Our response is too long to fit into the chat box, so we’re posting it here

To Delia & welovedcm: Shorter lead time, cross docking and postponement are all value adding services. They help to improve customer service. With better customer service, customers would have the perception that the product has a higher value, compared to one without customer service. As we all know, no one likes to wait. Thus a shorter lead time increases customer satisfaction which increases the value of the product perceived by the customer. For cross docking, we’ll use perishable products as an example. For these products, their value decreases with time, which makes it essential to ship it out asap. For example, when vegetables are kept for a period of time, it will start to turn brown and rot. Once this happens, its value drops drastically and it becomes almost worthless. Cross docking also brings different products from different suppliers together, then consolidating the products together into one package; that is one customer’s order. This package can be sent out altogether to the customer at one arrival time instead of receiving them at different times which would cause confusion. Lastly, postponement allows customization. For example, Dell allows their customers to pick and choose exactly what they want. This creates value as customers can have their computers to suit their liking, rather than having one which does not function using the language they are most comfortable with, or not having a software that they require, which would be of no value to them. We hope that this has answered your question. Please feel free to clarify any other doubts with us. Thanks.

VALUE ADDING ROLES OF WAREHOUSING AND DISTRIBUTING OPERATIONS



What are value adding services?
These services are aimed at increasing the value of the product to the customer. Many do not get what it means as they perceive it as increasing the physical amount of value into the product. However, It does not need to mean that way, but can also simply mean just getting the right product, in the right quantities, to the right place at the right time. And whatever makes that happen, can be counted as a value added service.

Look on further to understand this topic better.

Value adding services include :
1. Labeling/ Tagging
2. Product mixing
3. Shorter lead-time
4. Load unitization
5. Product protection
6. Pick and Pack
7. Quality check/ Quality Assurance
8. Packaging
9. Improve customer service
10. Cross dock
11. Postponement
12. Contingency protection

Let us now go through the individual points to get a clearer picture.

1. Labeling/ Tagging
- Re-labeling goods for export with foreign labels (expiry dates and product description)
- Re-labeling the goods to be loaded and sent out with the customer’s name, address, order quantities, any other relevant details pertaining to the order.
- RFID tags, price stickers, and other promotional labeling- ready for retail display.
- A computer system will print out the order number and other details in a sticker form so it can be stick onto each product to be sent out.
- Radio Frequency Identification (RFID) tags makes reading and storing date about products possible without physical or line-of-sigh. Promises greater efficiency and cost-effectiveness in getting the product to their customer- Errors are decreased significantly.

2. Product mixing
-Companies usually produce items at different plants; a company that does not warehouse all the different goods they need would have to order straight from differing suppliers, causing differing arrival times and opportunity for mix-ups.
-Therefore, the DC will take in customers’ orders then consolidate the orders from their different suppliers, then pack them in one package to send out to the customer.
- This provides convenience for the customers as they don’t have to look for each individual item manually.


3. Shorter lead-time
-Customers get their orders fast. Especially when they are in urgent need of items.
-Increases customer satisfaction and therefore enhance future sales.
- Can be done by airfreight. Although cost of airfreight is relatively high, a company can nevertheless trade it off against the savings in warehousing and inventory costs, therefore reflecting the savings in cost onto the customer.
-Expediting orders

4. Load unitization
-Moving a greater quantity of goods per journey, therefore reducing the number of journeys required, and hence the handling time and cost.
- Therefore customer is able to pay less for their orders.
-Speeding the loading and unloading time
- Minimizes the risk of damage and pilferage.


5. Product Protection
-Temperature sensitive control room for products that require low temperatures to be kept in.
- Keeping the products fresh and preserves the quality.
- Products that usually require low temperatures are unloaded and quickly put into the cold room.
- Also done for fragile products. Eg, with the use of bubblewrap or Styrofoam to cushion the product in case it drops.


6. Pick and Pack
-Products are usually received in big bulks. Therefore the DC has to de-palletize and break bulk to smaller package sizes suitable for customers’ orders.
- Picking individual items (packs or inner packs) from cases for orders and build new cartons, packs, or pallets to meet customer requirements.


7. Quality check/ Quality Assurance
-Upon receiving goods, warehouse/DC will perform QC to ensure products are:
- In correct count/amounts
- up to standard or in good quality
-QC/QA are also done throughout the product’s duration in the facilities of the warehouse/DC.
-Prevent pilferage/damage/ obsolescence
-QA to assure customers that their products are safe with us and they can trust us.
-When goods arrive from the supplier, the receiver will tally the invoice amounts with what is received.
-Any discrepancies are feedback to the supplier and reported to the purchasing department.


8. Packaging
- Packaging for temperature- sensitive products or biological products.
-For food products, it has to keep the food fresh
-Ensure that the goods remain in their original conditions even after transportation and climate changes.
-Reduces the chances of a customer receiving a spoilt product or a defect.


9. Cross dock
-Usually adopted when warehouse/DC follows the U-flow of movement for products.
-After receiving the goods, it is moved to the loading bay to be sent out along with the other products in the customer’s order; the goods do not stay in the warehouse/DC
-Very essential when it comes to products with a short shelf-life, or with very short time constraint.
-Customers are able to get their goods faster and save on chances for the product to become obsolete or prone to pilferage and/or damage.


10. Postponement
-Is the process where finished products are manufactured from components or sub-assemblies, as and when only assembled when customer orders are received.
- This prevents holding large inventories, and prevents goods from becoming obsolete.
-By holding components or sub-assemblies, companies can also actually save costs by eliminating tax payments and in turn reflects onto the customer by being able to pay lesser for their goods.
-Helps to maintain high levels of flexibility and customer service.
-Raw materials are unloaded and kept in the warehouse/DC and only assembled upon customer’s orders then sent out to the customer in the exact specification they desire.

11. Contingency protection
-To buffer for unexpected demand, transportation delays, vendor stock outs, strikes or goods damages during transit.
-By keeping buffer stock, the goods will still be available to customers despite the unexpected situations and will usually lead to customer satisfaction and enhance future sales.
-Done by forecasting the demand and ordering what is needed based on the forecasted demand.


USEFULNESS OF VALUE ADDING ROLES
• When a warehouse or distribution centre adds value to a product, it benefits both the customer and the retailers. For example, packaging helps to prevent a product from being damaged. Both parties benefit from this as the chances of a customer receiving a damaged product would be lower and it would save the retailer on costs they would incur to replace the damaged item. Thus this adds value to products.

• In a distribution centre where they use cross docking, it is a value adding role as it decreases the lead time for customers. When customers lead time is shortened, it increases satisfaction and also the greater possibility for future deals and even loyalty. Thus when a customer keeps coming back in the future, this generates greater profits, which is surely useful.

• One usefulness of the RFID system is that it is easier to identify and track goods. It enables pickers in the warehouse to know where to locate goods by just keying in the identification number given to that particular good. Thus, it will shorten the entire order processing time. This will enable the goods that need to be delivered be sent out to the destination earlier, or on time. This improves the order picking process by increasing efficiency, and useful in a sense such that workers can accomplish orders quickly.



CONSTRAINTS OF VALUE ADDING ROLES
• Although lead time for customers will be reduced, there is a limit to it as the distribution centre and warehouse has to also take into consideration their supplier lead time. Factors such as air freight or express deliveries have to benefit the company in the long run in terms of profits. It is not possible if the customer lead time is shortened such that the distribution centre or warehouse incurs a loss. Thus it will be brought to a point where both parties are still enjoying benefits. Customer sales have to offset the extra charges in air freight transportation costs.

• Radio Frequency Identification (RFID) is extremely useful to a warehouse or distribution centre in terms of saving time and man power. It can also be used to track the location of their goods to see if they are on the right track. However it also depends on the type of goods that are being stored or tracked. Even though each RFID tag only adds a small sum to the costs incurred, it would only be practical if it does not affect the profit margin by a large percentage. For example, placing a tag on a can of coke will be considered expensive as the revenue and profits from each can is small. Having this additional cost might decrease the profits by a large percentage. On the other hand, tagging a laptop would be considered cheap as each laptop could be sold for a few thousand dollars and it would make this additional cost insignificant. Thus RFID is generally used for the middle and higher priced products.

• Facility constraints might occur especially when a warehouse or distribution centre handles a variety of products. For example, products which need to be stored in a cold room might face stock outs when there is a sudden increase in demand. Because the warehouse or distribution centre has only a limit space designated for the cold room, only a certain amount of inventory can be kept and thus, proper planning has to be made