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In a multiple warehouse, operations related to warehousing can be of two kinds: Centralized and Decentralized. In case of Decentralized warehousing operations, every warehouse is regarded as a different entity, such that every warehouse has an individual safety stock, and orders from lower warehouse to upper warehouse and in-transit stocks will be in place, in addition to all warehouses maintaining optimised inventory. In a Decentralized warehousing store, consumption centers are situated at different and distant places, while the transaction of goods is quite high. Not only does it prevent accumulation of surplus materials and obsolescence, but also offers service wherever it is needed. However, at the same time, the system also has certain drawbacks, such as, increased stock and manpower in each warehouse leading to high running cost.
On the other hand, in case of a Centralized warehousing system, activities such as order processing, control stock movements and storage of safety stocks are centrally controlled by a central warehouse. However, it seeks a well setup of information system, which offers these benefits:
- Assimilate multiple items ordering on a single source.
- Reduces safety stock by a factor equivalent to “n”, where n refers to the number of warehouses.
- Reduces total inventory cost by a factor equivalent to “n”, which justifies the information system cost.
In this system, the central warehouse is responsible for additional recordkeeping as well as taking informed decisions related to operations in a branch warehouse. Thus, it maintains a track of the current stock of all items in each branch, the rate of sale thereof, the current amount on order, and the amount in transit. Thereafter, decisions on the time period and quantities are taken from the factory. However, if the decisions are taken on the basis of outdated, incomplete and flawed details, they may eventually be proven wrong, and can result into rise in expenditure and reduction in sales.
