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One of the best ways to alleviate the logistic nightmares of operating multiple distribution centres is to create a central distribution centre. The organization and set-up of the stores depend upon the requirements and have to be tailor-made to meet the specific needs of the organization.
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Main Benefits
1. Better control
One of the advantages of having a centralized distribution is to have better control. Organizations set up central stores that are responsible for all activities and transport their inventory as and when required to other stores which are usually attached to the production capacities located in different locations.
2. Inventory management
Inventory can be as minimum as material ordered based on the requirement of all other attached parties. The material can also be ruled out to and from the attached central stores. This is especially so in the case of tools, fixtures, equipment, and spares. Make sure to use the best inventory management software.
3. Reduced cost
By choosing to centralize warehousing and distribution, the need to pay rent or utility and incidental expenditures for different warehouses is reduced. The need to spend more on new equipment and technologies for each warehouse is also eliminated.
Centralized warehouses also make room to reduce shipping costs. That may seem strange but the reason for that is because it makes room for shipping in bulk size which will make the costs lower.
With these reductions in costs, retailers can now set pricing strategies with more ease due to the more stable nature of its inventory management. This will allow for higher margins or lower prices for customers.
4. A requirement of fewer team members
Unnecessary duplication of records takes place in decentralized stores. Centralized stores will require fewer staff members for management. For a smaller business, this can be one of the most important reasons for having decentralized distribution systems. With not having as big financial pressure on you, you can be able to have a better focus which will improve all parts of your life.
5. Economy in storage
Is possible in a centralized distribution system as goods in bulk will occupy less space. That will offer you even lower renting costs, which will make you able to invest more into other things like marketing.
6. Accessibility
One of the biggest advantages of having all the products in one central location means getting easy access whenever needed. That also makes it easier for you to handle some kinds of crises. The reason for that is you know something is missing for example you can check it instantly.
7. Reporting
Depending on the kind of business or the kinds of products you offer to your customers, you need to keep a close eye on what you have in stock. With a central distribution center, creating these types of reports becomes incredibly easy. You only have to go to one source rather than track down multiple reports from multiple distribution centers.
8. Standardization
Implementing centralization would result in the standardization of the processes. This guarantees lesser variations and better performance. It will save you from a lot of potential headaches and make it easier for you to make decisions.
Because of that will you not only save money on having a centralized distribution system. You will save something way more precious namely your time.
That will give you more time to do the things that will make you able to really grow your business like strategizing, developing new leaders, etc.
Besides that can it help you establish yourself as more reliable. The reason for that is that the shipping will always be the same and that will offer you a competitive advantage against competitors. Look at Mr. Bezos he had as his cornerstone to have a fast and reliable delivery system and he is pretty successful from what I know.
9. Flexibility
In a crisis or an emergency, standardization of work takes just one step to revise all the activities at once. This guarantees a greater degree of flexibility in an organization than in a company with no centralized warehousing.
10. Better customer service
By choosing to limit the number of warehouses or distributors, a company can focus its resources on fewer facilities. This means the facility will have highly skilled workers, the latest technology, and the best equipment. With all of this in one facility, the highest quality of service can be offered to customers
About the Author
My Name is Taara Singh, I enjoy reading & writing articles about Logistics & Supply Chain Management Topics. My goal is to educate, support, and empower everyone I work with! I will provide all the motivation and information you need to create a business plan that works for you.
it was very informative. my concept related to the topic has been cleared. Awaiting for more useful articles on scm from u. Good job!
Hi Taara. I agree with your point that there are a lot of benefits to a centralized distribution system. It can reduce costs and increase profits. It can also be very easy to measure the performance of the organization. Thank you for sharing these benefits with us. I really appreciate your efforts to make people aware of the advantages of a centralized distribution system. Thank you.