The content of the article does not present any novelty regarding the choice of location, site, or solutions in the area of micro-processes occurring in a warehouse; nor is the analysis of total logistics costs, including warehousing costs, anything new.
Both in publications concerning real estate valuation and in issues related to logistics management based on cost decisions, a great deal has been stated, confirmed, and analyzed. What message, then, does the presented work carry, and what new insights can it bring to the world of real estate and cost management? The main message is the formulation of a holistic research methodology that allows for the systematization of decision-making directions at the strategic, tactical, and operational (warehousing) levels.
The article is therefore an attempt, within the creative and study capabilities of the authors, to identify areas of decision-making regarding network configuration, concerning forms of ownership and infrastructure solutions in the warehouse through handling principles. It is thus a path of analysis conducted from the strategic to the operational level through cost decisions.
The paths of analysis conducted in the work were carried out through the following elements:
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strategic decisions: optimal location,
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tactical decisions: choice of ownership form,
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operational decisions: handling principles.
In search of the optimal location
The necessity for the interaction of logistics functions (procurement, production, and distribution) in a global dimension has resulted in the creation of global supply chains. The greatest challenges faced by modern supply chains are longer order fulfillment times, delivery times burdened with a greater degree of uncertainty, and the need to consider various delivery variants, mainly differentiated in terms of time and cost.
In the concept of global logistics costs, such basic partial costs should be included as: transport costs, inventory holding costs, costs of maintaining/renting storage space, procurement costs, and order fulfillment costs.
The fundamental problem in assigning generic weights is that the structure of the aforementioned costs:
1) is variable over time and depends on many variables,
2) this sequence causes poor management in one of the cost activity areas to generate losses in another, dependent continuum of cost objects.
Among the fundamental factors shaping total logistics costs is, among others, location (Figure 1).
Decisions on choosing the location of a facility are a very complicated process, involving issues of constraints resulting from various conditions stemming from the nature of production and/or commercial activity, and consequently – from customer service policy, centers of gravity in relation to the source of raw materials, cargo characteristics, transport costs, and the sales market.
The problem of locating multiple facilities is solved based on factors such as: the number, size, and location of facilities, supply and sales areas that the network is to connect, and the items produced and stored in each facility. Continuing, the number of facilities in the system increases the number of warehouses. The decision to connect customers with specific production plants or warehouses determines the geographical reach of the markets associated with it. The larger such a market is, the larger the facility must be.
At the same time, analyzing Figure 1, beyond the factors identified above, decisions on facility location affect the levels of individual costs within total logistics costs. The fewer storage facilities and the smaller the storage area, the lower the warehousing costs, with a simultaneous increase in order frequency and an increase in transport and/or sales costs.
Reducing the distance between facilities in the network influences the reduction of transport costs, but because transport rates are not proportional to distance, the reduction in transport costs does not compensate for the increased storage costs.
Another factor in choosing a storage location is the agglomeration factor, access to sub-suppliers and recipients, which provides effective distribution channels, as well as the characteristics of the stored material. Hence, strategic decisions in designing a logistics network are distributed across three levels:
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strategic decisions: location of plants and distribution centers; potential sources of supply,
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tactical decisions: use of public warehouses and tasks performed in them, resource allocation,
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operational decisions: change of customer status, contingency plans.
In summary, the choice of location is influenced by: demand and total logistics costs.
The article comes from the journal “Logistyka” 4/2011.