For many years, I ignored warehouses. I drove by them and I was vaguely aware that they existed, but that was the extent of my knowledge. If I had an opinion, it would have been that warehousing is a low tech, commodity business.
I was so wrong.
Now I work in transportation and logistics and I’ve come to realize that warehousing is a high tech big business often run by billion companies with global footprints.
The biggest names in retailing, manufacturing and distribution all depend on the warehousing industry, which continues to grow in volume and sophistication.
In this article I explain the 7 main types of warehouse services offerings. While each warehousing company has it’s own unique specialties, these are the predominant warehouse service offerings.
Everyone knows what a warehouse is, but I decided to publish Wikipedia’s definition because it was really good.
A warehouse is a commercial building for storage of goods. Warehouses are used by manufacturers, importers, exporters, wholesalers, transport businesses, customs, etc. They are usually large plain buildings in industrial areas of cities and towns and villages.They usually have loading docks to load and unload goods from trucks. Sometimes warehouses are designed for the loading and unloading of goods directly from railways, airports, or seaports. They often have cranes and forklifts for moving goods, which are usually placed on ISO standard pallets loaded into pallet racks.
Stored goods can include any raw materials, packing materials, spare parts, components, or finished goods associated with agriculture, manufacturing and production.
Last summer, Inbound Logistics published a list of different 3PLs and their services. As I read, the article, I thought it would be helpful to publish a definition or overview of the 7 warehouse service offerings described in the article.
Warehouse Service Offering 1 – Pick and Pack
Pick and Pack services are offered by many businesses that specialize in supply chain management solutions. Pick and pack is a part of a complete supply chain management process that is commonly used in, but not limited to, the retail distribution of goods.
It entails processing small to large quantities of product, often truck or train loads and disassembling them, picking the relevant product for each destination and re-packaging with shipping label affixed and invoice included. Usual service includes obtaining a fair rate of shipping from common as well as expediting truck carriers. Typically companies will use a warehouse management system (WMS) to ensure maximum effectiveness and efficiency. WMS is software used to manage movement and storage of materials within a warehouse
Warehouse Service Offering 2 – Subassembly
Many warehouse companies do light assembly or sub-assembly work for their clients. This many entail receiving multiple components to the warehouse, assembling, inspecting, repackaging and shipping to their client.
The sub-assembly is a collection of parts put together as a unit, to be used in the making of a larger assembly or a final or higher item. What may be a subassembly at one point, however, may be an assembly at another.
Companies outsource this subassembly work to reduce manpower cost, maximize manufacturing space utilization, level inventory and to manage inbound packaging requirements
Warehouse Service Offering 3 – Site
Location Site location services help companies find the ideal location for their warehouse or distribution center. The ideal warehouse or distribution center location is usually determined by a combination of where the shipments are coming from and where they are shipping to.
Access to transportation infrastructure is also a key consideration. A warehouse or distribution center that is far from its suppliers and customers would obviously add a lot to logistics costs.
Warehouse Service Offering 4 -Distribution Center Management
A distribution center is a warehouse for products. When a product is ordered, it is shipped from the distribution center or warehouse. The distribution center manages inbound and outbound shipments and inventory.
A distribution center will typically be responsible for the following processes: receiving, putaway, order processing, replenishment, pulling, restocking, picking, validation, sorting and shipping.
Most companies in the distribution center management business will use a distribution center management system (DCMS). DCMS is an enterprise oriented application designed to track the activities performed in a distribution center.
Warehouse Service Offering 5 – Vendor Managed Inventory
Vendor-managed inventory (VMI) is a family of business models in which the buyer of a product provides certain information to a supplier of that product and the supplier takes full responsibility for maintaining an agreed inventory of the material, usually at the buyer's consumption location, usually a store. A 3PL can also be involved to make sure that the buyer has the required level of inventory by adjusting the demand and supply gaps.
The close relationship between supplier and buyer reduces the chance that the buyer will ever run out of stock. VMI also helps manage inventory and react to changes in supply and demand. Many of the big box retail chains use VMI very successfully.
Warehouse Service Offering 6 – Crossdocking
Cross-docking is the practice in logistics when cargo from incoming vehicle is directly loaded into an outbound mode of transportation.
Companies receive the following benefits from cross-docking: reduced labor costs, reduced need for warehouse space, and reduced lead time from order to customer.
There are different types of cross docking depending on the whether the client is a distributor, manufacturer, wholesaler or retailer. The most common process would be as follows: the warehouse receives goods from multiple suppliers, repackages those goods, loading the goods on to another truck for shipment to the customer.
Warehouse Service Offering 7 –Fulfillment
Fulfillment is the process of taking an order and executing it by making it ready for delivery to its intended customer. It may involve warehouse pickup, packaging, labeling.
There are many variations depending on the client, but the most basic services provides are: storage and warehousing, order processing, pick and pack, shipment of product, returns and exchanges, call center, invoicing and order administration.
The fulfillment service provider plays a key role in the supply chain because they will have direct contact with the client’s customer.
As outsourced logistics, online businesses and technology grows, the warehousing industry will also continue to grow and new services offerings will be developed.