CEO Insights Magazine

With over two decades of experience in the supply chain tech industry, Mr. Ashvini, a former Indian Navy and McKinsey professional, holds a strong belief in curing the complexities of supply chains. He is an alumnus of ISB and Armed Forces Medical College, Pune.

As brands continue to grow and expand their operations, one crucial question often arises: When should they consider operating from multiple warehouses? This question becomes increasingly prominent as brands evolve from handling 500 orders a day to managing 1500 orders a day and beyond. The decision to expand to multiple warehouses is significant, influenced by various factors that can shape a brand's long-term success. Let us examine the key considerations that brands should contemplate when making this strategic move:

The Threshold for Expansion

While there is no one-size-fits-all answer, my experience suggests that once a brand reaches around a thousand orders a day, it is a prime opportunity to consider expanding to multiple warehouses. The first crucial decision to consider after this is, how many additional warehouses to establish? Brands must weigh the options carefully, deciding whether to extend operations by just one additional warehouse, or expand across multiple geographic regions, such as east, west, north, and south. The choice depends on various factors that include product diversity, customer distribution, and the potential for business growth in those regions.

Key Decision-Making Parameters

1.SKU Diversity: Brands should assess whether their products are concentrated around a few 'hero' SKUs or distributed evenly across their catalog. This evaluation can influence the choice of warehouse locations.

2.Supply Chain Partners: Compatibility with supply chain partners and the adaptability of existing tech systems are critical factors. Choosing a new geo-graphic region with inadequate support can compli-cate expansion efforts.

3.Clear Objectives: Brands should define their objectives for expanding to new territories. Is the goal to offer faster deliveries to customers, tap into strategic markets, or both? Clear objectives help in evaluating the success of the expansion.

4.Cost Savings: Expanding to multiple warehouses can lead to cost savings. Brands must consider the potential reduction in logistics costs due to increased local and regional deliveries, which can boost profitability.

Inventory Planning

Effective inventory planning is crucial when operating multiple warehouses. Brands typically begin with 30 to 60 days of inventory, depending on SKU distribution. Intelligent inventory replenishment tools can help determine the optimal inventory levels for each warehouse. This process should be ongoing, with regular adjustments based on demand patterns.

Reverse Logistics

Brands must also address the reverse logistics journey, considering returns and product movements from customers to the warehouse and between regional warehouses. Addressing this early in the growth journey is essential to maintaining operational efficiency.

Multi-Channel Operations

Last but not the least, successful brands leverage multichannel operations from their regional ware-houses. This means processing not only D2C orders but also B2B and marketplace orders from a single inventory pool. Making this strategic decision can enhance operational flexibility and revenue potential.

Conclusion

Expanding to multiple warehouses is a crucial decision for brands experiencing growth. When executed strategically, it can lead to improved customer service, cost savings, and enhanced revenue opportunities. Brands should carefully evaluate their circumstances, considering factors such as SKU diversity, supply chain partnerships, and have clear objectives. Effective inventory planning, reverse logistics management, and the implementation of multi-channel operations are essential elements of a successful expansion strategy. As you embark on your journey to expand to new warehouses, consider partnering with a provider that has warehouses across the country and a comprehensive technology stack to streamline your operations. This will ensure you have a successful growth journey as you explore the potential of operating multiple warehouses in today's dynamic business landscape.