Warehouse and distribution buildings represent a significant component of a country’s total industrial stock.
Warehouse buildings are usually one –story buildings with 10-30% office finish, dock and grade loading, above 16’ ceiling height and 1-2 parking spaces per 1,000square feet. The bulk of warehouse space is used for storage and/or light assembly and it is product oriented. Distribution buildings are characterized by a smaller percent of office finish (5-10%), 20,000 square feet of minimum divisibility, dock loading, ceiling height of 20’or higher and 1 parking space per 1,000 square feet. Warehouse and distribution space is used for a number of different functions , the most common of which are: 1) stockpiling, 2) product mixing, 3) production logistics, 4) consolidation and 5) distribution (Ackerman, 1990).
Stockpiling refers to the storage of production overflow which occurs either because of constant production runs and seasonal demand or seasonal production and constant demand. Usually, such overflow production is stored at warehouse facilities that are either incorporated in the manufacturing plant or located in the vicinity of the production facility.
Product mixing refers to the combination of different products that form an entire line and are produced by different plants. Such mixing facilities, which are called full-line facilities, are usually located strategically in relation to the manufacturing plants whose products they consolidate in order to minimize transport costs of inbound shipments.
Production logistics refer to the storage of intermediate inputs in the production process. Such intermediate inputs, as well as raw materials, are usually stored at warehouse and distribution facilities close to the production plants. The increasingly popular applications of just-in-time techniques in production that require flexibility of production runs will make storage of intermediate inputs close to the manufacturing plant even more necessary.
Consolidation refers to the combination of small load shipments from different suppliers to one large load that is shipped to its final destination. An example is the consolidation of a set of intermediate inputs produced by different plants but used by a single finished goods manufacturing plant. Given that small load shipments are less economical, consolidation warehouses should be located closer to the intermediate input producers so as to minimize the distance for small-load inbound shipments and maximize outbound large-load distances.
Distribution is exactly the opposite of consolidation, as it refers to the decomposition of many orders arriving in large loads (full carloads) to smaller loads that are shipped to the final customers, typically retail stores. Distribution facilities should be strategically located with respect to consumer concentrations so as to maximize distances travelled for inbound large-load shipments and minimize distances for outbound small-load shipments.
Value Added Services
In the recent years in response to escalating concerns for cost efficiency and customer satisfaction, many warehouse and distribution facilities are increasingly providing value added services, such as consolidation, packaging, labeling or even simple assembly. The provision of such services at the warehouse and distribution facilities as opposed to the factory, allows companies to postpone product configuration, packaging, and pricing until the last minute. This in turn enables firms to more accurately match product supply to consumer demand.