Page 207 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Logistics and Supply Chain Management

Notes Suppliers of agricultural products to farmers often use spot stocking to position their products
closer to a service-sensitive market during the growing season. Following the sales season, the
remaining inventory is withdrawn to a central warehouse.

9.1.2 Assortment

An assortment warehouse is one which may be utilized by a manufacturer, wholesaler, or
retailer-stocks product combinations in anticipation of customer orders. The assortments may
represent multiple products from different manufacturers or special assortments as specified by
customers. In the first case, for example, an athletic wholesaler would stock products from a
number of clothing suppliers so that customers can be offered assortments. In the second case,
the wholesaler would create a specific team uniform including shirt, pants, and shoes.
The differential between stock spotting and complete line assortment is the degree and duration
of warehouse utilization. A firm following a stock spotting strategy would typically warehouse
a narrow product assortment and place stocks in a large number of small warehouses dedicated
to specific markets for a limited time period. The distribution assortment warehouse usually
has a broad product line, is limited to a few strategic locations, and is functional year-round.
Notes: Assortment warehouses improve service by reducing the number of suppliers that a
customer must deal with. The combined assortments also allow larger shipment quantities,
which in turn reduce transportation cost.

9.1.3 Mixing

Warehouse mixing is similar to the break bulk process except that several different manufacturer
shipments may be involved. When plants are geographically separated, overall transportation
charges and warehouse requirements can be reduced by in-transit mixing. In a typical mixing
situation, carloads or truckloads of products are shipped from manufacturing plants to
warehouses. Each large shipment enjoys the lowest possible transportation rate. Upon arrival at
the mixing warehouse, factory shipments are unloaded and the desired combination of each
product for each customer or market is selected.
The economies of in-transit mixing have been traditionally supported by special transportation
tariffs that are variations of in-transit privileges. Under the mixing warehouse concept, inbound
products may also be combined with products regularly stored in the warehouse. Warehouses
that provide in-transit mixing have the net effect of reducing overall product storage in a
logistical system. Mixing is classified as a service benefit because inventory is sorted to precise
customer specifications.

9.1.4 Production Support

The economics of manufacturing may justify relatively long production runs of specific
components. Production support warehousing provides a steady supply of components and
materials to assembly plants. Safety stocks on items purchased from outside vendors may be
justified because of long lead times or significant variations in usage. In these, as well as a
variety of other situations, the most economical total-cost solution may be the operation of a
production support warehouse to supply or “feed” processed materials, components, and sub-
assemblies into the assembly plant in an economic and timely manner.
9.1.5 Market Presence

While a market presence benefit may not be as obvious as other service benefits, it is often cited
by marketing managers as a major advantage of local warehouses. The market presence factor

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