Warehousing and Customer Service
Warehousing adds value in customer service, by facilitating high inventory availability, shorter response times, value-added services, returns, customization, and consolidation among others.
Fill rate is the portion of a customer's demand satisfiable from on-hand inventory. In most cases, a significant investment in safety stock is required to provide high customer fill rates. That safety stock must be housed somewhere, and that somewhere is typically a warehouse.
Warehouses in close proximity to the customer base and with short internal cycle times help to reduce response times to customers. We have one client that provides same-day delivery of critical service parts via a nationwide network of small warehouses with short order cycle times. One of our financial services clients supports its financial analysts with small warehouses located in the centers of major financial districts, serving offices via subway, courier, walking, and bicycles. One of our convenience store clients is improving product freshness by increasing delivery frequencies to its 14,000 stores supported by a major increase in the number and capacity of its warehouses and distribution centers.
Following the mass customization movement, the likelihood that an order will require customization in some form is increasing exponentially. The ability to execute the requisite value-added services such as custom labeling, special packaging, monogramming, kitting, coloring, and pricing is and will continue to be a competitive supply-chain differentiator. Warehouses are uniquely equipped with the workforce and equipment to execute these value-added services. In addition, by holding the non-customized inventory and postponing the customization, overall supply chain inventory levels may be reduced. As the physical facility closest to the customer location, a warehouse is also a natural place to customize, kit, assemble, or countrify products in accordance with the principle of postponement—minimizing overall inventory investments throughout a logistics network by delaying customization. For example, one of our health and beauty aids clients puts its shampoo in blank bottles for storage. Once an order is confirmed from a specific country, the labeling required for that specific country is applied in line with the picking and shipping process.
One customer service is foundational to our culture's expectations of logistics systems but taken for granted is consolidation. For example, if you order a shirt and a pair of pants from a mail-order company, rarely would you want the shirt showing up one day in one package and the pants showing up another day in another package. For those items to show up at the same time in the same package, they most likely need to be housed under the same roof, that is, in a warehouse.
Returns constitute another customer service facilitated by good warehousing practice. Convenient and inexpensive returns for customers yield higher sales and customer satisfaction ratings. Warehouses and distribution centers are typically already located in close proximity to the customer base and have the workforce and material-handling equipment uniquely suited to handling returns.
Although not directly considered a customer service, in many parts of the world, physical market presence is an important cultural competitive differentiator. Warehouses and distribution centers are well-recognized means of establishing physical market presence.