Overview of Value-Adding roles

Introductory video

Value Chain Model

The value chain is a series of activities that add value to a product. As you can see from the model, inbound and outbound logistics play a part in adding value to a product. Example: Transportation and warehousing

Definition of value adding

Value adding are activities that either reduce cost or increase revenue of a firm or both.


What is value adding from a warehouse's perspective?

Warehousing plays a strategic role of attaining the logistics goals of shorter cycle times, lower inventories, lower costs and better customer service. To meet customer demand for lower prices, logistics managers examine warehouse process for productivity and cost improvements. All these are value adding from a warehouse's perspective.

The true value of warehouse is to have the right product at the right place and cost in the right time .


What are some value added roles of warehousing and distribution operation centre? (Explaining in this order)

• Product and supply mixing
• Transportation Consolidation/Break Bulking
• Contingency Protection
• Smoothing
• Service
• Product assembly/ Postponement
• Kitting/Pre-assembly
• Crossdocking/Transloading
• Specialty packaging
• Private Labeling (Private branding)

Overview of the 5 primary roles of warehousing/Distribution centre.

There are 5 primary roles that any warehouses would exist to provide:

Product/supply mixing: Most retailers sell more than one kind of products, therefore it is necessary for warehouse to breakbulk the inbound goods to various required assortments. In fact, mixing also takes place in a retail store, imagine yourself in a supermarket, you would probably choose a few items for checkout.

Transportation Consolidation and Break Bulking: Have you ever shared a cab with a friend who is on the way before? Is it cheaper than an individual ride? A warehouse would like wise be the same, by consolidating or pooling materials from various sources into a single shipment, a firm can enjoy significant cost-savings in transportation costs. If a firm is serving multiple markets and when volume shipment arrives, it is necessary to break bulk and redistribute it the the various market.

Contingency Protection: Cash on hand is an example of contingency protection to meet any unexpected expenses in our daily life. A warehouse would also functions this way to have extra inventory stored on hand so that a retailer/customer will have a lower chance of stock out situation.

Smoothing: If you have been going lectures consistently, exam would be a very smooth process. However, if you are one who does not go consistently, then extra work like asking about would have to be carried out during the exam process. A warehouse would hold inventory to meet the variation in demand so that the production system can operates in a constant manner. A warehouse that feeds materials into the production would also be constant.

Service: The warehouse is use to serve a specific market or rather to support any marketing activities. Example Spot stocking to maximize sales during promotional period.