11.2.1 Warehouse Taxonomies
Various taxonomies are mentioned in the literature. Two of them are presented hereafter.
11.2.1.1 Common Taxonomy
Different types of warehouses exist to serve diverse customers.
The most common type, called “retailer supply warehouses” (RSW), receives finished products from manufacturing systems located in the same country or from foreign suppliers and provides stocks for retail stores. Normally, such a warehouse serves routinely a given set of captive customers.
The second sort of warehouse, called “spare part warehouses” (SPW), furnishes spare parts and serves clients and manufacturing systems. It is often associated with mass production (cars, household appliance, computer systems, etc.). The difference from RSW lies in that some orders are highly random, the demand for specific types of parts may be relatively small and, last but not least, orders are usually very urgent. Thus, this requires that some of the parts be held in stock for years.
The third type denoted by “mail order selling” (MOS), warehouses and ships orders to individuals and informs customers using mail order catalogs or Internet sites. Orders are placed by the Internet, letter, or phone. Each individual order usually concerns a small number of items, but overall the variety and quantity of items at stake is commonly huge.
The last type, referred to as “special warehouses” (SW), is relatively rare.
These warehouses are usually rented for a long or short period of time. The prod- ucts stored in such a warehouse are often expensive, bulky and seldom required.
The characteristics of the aforementioned warehouses are reported in Table 11.1.
Table 11.1 Summarizes the characteristics of these types of warehouses Warehouse type
Characteristic
RSW SPW MOS SW
Variety of products concerned
High High High Low Demand intensity High Medium High Low
Randomness of demand
Medium High High Low Response to demand Quick Quick Medium Medium
Associated
production type Variable Mass production
Variable Variable
11.2.1.2 Taxonomy Based on Warehouse Functionalities
Six types of warehouses can be identified on the basis of their functions:
• Warehouses that are used to provide distribution services on behalf of their cus- tomers. These warehouses more often than not belong to a company that is also in charge of upstream and downstream transportation. They may serve several independent production systems. This type of warehouse is often referred to as private warehouses. DHL, a well-known transport company, engages numerous private warehouses in its transportation network.
• Public warehouses are essentially spaces that can be leased for limited periods to deal with short-term storage needs. A public warehouse may occasionally be used as a supplemental storage space for an overloaded private warehouse.
• Warehouses that receive products in large quantities and dispatch a large num- ber of small lots. This is common in the food industry, for instance. “Do it yourself” (DIY) centers is another example of this type of warehouse. They are also called distribution centers.
• Warehouses that provide value-added services. They are usually part of produc- tion systems. Tasks performed in such entities are mainly: repackaging (to make the products on sale or to prepare them for specific operations), labeling, assembling (computers, for instance), etc.
• Warehouses that store products for periodic delivery. This is the case when de- livery must be made on a just-in-time basis. Examples of this type of ware- house can be found in assembly systems where the components are outsourced (car or domestic appliance manufacturing, for example).
• Warehouses for fresh food products. These warehouses are refrigerated and of- ten called climate-controlled warehouses.
422 11 Warehouse Management and Design
11.2.2 Warehouse Usefulness
Warehouses are almost inevitable:
• To cope with the discrepancy between the relative slow supply chain response and rapid changes in quantities ordered. A warehouse helps to react quickly when demand changes abruptly. Note that the low reactivity of supply chains usually results from their complexity (the number of companies involved and the multitude of stages in the production processes), the existence of quality problems (that lead to rework) and use of long-duration and/or unreliable trans- portation systems (mainly in the case of offshore outsourcing), etc.
• To favor upstream production systems by allowing them to increase the size of lots, thus simplifying the management, increasing the throughput and reducing the production cost by reducing the number of setups. Transportation costs also decrease since the disparity of the products loaded in the same truck or freight car decreases, thus reducing the distribution costs.
• To configure and finalize products as near as possible to the customer. This is the case when different products can be obtained by assembling components is- sued from the same limited set. This situation is frequent in the computer and furniture industries and more generally in firms where the strategy consists in postponing product differentiation, assuming that it is easy to perform (person- alizing products consisting in packaging, labeling or colors, for instance).
• To execute additional operations like inbound inspections, part preparation, kit- ting or packaging. Inbound inspections mainly concern quality control. De- pending on the kind of verifications needed, inbound inspection may require specific area and certain material-handling resources. Preliminary part prepara- tion facilitates manufacturing operations that follow. Kitting occurs when pre- determined parts or components are removed from storage and gathered to- gether to make up kits. These kits are then used for the next manufacturing or assembly operations.
• To recondition the products to meet customers’ requirements. The objective is to switch from production packaging to that demanded by customers or retail- ers.
• To reorganize the lots for transportation purpose. This function includes sort- ing.
• To have a wide assortment of items so that customers can purchase small quan- tities of many different products at reasonable costs. This is often the case in the food industry.
• To supply seasonal production to retailing groups as and when required. This concerns climate-controlled warehouses.
• To protect against technical glitches and security threats.
To summarize, the objectives of warehouses are to build a bridge between up- stream and downstream activities.
Finally, price stabilization is another consequence of warehousing since scar- city in the supply of goods may increase prices.