Supply Chain Management Essay

1150 Words May 29th, 2013 5 Pages
Discuss And Illustrate The Economic Justification For Establishing A Warehouse

Storage has always been an important aspect of economic development. For manufacturers, strategic warehousing offered a way to reduce holding or dwell time of materials and parts. On the outbound side of manufacturing, warehouses can be used to create product assortments for customer shipment. An important charge in warehousing is maximum flexibility. Ideally a warehouse will simultaneously provide economic and service benefits. Warehouses offer many economic benefits for companies. One economic benefit of a warehouse is derived from the ability to consolidate products from a number of production plants into large, consolidated shipments delivered to
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Consolidation occurs when a warehouse pull together small shipments from a number of sources and combine them into larger, more economical, shipping loads intended for same location. Small, flexible shipment in. Large, economical shipments out.
The benefits of consolidation are the lower in transportation cost as goods could be ship full truckload and quicker delivery instead of transporting the products as small shipments from different sources. With larger volume, you are able to get the lower rates, improved service, shorter transit time and less handling of your freight.

Economy of scale is achieved by transporting the large shipment from origin to destination. Break-bulk occurs when a warehouse receive bulk shipments and breaking these small shipments for delivery to various customer.
Break-bulk warehouse operations are similar to consolidation except there no storage is performed. The long-distance transportation movement is a large shipment, transport cost is lower and there is less difficulty in tracking. Both consolidation and break-bulk arrangement use warehouse capacity to improve transportation efficiency. Many logistical arrangement involve both consolidation and break-bulk.

How do warehouses perform assortment?
The basic benefit of sorting is done to reconfigure freight as it flows from origin to destination.
There are three types of assortments performed in the warehouses namely
– Cross docking, Mixing, and Assembly are widely

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