Warehouse Property Demand
Warehouse property demand is of utmost importance in maintaining a healthy industrial market. Given the functions that warehouses are used for (stockpiling, product mixing, consolidation, production logistics,distribution and value-added services) the major determinant of warehouse space demand is the amount of inventory held by manufacturers, wholesalers and retailers.
An estimated 50% of the total inventory stored in warehouses and distribution facilities consists of raw materials and intermediate inputs. Inventories of intermediate inputs and raw materials are typically stored either close to the finished goods manufacturing plant, or at strategic locations in relation to many intermediate input manufacturing plants that supply the same finished goods manufacturer, or close to clusters of finished goods manufacturers. This means that at least 50% of warehouse property demand, which has to do with the storage of intermediate inputs or raw materials, is associated with the location of production facilities. Inventories of finished goods are stored either at plant warehouses, that is, warehouses incorporated in the manufacturing plant or in the vicinity of the plant, or field warehouses, aimed at serving the different consumer markets, regions and metropolitan areas. According to an Ohio State University survey, in 1992, 34.1% of produced finished goods were stored at plant locations for more than 24 hours, 52.4% were shipped to field warehouses and 13.3% were shipped directly to customer’s businesses. By 2000, the percent of finished goods stored at plant locations was expected to decline to 29%; the percent shipped to field warehouses was expected to decline to 51.6%; and directly to the customer’s business was expected to increase to 19%. Thus, although by 2000 a growing percent of finished goods was expected to be shipped directly to customer’s businesses, more than 50% of inventory was expected to be handled by field warehouses. These trends would imply that there would be an increasing warehouse property demand at locations strategically located with respect to consumer concentrations, in order to reduce costs of shipping smaller orders to retailers.
Users of Warehouse and Distribution Buildings
According to a survey of the Warehousing Education and Research Council (WERC) in the early 1990s, that was carried out among its 368 members, 70.7% of warehouses and distribution centers owned or used by these members, were utilized by manufacturers, 23.6% by wholesalers and 5.7% by retailers. It is understandable though that these results maybe biased as they depend completely on the mix of warehouse and distribution facility users that decided to become members of WERC. This mix may not be representative of the total population of users of warehouse and distribution facilities in the country. In any case, inventory levels kept by the three aforementioned groups of users determine the total levels of inventory in the market and, therefore, warehouse property demand at any given point in time. The introduction of new technologies and the use of information processing and materials handling equipment, tend to increase inventory management efficiencies and inventory velocity resulting into reduced inventory requirements for a given amount of sales.
Location Demand for Warehouse and Distribution Facilities
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