Warehousing and Distribution 

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Warehousing and DistributionA warehouse can simply be defined as a planned space usually a large commercial building for handling and storage of goods. Therefore warehousing refers to all the processes involved in the storage and handling of goods in such a planned space. The goods commonly found in warehouses include; machinery spare parts, building materials, finished agricultural goods, furniture and electronics. Some of the activities that take place in a warehouse include receiving goods, offloading goods, forklifting goods and stacking the goods. The coordination of all the activities is what warehousing entails. Distribution on the other hand is the process of making the goods available for consumption by business users and final consumers. A combination of warehousing involves the acquisition of goods from manufactures, storage of the goods and availing the goods to the consumers.

Distribution business model

A business model is the plan that is formally made to ensure a business is steered towards profitability. In the distribution business, it is also important to come up with a business plan that will clearly list out the range of costs and the expected revenues. This will create a sense of direction for the business. There are four major steps that can be followed in coming up with a distribution business model;

The first involves establishing the market needs which will determine the types of distribution services to offer. Also to be determined are the modes of distribution; such as the choice of transport for example using railway transport for bulky goods or air transport for perishable goods and specialized services such as transport of hazardous goods and wide loads using appropriate vehicles.

The second step is researching and understanding the cost structure. This should come from all the costs involved such as the equipment, licensing and staff expenses. A full understanding of the cost structure is essential in setting the right prices that will bring profits.

The third step involves setting pricing structures and establishing appropriate payment methods for the consumers. It is advisable to offer a variety of payment methods for the consumers such as cash, checks, and credit card for their convenience. Terms of payment should also be determined such as the incentives for prompt payments, grace period for early buyers and penalties for late payments.

The fourth step will involve gaining economies of scale in the market to keep up with competition and increase profitability. Economies of scale are an integral part of any distribution business mode. This will involve increasing the magnitude of your services, geographical cover and assets such as distribution vehicles. Such growth of the business creates reliability within the services and gives you power to steadily increase prices which improve the profitability of the distribution.

Potential warehousing issues

Some of the potential issues likely to arise in warehousing can be;

  1. Theft: Cases of both internal and external theft can occur. To curb this vice, CCTVs can be strategically set up along with other security measures such as armed guards and inspection of all those leaving the warehouse premise. Barcode or RFID tracking can be a smaller step that will help curb loss.
  2. Damage: The manner in which goods are handled especially those that are fragile can cause damages. Employee training and coming up with better handling procedures can help reduce these damages. FIFO allocation can ensure each case is in the warehouse for the shortest time possible, and least prone to damage.
  3. Accidents: Accidents can also occur in the warehouse, both minor and fatal. The facility has to meet the safety standards and the staff motivated to prevent accidents in the warehouse. Making sure heavy items are low and easy for picking can minimize the most frequent injuries due to product movement.
  4. Wrong quantities: Receiving low quantities of goods than the order can cause stock outage which affects sales negatively. On the other hand, too much stock increases storage costs. Systems should be in place to ensure accurate quantities are received at the warehouse and alert management when running low.

Importance of perpetual inventory

The ability to track goods through inventory management is essential for the survival of any business. Accurate inventory information can help reduce waste, meet customer expectations, maximize profits and anticipate future customer needs.

Formerly, inventory involved conducting a physical count of goods in a warehouse and reconciling the numbers with figures on paper. Such a physical stock count would be done periodically with the inventory figures updated at such times. This was known as the periodic inventory system since it was done periodically though some businesses still apply it currently. But a new system, perpetual inventory management which uses the inventory management software allows for real time updating of inventory count has since replaced the old system. The inventory management system updates the data automatically using the information fed to the database which enables the system to track every change. Advances in the inventory management software has also enabled its integration into other business systems which makes perpetual inventory a more powerful and practical option for businesses. Perpetual inventory is therefore important in the following ways;

By relying on automated processes through the use of bar-code scanners for real time updates, perpetual inventory increases the accuracy of data. The automated process eliminates the possibility of human error which was common in the periodic inventory system. This provides a business with the real situation of inventory at any moment.

The perpetual inventory system also improves the effectiveness and efficiency of warehouse management. Providing information such as the most restocked item and goods that are always ordered together is vital information for the organization and maintenance of the warehouse. The integration of the inventory management software with other business systems makes it easier for the warehousing processes to be coordinated with the whole business as an organization.

The ability of the perpetual inventory management system to produce reports anytime makes it easier for businesses to have instant access into the inventory database. Such information enables quick responses to changes in demand and distribution environment.

The core benefit of the perpetual inventory management software is the ability to integrate with other business systems such as the financial and accounting systems. Such integration provides for accurate and comprehensive reports about the business making analysis of such data easy and quick. For example, integrating the inventory management software with the marketing department enables the marketing team to quickly determine the most selling products and where more marketing efforts are needed.

Goals for warehousing and distribution

The warehousing and distribution business environment is very demanding and the stiff competition gives no room for mistakes. It is therefore important to come up with aim for goals that will propel the business forward. Such goals can include;

  • Providing customers with outstanding services in storage and transportation of their goods in a manner that enhances the organization’s rapport. Customer feedback and complaints have to be attended to promptly to meet this goal.
  • Reduction of distribution and warehousing costs to minimize expenses and increase profitability for the business. This can be achieved through the application of the latest technology and use of best transport means in the distribution processes that minimize both resource use and damages to goods.
  • Continuous improvement through service quality assessment that determine the areas to make improvements by seeking ways to reduce costs, eliminate inefficiencies and improve on the quality of customer service.
  • Maximizing on the use of warehouse equipment and staff; this should ensure that the available equipment and staff are adequately utilized to avoid costs of hiring more or poor service.
Justin Velthoen

Justin Velthoen

Justin Velthoen has 20 years of supply chain experience, from food distribution to manufacturing, to systems management and implementation. His primary focus is helping businesses realize the cost savings directly to their bottom line.

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