Warehousing - Role in Market Logistics

Every company selling physical goods, has to store the goods ready for sale until they are sold. Production and consumption cycles rarely match. Therefore, storage facilities are needed. In agriculture commodities, the storage need is obvious, as production is seasonal and consumption is year long. The storage function or service helps to smooth the discrepancies between production timing and quantities and consumption timings and quantities.

Companies have to decide on the number of finished goods stocking facilities. If more stocking locations are used, goods can be delivered to customers more quickly on the intimation of demand. But more warehouses would mean more costs. Hence a balance has to be determined between the customer service level that comes from more warehouses and the increase in cost due to multiple warehouses.

Some portion of the finished goods are kept near the production plants and the rest sent to warehouses close to the customers. These warehouses can be company owned or public facilities on rent. Some of them are storage warehouses, having stocks for a longer period of time. Some of distribution warehouses, which receive goods from various plants and suppliers and ship assortments to customers as quickly as possible.

The modern trend is to have automated warehouse systems, where entire handling of the material is automated.

Source:
Marketing Management, Kotler, 9th Edition. Page 595.