So You've Outgrown Your Warehouse...A Sign of Growth or Mismanagement?

by: 

Remember your first brand new car?  What a well-oiled machine it was? 

It was the perfect fit at that time. Then overnight, you had a family and found that suddenly you’ve outgrown the car. It had become cramped and no longer manageable or practical. This can be how it feels when you suddenly are faced with a crowded warehouse and distribution complications.

 The problems compound daily- you have nowhere to put inbound materials, so you put space in a “temporary” location in an aisle.  Then the orders take twice as long to ship since the aisles are blocked, and you can’t find some of the items you need since they don’t show a location.  Labor costs skyrocket, materials get damaged; orders are then compromised. The fixed walls of your warehouse have grown into a major concern for your supply chain.  Fortunately, this can be a sign of growth and sadly, a symptom of mismanagement.

 As e-commerce growth continues, competitive dynamics are also driving demand for new distribution space near more densely populated markets. In the past, much of the industrial warehouse space was built in suburban or rural areas where land was plentiful and cheap, and labor and taxes were low.  But in some domestic markets where land is limited, developers are getting creative, even constructing multi-story warehouses to accommodate demand. Although leasing space in urban markets is more costly, developers believe retailers will be willing to pay more for a prime distribution location. Warehouse operators are also more sensitive to human capital needs and need an ample labor supply near in urban areas. The industrial real estate industry is likely to continue increasing rents as well, but so far it seems too cautious to overbuild.  And, retailers continue to absorb premium rent prices, believing they can be offset by lower freight costs given their close proximity to customers. Outgrown your warehouse image.jpg

Before you push the panic button and rush to a quick fix such as hiring additional manpower, you might ask yourself, how are more people on my payroll going to provide a solution to my current space problem? And, what if I experience another growth surge? First, you must first determine the reasons related to your diminishing warehouse space, this will help you make informed decisions moving forward. 

 Why You've Outgrown Your Warehouse could be one or more of the following reasons:

  1.  Increased Inventory Volume

Sales are up, and you need more space to hold inventory. This is a great problem to have, and it is a strong sign that your business is growing. You must have the appropriate storage space in order to meet your customers' increasing demands.

      2. Temporary Storage

 Is it your busy season and you have more inventory than normal? If the need for more space is a short-term problem, you may only need a temporary storage solution rather than searching for a new warehouse. 

  1. Warehouse Storage and Redesign

 If your current warehouse structure is not working efficiently, it may be time to speak with a warehouse consultant to improve operational efficiency. An operational analysis, engineered labor study, material flow evaluation or a warehouse design and facility plan are just some of the warehouse solutions available from experienced logistics consulting firms.

 Once you determine the reasons why you are growing out of your space, you will be able to find viable storage solutions that allow you to meet your current and long-term needs. 

Storage Solutions

  • Third-Party Logistics: To avoid fixed costs of employees, insurance, equipment and facility operating costs, you should consider outsourcing your warehousing and distribution to a trusted 3PL that can help you avoid the need to lease new space by providing storage, fulfillment services, transportation and inventory for you for as long as you need it. You’ll be able to contract only the space you need. Now, having your own network of sites to ship from has its advantages, but it is hugely expensive. A more economical option is to work with a 3PL that has its own national fulfillment warehouse network and can get you closer to your customers without the need for a big infrastructure investment.
  • Larger Warehouse: When you simply need more space, a larger warehouse is the best solution. If costs are a concern, you can try to move further away from the city than your current location. This may allow you to find a larger warehouse within your budget. Of course, you always have the option to call real estate agents and look for a bigger office or warehouse. The issue is that moving your entire operation will take a significant amount of time and money.
  • Secondary Warehouse: This might consist of a separate local facility to segregate part of your supply chain like inbound raw materials, or a west coast regional distribution center to reduce the pressure on your current facility. Whether you want to operate from a new distribution center or you have excess inventory you need to warehouse, opening a secondary warehouse can be an ideal solution.
  • Sale of Old Inventory: There comes a point when your old inventory may be costing you more in storage than it's worth. Having a sale can help you move your older inventory out of your warehouse to make room for new. There are excess inventory and closeout buyers that will purchase an entire container of goods to help move these items quickly.
  • Expand your existing premises: Lastly, you can construct an addition on your current facility, if physically and legally possible. You don’t have to move anywhere, you don’t have to shut down, and you can focus on production. Even if you lease, you can work with your current landlord to meet your long-term needs.

So now that you are aware of what your options are, speak to your workers, and even your customers; consult with your advisors and make a decision- real estate agent, lawyer, builder, engineer and accountant are all key people in the process.

Our company is committed to delving supply chain solutions through any of these options: construction, outsourcing, overflow or real estate brokerage— warehouse space right away without waiting for construction to finish.

Here at Spartan Logistics, we know that any given customer has very specific needs for their warehouse space. We also know that our existing facilities might not always meet the needs of every customer that comes to us for service. This is why we offer a customized “build-to-suit” opportunity for our clients. Spartan aids in selecting or partnering to strategically place a warehouse location that is optimal for distribution.

Our affiliate company, Logan Creek Construction, a design and build national scope construction firm, has the experience to handle custom warehouse projects. This allows our customers to have the perfect distribution center, tailored to meet their needs. Through the services of NAI Harmon Group, Spartan Logistics can help you find existing warehouse space you need if we don’t already have it.  Click on the General Inquiry button to inquire about any one of our warehouse locations, new-build construction or real estate available.

 General Inquiry

 

Topics: Outgrown Your Warehouse