Warehouse Network Consolidation — A Strategy for Supply Chain Agility

What is warehouse consolidation?

Warehouse consolidation is a strategy aimed at streamlining operations by merging multiple warehouses into a single facility or reducing the number of locations. This process involves reevaluating the existing warehouse network, inventory management systems, and logistical processes to identify opportunities for consolidation and optimization. The goal is to maintain or improve operational efficiency while minimizing redundant costs and enhancing overall efficiency in the supply chain.

What are the pros and cons of warehouse consolidation?

Overall, while warehouse consolidation offers numerous benefits in terms of cost savings, efficiency, and customer satisfaction, it also comes with challenges that need to be carefully managed to ensure successful implementation.

Pros:

1. Reduced Transportation Costs: By combining multiple smaller shipments into a single larger shipment, businesses can lower transportation costs. This is because larger shipments are often more cost-effective to transport than multiple smaller ones.
2. Lower Fuel Emissions: Consolidating shipments reduces the number of trips needed, which in turn lowers fuel consumption and emissions. This is beneficial for both cost savings and environmental sustainability.
3. Minimized Shipping Costs: Consolidation helps in reducing overall shipping costs by optimizing the use of transportation resources and reducing the frequency of shipments.
4. Increased Customer Satisfaction: Efficient consolidation can lead to faster and more reliable deliveries, which enhances customer satisfaction. Customers receive their orders more quickly and with fewer delays.
5. Saved Warehouse Space: Consolidation allows businesses to optimize their warehouse space by reducing the need for multiple storage locations. This can lead to significant cost savings in terms of leasing and maintaining warehouse space.
6. Increased Employee Productivity: With fewer shipments to manage, employees can focus on other important tasks, leading to increased productivity and efficiency within the warehouse.
7. Improved Operational Efficiency: Overall, consolidation streamlines logistics operations, making them more efficient and cost-effective. This can lead to better inventory management and reduced operational costs.

Cons:

1. Higher Initial Costs: Implementing a warehouse consolidation program can require significant upfront investment in technology and infrastructure. This includes costs associated with redesigning warehouse layouts, purchasing new equipment, and integrating systems.
2. Complexity in Integration: Integrating new systems with existing processes can be challenging, requiring time and resources for training and adjustment. This complexity can lead to temporary disruptions in operations.
3. Maintenance Requirements: Advanced technologies used in consolidated warehouses may necessitate ongoing maintenance and support, which can increase operational complexity and costs.
4. Change Management: Transitioning to a consolidated warehouse model may encounter resistance from employees accustomed to traditional methods. Effective change management strategies are essential to ensure a smooth transition.
5. Risk of Over-Reliance: Relying heavily on a single consolidated warehouse can pose risks if there are disruptions or failures in that facility. This, of course, can impact the entire supply chain.

How can AutoStore make my supply chain and distribution network more agile?

AutoStore's high-density storage system enables businesses to consolidate multiple distribution centers into a single, high-efficiency location. This consolidation reduces costs associated with leasing, staffing, and maintaining secondary facilities, and can generate immediate revenue by allowing companies to vacate and sell legacy properties.

• Lease Termination for Secondary Facilities: AutoStore’s high-density storage system enables businesses to consolidate all inventory into one primary distribution center. This reduces costs associated with leasing, staffing, and maintaining a second facility.
• Opportunity to Sell Owned Real Estate: If a company owns a legacy building used for storage, the improved space efficiency provided by AutoStore allows them to vacate and sell the property. This can generate immediate revenue, providing funds to reinvest in operations or automation.
• Streamlined Operations in a Single Facility: Operating from one optimized facility reduces logistical complexity, improves inventory tracking, and enhances order fulfillment speed, benefiting both the business and its customers.
• Reduced Transportation Costs: With one location, inter-warehouse transfers are eliminated.
• Lower Carbon Emissions: Fewer facilities reduce energy usage and logistics-related emissions.
• Cost Savings for Customers: Operational savings from reduced leases, labor, and energy consumption can allow for more competitive pricing or free shipping options.
• Overflow: Elimination of temporary overflow spaces used during peak seasons. Businesses often need extra storage space during, leading to high demand for short-term, seasonal leases that come at a premium.

According to a recent study by Forrester, companies can save $5.9 million in real estate costs by implementing AutoStore. Learn more in this report.

Companies that use AutoStore for supply chain and distribution

The following companies have heavily integrated AutoStore into their supply chain and distribution networks. These companies have become more agile and cost-efficient, and in some cases, they’ve been able to divest valuable real estate.

• Varner: This major European e-commerce retailer consolidated 10 fashion warehouses into 1 by using a multi-Grid AutoStore solution, significantly reducing their operational footprint and improving efficiency exponentially.
• On behalf of one of the world’s leading medical technology companies, 3PL provider Arvato consolidated logistics for three business units — previously operating at two separate locations — under one roof in Memphis. The “heart of the warehouse automation system” is an AutoStore that allowed for the mass consolidation. Memphis is 1 of 10 Arvato locations using AutoStore. Medline, Best Buy, and Sonepar also operate five or more AutoStore systems across their supply chain networks to enhance space efficiency and customer service.
• After implementing AutoStore in Oslo and Bud, a village in the western region of Norway, car parts manufacturer GS Bildeler was able to reduce the number of physical warehouse locations while also increasing speed of delivery.
• A major North American retailer specializing in the automotive, hardware, sports, leisure and housewares sectors recently announced the closure and sale of a large, $250 million property they no longer need for warehousing and distribution because of their strategic supply chain investments and consolidation. The decision was likely influenced by the efficiency gains from its investment in multiple AutoStores.

Can AutoStore help me implement a network-wide warehouse consolidation?

AutoStore and its network of 20+ systems integration partners work hand-in-hand to help businesses analyze and improve their entire supply chains. Here’s how the process works:

AutoStore System Design Analysts

Our in-house system design capabilities, particularly through our Grid Designer tool, offer advanced 3-D design and live simulation that can predict actual performance with over 99% accuracy. This tool allows you to design and test optimal warehouse layouts, ensuring that the space is used efficiently and that the system meets your specific needs and performance goals.

You can schedule an initial, 30-minute consultation with our dedicated System Design Analysts to discuss your business needs. You submit your available space dimensions and data from your general process operation rates to us and we enter the data into the design tool, which then generates tailored recommendations about the number and type of AutoStore modules to use.

This initial call helps to easily tailor a first design to your actual picking and goods-in rates, as well as your available space. But, it can also allow you to look beyond one location and see how your distribution network, as a whole, can benefit from enterprise-wide warehouse automation and consolidation.

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AutoStore partners

Once you have a clearer picture of how AutoStore might fit your business needs, we can refer you to a qualified system integrator who specializes in the design, installation, and servicing of AutoStore technology.

Learn more about AutoStore partners.

It’s important to keep in mind that AutoStore is modular (fits any space) and product-agnostic. That means it can connect with any type of third-party machinery (conveyors, sorters, vertical lifts, AMRs, AGVs, etc.) and software (WMS, WES, WCS, ERP, CRM, etc.). Our partners, together with our in-house partner sales managers, global account managers, and business development managers (such as myself), can help you find a holistic solution that fits all the bits and pieces of your existing supply chain infrastructure.

Conclusion

In conclusion, optimizing distribution networks through warehouse consolidation with AutoStore offers a transformative approach to logistics. By merging multiple distribution centers into a single, high-efficiency location, businesses can significantly reduce costs, enhance operational efficiency, and improve customer satisfaction. The integration of AutoStore's high-density storage system not only streamlines operations but also provides opportunities for immediate revenue generation through the sale of legacy properties.

While the initial investment and complexity of integration may pose challenges, the long-term benefits of reduced transportation costs, lower carbon emissions, and increased employee productivity make it a worthwhile endeavor. Companies like Varner, Medline, Arvato, and Best Buy have already reaped the rewards of this innovative solution, demonstrating its potential to revolutionize supply chain management. With the support of AutoStore's system design analysts and integration partners, businesses can confidently embark on a network-wide consolidation project, ensuring a more agile and cost-efficient distribution network.