4 Warehousing
Logistics is an important factor promoting globalization and international flows of
commerce. Modern logistics systems economies are based on the reduction of inventories, as
the speed and reliability of deliveries removes the need to store and stockpile. Consequently,
a reduction in warehousing demands is one of the advantages of logistics. This means
however, that inventories have been transferred to a certain degree the transport system,
especially the roads. This has been confirmed empirically. In a survey of 87 large British
firms cited by McKinnon (1998), there had been a 39 per cent reduction in the number of
warehouses and one third of the firms indicated an increased amount of truck traffic,
although the increase was thought to be small in most cases. Inventories are actually in
transit, contributing still further to congestion and pollution. The environment and society,
not the logistical operators, are assuming the external costs.
Not all sectors exhibit this trend, however. In some industrial sectors, computers for
example, there is a growing trend for vertical disintegration of the manufacturing process, in
which extra links are added to the logistical chain. Intermediate plants where some assembly
is undertaken have been added between the manufacturer and consumer. While facilitating
the customizing of the product for the consumer, it adds an additional external movement of
products in the production line.