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As businesses grow, they may encounter an increased need for industrial storage to carry a larger range of products, serve a wider geographic area of customers, or some combination thereof. During this growth and expansion, you might consider branching out on your warehousing capabilities to better meet the demands of your business and customers.

The most common warehouse configurations are either centralized, wherein all products are shipped from one primary location, or decentralized, a method of maintaining several smaller warehouses spread out to different areas in order to better serve different markets or stocking different products. Each method has their own advantages and disadvantages, and if you’re considering branching into a different warehousing method here’s a few advantages and disadvantages to each to keep in mind.

Centralized Warehouses

-A common advantage of centralized warehousing is the reduction of operating costs. By choosing to centralize your distribution centers, the need to pay rent and utilities is reduced drastically. These reduced costs can also allow you to set easier pricing strategies due to the stable nature of inventory management, allowing for higher margins, lower prices, or both.
-Another big upside to centralized warehousing is the ability to provide better customer service. By limiting your number of warehouses or distributors, you can focus on bringing in skilled workers, the best equipment around, and a better and more focused way to respond to customer requests and inquiries.
-However, the approach isn’t perfect. A big drawback to centralizing your distribution is increased shipping costs. Particularly with rush deliveries or long-term inventory shipments, centralized locations can increase the cost of shipping to certain parts of your market, which may translate to higher costs for the consumer – and in this age of increased demand for consumer convenience, shipping costs can be the clincher for making or breaking a sale.

Decentralized Warehouses

-One of the biggest advantages of decentralizing your shipping and receiving is a reduction in delay of material handling. Wherever your products are coming from, having a connected network of warehouses and supply facilities will allow you to receive products more quickly and get them out to your customers more quickly.
-Another reason managers turn to decentralized warehouses is the increased ability to store products. This can come in handy a number of ways; you can store a higher volume of the same products to keep up with demand, or you can stock a wider range of products to better meet the needs of your customers, all while avoiding the concerns of taking up more space on your wire shelving or storage solutions with products that might not sell as fast as others.
-Of course, the biggest problem with decentralizing your warehousing is one of the most obvious issues: increased operating costs. Even with all the benefits in stocking and shipping that this approach brings, the fact of the matter is you’re still faced with the costs of owning/renting, maintaining, and outfitting more than one warehouse, which can begin to add up after a while.

Whatever your approach, just make sure to think your plan through and weigh each method to see what’s best for your business.

5 Responses to “Centralized vs. Decentralized Warehouses”

  1. Jason Darnstaedt says:

    What it comes down to is weighing shipping costs vs. operating costs. Which approach is going to make the most sense financially for your organization? In some cases a combination of the two approaches might make sense, if you’re able to find a scalable decentralized option during peak seasons.

  2. Jully Thampy says:

    I happened to visit this website and i must confess it attracted me instantly. For some reason i loved the color and design of this website and was urged to leave a compliment here. Lots of information is there on the HomePage itself, yet it is not overwhelming and irritating. Love the site!!

  3. patrick njatha says:

    good and encouraging

  4. jim says:

    nice information.

  5. Najma Qureshi says:

    This is a very important piece of information. Both the types of warehouses have their own importance at their place. But the question arises here is whether the cost of inventory in all decentralized warehouses would justify the investment and improvement in the customer service level.

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