Logistics firms are trying to serve their clients the best they can by providing the most reach, the best price and the highest quality service. Sometimes that means having eyes and ears on the products themselves. Other times it means working with trusted partners. However, more companies are seeking to become multi state and multi national fulfillment companies to meet all of their clients needs.
The Pros of Multi-Location Fulfillment Companies
The top benefit of having a multi-location company is that you can control more parts of the value chain. You are shipping between your own locations and you have your people handling goods. If clients have questions about packing, shipping or handling, you can answer immediately.
Next, you can have a more unified technological infrastructure. You track packages and know exactly when they arrive at each location. You anticipate the movement of goods from one place to the next with much greater accuracy. Your ERP system has more data inputs which creates more accurate predictions in the future.
The third benefit is that you can manage inventory much better with many different locations. While demand is low, you can keep inventory in low-cost locations or not order it at all. When demand is high, move the goods much closer to the end customer for faster turnaround. That increases cash flow and ultimately gets to the bottom line. If carefully managed, your debt will also be lower as a percentage of the overall business.
The Cons of Multi-Location Fulfillment Companies
The drawbacks of a multi-national or multi-state fulfillment companies are many. Firstly, fixed costs are much greater. Each location has its own contract for rent, it’s own general manager, it’s own staff and it’s own equipment. These require a large upfront and ongoing cost. Without sufficient business to cover these expenses, the business will face grave difficulties.
The second issue is bridging the cultural gaps between the locations. If your two warehouses are in Illinois and Indiana, this won’t be a huge problem. However, if they are in Oregon and Ohio you may have different work cultures. If they locations are in Maryland and Mexico you are sure to have language, legal and financial challenges that are tough to bridge. Management must place special emphasis on common, shared goals and east to understand principles for everyone in the organization to follow.
The last issue is logistical. As mentioned earlier, more locations improves the capability of your ERP system. However, that also mean putting effort, manpower and attention to the back-end coordination. Without careful coordination, responsibilities may be lost as managers in different locations expect their counterparts to take care. Similarly, customers are putting greater trust in you to move goods from one location within your firm to another one. At a minimum, you will have a much larger web of relationships to manage with logistics firms, distributors, manufacturers etc. that will all have to be managed.
The unifying feature is that the more capital you have, the more you can expand and the less it will impact your business. On the other hand, if you are like most businesses and have a limit to your capital, you will have to weigh the trade-offs of growing to many different locations. Ambitious companies that want to grow their revenue eventually will have to expand to more locations in order to acquire more customers and better serve existing ones.
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