In recent years, there have been numerous articles written about virtual inventory, continuous replenishment and Just-in-Time, and with good reason. They're highly efficient logistics practices that can help your company save time, money and market share.

But as the continued use of warehouses and distribution centers attests, they are not necessarily the last or only word on getting products from point A to B.

Most companies don't have the organizational infrastructure and forecasting accuracy to predict their needs down to the minute. And even if they do, their vendors or customers don't. As a result, the need to store or handle products within the context of a warehouse or distribution center remains strong, and so does the impetus to look for new and better ways to get more value out of warehouses.

With that in mind, I'd like to suggest three simple questions that your company should ask if it wants its warehouses and distribution centers to "get the most bang for the buck."

Do You Have a "Silo" or Integrated Supply Chain Mentality?
True supply chain management is a philosophy as much as it is a process — a "big picture," team-oriented way of approaching logistics and business challenges that cuts across traditional departmental boundaries. And despite its obvious merits, it is not a philosophy that everyone embraces.

According to a recent survey, fewer than half of all U.S. companies are incorporating supply chain management into their overall strategies, which means there's at least a 50/50 chance that your company still operates under the more traditional "silo" approach. And that doesn't even begin to factor in the companies that practice supply chain management in name only!

So before you attempt to make your warehousing add more value to your supply chain, find out if you have a true supply chain in the first place. If you don't, reallocate the time and money you intended to spend on improving your warehousing function to building your supply chain. That, more than anything else, will have a dramatic effect on your bottom line.

What Else Could My Warehouses Be Doing?
A good warehouse is like a blank sheet of paper — full of infinite possibilities, provided you exercise the right amount of imagination and creativity.

In order to get the most value from your warehouses, you need to literally think out of the box and view them as more than just a place to receive, store and ship materials. By that I mean you should consider incorporating other value-adding functions into your warehousing activities, because it might enable you to save transportation dollars or improve your customer service. (Such functions include packaging, labeling, product inspection, sub-assembly and kitting.)

And you should ask yourself if there's any way your company can use its warehouses to assist or promote other areas of the company, such as marketing or purchasing. The answers might surprise you, and they could yield big benefits for your company.

This may seem like an elementary question, because most companies are very thorough when it comes to choosing their distribution channels and facilities. But the relationship between warehousing location and efficiency is so direct that I don't think it can be stressed enough.

Thanks to the continuing development of forecasting and logistics information systems, logistics professionals can do a far better job of assessing where product will be at any given time. As a result, many companies are finding that they don't necessarily have to have their distribution centers as close to their customers as they once did. Some are finding that it makes more sense to move their distribution centers closer to their plants. Others are choosing to consolidate their distribution centers. And others are opting to move their centers to major regional markets that can reach large portions of the country in a relatively short amount of time.

Your company should continually be evaluating your warehousing locations with these possibilities in mind. In addition, it should be applying the principles of supply chain management to ensure that your warehouses aren't costing you as much money as they're saving.

For example: Let's say that you chose your current warehouses because they charged less rent than some others. It seems to make good financial sense unless those warehouses are so remotely located that it's harder for trucks to get to them, or they have so few truck doors that trucks have to wait a long time to load or unload. If your warehousing "bargains" add more expenses than they save, even if they're not warehousing expenses, maybe they aren't such bargains after all.

Does It Still Make Sense for Us to Handle Our Warehousing?
Despite the fact that I work for a company that has its roots in third-party warehousing, I am not going to tell you that a third-party warehouse is an ideal option for every company.

Every corporate culture is different, and a 100 percent in-house warehousing program might be exactly what your company needs. In addition, some companies tend to clash, instead of blend with their vendors, which is a sure recipe for outsourcing disaster. However, you do yourself and your company a great disservice if you don't at least consider outsourcing as a viable option, if not for all of your warehousing locations, at least for some of them.

I can cite countless examples where companies managed to significantly trim their warehousing costs merely by handing the warehousing function over to an outside provider. And there are many well-publicized benefits that most third parties can offer their customers that can make using an outside warehouse financially rewarding. These include better flexibility, economies of scale and the chance to focus on core competencies.

Naturally the circumstances have to be right. But the important thing is to keep an open mind and choose what's best for your company whether it's "in-house," "outside" or a combination of the two.

Diamonds in the Rough
By suggesting that your company ask itself these questions, I am not trying to imply that your company has to operate a warehousing-dependent logistics program in order to be successful. Nor do I think you should hesitate to use inventory-minimizing techniques when they are appropriate and achievable for your company. But as long as even part of your logistics program includes a warehouse or distribution center, you need to pay careful attention to what's going on there and work hard to tap the hidden potential.

Based on what I see, most warehousing programs aren't dinosaurs. They're diamonds in the rough. The question is, will your company be smart enough to make the cut?

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