Question

You are the logistics manager for a national retailer with 100’s of retail locations around the country in which your suppliers currently deliver directly to the retail stores.  Based on what we discussed in class, explain how you might use warehousing to minimize these less than truckload (LTL) shipments. What is the relationship of the number of warehouses you have and the effect on inventory levels?  What are the basic tradeoffs in this relationship?

            

Answer 1

The warehousing can be very essential to avoid less than truck load. The suppliers from different location can transfer the material to warehouse. Once the full truck load is formed, material can be dispatched to the retail stores. It can help to drastically reduce logistics cost and overhead for the company.

As the number of warehouses increase, the inventory level at the retail stores will decrease as warehouses act as the buffer space. However, if there is single warehouse which caters to several retail stores staggered around the country, then the inventory level will be high as the lead time to supply from warehouse to store may be high. However, if the number of warehouse increase, then it will be more distributed and closer to retail store location. Hence, material can be supplied as and when required when lesser lead time. It will help to maintain lower inventory level

The trade offs are:

• The capital cost will increase in building the warehouse and taking on lease
• The cost of managing warehouse will be high
• It will help to reduce the inventory level at retail stores thus helping to reduce space requirement
• It will help to react more quickly to uncertainties and sudden changes in demand making the supply chain more dynamic and vibrant