Tips and things you should be exploring if you are looking to expand your distribution center
Most companies don’t look to partner with a third-party logistics provider (3PL) if their business is stagnant with no intent to grow. Shippers partner with logistics service providers like ODW Logistics to scale their business quickly, increase their visibility into their supply chain, and gain shipping and distribution efficiencies.
Companies that are looking to expand their warehouse footprint into a new market should spend quality time determining the most optimal location for their new distribution center. A customer’s clientele and respective volumes will dictate when a new market should be considered. Understanding where your customer’s orders are being distributed to most frequently plays a large role in determining where a distribution center should be located. Getting your product to your customer as quickly as possible can be a critical advantage to your supply chain. Let’s say a customer who has primarily been shipping to the east coast lands a new deal that ships primarily to the southeastern part of the US. It may be time to look for a new distribution center that puts their product closer to these new end-users. That being said, the volumes should be substantial enough to warrant covering the newly fixed costs of a building (or portion of), new MHE, and any new costs such as additional IT, building set up, etc.
Other factors to consider when expanding to a new market:
- Proximity to manufacturing or import origin
- Can you get close proximity to this, while not sacrificing customer speed/experience?
- Nearness to end customer now & in the future
- Omni-channel, retail, wholesale customers should all be considered.
- Transportation Impact
- With rising costs of transporting, reduced driver & equipment availability, and an increase in fuel prices.
- Availability, timing, and cost of capital.
- Are there support & repair agencies close enough to meet your expectation of responsiveness when issues arise?
- Costs of conducting business
- Labor rates, space rates, talent pool, etc.
How does someone determine if the volumes are substantial enough for a new DC and where is the optimal location the DC? for the first thing you should analyze is lane-specific and line-item inventory level data that shows inbound volumes, inventory levels to be kept on-hand, and then outbound data. Logistics planning software would allow a 3PL to model alternative scenarios that provide optimal locations to meet cost controls and service advantages to your supply chain.
Selecting the right 3PL to help with your expanding warehouse footprint can help you:
- Lower the total cost of your supply chain spend
- Improve customer satisfaction
- Improve profitability
- Give you better visibility into your supply chain
Many companies turn to 3PLs and other experts to help them in the analysis process and for good reason—they live and breathe this each and every day. It is crucial that you find the right 3PL before making any decisions. Good results start with a good partner who has your end goal in mind at all times.