Centralized warehouse:

A storage facility within a warehouse management system that is part of a supply chain. The
warehouse is located in the most centrally located position. The centralizing warehousing is a sytem
where the company maintains the single centralized warehouse versus several facilities spread out
to cover an area. A centralized warehouse is that warehouse which receives materials for and issues
them to all departments, divisions and production lines of the company. Such a warehouse is only
one in the company which receives materials for and issues to all who need them. The materials
required for all the departments and branches are stored and issued by only one warehouse.

Advantages Of Centralized Stores

The followings are the main advantages of centralized stores.

1. A better supervision of warehouse is possible because the warehouse is located under a single
supervision.
2. High delivery precision
3. A better layout of store and its control are possible.
4. Less space is occupied.
5. Investment in stock is minimized.
6. It is economical for storing materials.
7. Safety of materials is possible according to the nature of materials.
8. Trained and specialized persons can be appointed.
9. Wastage of materials can be minimized.

Disadvantages Of Centralized Store

The followings are the main disadvantages of centralized stores.

1. Delay in sending materials to the departments and branches.
2. Increase in material handling cost.
3. Greater risk of loss by fire.

Centralizing warehousing is a system where a retailer or its supplier maintains a single centralized
warehouse versus several facilities spread out to cover an area.

a) Logistic Advantage:

Lower Fixed Distribution Costs: Since fewer resources are needed to run one warehouse as opposed to
several, centralization has a positive effect on costs relating to warehousing activities.

Lower Variable Costs: Variable costs of warehousing such as labor, transport etc, can be kept at a
minimum or at a constant when the total amount of inventory decreases overtime.

Lower Inbound Costs: It means that distributors or a warehouse of a company can save on shipments
from manufacturers as a centralized warehouse can take in large quantities at a single location, versus
having shipments go to multiple locations. This enables better value not just to the company but also to
the end customer and ensures higher profit margins (Kokemuller, 2014).
Integration of Activities: Centralization helps in integrating all the warehouse and logistical activities
under one roof and these results in lower management costs. As such the company can concentrate on
other core competencies.

Lower Learning Costs: Since all products are centrally located in one warehouse, old products can be
phased out quickly and the distribution system can adopt faster to volume fluctuations.

b) Service Advantage:

Shorter & Secure Lead Times: A centralized warehouse helps in achieving shorter and secure lead times
on all the products. The warehouse can send goods and other consignments to customers much faster
thus reducing lead time.

Higher Delivery Precision: Since all the products are centrally located in one warehouse, more deliveries
can be carried out correctly. The number of deliveries and the time windows can be matched
simultaneously.

Differentiation: A centralized warehouse can store products of various shapes and sizes. The possibility
of customizing solutions increases with a centralized system.

Better Information: With all the products being centralized, it is easier to manage inventory levels.
Consequently the customers can be supplied with more precise and accurate information on delivery
times by the company.

Customer Service: The best people, equipment and inventory systems are all centrally located in a
centralized warehouse. This is beneficial as the warehouse can focus on the needs of the customers and
provide good customer service

2.1.2 Disadvantages of Centralized Warehouse:

a) Delay in sending materials to the departments and branches.

b) Increase in material handling cost as staff will be required for transportation from stores to the
various production units (materialsmanagement.info, 2014).

c) Greater risk of loss by fire because if a fire breaks out, entire stocks can be lost bringing production to
a halt (