Centralized Warehousing System: Is it the Best Choice for Your Business?

As a business owner, it is crucial to be constantly thinking of new warehousing and distribution strategies that will better benefit your company. A common strategy that businesses adopt is partnering with a centralized 3PL to evaluate what works best for your business. When looking at new solutions for your company, it is important to look at the advantages of centralized warehousing so that you are able to make the best decision for your company.

Pros:

Improved Inventory Control

Utilizing a centralized warehouse provides your business with the opportunity to have improved inventory control as these warehouses are typically product based and specialize in centralized inventory management. Centralized warehouses are equipped with proper centralized inventory systems to ensure your product is in its proper place and is easily trackable.

Higher Quality Customer Service

Storing your product in too many warehouses can often times lead to misplaced inventory and poor customer service as there are too many people handling your processes. Once your businesses decides to utilize a centralized location with a warehouse advantage, the quality of customer service will increase as there will no longer be multiple entities in communication with them. Finding a centralized warehouse that matches your business needs will greatly increase your bottom line as the team of experts are equipped with the latest technologies and have an understand on how to handle specific materials.

Reduced Operation Costs

Operating your business out of multiple facilities can be costly as you are paying for multiple rental spaces, material handlings, and personnel costs. Downsizing to a single location allows your company to save significantly on operation costs and have more stable inventory prices allowing for higher margins and lower prices for your customer.

Cons:

Labor and Skill Shortages

Since the start of the pandemic, labor and skill shortages have swept the nation and businesses have found it difficult to recruit new talent. Depending on the area, centralized warehouses may be at a higher risk of these shortages which can ultimately affect these processes down the line. If your business is unable to parter with a 3PL due to these issues, your team will most likely have to invest in expensive training and technology.

Potentially Higher Shipping Costs

Though moving all of your warehousing needs to one centralized location may reduce the cost of inbound shipments, the cost to ship outbound can increase. Having a centralized warehouse versus a decentralized warehouse with all of your product can be costly as product may need to be shipped out to further locations. When routes become longer and more complex, shipping costs and delivery times begin to increase.

Lack of Continuity

Unfortunately, when working in supply chain, it is inevitable that your company will experience unforeseen disruptions. While the pros of partnering with a 3PL that is in a centralized location may outweigh the cons for your business, it is still important to consider that relying heavily on a single warehouse can cost your business money if another catastrophic event like COVID-19 occurs.

As a business owner, choosing whether a centralized warehousing system is best for your business can be a daunting task. Ultimately the choice comes down to your situation and your business model. Centrally located with over 30 years in supply chain management, NewStream is ready to help you make the best choice for your business. Our team is equipped with the proper knowledge and expertise you need to set your business apart from the rest and love your supply chain!

Is a centralized warehousing system the best choice for your business? Let’s talk, our experts are waiting to help you decide!