All businesses at some point or another are faced with the dilemma of whether to relocate or stay in their existing premises.
This decision can be complicated by any number of factors, such as have you outgrown your space? Is it big enough to absorb 5 to 10 years planned growth, not only in volume but in SKUs? Does it have enough dock doors to meet your shipping and inbound demands? Is the available labor pool sufficiently skilled to meet your supply chain requirements? How much will it cost to relocate? Is it less expensive to stay put? The list is almost endless.
These questions are relevant whether or not the building is leased or owned- space is space.
The above is an example of a consultancy project that Mitchell and Partners Logistics Inc undertake on a regular basis. We have worked with organisations large, medium and small in helping them navigate this critical strategic decision.
Obviously the financial calculation in deciding whether to relocate or not is paramount. This can mean taking a long hard look at areas such as inventory management,; we all know the uncontrolled flow of inventory into organisations can tie up lots of space and give the impression of an impending space squeeze.
Whereas a tightening up of inventory management can often free up enough room to allow some relief from the space crunch.
On the other hand, the competitive advantage in providing excellent customer service is too important to be ignored. Inventory being available when required is critical to a consistently high level of customer service. Therefore reducing on hand inventories will only go so far in providing an answer to your relocation quandary.
Another area for immediate review might be your “use of the cube”, that is are you utilizing the available storage capacity to its maximum?
Would having a reliable, cost effective 3PL warehousing partner supporting you assist in your operational strategy? Not only to relieve your inventory congestion, but also to smooth out the logistics and peaks of receiving and shipping and maximizing efficiencies of distribution and ecommerce fulfillment , last mile delivery, etc.
The addition of a 3PL can also provide flexibility for your procurement team to take advantage of an attractive price to forward buy an item without creating a space availability problem.
In my experience the addition of a 3PL may not be the total solution to your space and growth question, but they are often an integral part of a multi- pronged solution.
We worked on exactly this problem for a major automotive provider. They were demonstrably running out of space, added to which their sales were expanding with new models being released every year. The space requirement for parts and accessories was consequently growing dramatically.
Initially it looked as if relocation was the only option. However after carrying out a good deal of detailed analysis and a number of strategy meetings with the operational and senior teams it was proven that they could stay put and utilize 3PLs strategically located to support their activities. At the same time we made a number of recommendations about cube utilization, which added extra storage capability.
Obviously great care had to be taken as to the location of the 3PL facilities, as the cost model factored in savings on freight transportation. In addition consideration had to be given as to which SKUs would be stored at the 3PL warehouse, this in turn lead to consideration of which customer locations would be served by the 3PLs.
It therefore became important to review the service profile of the 3PL provider. Did they understand our client’s service ethos? Was there a real commitment to going the “extra mile” to meet any customer demands? A careful follow up on references focussing on service was helpful.
In this particular case, the relocation option was not taken off the table by the client, but was deferred until a later date.
I think this illustrates the complexity and importance of making the right decision in deciding whether to relocate, and further demonstrates that it is by no means a simple decision there are a number of factors to be taken into account.