses to cater to customer demand when demand unexpectedly rises. Warehousing involves storing products until they are ready to be shipped to the customers. Managing warehousing efficiently helps companies optimize their supply chains, distribution and other business process including the final delivery to the customers. Efficient warehousing can drive faster growth by ensuring superior availability of products.

In this post, we will discuss warehousing, its functions and benefits as well as some warehousing best practices that can help businesses serve customers even efficiently and improve their bottom line. Companies generally use warehouses to store goods and mostly temporarily. Suppose, there is a toy company that experiences generally low demand throughout the year except in the holiday season when the demand for toys surges very high. The toy company will keep manufactured toys stored in the warehouse until the holiday season when it knows the demand for its products will remain very high. Sometimes businesses also store products in warehouses expecting their prices to increase.

Warehouses and distribution centers play an important role in terms of the movement of goods in the supply chain. One can understand a distribution center as a type of warehouse where products are stored so that they can be moved to the distributors, retailers or consumers. For example, manufacturers store products in the warehouses from where these products are sent to diverse distributors, wholesalers and retailers for sale to consumers.

Main functions of a warehouse:

Storage:

The primary function of a warehouse is storage. Companies need to store products as well as equipment. A large company may need enough storage to minimize wastage of products which can otherwise get spoiled or be stolen. For example, companies may maintain excess inventory in warehouses to respond to changes in customer demand.Products that are not sold immediately can be kept in storage in warehouses until they are sent to retail outlets for sale. Companies also keep the stock that is not fully ready to sell or use or for storing raw materials as they arrive from the suppliers. Moreover, companies that have extra storage space to manage extra inventory may be more ready to respond to fluctuations in demand than the ones that do not have extra storage.

Most companies store the inventory that is sufficient to cater to customer demand. However, due to seasonal fluctuations in demand, sometimes companies may also need to store products for extended periods.

Movement of goods:

Warehouses play a critical role in the distribution of products to the customers as well as receiving goods from supplies. Overall, there are a critical point in terms of movement of goods around from suppliers to business and then from business to customers. Inbound deliveries from suppliers may first reach a warehouse before being moved to the retail stores. Efficient warehouse management ensures that goods move around seamlessly throughout the warehouse. It maximizes operational efficiency and also makes sure that goods are timely delivered to the customers. Especially, in the case of perishable goods, it helps make sure that they are shipped out fresh. Companies can aslo use warehouse management software to make sure that goods are seamlessly moved around in the warehouse with highest efficiency.

Safeguarding goods:

Goods can be lost due to several factors. For example, they can be stolen or they may get damaged if not stored properly or they may even be spoiled for not being stored at the right temperature. One of the other critical functions of warehousing is to safeguard goods. It prevents theft of goods or their damage or loss caused by other factors. Simply put, effective warehousing guarantees the safe storage of goods. Sometimes goods may need to be stored at controlled temperatures and at other times there might be the need for enough ventilation and light. The chances of loss by theft are also prevented in a warehouse by having proper security measures in place. Perishable goods can also be safely stored at controlled temperatures and with the use of insecticides when necessary. Managing warehouses effectively means safeguarding goods so that they do not perish or get damaged or lost due to some other factor. Some companies whose products are at risk of being lost to pests also carry out regular pest control at their warehouses to protect the goods stored there.

Quality control:

Warehouses also play an important role in terms of quality control. Products received from the suppliers can be checked at the warehouses. The warehouse staff can duly inspect the received goods for quality. They can ensure that the products they have received match the quality specifications provided by the company. It also involves making sure that the products they have received were not damaged while in transit and the quality matches the company’s and the customers’ expectations. In terms of quality control, a warehouse offers just the right place to carry out quality checks and ensure that the product being sent to the consumers matches all the quality expectations. It helps to ensure that the customers receive the right quality products.

Inventory control:

Stock counting is a vital part of inventory control. However, most stock counting takes place at the warehouse. Stock counting involves manually checking all the inventory you have at hand at your warehouse. Combined with the inventory management systems used by the company, stock counting provides a more accurate view of the stock at hand. While for some businesses, it may be legally required to carry out stock count at least once a year legally. In most cases, regular stock counting has its own benefits and helps identify any losses happening due to theft, damage or other events instantly.

Paperwork:

Warehouses are also the most suitable place for carrying out most of the paperwork related to shipping, packaging, invoicing and so on. While generally there is a lot of documentation required to be carried out at the warehouse when goods are to be dispatched for their next destination, in several cases, companies may also be required to get necessary clearance from the transportation authorities. So, a warehouse is the most suited place for carrying out all these checks and paperwork. The warehouse staff ensures that all the necessary paperwork has been carried out before the goods leave the warehouse.

Financing:

In some cases, businesses also use the inventory lying in their warehouses as collateral for taking loans from banks and other financial institutions. It is generally useful to complete all the paperwork related to warehousing regularly and carefully since it works as evidence when a company is trying to raise finance on the basis of the inventory. For many small businesses, their inventory in the warehouses can be a significant source of financing. The goods will still remain in the custody of the owner, but the business can use it as collateral to apply for loan.

Price Stabilization:

Some businesses might be highly vulnerable to extreme price fluctuations. These generally include companies that earn revenue from buying, manufacturing or selling goods. The company might need to decide when it is the right time to sell and when it is the right time to buy based on the price fluctuations. It will however need to properly warehouse the products if it is waiting for prices to stabilize. Suppose, prices for certain goods have decreased due to an increase in supply, the company might need to store them until the prices are up again. When the prices rise, it is the right time to sell since the company can now make a decent profit. In such a situation, warehouses serve an important purpose for companies and help them keep goods in store until the prices have stabilized. Companies must focus on effective warehouse management since their bottom line depends on it. Moreover, they need to predict the fluctuations in supply and demand so that accordingly adjust their buying and selling strategies to make a decent profit. The warehouse and logistics managers are required to focus on efficient storage of goods when the supply is high and their packaging and delivery when the supply is low and it is time to sell. While this helps companies effectively manage their profits, effective warehousing also helps weather the effect of seasonal fluctuations with higher efficiency.

Cross docking:

For a large number of businesses and especially the large retailers like Walmart, Costco or Best Buy, their warehouses mainly serve the purpose of cross docking points. Cross docking involves transferring goods from the inbound vehicles to the outbound vehicles to retail stores without storing them so as to minimize inventory management costs and reduce the time it takes to deliver products to the final customers.

For most businesses, cross docking is an essential function of their warehouses. While it allows to fulfill customer orders faster, in the longer term, the companies also realize reduced storage costs in the longer term. In the case of leading retail firms like Walmart, or Costco, cross docking is an integral part of their inventory management system.

Warehouse management best practices:

Say no to manual input: Instead of using manual input, companies must rely on barcodes and RFID scanners since manual input may sometimes give rise to major errors or even cause a real disaster. On the other hand, barcodes and RFID tags need nothing but you have to simply point and click to scan. You can connect it to your inventory management system to maintain a record of all the inventory in your warehouse.
Plan the picking procedures: While it is generally up to the business that how it picks, standardizing the picking process has some benefits. A warehouse management system can help you streamline picking procedures.
Reduce physical touch points : Focus on your fulfillment process and remove as many touch points as possible. It will help you minimize delays and reduce warehousing costs. While some touchpoints may be essential some may be removed to reduce the chances of wear and tear and speed up the process of delivery.
Make in demand products easily accessible: You must analyze your inventory and products to check out the items that experience higher demand and the ones that experience lower demand. The ones that are ordered more often must be stored in a manner that they are easily accessible. If the higher demand products are placed closer to the packing stations, you might be able to cut down on the delivery times.
Track warehouse KPIs: Warehouse managers must use key performance indicators or KPIs to measure the performance and success of their warehousing practices. Some of the commonly used KPIs include inventory accuracy, order cycle time, and order fill rate. By tracking these KPIs regularly, you will be able to identify areas needing improvement and make data driven decisions to improve warehousing management.
Make warehouse safety a priority: You should make the safety of your warehouse a priority. Follow all the safety practices and train your staff in safety techniques as well as provide them the required safety equipment. Make sure that you and your staff and remain ready for emergency situations and there are no safety hazards inside your warehouses.
Remain ready for emergencies: Always keep a plan for managing emergencies in place since they can happen just any time. Make sure your staff has been trained to act in situations like fire, natural disasters or any other form of emergency situations.
Improve continuously: In terms of warehouse management also, it is critical to continuously improve since there is always the need to. It helps you keep ahead of your competition and provide better service to your customers. Take time to watch your warehousing practices and note areas where improvements can be made. Since the business world is continuously evolving and customers’ needs and preferences are also, companies need to continuously improve their warehouse management practices so as to be able to cater to customer demand with higher efficiency.
Standardize vendor operations: By standardizing vendor operations, companies can reduce their supply chain related costs. It will also help them streamline their supply chain operations. Ensure that your vendors are following the same processes for shipping and receiving and that they follow your quality related guidelines.