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Consolidating distribution centers but growing products?

Distribution data distribution center Retail seasonality

In a market of fluctuating demand, many industries are experiencing periods of either accelerated growth or decline in business. Through these changes, companies are consistently searching for ways to optimize their processes to accommodate fluctuating demand, all while keeping costs down and offering rapid turnaround times for customers. An emerging method of streamlining distribution is the consolidation of operations into a single distribution center (DC), condensing all products into one facility.

We see this practice frequently in industries that, though still viable, do not experience the high demand they once had due to evolving consumer preferences. Let’s take the book industry for example. With the prevalence of tablets and e-readers in the market, book distributors no longer need multiple regional warehouses or DCs so they aren’t required to keep a large stock of inventory on hand. Many publishers have closed the majority of their DCs and transitioned to housing all SKUs in a single facility..

At the other end of the spectrum, companies in thriving industries with ever-expanding product catalogues, such as those in beauty and cosmetics, are eliminating specialized distribution centers in favor of consolidated facilities that handle all varieties of goods. In the past, these businesses typically established multiple warehouses in widespread geographical locations, each handling a different subset of products. Due to the rise of e-commerce and the demand for faster, smaller custom orders, it has become more and more costly and labor intensive to pull items from multiple facilities for fulfillment. By housing all products in a single facility, managers can streamline the distribution process and provide orders faster to consumers.

Whether they are downsizing or simply merging inventory, a company can clearly cut down on the costs and labor associated with running multiple facilities by consolidating distribution centers. Despite its financial benefits, managing a consolidated facility can open up an array of new challenges created by the influx of products in one location. As the variety of SKUs grows, the warehousing and order fulfillment process evolves in complexity, and managers must determine the best means to handle the growth of inventory within a single, confined space.

In many cases, product growth involves new items with specialized handling requirements. Manual labor alone may not be enough to handle these new complex picking processes, leading businesses to turn to automation to quickly and efficiently fulfill incoming orders and manage inventory. With retailers also looking to stock more varieties but fewer quantities of items, warehouses and DCs will benefits from an automated system that can pick a vast variety of products and create custom orders.

With limited storage capacity in a single facility, logistics professionals must maximize the usable space available to them. By utilizing an automated storage and retrieval system (AS/RS), companies can achieve much higher product densities, making the most of premium space while also improving productivity. The most effective solutions are flexible and modular, scaling as the business fluctuates. Building upwards with systems that maximize vertical space will create even more productive area for storage. These automated solutions can also help companies keep up with seasonal peaks without having to expand the physical size of their DC.

Essential to managing space within a consolidated facility is controlling inventory volume while maintaining enough supply for rapid order fulfillment. An effective Warehouse Control System (WCS) can assist distributors in this aspect of organization in their facility. By harnessing vast quantities of data, a WCS can efficiently analyze and handle inventory management and replenishment. By optimizing inventory control, facility space will not be eaten up overstock or an abundance of slow moving items, and fulfillment speed will be maintained for customer satisfaction.

In industries experiencing rapid growth or demand fluctuation, a consolidated distribution center could be a viable solution to optimize operations – but only if operates well. By implementing high-density automated systems to handle the inventory in these centralized facilities, companies can maximize space, save in labor costs, and service their customers with greater speed and efficiency.

Author Bruce Bleikamp

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