Tom Peters, a famous writer, and management guru, who changed the way a large business operates, in his book “In Search of Excellence” said:
“Leaders win through logistics. Vision, sure. Strategy, yes. But, when you go to war, you need to have both toilet paper and bullets in the right place at the right time. In other words, you must win through superior logistics.”-Tom Peters
So, how can this approach be applied to logistics in business? Well, in both cases, you must be prepared for the unexpected.
The “winning bullet” in business logistics, to get ahead of supply chain issues, increased demand, and other scenarios, is the possession of buffer storage or safety stock. And that’s precisely what we’re going to discuss here — all you need to know about buffer storage for your warehouse.
What is Buffer Storage?
Let’s say you run an e-commerce company, and your business is based on client orders. You discover that you are out of a crucial product due to an unexpected rise in demand. This means that you have to order additional stock, and postpone fulfilling the order for your customer until you have it.
Alternatively, let’s say you run a distribution company, and you recently got a regular order from a client, but you realize that you won’t be able to meet their demand on time since your client has an unexpectedly long lead time.
Both of these situations can have a negative impact on your customer service. When your product is out of stock, your customers might choose to turn to your competition and buy a similar product from them instead. And just like that, your company loses profit, and a customer who was once possibly loyal to your brand.
The best way to avoid this lost revenue, dip in customer satisfaction, and loss to your competitors, is safety stock.
Safety stock or buffer storage is the amount of excess stock kept on hand to reduce the risk of running out of raw materials or finished goods and to avoid the consequences of unexpected supply or demand uncertainties.
The ultimate goal of buffer storage is to make sure that your stock does not run out in case of increased demand or late arrival of new orders, so your customers remain satisfied and continue to do business with your company, knowing that you are prepared for any situation.
If supply chain management is new to you, we will teach you how and where to keep your buffer storage.
The best option? A buffer storage warehouse.
What is A Buffer Storage Warehouse?
A buffer storage warehouse is a storage area or planned space where your products or raw materials are stored before they are sold, transported, or used. When said items enter the warehouse, employees receive information about where these goods should be stored. When ready, the goods get passed down the distribution network to the customers.
To explain this further to you, we will go back to the e-Commerce business example.
Many e-Commerce companies buy products in bulk from their suppliers, then send them to their warehouse for storage. When a customer places an order on an e-commerce website, the warehouse employees select and pack the item in the warehouse and ship it directly to the customer.
Buffer storage warehouses are not limited only to eCommerce. They are used in every business that is based on customer demand, including:
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- Distribution
- eCommerce
- Manufacturing
- Physical retail
- Importation
- Exportation
What`s the Difference Between a Warehouse and a Distribution Center?
While a warehouse is usually a building where you keep products or materials for your company’s needs, a distribution center is a more particular type of warehouse created to fulfill orders with the intention of distribution to other businesses or customers.
Benefits of Buffer Storage Warehouses
A buffer storage warehouse is a crucial link in the supply chain for every business that deals with physical goods. Warehousing has an impact on much more than where items are housed. There are a few ways that a buffer storage warehouse can benefit your company:
Control inventory: You can implement automated systems into your buffer storage warehouse to keep an accurate log of inventory, keep track of stock levels, and keep an eye on the supply and demand of each item. This can help you prevent shortages and delays in the overall supply chain fulfillment process.
Save space: A buffer storage warehouse can serve you as a “parking area” for products until they are ordered. Goods may not be needed immediately at a particular moment, so they are kept in buffer storage so that your storage area does not become overloaded with these items. That saves space in your company storage, which can be used for other goods that are needed immediately.
Improve Security: Cargo theft, lost inventory, whatever the case is, the loss or theft of valuable inventory in your warehouse can be a big problem for your company. You can monitor your buffer storage warehouse with cameras and guards. This way you can save your products and be insured should anything be stolen or damaged, thus protecting your company assets.
Affects your company’s reputation: As a business owner, you may overlook the fact that buffer storage warehouses can provide replacement stock in times of crisis, such as when items are damaged or defective. How fast your company can fix those mistakes and calm down your angry clients depends on having an experienced and fast warehouse crew on your side.
Prepare for seasonal growth: Your company can begin to purchase additional stock for holiday sales early as the fall. Since holiday sales may increase demand for your products, with the correct buffer storage, your company is prepared for such a challenge. If a product sells out in your store, you will replenish inventory from your safety stock. If your company doesn’t sell out all products in seasonal sales, you can still store them safely in a buffer storage warehouse.
Wrapping Up On Buffer Storage
As a business owner, you can choose between public, private, or bonded buffer storage warehouses. You are free to decide which option is best for your company.
Our “main bullet“ in this article was to help you understand that having a buffer storage warehouse is essential for your business since it can help your company to save on an additional order fulfillment cost and give your customers a flawless experience without facing any backorders.
Are you ready now to improve your supply chain and be prepared for unexpected orders and demands? We think you are!
