Warehousing and whether your company should opt for centralized warehousing to ensure smooth distribution are concepts many people wonder about. Centralized warehousing: is it right for you? It’s a question the warehousing professionals at Lutheran Brothers in Detroit, Michigan get asked all the time. If you’re considering a change in your warehouse and distribution strategy, there are advantages and disadvantages to the centralized warehousing strategy.

What is a centralized warehousing strategy?

This is a storage strategy that means your company has decided to house all of its inventory in a single warehouse location or even in different major hubs that will cover a large region to accommodate a far-reaching distribution model.

What is a decentralized warehousing strategy?

This means you have made the decision to spread your inventory across various regional warehouses. Small amounts of inventory and components will be housed in warehouses. 

Centralized Warehousing: Is It Right For You?

Here are some of the advantages of a centralized versus a decentralized warehousing business model:

  1. When all your inventory is in one location, it’s easier to have inventory control. That being said, with advancements in technology, managing inventory – no matter where it’s located – is as simple as opening an app.
  2. Potentially eliminating inventory mishandling. If all your inventory is in a centralized location, you will rest easier knowing that your inventory won’t be mishandled or lost, or damaged in transit.
  3. A single inventory management system, when you’re utilizing a centralized warehouse location, does make tracking inventory easier. Regardless of technology, if your inventory is scattered, it means it’s not as easy as walking into the warehouse to locate inventory.
  4. When you centralize your warehousing, you may see decreased transportation and shipping costs. A centralized warehouse helps reduce the need to dispatch trucks and drivers to replenish diminishing inventory.
  5. Ease of quality control and customer service is amped up when operating from a centralized warehouse location.

Disadvantages include:

  1. An increase in shipping costs. You may see an increase in shipping costs if you’re operating out of a centralized warehouse.
  2. Depending on where you ship your inventory, it might cost more to ship items across the country than it might cost you to have a decentralized warehouse model.
  3. It could take longer for shipments to arrive at their destinations. Direct-to-consumer inventory processing and delivery may take longer.
  4. Business continuity and supply line disruptions can occur. Imagine if you have a centralized location and a catastrophe occurs, you may find your inventory is damaged and unusable. If you can’t get to your warehouse or get your inventory out, your business’s order fulfillment can collapse.
  5. Finding and keeping employees. If your centralized warehouse is in an area of the country that is struggling to find employees, you may find yourself with a labor shortage. If you have warehouses in various locations, you may be able to keep the supply chain moving because of the potential ability to hire staff in a different region.

Bottom line: As with most aspects of business operations, there is no one-size-fits-all solution. You need to weigh the costs and the pros and cons as well as the strengths and weaknesses in your supply chain and determine what option is best for you.

If you’re looking for secure, easy-to-access, quality, experienced storage professionals, contact Lutheran Brothers.

If you are looking for clean, secure and economical warehouse space to lease and operate your business in with your own personnel, look no further than Lutheran Brothers in Detroit, Michigan.