Inventory storage and warehousing

Businesses need to decide on the best way to store inventory to make it:

  • easily accessible
  • cost effective
  • well maintained

Businesses often store inventory in warehouses. Warehouses are facilities bought or rented by the company that are used to store and distribute inventory. They need to be secure to prevent theft or damaged stock.

Aisles of boxes in awarehouse

A business can choose to use:

  • centralised storage/warehousing
  • de-centralised storage/warehousing

Centralised storage

Centralised storage is when a company chooses one central location to store all the stock for the organisation. The stock will be distributed to departments as required from the central warehouse.

BenefitsCosts
Suppliers are delivering to one location which reduces delivery costsHigh costs incurred due to specialist equipment and large storage facilities
Economies of scale are gained due to bulk orderingMay incur increased delivery times and delays in receiving stock to departments
Specialised staff can be employed to manage inventory, which will reduce theft and improve efficiencyIncreased wage costs as specialist staff are required to manage the storage and distribution of stock
Standardised procedures can be implementedHarder to meet specific requirements of specialised departments within the company
Centralised warehouses are often located near good infrastructure making them accessibleStoring large amounts of stock may increase the chance of wastage
Reduces duplication of stock and administration costs

De-centralised storage

De-centralised storage is when each department within the organisation is responsible for ordering and storing their own stock.

BenefitsCosts
Inventory is accessible so no delay in receiving required goodsIncreased delivery costs due to low amounts of inventory being delivered to multiple locations
Small amounts of stock being held prevents wastageSecurity may not be as effective leading to increased theft
Departments are more responsive to local needs and changes in the marketNo specialist staff dealing with stock may lead to disorganisation and delays