Value Adding Roles - Service

What is Service?

Warehouses can provide services that enhance a firm's revenue growth. It is important to have goods available when demanded by customers. This will lead to customer satisfaction and enhance future sales.

The rational of having a warehouse to service a market is that sales improvements will be able to offset additional cost of operating the warehouse.

Example:

From the example figure 3.1, establishing a warehouse to service a specific market may increase cost but also increase market sales and revenue. Warehouse can provide service as a result of value-adding services, Spot-stocking and full line stocking/Assortment .


Elaborated Explaination:

Value added services are any work that creates a greater value for customers. It typically change the physical features of products so they are presented in a customized manner. From the 1st post, we have listed a list of value added services.
(Note: We will be explaining in-dept for each value adding services. Therefore, we will leave off this part.)

Spot-stocking is usually performed to support customer accomodation and seasonal products. Example: Agricultural, Winter, Summer products. Instead of maintaining inventory of seasonal products the whole year round, or shipping directly from the manufacturing plant to retail stores/customers, responsiveness can be improved through temporary storage positioning in strategic markets during peak selling period (Winter clothings during winter period). In addition, significant savings in warehousing and transportation costs could be achieved for the manufacturer/cilent.

Under this concept, selected inventory is positioned in a local warehouse to fulfill customer orders during critical sales period. Utilising warehouse facilities allow inventories to be placed near key customers to ensure that sales will be maximised.

Example: During chinese new year period, manufacturer of pineapple tarts usually spot stock near local retail stores. After chinese new year period, such spot stocking would be reduced or eliminated.


Assortment/Full line stocking creates assortments representing multiple products from different maufacturers. Example: World of sports's warehouse would store different sporting products from different suppliers so that customers can be offered assortment.


What is the difference between spot stocking and full line stocking? Full line stocking warehouse is more restricted to a few locations and operates year round. It improve service by reducing the no. of suppliers that a customer must logistically deal with. The asssortments also make it economical larger shipments possible.


2 – 3 usefulness of this topic in the distribution centre

• Increase market sales, revenue and gross margin. The DC is a profit centre rather than costs centre.
• Ensure lowest logistical costs for customers through combined assortment.

2 – 3 Constraint of this topic in the distribution centre

• It is difficult to quantify service return on investment due to difficulty in measurement.
• The warehouse must have the expertise to provide the type of services demanded by customers.