It’s gratifying to know that your company’s business is growing to the extent that your existing supply chain facilities can’t keep up, but…
If like many enterprises, you might be considering the creation of another distribution centre to ease pressure on your supply network, are you sure that’s really the best solution, and can you be certain that your network itself isn’t actually the real issue?
Possible Alternatives to Adding Another DC
Before you commit to adding another distribution centre, it’s critical to ascertain the potential impact on your supply network as a whole.
You should also take a good look at your existing distribution centres. There are often ways and means to improve the utilisation of existing facilities—some examples of which you’ll find if you read on.
Improving Distribution Centre/warehouse Utilisation
If you could improve the actual utilisation of the existing warehouses in your network or even increase their holding capacity, you might be able to stave off the need to add another distribution centre for some years, perhaps even indefinitely.
Of course a lot depends on how many warehouses or DCs you have, but the more there are, the greater the possible gains from improved utilisation.
Companies often make the assumption that their facilities are running at capacity when in fact, a lot of potential storage space is holding nothing but air. In many cases it’s possible to improve DC storage capacity and throughput with some tweaks to interior layout and storage infrastructure.
Possible solutions to increase utilisation might include:
- Replacing single-deep racking with a type which offers greater storage density (double deep, push-back, flow-through, or other racking solutions)
- Reducing the width of warehouse aisles. (This will probably require the use of specialised narrow-aisle forklift trucks. A little costly perhaps; but not as expensive as adding another distribution centre)
- Installing specialised racking and equipment to make better use of vertical space (in warehouses where roof height allows)
- Optimisation of warehouse layouts to improve workflow efficiency (This can make the warehouse more productive and help you move goods more swiftly through your distribution network)
Reduce the Load on Your Distribution Network
If you can’t increase warehouse capacity or utilisation in your distribution network, perhaps you can reduce the need for it. This is one of the goals of network design modeling and optimisation.
If you don’t actually test how alternative scenarios and strategies could improve efficiency, you might find that adding another distribution centre fresh problems, rather than solving the ones you already have.
For example, the addition of some cross docks into your network might be a more efficient solution than a new distribution centre, as might a logistics outsourcing strategy.
Another network optimisation objective might be to reduce the amount of stored inventory you need. Reduced inventory levels mean less storage capacity, meaning perhaps that new DC won’t be a requirement after all.
Boost Your Network Knowledge
When all is said and done, it may be that another distribution centre is just what’s needed to perfect your company’s supply network. It’s simply advisable to see what can really be done with your existing assets, before making the decision to invest in new real-estate.
You can learn a lot about the topic in Supply Chain Secrets, my guide which aims to help companies like yours save millions of dollars through supply chain improvement. You can find out more about this and my full range of supply chain titles in our book store. Why not stop by and take a look?
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