Logistics
Written Assignment 3 * How does the warehouse location decision affect the rest of the logistic decisions?
With costs exploding in the market, the location of a warehouse is crucial for an organization’s profitability. In a well-designed supply-chain location is of supreme importance. Selection not only impacts the supply chain it also has a significant impact on future cash flows. As with any individual logistics activity, management must always ensure that the logistics system as a whole benefits from the chosen warehousing strategy. In other words, the costs of the building and maintaining the warehouse have to be less than the benefit the firm is receiving.
When the location is chosen, management has to decide whether they want to support multiple markets from one centralized warehouse or place a facility in each market. Once the question of centralization is addressed, the decision of how many warehouses comes into play. Then management must look into warehouse alternatives such as private warehousing, contract warehousing, or public warehousing. This decision is based on the type of warehouse functions are needed by the firm (i.e. receiving, put-away, storage, replenishment, order selection, etc.). Also on whether the warehouse is going to serve the firm as a place for gathering / consolidation or break-down function. If they choose a private warehouse, a one level warehouse facility is most recommended but that also depends on location and what the chosen location allows the firm to construct.
The warehouse location has a direct impact on the entire logistics system. For example, inventory decisions are affected in several ways. One, the number of warehouses influences the overall level of safety stock in the system. Two, the allocation of markets to warehouses affects the sizes of inventories at various warehouses.