What Is Warehousing? Definition, Functions and Advantages

What is warehousing?

Warehousing is the process of buying goods from a manufacturer and then storing them in a warehouse before fulfilling the orders. The process of warehousing involves the organization and management of any products before distribution. Businesses may store goods in a warehouse, storage facility or, in the case of small businesses, in a home garage or basement.Related: What Is Warehouse Logistics? Definition, Advantages and Tips

5 functions of warehousing

Here are a few of the primary functions of warehousing:

1. Streamlining the shipping process

Larger companies often place warehouses in strategic locations to help with shipments. They may choose to build warehouses in close proximity to a large percentage of their customers or along a direct shipping route. This helps them pick and ship goods faster and more efficiently.Related: What Is Consolidated Shipping in Freight Activities?

2. Supporting the supply chain

Manufacturers use warehouses to store raw materials and finished goods. This allows them to keep the production facility clear of excess amounts of material and product that may use valuable space in the factory. Keeping the warehousing and production functions separate optimizes the warehouse for the receipt and distribution of goods and materials, creating a more efficient process than an operation focusing on both. Using warehousing for finished goods can also give manufacturers the ability to run larger production batches since it provides a location to store the product.Larger production runs result in lower costs for the manufacturers and warehouse distributors. Businesses may invest in warehouse space based on the room needed for related warehouse services. This may include adding an assembly line or additional storage space for a new line of products. Warehousing is a vital part of the supply chain for most brands that ship actual goods or products to their customers.Related: Supply Chain Management: What It Is and How It Works

3. Managing inventory

Warehousing includes inventory management, which is the tracking and organization of products and goods shipments. Having a good logistics plan in place is critical for shipping goods in a timely manner and at a cost-effective price. Another function of warehousing is also capacity planning. In addition to storing existing goods, it’s also necessary to know that you have the space available for new products.Related: 19 Inventory Management Techniques for Better Outcomes

4. Enabling climate control

Warehouses not only provide businesses with secure storage, but they can also provide storage with climate control. This may be essential to some businesses that have products in which preservation depends on the climate. It can also help businesses extend the life of perishable products, giving them a larger window in which to sell them.

5. Maintaining quality control

Quality control related to receiving raw materials and shipping finished goods is a function of warehousing. Inspecting raw materials at an inbound warehouse can prevent nonconforming materials from entering the production process at a manufacturer. Inspecting outbound finished goods at a warehouse provides a final check for quality defects before products ship to distributors, retailers or customers.

Types of warehousing

There are a few different types of warehouses, including:

• Private warehouses: A private warehouse is when a business exclusively owns or rents a warehouse space. Some businesses may choose to rent out any additional space they have to others.
• Public warehouses: A public warehouse is a place that businesses rent to store goods. State or government departments or large corporations may own the warehouse and rent out the space to other entities.
• Co-op warehouses: A co-op warehouse is a space that a cooperative owns and rents. They may rent out different warehouse facilities to businesses that share the space.
• Distribution centers: A distribution center is a place that receives shipments and then moves them to a new location. Larger companies often have numerous distribution centers in different locations.

Advantages of warehousing

A few of the most common advantages include:

Storage organization

Businesses that have access to a warehouse have the ability to better organize their goods. This allows them to implement inventory tracking or storage methods to understand how much inventory they currently have as well as its value. Better organization in the warehouse can also help warehouse employees find and package goods for shipment more efficiently.

Labor management

An organized warehouse with an efficient tracking system in place can help businesses better understand their labor needs. This can help them hire and schedule only the number of warehouse workers they currently need and also helps them anticipate busier seasons so they can hire and train staff ahead of time.It also enables selective hiring for employees focused solely on warehousing as opposed to a cross-functional employee. For example, an operator who runs a production line may also complete a range of warehousing functions. A cross-functional employee with a range of responsibilities can cost a business more than an employee with a focused scope of work.Related: What Is Labor Cost? (Definition, Formula and Examples)

Cost-effectiveness

Having access to your own warehouse can be more cost-effective than renting a space. Organizations can make adjustments to the space that makes the most sense for the business. This can also lead to the potential to reduce overhead costs.

Security

Having the right warehouse space can help companies secure their goods. Businesses can account for the special needs of certain products by adding refrigerated or temperature-controlled storage areas. Warehouse managers also have more control over safety protocols and training, ensuring the safety of their goods and staff members.

Faster shipping

Choosing a warehouse in a location central to the business’ customers can also help speed up the time it takes to deliver products. By strategically choosing a centralized warehouse, businesses can ship items faster. They can also send products to nearby warehouses that help make the delivery process more efficient and cost-effective.This can be especially beneficial when a business expands to a new area. By setting up a new warehouse in the new location, they can ensure that more customers enjoy the fast shipping the company is known for.

Easy processing of returns

Processing returns can be a challenge for some businesses. Having access to a warehouse allows brands to allocate an area for returns. It also gives businesses the chance to offer additional returns services, like printing prepaid return labels or sharing return tracking information.Related: Definitive Guide to Reverse Logistics (With Benefits and Methods)

Elements of warehousing to consider

These are some elements supply chain managers consider when determining warehousing needs and systems:

Cost of warehouse storage

Storing goods in a warehouse comes at a cost. Smaller or newer businesses may find it challenging to anticipate these costs and fit them into the budget. By evaluating their revenue, goals and costs ahead of time, a business can decide if warehouse storage is a necessary cost to include in the budget.

Organizational processes

Without proper organizational procedures in place, storing goods in a large warehouse can be overwhelming for some businesses. It may also take business owners some time to develop an organizational process that works for their business. In addition to creating a clear method of organization, it’s necessary to train team members in these same practices to maintain it.

Central location

It may be a challenge for some businesses to find a centralized location. A business’ customers may span across many states or even countries. Depending on the size of the business, they may choose a few central warehouse locations.

Anticipated needs

Most businesses choose a warehouse based on their current needs. While it’s also a good idea to keep future needs in mind, this can sometimes be hard to anticipate. For example, a brand may consider expanding its goods to include products that require climate control. However, choosing a warehouse with climate control capabilities before you’re ready can be expensive.