Reference no: EM133053694

Discuss, at least one reason source Warehouse Justification justifying the placement of a warehouse in a logistical system.

Warehouses are justified in a logistical system when a service or cost advantage results from their positioning between suppliers, manufacturers, and customers. Competitive advantage generated by establishing a warehouse network can result from lower total cost or faster delivery. From the viewpoint of transportation economies, cost advantage results from using the warehouse to achieve freight consolidation. However, freight consolidation typically requires inventory to support assembly of customized orders. Alternatively, consolidation or assortment may be achieved by establishing flow-through facilities or cross-dock sortation that operates without predetermined inventories. Such continuous movement effectively converts warehouses from inventory storage to mixing facilities. Of course, some business situations will justify a combination of inventory storage and continuous flow-through or cross-dock operations to effectively and economically service customers. From the perspective of integrative management, the key logistics system design questions become: How many and what kinds of warehouses should a firm establish? Where should they be located? What services should they provide? What inventories should they stock? Which customers should they service? This sequence of interrelated questions represents the classical logistics network design challenge. For manufacturing firms, network design begins with marketing strategy and continues into manufacturing and procurement planning. In retailing and wholesaling enterprises, the framework spans from purchasing to customer support strategies.