(Courtesy: Habitat for Humanity in LaCross, WI. flickr.com)
There are businesses who can stock a lot of inventory on site and then there are businesses that need to rely on a warehouse for back up. The question begs to be asked. What type of inventory is warehouse inventory?
Warehouse managers who have knowledge in inventory management say that raw material; maintenance, repair or operation (MRO) inventory; merchandise; and finished products are ideal items to store in a warehouse.
Raw Materials
Manufacturing plants that use raw materials to make finished products are ideal candidates for having warehouse support. The plant doesn’t have to waste space that may be necessary on something that they don’t need immediately. An off-site warehouse permits the plant to handle variations in production due to the orders it receives.
For example, let’s say a plant unexpectedly receives a large order. What happens if they don’t have enough of the finished product inventoried on site to fill the order? They have to make more products. Instead of having to order the raw materials it needs to make those products, which can add down time to the production process, the manufacturer can simply call the warehouse for the additional raw materials it needs.
Raw materials can be defined as anything that needs to be purchased from an outside source that is necessary for use in the production process. That can include chemicals, minerals, or grains as well as nuts, bolts, wheels, or ball bearings.
MRO Inventory
Manufacturing facilities rely on their machines to work. However, when one breaks down, they need a replacement part pronto. Well, it’s going to be the warehouse that saves the day. Any items that are used in the maintenance, repair, or operation of a production facility are included in this category. That not only includes spare parts for the machinery, it also involves oils, lubricants, and other items that are needed to service the production process.
Merchandise
Retail stores that rely on having merchandise available risk the possibility of lost sales and unhappy customers if those products are not present when the shopper wants to buy them. A warehouse assures that the items are available when the customers want it. Having enough inventories on hand or in the warehouse means that retailers don’t have to back order items causing customers to wait. And that means that the selling and shipping process performs smoothly.
Finished Products
Then there are manufacturers who must produce products based on orders. These manufacturers may run their operation continuously so that there are always enough products available. This business needs a warehouse where it can transport and store the finished product so that it has enough space for the production of the next batch of products.
The warehouse cannot only store the products, but it can also receive and ship out orders so that the manufacturing facility doesn’t have to worry about it.
In short, a business needs warehouse back up to supply assistance to the manufacturing segment in the production process and to fill orders when the production facility can’t.
(Next: How to set up inventory in a warehouse)