storage and warehousing

Question 1

what is centralised storage

Answer 1

involves storing inventory in one central location in a large, purpose-built warehouse

Question 2

what is decentralised storage

Answer 2

involves storing inventory in many different locations in smaller warehouses or store rooms

Question 3

advantages of centralised storage

Answer 3

-Specialist staff are employed to maintain inventory, which improves the speed of inventory handling and security.

-Centralised warehouses can store a massive amount of inventory, benefiting from economies of scale.

-The same procedures for issuing inventory are used across the organisation, improving consistency.

-It may be cheaper to store inventory in one large warehouse than the total cost of many smaller on-site storerooms.

-Easier for suppliers to deliver inventory as centralised warehouses are often located close to infrastructure, (e.g. motorway networks, docks)

Question 4

disadvantages of centralised storage

Answer 4

-Inventory has to be delivered to each division or department, causing delays.
-Specialist staff need to be employed to maintain inventory, increasing wage costs.
-Specialist equipment needs to be purchased and maintained.
-Inventory usage levels and needs are unclear as divisions need to communicate with the warehouse.
-The use of centralised warehousing has declined due to more efficient inventory systems such as JIT, sourcing direct from the supplier.

Question 5

advantages of decentralised storage

Answer 5

-Inventory is always close at hand when needed for production or to sell to customers.
-Smaller, more local warehouses are more responsive to local needs.
-Inventory usage reflects production as it is stored in factories or retail outlets
-Smaller amounts of inventory result in no negative consequences of overstocking.

Question 6

disadvantages of decentralised storage

Answer 6

-Can lead to wastage or theft of inventory as security isn’t as good as it is in centralised storage.
-Lack of specialist staff can lead to inventory control being clumsy and inefficient.
-Each division may handle inventory differently, leading to inconsistency and problems being harder to pinpoint for senior management.
-Smaller amounts of inventory result in negative consequences of understocking.

Question 7

advantages of computerised inventory control

Answer 7

-Databases keep balances of inventory which are automatically updated.
-Can be linked to tills through EPOS, which update inventory levels with each sale.
-Accurate and constant monitoring of inventory levels allows for automatic re-ordering.
-Allows for decisions on slow moving inventory or best sellers to be made by managers from their computers.
-Can highlight regional variations in inventory for head office.
-Can highlight seasonal shifts in demand.
-Is a deterrent to theft by staff as they know inventory levels are monitored closely.

Question 8

disadvantages of computer inventory control

Answer 8

-Computerised systems will cost a lot of money to install and maintain.
-Money and time need to be invested to train staff to operate the system efficiently.
-Crashes and breakdowns can hold up re-orders and production.