Most consumer catalogs operate out of a single distribution center. To control outbound shipping costs, their centers typically are located near the demographic center of the country.
However, as retailers grow, many open multiple centers. Their goal usually is to locate them so that the trucks carrying inventory can reach their stores within a day.
Business-to-business marketers more often have multiple centers to get orders to customers within same day to two days.
Maintaining multiple distribution centers adds significant complexity to inventory management. Ideally, a second center would boost inventory levels by 30%-40%. In actuality, however, the jump in inventory often is considerably higher, because most companies’ ability to forecast and plan is not as accurate as it should be. In addition, products often sell differently in different areas of the country. Additionally inventory will need to be leveled between DCs.
Curt Barry is president of Richmond, VA-based operations consultancy F. Curtis Barry & Co. He is also one of the faculty of MCM Live, a two-day intensive for multichannel merchants presented by MULTICHANNEL MERCHANT magazine. The first MCM Live will take place March 16-17 in Chicago. For more information and to register, visit www.MCMLive.com.