Benefits of consolidating distribution centers

Some companies have moved back office functions, and sometimes even sales and executive offices, out of costly urban locations and consolidated them with warehouse and distribution centers in suburban or rural areas, significantly reducing their costs wile expanding their space.

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Suppliers ship truckloads of products to the distribution center, which stores the product until needed by the retail location and ships the proper quantity.

Since a large retailer might sell tens of thousands of products from thousands of vendors, it would be impossibly inefficient to ship each product directly from each vendor to each store.

Thought and planning should go into any process of consolidation and centralization, because they make sense in a broad range of circumstances, but not all.

For example, consolidating the recruitment and hiring process within the headquarters of a firm with multiple locations will ultimately lead to greater inefficiency and cost.

Each department in a company has different staffing requirements, for example.

Yet the hiring process in most companies is centralized within the human resources department, ensuring that a uniform procedure is followed for all applicants and thus reducing the company's potential liability.

Many retailers own and run their own distribution networks, while smaller retailers may outsource this function to dedicated logistics firms that coordinate the distribution of products for a number of companies.

A distribution center can be co-located at a logistics center.

These same economies of scale apply to staff as well - receptionists and other support staff can often serve a consolidated office with little or no loss of efficiency.

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