Warehousing as an Important Business Activity - Research Paper Example

A warehouse is a place in which goods or merchandise is stored for a period of time before they are transferred somewhere else. These goods could be in the form of raw materials which have been purchased in bulk and are stored till they are required for processing. These goods could be in the form of intermediary or semi-finished goods which will be processed further when needed. The warehouse may also have finished goods which can be delivered directly to the customer or may be transferred to another reseller or retail outlet. In any case, the warehouse serves to store the goods and keeps them in a safe and sound condition till they are needed by the business. Warehousing is an important business activity and a critical commercial function. Warehouses offer several advantages to the business. Firstly, a warehouse allows the business to store goods and use them when needed. This ensures that the business can carry on smoothly in its operations and the business activity can never be suspended due to non-availability of required goods. Hence, it ensures smooth and continuous operations of a business. Secondly, a warehouse allows the business to buy the goods in bulk and store them. The business usually takes advantages of discounts and lower prices because of buying the goods in bulk. Without a proper warehouse of adequate size, they would have to reorder the goods again and again and hence would incur higher costs. Also, there is certain reorder cost associated each time goods are ordered and shipped. This includes communication costs and transportation costs. With a warehouse, the business incurs the fixed cost once and orders the goods in a large quantity. This also results in cost savings. In many cases, the price of certain goods increases rapidly. If the business were to buy these goods again and again, they would have to pay a higher price each time. If the business has warehousing facility, they can order the goods in bulk and avoid paying the higher prices. Given these advantages, most businesses want to make use of warehouses. However, not every type of warehouse at every location is of use to the business. Selecting a location for a warehouse is a critical activity and there are several factors which need to be considered before selecting a location. Besides, once the warehouse location has been selected, the business needs to plan its supply chain accordingly and mould its operations to take advantage of the warehouse. The foremost factor to consider while selecting a new warehouse location is the geographical and infrastructural conditions. The primary role of the warehouse is to store the goods and maintain them in a good condition. Hence, the business should select a location where there are no geographical and infrastructural issues which can damage the goods. There are several geographic factors which affect a warehouse. This includes climate, temperature, humidity, sunlight etc. Depending on the nature of goods, these factors play a significant role in keeping the goods in good condition. For instance, consider a warehouse for a paper manufacturer who stores large sheets of paper in his warehouse. Paper is a sensitive item and can be easily damaged by humidity or sunlight. The ideal warehouse location for him should be one which is a dry place with moderate climate and the goods are not affected by the weather elements. Infrastructural conditions play an equally important role in selecting a warehouse. A warehouse is typically dependant on several infrastructural resources. These include electricity, communication network, transportation facilities, banking and insurance facility etc. All these factors play a critical role when selecting a warehouse location. Electricity is very important particularly in warehouses which have specialized machinery to protect goods. These would include refrigeration facilities to keep perishable goods fresh. Without a constant uninterrupted electric supply, these perishable items cannot survive. Similarly, goods need to be transferred to and from the warehouse very frequently. It is important that the transportation network is reliable and efficient. There should be minimum time involved in moving the goods which requires that the place has a good road or rail network. Also, the transportation costs should not be much high. Communication plays an important role in ensuring the timely transfer of goods from one location to another. Communication facilities are required to carry out correspondence with other business units and with external customers and suppliers. In many cases, the warehouse may require financial assistance from banks to obtain loans or receive payments or make payments. Good banking facilities are important for a warehouse and need to be considered when selecting a location. Similarly, insurance plays a vital role too. Most warehouses insure the goods against damage or theft. Hence good insurance facilities which can cover the goods and provide claims in a timely manner are very important. There are other factors which are counted under infrastructure conditions and hence are also considered in choosing a warehouse location. One of them is the law and order conditions. The location should have good law and order condition and the warehouse should be safe from attacks. An unsafe location would not be desirable for a warehouse. Many businesses are dependent on natural resources for producing their goods or storing them. For instance, many businesses use water, agricultural products or mineral resources in their production processes. Some businesses also make use of natural resources for storing these goods. For instance, certain products require adequate supply of sunlight to stay in good condition. Some other businesses use natural resources in packaging the goods. Hence, depending on the nature of goods, the availability of natural resources is another factor businesses use in selecting a warehouse location. Warehouses typically involve movement of goods in and out of the warehouse and within the warehouse. All this makes use of a lot of manpower. Hence, having adequate supply of labor to move the goods around is very important. The labor should also be cheap to cut down the costs. Availability of cheap labor is one of the reasons why a company chooses a particular location for warehouse. Most underdeveloped areas have plenty of cheap labor available and this is one reason why many warehouses are located in these areas. Another factor to consider while selecting a location for a warehouse is the local industries around the warehouse. Depending on the nature of business, a business may be using the products produced by these local industries and storing these in the warehouse. They could also be producing raw materials at some other location and supplying these to the local industry after storing them in the warehouse. Hence, the business needs to consider the state of the local industry at the location of the warehouse. Having a warehouse in an area with several local industries would save the business from incurring transportation costs. The businesses want to keep down the cost of storing the goods to a bare minimum. One of the components of the cost is taxes. Tax regulations differ from area to area. In some areas, there is a high tax levied on the purchase and operations of a warehouse. In some areas, the tax requirements are not that severe. In order to encourage businesses to open their warehouses in certain areas, the governments also start to offer tax holidays. Normally, tax requirements are lesser in developing countries than the developed ones, and this is one reason why companies operate their warehouses there. Besides all the factors mentioned above, there are also several external costs and benefits associated with operating a warehouse. Collectively, they come under the category of public interest. A warehouse may store dangerous goods such as harmful chemicals which, if not handled properly, could cause severe damage to the environment. Hence, considering the public interest and the damage to the environment and affect on lives of people around, the company might not choose to open a warehouse in an area with people living around it. The purpose of warehousing is not just to store goods, but to make sure that these goods are available for use whenever they are needed. Hence, it is important that the goods can be transported in a very short time to and from the warehouse. Consider a case where the warehouse operates in a foreign country and needs to ship the goods to the home country whenever they are needed. In this case, since the goods need to be shipped frequently, it would be very advisable to have the warehouse near the shipping port. This would save the time to bring the goods from another location. Also, the costs of moving the goods would be greatly reduced as well. Similarly, a company using air or rail transport as its major medium of transport, may want to operate their warehouses near airports or railway stations respectively. This will help them strengthen their supply chain and operations, and to further increase their business. The recent trend these days is of warehousing being carried by a specialized company which offers its services to several other companies. This is opposed to the previous concept where each company had its own warehouse. By using warehousing services provided by an external company, the business is relived of handling warehousing itself and incurs lower costs. The warehousing companies specialize in storing and transporting goods and are able to do it much more efficiently. For a commercial warehouse to be successful, it also needs to be location at a strategic location. Firstly, the warehouse can either specialize or deal with only a certain type of industries, or it may be a general one which provides services to any type of industry. Normally, industries of same type are located in a common area. It would be a very suitable location if the warehouse is also location in the area and provides easy access to all the businesses. However, if the warehouse is a general one and has its clients spread all across, it may choose to operate near a shipping port, air port or railway station to provide easy access to transport facilities to its clients. Secondly, the warehousing company should ensure that it has all the infrastructural facilities that the clients require. There should be reliable power supply, solid transport and communication network and other facilities. The warehouse should ensure that the goods are kept in safe and sound conditions and should tailor the environment which suits the nature of the goods, for instance provide refrigeration facilities for perishable goods. Bibliography Key Factors to Consider during Warehouse Sizing . (n.d.). Retrieved from Supply Chain and Logistics Consulting Ltd: http://www.supplychainlogistics-consulting.co.uk/warehouse-sizing.html Bagde, J. (2008, October 5). Importance of Storage Warehouses. Retrieved from Articles Base: http://www.articlesbase.com/home-improvement-articles/importance-of-storage-warehouses-590663.html Greenville County. (n.d.). Mini Warehouse Storage Design References. Retrieved from http://www.greenvillecounty.org/Codes_Enforcement/Forms/MiniWarehouse.pdf Luton, D. (n.d.). The importance of a good warehouse floor. Retrieved from Modern Materials Handling: http://www.mmh.com/article/350610-The_importance_of_a_good_warehouse_floor.php Management-Hub.com. (n.d.). Features of Warehouse Management. Retrieved from http://www.management-hub.com/warehouse-management.html Piasecki, D. (n.d.). Warehouse Fire Safety. Retrieved from Inventoryops.com: http://www.inventoryops.com/fire_safety.htm Total Warehouse Solutions.com Ltd. (n.d.). LAYOUT ALTERNATIVES. Retrieved from http://www.totalwarehousesolutions.com/storagesolutions.html Warehouse Layout Design - Sizing the Space Requirements. (n.d.). Retrieved from Supply Chain and Logistics Consulting Ltd: http://www.supplychainlogistics-consulting.co.uk/warehouse-sizing.html Read More