examine the environmental and social sustainability of warehousing operations. w
ID: 386822 • Letter: E
Question
examine the environmental and social sustainability of warehousing operations. warehouse operations present both constructional and operational impacts on the environment. In addition, warehouses have a social impact in regard to the workforce and the greater community. explain the following: •How does the decision between owning and leasing a warehouse affect the environmental impact a company will have with its warehousing operations? •When choosing a warehouse location (either to purchase or lease), prioritize ease of access to freight nodes, proximity to the end customer, and overall social impact as critical elements. •How would you balance these competing priorities when selecting a warehouse location?
Explanation / Answer
Benefits of owning a warehouse
1: Tax benefit – Commercial property owners gain tax advantage by deducting depreciation, interest, and expenses.
2: Potential income source – When we own a warehouse, we have scope to give additional space of warehouse on rent or on lease
Disadvantages of owning a warehouse
1: Huge cost involved – The cost involved in down payment and installment can be invested for some better use.
2: Yearly Cost Increases - Property taxes and insurance costs negative impact on cash flow negatively.
3: Maintenance cost is another issue
Benefits of Leasing a warehouse
1: Huge number of alternatives to choose from – The business owner can select the location based on many factors
2: Money saved as installment can be used elsewhere
3: Flexibility – Easy to switch location based on customer requirement
Disadvantages of Leasing a warehouse
1: The amount of rent or lease increases annually
2: The business owner has little control of the property as it is owned by someone else
Positive environmental impact: Money saved, and profits made can be used for reducing environmental degradation
Negative environmental impact: Various types of business includes storage of petrochemical products, rubber, food processing, and other hazardous products. Leakage of such products, fire, and any other accident can impact the environment negatively
Priority of critical elements
First Priority: Proximity to customers – It should be near to the target customers and potential customers. This helps in catering demand fluctuations.
Second Priority: Ease of access to freight nodes – This helps in reducing costs.
Third Priority: Overall social impact – Once the warehouse is near to customers, the management automatically becomes aware of social and environmental impact.
Balancing of competing priorities
There are various ways of warehouse selection
Location Factor Rating Method
The location factor rating method is the judgment method, where each factor is rated accordingly. Managers weigh factors which are more important so that the decision process is more objective. The factor rating method or weighted score method is popular because a wide variety of factors, such as education, recreation facilities, and labor skills can be objectively included for comparing.
The procedure for factor rating method is mentioned below:
Location Break-even Analysis
Location break-even analysis is a graphical and algebraic representation of the relationship among volume of output and total cost for each location alternative for economical comparison. By identifying the Fixed Cost (FC) and Variable Cost (VC) per unit and plotting them on the cost-volume graph for each location, it can be determined which of the alternative provides the lowest Total Cost (TC) for the given level of production volume (units).
The procedure for location break-even analysis is mentioned below:
Center of Gravity (CG) Method
Center of Gravity (CG) method is normally used for locating warehouses in the supply chain system. CG can be defined as the location that minimizes the weighed distance between the required warehouse and its supply and distribution centers, where the distance is weighed by the demand load between the supplier and distribution center.
It’s the skill and experience of the management to select a location which balances between all critical elements
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