Warehouses are locations in the supply chain to and from which inventory is transported. Supply chain planners can help to reduce costs by making good decisions about warehousing strategies, such as the location and capacity of warehouses, and operational decisions such as the functions to be performed at the warehouse, the order-fulfilment methodology to be used, etc.
When deciding on the location of warehouses, planners use a trade-off analysis to choose between a large centralized location, which is more efficient, and multiple decentralized locations that offer a higher level of responsiveness. A number of factors including the quality, cost and availability of the workforce, tax effects, and proximity to customers are used in the analysis. Capacity decisions typically involve decisions on the need for and amount of extra capacity. Warehouses with excess capacity offer flexibility at a cost, while those with little excess capacity are more efficient. Trade-off analysis is also used to make decisions on warehouse capacity. Operational decisions deal with day-to-day processes such as stock placement, stock picking, and cycle counting. Warehouse planners use warehouse management system (WMS) software to plan and execute these processes.
Collaboration in a supply chain focuses on joint planning, coordination, and process integration between the firm and its suppliers, customers, and other partners such as the logistics providers. In addition to cost reduction, collaboration offers the advantages of business expansion to other areas, increased return on assets, improved customer service, reduced lead times, increased reliability and responsiveness to market trends, and a shorter time to market. Several options are available for achieving collaboration in a supply chain. These include:
systems that transmit information between partners using technologies such as fax, e-mail, electronic data interchange (EDI), or extensible markup language (XML);
systems such as electronic hubs and portals that facilitate the procurement of goods or services from electronic marketplaces, catalogs, and auctions;
systems such as collaborative planning, forecasting and replenishment (CPFR) that permit shared collaboration rather than just a simple exchange of information amongst the supply chain partners.
The three systems identified above offer different levels of benefits and are associated with varying levels of expected costs. Organizations need to examine and quantify the benefits and costs of the alternative systems before selecting an appropriate system.