Regardless of the products you sell and ship, and the final destinations of those shipments, your warehousing locations are crucial to the success of your business. Do you need more warehousing locations? Is it better to consolidate? Logistics is a dynamic business; this means that you’ll constantly have to pivot successfully to meet demand, not to mention ensure that your costs are kept in check. When costs skyrocket, growth is no longer sustainable, the same is true for your warehousing costs.
This leads to a very important question: is it better to have fewer warehouses distributing products to more locations, or more warehouses strategically placed all over the country? Whether you own your own warehousing resources or outsource them to a third-party, the questions remain the same. Is less more? The answer isn’t a simple yes or no, but there are many things you should consider before deciding.
What to Consider
When choosing to either expand or consolidate your warehousing locations, some of the things you should consider include:
- Cost: conduct a thorough cost-benefit analysis considering overhead, transportation, and inventory management costs.
- Speed to Market: assess the impact of locations based on your customer’s geographical footprint, expected delivery times, and potential impacts on customer satisfaction.
- Ease of Management: evaluate your capability to manage either a centralized or decentralized warehousing structure.
- Labor and Resources: consider the availability of skilled labor based on potential warehouse locations, your current inventory management and technology infrastructure, and the resources you will need for every location you have.
- Customer Demand Patterns: run a thorough analysis of historical customer data and market trends to align your current warehouse locations, your potential warehouse locations, and predicted customer demand.
- Supply Chain Resilience: evaluate the potential risks in your supply chain based on your current warehouse strategy. Match that with the increased or decreased risks you may encounter with an expanded or consolidated warehouse infrastructure.
The Pros of Consolidating Warehousing Locations
- Cost Savings: there are generally reduced overhead costs associated with managing fewer locations. Costs can include property expenses, utilities, maintenance, staff, and more. If you outsource your warehousing, consolidating inventory management can lead to lower storage costs.
- Centralized Operations: consolidation leads to better control and visibility over inventory, allowing for more optimized order fulfillment. There can also be improved coordination and communication among centralized teams. Managing less can often lead to more control.
- Better Use of Resources: consolidation can lead to more efficient allocation of resources and labor. It can also allow you to centralize technology and infrastructure, reducing redundancy and waste.
- Enhanced Security: security can be more focused with fewer locations, and safety protocols and surveillance are often easier to implement and manage.
The Cons of Consolidating Warehousing Locations
- Increased Transportation Costs: because warehouses are more spread out, this can lead to higher freight costs, longer delivery times, and slower speed to market.
- Limited Market Coverage: fewer warehouses can result in longer lead times for customers in specific regions as you face challenges in meeting localized demand variations.
- Risk of Disruption: more centralized locations may leave you vulnerable to disruptions like natural disasters, geopolitical issues, or supply chain issues. Diversification in warehousing locations helps you spread out the risk.
The Pros of More Warehousing Locations
- Improved Customer Service: having products stored within closer proximity to customers leads to faster shipping times, enhanced flexibility in meeting demand fluctuations, and overall better customer service.
- Controlled Transportation Costs: more locations can result in lower freight costs due to shorter transportation distances. You open your opportunity to utilize local carriers for cost-effective final-mile delivery.
- Better Market Penetration: more warehouses can help with expanded market reach and increased market share. You will have the ability to reach more customers, quicker.
The Cons of More Warehousing Locations
- Increased Operational Complexity: managing multiple warehouse locations introduces new complexities in inventory control, order fulfillment, customer service, technology, and other systems and resources.
- Higher Overhead Costs: increased expansion brings greater overhead expenses. This can lead to issues in achieving economies of scale. Make sure your growth is sustainable for your business.
- Resource Allocation Challenges: more locations can lead to issues securing skilled labor and people for management positions. You will need to find reliable and qualified professionals to fill more roles.
Is Outsourcing to a 3PL the Better Choice?
Can’t keep up with managing a warehousing infrastructure? Need one less thing to worry about? Outsourcing your warehouse management to a third-party provider can be the best decision you make. Whether you are keeping your warehouse solutions in house or not, our team at King Solutions can help you get the most out of your warehousing resources.
From freight storage to fulfillment, inventory management and visibility, and everything in between, we can be your complete 3PL warehousing partner. Even if you own your own warehouse locations, we can help increase your speed to market and decrease shipping times by helping you clear your docks, integrate inventory management systems, and provide end-to-end visibility of your inventory and shipments.
Ready for a better warehousing solution? Get in touch with our team today for a free analysis.