Prof. Dr. Mehmet TANYAŞ
Maltepe University
Head of International Trade and Logistics Management Department
President of the Logistics Association (LODER)

Warehouse management is the art of operating the warehouse and shipment system effectively and efficiently. Warehouses and material handling systems are core elements in the flow of goods, establishing and organizing the connection between the sender and the receiver. Efficient warehouse management requires detailed knowledge of the necessary processes, as well as advanced technical knowledge including the successful technical and operational implementation of the entire system. However, there are no generally valid and universal rules to achieve this goal. Requirements arising from the customer's order structure, differences in products and services, production requirements, and many other factors are involved.

A significant problem to overcome relates to the flawless implementation of the system. Above all, errors in the initial stage lead to both significant costs and represent risks such as loss of customers, negative market image, or intense complaints that could jeopardize a company's business success in the medium and long term. Finding an appropriate and efficient system is always essential.

While the term warehousing leaves a negative impression, such as high costs and non-value-added time, in practice, most companies have to store their products for various reasons. The distinguishing feature from a logistics perspective is that warehousing is a planned process of importance in terms of duration and location. The answers to the question of why we store are stated below.

Increasing logistics performance: Meeting an order immediately is one of the basic customer requirements. Since order time and ordered quantity cannot be precisely predicted for large quantities of products, the first approach is to keep some inventory, which can also be defined as ensuring delivery readiness. This process is justified, especially when there is a long distance between production and consumption regions and customs procedures are involved. Distant markets can only be accessed through storage. Today, the increasing variety of goods and products, the trend towards smaller-batch orders placed more frequently, and shorter delivery times than ever, make logistics service a decisive factor in supplier preference. A company can establish, maintain, or improve its market position by operating its distribution center effectively and efficiently. Naturally, inventory management requires continuous control of inventories and optimization of the ordering system to avoid excess stock or long-term storage.

Ensuring productivity: Supply chains designed for just-in-time delivery and operating with minimum inventory in this framework are highly sensitive to variables. Therefore, one of the main reasons for holding stock on the supplier side is to avoid high-cost situations such as line stoppages.

Offering additional services: Customers no longer demand only the short-term supply of a single product or material. In almost all fields, the variety and models of products are increasing. One of the ways to keep costs low is to use standard and modular parts to enable product variety as much as possible in the later stages (postponement principle). These assembly services are increasingly offered in distribution centers. On the other hand, products can be supplied through specialized distribution channels. For example, adding sales information (labeling, etc.) or promotional activities are shifted to distribution centers.

Reducing transportation costs: One of the main reasons for holding stock is to reduce transportation costs by using high-capacity vehicles and optimally utilizing load capacity (full loads). Furthermore, this situation requires optimization of handling processes in receiving and distribution. In general, transporting products in highly frequent small batches is definitely less efficient than consolidated large-quantity transport where existing capacities (equipment, vehicles, etc.) can be used more efficiently. Retail trade in particular lacks the capacity (number of gates, labor, etc.) to handle frequent deliveries; for this reason, delivery quantities adapted to orders are gathered in these intermediate stages (warehouses).

Balancing production and consumption: Although the market has long since transformed from seller-oriented to buyer-oriented, and therefore to production-on-demand (pull system), most companies still have to produce in economic quantities. Over time, manufacturing companies encounter different production times and output quantities due to input and process variabilities. In order to ensure continuous use of production facilities and processes and to avoid idle time, semi-finished goods may need to be stocked. In addition, certain production processes may be subject to an uninterrupted production regime (e.g., cooling processes, glass furnaces, etc.) that cannot be intervened. Some business sectors, such as food products, may be subject to significant seasonal fluctuations that cannot be resolved solely by changing production capacity. Therefore, it is necessary to store products produced in season or to store by producing pre-season to meet seasonal demand.

Market position: Quantity discounts applied to large-volume purchases are another reason for storage. The shift of storage costs from the seller to the buyer is balanced by price reductions and lower procurement costs (ordering, etc.).

Warehousing as a stage of the process: For some products or processes, storage becomes a part of the production process by providing value-added services (packaging, labeling, etc.).

In conclusion, holding stock is not just a matter of storage. What should be more decisive is the optimal and effective management of product flows, their ideal combination, quantity, and order. In this context, warehouse management is responsible for the effective and efficient operation of the warehouse, but the company's supply chain management has a greater responsibility in terms of balancing demand and supply. The fact that the warehouse also has a capacity limit should not be forgotten.

Source: Hompel, M.T., Schmidt, T. (2007), “Warehouse Management: Automation and Organization of Warehouse and Order Picking Systems”, Springer-Verlag, Berlin, ISBN-13: 978-3-540-35218-1