Warehousing Meanings

When storage is about all aspects of the interim storage of goods and products at different stages of production. In this article, we summarize what needs to be taken into account when it comes to warehousing, which systems are available and how they can be used particularly efficiently.

Definition: what is warehousing?

The storage of goods is a targeted interruption of the flow of materials within the company’s processes. It is deliberately acted in such a way that raw materials, semi-finished products or finished products are not passed on directly in the value chain, but are instead stored in stock. There are various systems within warehousing that can be used, which we will go into in detail later.

Storage is usually intended to ensure that sufficient goods are available to bridge potential bottlenecks. At the same time, this creates costs, which is why companies always try to optimize the storage time in order to keep downtimes as low as possible, but also to minimize the costs of storage.

Importance of storage

From young start-ups to large corporations, almost all companies that are not in the service industry or that only work online have some form of warehousing. The topic is correspondingly significant, because, not least, every warehouse causes running costs. In addition, customers in B2C business in particular expect that products are always available and that delivery takes place very quickly. Perfect processes in the warehouse are a basic requirement here in order to meet today’s requirements.

At the same time, the storage of products can also have completely different reasons, such as wine, which gets better and better over the years and therefore has to be stored. Another possibility are speculative objects that are not actively used, for example if we think of gold bars that are stored for years and then, at a good time after the storage period, are resold.

Warehousing strategies

The aim of all companies that operate a warehouse is to optimize storage. The best way to do this depends entirely on what the storage is for and what products are involved. Depending on these factors, there are different strategies that can be used here.

First in – first out

The so-called “FIFO procedure” means that the products that are brought into the warehouse first are also removed first. This approach is widespread and one of the most frequently used strategies because it can be used in many industries.

Last in – first out

This method is often used when the warehouse does not allow otherwise for spatial reasons and the goods are not perishable. Think of a lamp at a hardware store, for example. New lamps are delivered, one lamp is still on the shelf, but the newly delivered ones are stacked on top so that the one remaining lamp is now at the bottom. The lamp that was last layered, however, is now the first to be sold. So here last in – first out was applied.

First Expired – First Out

This method is obvious for all perishable goods. Let us think of food, for example, but also of medication. The goods are sold in the order that ensures that the products that expire first leave the warehouse first.

Chaotic warehousing

The term chaotic warehousing sounds a bit casual, but this method is really called that. In concrete terms, this means that individual pieces of each product are distributed throughout the warehouse. The aim is not to create chaos, but to ensure that employees or warehouse vehicles only have short distances to the required product through the distribution at different locations. This means that the product can leave the warehouse particularly quickly if necessary. The name is not the program here, but the focus is on efficiency.

Tasks and functions of warehousing

How diverse the topic of warehousing really is can be seen as soon as one thinks about the individual functions of storage and, to a certain extent, also about warehouse management . We summarize these clearly below:

Backup function

The necessary places are supplied with material in good time. The aim is to ensure through sufficient storage that all goods are safely available at all times.

Finishing function

The wine example mentioned above is the classic of the refinement function, cheese would be another example. All those goods that are stored in order to mature or to improve their quality in some other way through storage can be ascribed to the refinement function.

Speculative function

Goods are stored because one hopes for an increase in value without actively taking care of the goods on an ongoing basis. An example would be commodities such as gold.

Compensation function (buffer function)

There can always be fluctuations in the sales area or in procurement, for example if a particularly large number of end products are being sold or if a supplier has difficulties. Correspondingly, a full warehouse compensates for these fluctuations if there is a sufficient buffer of stock .

Sorting function

The goods are sorted as they are currently needed in-house. As a result, some goods are stored longer and others shorter, depending on the general priorities of the company.

Performance function

Warehouses and salesrooms sometimes merge when we think of furniture stores or hardware stores, for example. In this case, the warehouse also fulfills the function of presenting the products.

Transformation function

Some goods have to be stored in order to be able to be further processed after a while. If this is the case, one speaks of a transformation function of the warehouse, similar to the refinement function.