MOUNT KENYA UNIVERSITY

NAME: SHIRLEEN NKIROTE

REG NO: DSPM/2019/47612

SCHOOL OF BUSINESS AND ECONOMICS

UNIT: STORAGE AND LOGISTIC

UNIT CODE: DBM 1213

 A. Briefly explain the meaning of the following terms:
i Storage: this is a space where you put things when they are not being used.
ii Warehousing- is the act of storing goods that will be sold or distributed late.
iii Economic order quantity- it’s the ideal order quantity a company should
purchase to minimize inventory costs such as holding costs. Shortage costs and
order costs.
iv Cross docking – this is a logistics procedure where products from a supplier or
manufacturing plants are distributed directly to a customer or retail chain with
marginal to no handling or storage time.
v Buffer stock- it’s a large supply of a commodity, such as, crop metal, fuel, that is
bought and stored when there is not enough, in order to control its price and
quantity in the economy.

B. Explain the importance of Inventory control.

It’s eventually about reducing costs and improving service. It paves for competitive ability

By enhancing market shares thus paving the way for competitive ability.

It improves services level- if you desire your hard-earned clients to come back to purchase your
products and services. It’s necessary always to improve your service level enough to be able to
match customer request swiftly.

Reduces storage costs- these benefits of inventory management envisage on focusing upon
inventory and reducing storage costs as you maintain adequate inventories.

High inventory turnover revenues- applying inventory planning to any business can serve as a
bridge to bring in higher revenues. Through proper inventory management and control. A
company is capable of increasing its profitability.

You can utilize warehouse space better. Proper inventory management and control invoice
accounting for all production, purchase, and sale of goods that meets customers demand. These
benefits of inventory management affect management strategy that supports organizational
warehouse in attaining better space management.
Makes cost accounting activities easier.

Business owners often develop internal strategies and measures that will guarantees better
control and planning of production and sales.

Regular supply at reasonable prices builds customer confidence- inventory control and planning
solutions allows small business to gain insight into what products are selling more than others.

Inventory holding results in effective utilization of human and equipment- proper inventory
management and control solution save time regarding human resources and equipment usage.

Inventory control enhances product quality- the use of inventory management and control can
assist in remarkably improving business efficiency and product quality.

Effective inventory control brings potential saving- it can bring in potential savings as benefits of
inventory management provide business with monetary and red fine benefits.

C. Identify and discuss the considerations that should be made in location of

warehouse

Rents rates and taxes

Cost will remain a key criterion when selecting the right location of a warehouse.

Work force availability, labour skills and costs when evaluating workforce availability. Consider
supply and demand: low workforce availability and high demand will drive salaries up, meaning
operating cost will be higher.

Markets and local environment factors:-

Any news warehouse should be as close as possible to major supplies, products and customers.
This will reduce lead times, decrease transportations costs and enhance responsiveness.

- Roads, highways and traffic flow- accessibility to roads and highways as well as local
traffic density must also be considered, especially if trucking is the main mode of
transportation.
- Proximity to airport, railway station and parts – in this case, the main modes of
transportation used to receive or ship goods to and from the warehouse must be
prioritized.
- Building availability and utility costs- if the business grows or shrinks, you will need to
adjust accordingly. If this is the case, you will want to minimize your need to re-evaluate
all these factors if moving to a new warehouse is your only option.