Page 229 - DMGT551_RETAIL_BUSINESS_ENVIRONMENT

Retail Business Environment

Notes Market Presence: The major advantage of local warehouses is that local warehouses can be more
responsive to customer needs and offer quicker delivery than more distant warehouse. As a
result, a local warehouse increases the speed of delivery. In many cases, especially for FMCG
products, this can result in increased market share and potentially increases profitability.

Cost Benefits through Operational Techniques

Some of the commonly used operational logistic techniques for cost reductions are, (a)
consolidation, (b) break bulk, (c) processing/postponement, (d) stockpiling, and (e) cross docking.
These basic techniques are described below. Cross docking has had a great impact on logistics
costs and therefore will be described in greater detail.
 Consolidation,
 Break bulk,
 Processing/postponement,

 Stockpiling, and
 Cross dock.
Consolidation

Warehousing is a concept for supply chain simplification and cost reduction. In this concept,
manufacturers move away from multiple warehouses for downstream storage and combine
their inventories with that of other manufacturers in huge warehouses that take the place of
internal distribution centers or third party logistics providers.
It is called consolidation warehousing, because these warehouses perform functions otherwise
found in manufacturers’ distribution centres or at wholesale grocery warehouses. Shipment
consolidation is when a warehouse receives and consolidates materials from a number of
manufacturing plants destined to a specific customer on a single transportation shipment. The
consolidation warehouse is a third party storage and consolidation point for the manufacturers
and a storage and order selection facility for wholesale grocers and retail supermarket chains.
The concept calls for multiple manufacturers to combine their output into just a few consolidation
warehouses instead of placing product in distribution centers or individual private warehouses.
In turn, the consolidation warehouses serve multiple wholesale grocers and supermarket chains
much like private warehouses now provide load consolidation.

Figure 12.2: A Consolidation Warehouse

Customer A Manufacturer A
Distribution
Customer B Center Manufacturer B

Customer C Manufacturer C

The difference is the scale of the operation. With the consolidation warehouse serving multiple
wholesalers and chains, manufacturers could ship full truckloads, often truckloads of a single
product to the warehouse. On the other side of the equation, the consolidation warehouse,
pulling product from a wide array of manufacturers, could build full truckloads for shipment to
wholesaler and chain distribution centers.

224 LOVELY PROFESSIONAL UNIVERSITY