The third important element in physical distribution concerns storing products for future delivery. Marketers of tangible products, and even digital products, may have storage concerns. Storage facilities, such as warehouses, play an important role in the distribution process for a number of reasons including:
Hold Wide Assortment
As noted in the Distribution Decisions Tutorial, many resellers allow their customers to purchase small quantities of many different products. Yet, as we saw, to obtain the best prices from suppliers, resellers must purchase in large quantities. In these situations, the need exists for storage facilities that not only hold a large volume of product, but also can hold a wide variety of resellers’ inventory. Additionally, these facilities must be organized in a way that permits resellers to easily fill orders for their customers.
Meet Unanticipated Demand
Holding products in storage offers a safeguard in cases of unexpected increases in demand for products.
Needed for Large Shipping Quantities
As we noted in our discussion of transportation, manufacturers generally prefer to ship in large product quantities in order to more effectively spread transportation costs. This often means manufacturers must create storage areas in which the manufactured goods can build up in the quantities needed for such large shipments to occur.
Offer Faster Response
Additional storage facilities, strategically located in different geographical areas, allows a marketing organization to respond quickly to customers’ needs. The ability to respond with quick delivery can be a major value-added feature since it reduces the buyer’s (e.g., retailer) need to maintain large inventory at their own locations.
Security and Backup
For digital products, additional storage facilities are not only needed to offer customers faster access to products (e.g., online content and software) but are also needed to protect against technical glitches and security threats.