How convenient do you believe the transportation of your products to retail centres would be, if your products were all coming from dozens of separate, different locations? If you operate under this system at present, do you experience challenges when sending out products to customers from multiple different distribution centres?
Why Multiple Distribution Centres are Inconvenient
On paper, having multiple distribution centres may not sound like such a bad idea. You’ve got all areas of the country covered then, right? But if you think about the extra effort that you need to invest in keeping track of different inventory levels of the same product, the logistics involved in getting storage containers delivered to many different locations, the costs involved in running an inefficient system encompassing many different storage centres, and other such issues involved in storing products in different locations, you will quickly see the arguments against having multiple distribution centres.
A few may argue that it is the traditional method of handling product distribution, but it isn’t necessary that an inefficient practice should be continued simply because it has always been practised that way in the past. The best way to avoid the added pressures of running multiple distribution centres is to create a central distribution hub.
By doing so, you will be able to focus on the important aspects of your business, rather than the logistics of having your inventory scattered across multiple locations.
Advantages of Having a Centralised Distribution Centre
The following are some of the reasons why you should choose a central distribution centre over running multiple storage warehouses:
There is not an easier way to access a product when you need it than to store it in one central location. Not operating in this way increases the number of obstacles that you must overcome to access your product.
If you have multiple distribution centres, you need to keep track of the locations of all your products. You need to be on top of the quantities in which everything is available in each location, and you need to figure out the most cost efficient and time efficient way of transporting each product from its current location to where it is required.
Your inbound transportation costs may increase if your products are housed in a central location but shipping your products will become more efficient. It is true that products will have to undertake longer journeys to reach their destinations, which comes with costs. It is an added expenditure which can be easily avoided by setting up multiple distribution centres. But there are far more costs associated with running multiple distribution centres, and the delays that this arrangement may cause in getting products shipped from one location to another may prove to be a bigger hassle in the long run than the increase in transportation costs as a result of operating from a single distribution centre.
Delays in shipment can lead to customer dissatisfaction which should be avoided at all times. Multiple delivery routes is another disadvantage of having multiple distribution centres which can further complicate the logistics of distribution.
Depending on the types of products that you offer and the kind of business that you’re in, you need to closely monitor which products you have in stock and which ones you need in greater quantities.
If you have a central distribution centre, you will find it much more convenient to create such kinds of reports. Instead of asking executives of different distribution centres to submit multiple reports, you can decide to go to a single source for all information with a central distribution point.
The number of employees that you need to hire will be far higher in the case of multiple distribution centres than the numbers you will need if you decide to opt for a central distribution centre.
Besides saving on employee salaries, you will be paying less rent as you are taking out a single property instead of having to pay rent for multiple properties in multiple locations. Another place you can save money if you decide to have a single distribution centre is the incidental and utility expenditures involved in running multiple warehouses.
You will also be able to eliminate the need for spending on new technologies and equipment for each warehouse. By centralising your warehousing and distribution you will not need as much manpower and resources as would be needed if you were to operate multiple facilities.
By lowering your operating costs, you can set pricing strategies easily as inventory management will be stable in nature compared to the alternate scenario of running multiple distribution centres. This will also pave the way for lower prices for customers or higher margins.
Exercise Better Control
Better control is another advantage of having a centralised distribution location. It is far easier to manage the operations of one location and keep your eye on all aspects of the distribution process if it is happening in one place, and not dozens.
By centralising warehousing and distribution, you are no longer required to maintain different inventory levels of the same product. This means that you can maintain your inventory at a minimum level based on the requirement of retail stores.
When faced with an emergency or a crisis, you only need to take one step to revise the activities if you have a centralised warehouse. This means that an organisation with centralised warehousing enjoys a greater degree flexibility as against an organisation with multiple warehouses.
By limiting the number of distributors or warehouses, you can use your resources for fewer facilities which is a more focused approach. This means that the facility will have the latest technology, more highly skilled workers and the best equipment. The availability of these resources ensures that you will be able to provide a higher quality service to your customers.
For some companies, it may make sense to have multiple distribution centres. For example, those dealing with perishable products, for whom time is of the essence in getting goods to stores. But in most other circumstances, the movement of products will be achieved far more efficiently, cheaply and smoothly if undertaken from one central distribution point.