- Allen Czermak
Why Is Warehousing Important In Logistics
One of the most basic lessons that was taught in introductory economics was the law of supply and demand. Each country, business, store, and individual uses this dynamic every day sometimes without realizing it. If a store has only a very limited supply of an item that is most desired the owner can up the price since the buyers are desperate for the item. For example, these past few months brought us an extreme egg shortage to the point where one dozen eggs cost $5.99 and even more at some markets. How could that happen? The reason that was given was that there was a devastating virus present in millions of chickens that had to be killed and not fit for egg production. Not everyone bought this reason, and we still don’t know for sure what happened but what we do know is that eggs are a staple in every home. Unless you are a strict vegan who will not eat anything taken from animals including dairy products and eggs, you cannot live without eggs. There are so many varieties of food that have eggs in them and sometimes we don’t even realize their presence because we don’t taste them. Some people eat an omelet every morning for breakfast even if they are watching their cholesterol and only eat the whites. What about muffins or cookies, breaded chicken cutlets and shining your freshly baked bread? Eggs are necessary in preparing so many foods.
How can a business keep the law of supply and demand steady, so they do not have to raise or lower prices drastically and suddenly? Some industries such as the petroleum sector can manipulate prices without having shortages to gain political attention when necessary. Legitimate American companies both wholesale and retail have a loyalty to their customers to try to keep prices steady in normal times except in such inflationary times as we are in now where industries are forced to increase their prices.
The wisest way for a business to assure the availability of their products is to buy access at fair market prices whether buying from China, the United States or any other nation that will deliver goods on time and in good quality. Then the issue becomes where to store the items that are not needed immediately. While cutting a deal with a manufacturer, both parties need to come up with a fair amount of inventory that will give both the manufacturer and the retailers the edge to keep their profit margin going in the right direction.
A warehouse is not simply a drop off zone for goods and materials coming to a temporary end of their long journey to the consumer. For a warehouse to operate efficiently it must be a safe house for valuable goods and be centrally located in close proximity to the logistic supply route. The right warehouse location can make the difference between success and failure of receiving the goods in a timely manner.
Why is Warehousing so Important?
There are two main reasons why a company would invest in warehousing. As a business grows the owners and managers want to have their excess items close by to satisfy their customers. So even if an item is out of stock today it will be back on the shelves by tomorrow. The second reason is when a ship comes in from China, the goods are shipped through a logistics company to the east, but it is prudent to keep some stock in the west so that the supplies do not have to be shipped back long distances. For example, a Dallas, Texas based company has a large contingency of customers in the Pacific Northwest but doesn’t have a warehouse there. Therefore, their customers can wait a week before getting the products they are asking for. If the Dallas based company were to open an additional warehouse in Baltimore then their goods would be miles closer to their customers thus solving this particular supply chain issue.
What Is On Demand Warehousing (ODW)?
It is not always practical for a company to own their own warehouses especially when they have to get their goods from different points A to different points B meaning their goods are being imported from different sources and coming into various ports of call in the United States.
It comes down to companies having basically two options, using a third-party logistics provider, or owning their own warehouses across America. Unless you are a tremendous company such as Walmart or Costco the price and maintenance fees for your own warehouse are not feasible.
In the past, in order to rent a warehouse, you would have to sign up for a five or ten year contract leaving no flexibility for unforeseen changes because of varying consumer requests. On the other hand, ODW (on demand warehousing) does not require long term commitments but rather storage based on a per-pallet range. A company does not have to sign up for a five-year-lease when they are only looking for short term storage. Global Trade Magazine writes that with this new idea of warehousing (ODW), a company is able to find warehouse space in twenty-four hours instead of waiting up to a year for openings. It’s true that a company such as Amazon seems to be able to build new warehouses within several months and fill them, but a typical small business needs to find storage facilities that are already built and operational. Ideally these warehouses are closer to their supply destinations matching with the right logistics operations. With the advent of advanced software and up to date management systems there are many unused warehouses that can be utilized immediately for a short amount of time. With this type of short term warehousing there are less delivery costs since the warehouses are conveniently located.
How ODW Helps the Supply Chain Function More Efficiently
There is nothing as disappointing as when a mom brings her child to the store to buy an advertised best-selling item that they have been longing for only to find the shelves empty. The disappointment is almost unbearable when you get to the store and the best you can get is a raincheck and who knows how to play with a raincheck? ODW has space and storage versatility, good professional help in unloading and loading of palettes, and paying as needed for warehousing. Instead of signing on the dotted line for a five-to-ten-year contract, there is no formal obligation to continue if the warehouse is no longer needed. Most importantly with a warehouse accessible nearby the store management is assured that a customer will have the item they desire on the shelf when and where they want it.
Since a business does not own the warehouse nor does it necessarily know the employees personally, the intimate relationship of boss to worker is not present the same way as when there is direct ownership of a warehouse. With a good manager who gives monthly reports and good security guards who will watch your stuff so that no pallets will be missing, you should be able to successfully run your business with on demand warehousing and hopefully as your firm grows you might need to begin buying your own warehouses slowly and carefully.
The trick is the same as we stated at the top of this article, supply and demand goes for successfully warehousing to keep the supply chain going smoothly. You may want to start small by keeping a two-month inventory close at hand to avoid running out of products. As your sales increase you will need more space to keep your extra inventory and that will be the juncture when you will decide whether to go from on demand warehousing to owning your own warehouse.
Warehousing is a crucial connection for the supply chain by linking customers with suppliers to ensure that supplies get to where they are supposed to go at the right time. With the supply chain crisis lessening, companies are now getting their goods at a faster pace with the help of reliable logistics industries. Along with proper and secure warehousing of products for future sales, wise wholesalers and retailers turn to logistic companies that they can rely on because even if the products are there at the ports they still have to be transported in trucks, trains and other ways of transportation and those waiting for their deliveries want their merchandise to be in good hands. We refer to them as an intermodal transportation companies that handles goods in the most cost-effective way for the customer. That’s why it’s so important to find the right logistics company that will be reliable, quick and get the goods to their destinations safely.
The blending of rising rents and limited warehouses available makes on demand warehousing a promising solution according to, Supply & Demand Chain Executive. By understanding exactly what your company needs as far as fulfillments will help you find the right specialist who will be able to not only support and watch your products but make your business grow.