Centralised vs. Decentralised Inventory
It’s safe to say that your back-end operations are as important as your front-end operations; you can’t hope to give out a good product if you can’t handle it properly behind the scenes.
And so, more of the effort is going to count behind the curtains. There, you have one significant process to focus on: storage.
Depending on the type and size of the business at hand, you’ll have a range of inventory styles to pick from. Would you allow your locations to manage their own inventory, or would you rather have everything placed under the same roof? The options are quite complicated, but you can count on us to brief you in.
At the most basic level, you essentially have two choices: centralised or decentralised inventory.
Centralised inventory is the kind of storage done by a company in a single, large warehouse. Everything is stored in one location; therefore, all products are handled and housed using the same methods and personnel.
- With just one warehouse to manage, storage infrastructure is a lot simpler and feasible – this includes equipment, warehouse staff, managers and bills.
- Money you might have spent on maintenance and payrolls can now be used on other important aspects of business, such as marketing, customer service, or improved manufacturing processes.
- Since you’re focusing on a single (or fewer) warehouses, you can count on a single vehicle to transport goods to and from the premises. Transportation costs and processes are simplified by a mile!
- Your stock is a lot safer and easier to manage – there’s no need to invest in safety “back-up” products.
- Since this is a “one-size-fits-all” kind of solution – and there will be a range of products racked in the same place – companies adhering to this method may face unintentional overstocks or under-stocks due to miscalculations.
- Processes that are too “simple” are more likely to inhibit innovation and development instead of promoting it, since they don’t offer room for growth.
Decentralised inventory is the style of storage that requires multiple warehouses, spread in different areas. Because of that, it has a larger range of handling methods and staff, which may vary from one warehouse to the other.
- Stocking up stores in different places is a lot easier when your warehouses are spread apart – especially if geographical barriers like oceans, mountains etc. create problems for you.
- With such speedy transportation of products, you can make sure your customers get their favorite products on time.
- You will be ready for worst case scenarios; damage caused due to rain, fire or some other disaster can be better dealt with if your products are extend to multiple locations.
- One thing worth noting about decentralised inventory is that it allows the warehouse managers to manage your stock for you. This kind of liberty gives a sense of ownership, which ultimately promotes unorthodox, forward-style of thinking!
- Systems set to manage warehouses will be a lot more complicated and expensive – along with more time and energy, you’ll need more managers, warehouse staff, equipment, and the like.
- Although transportation time is cut down immensely, their costs are not – in fact, you have to invest more on a greater number of vehicles, drivers, and maintenance equipment.
- Having your products spread out makes managing their safety a hard task – unless you invest in a good security system, you won’t know you’re missing products until it’s too late!
So what do I pick?
In the end, all arguments boil down to one simple question: what is your business type? If you have a single store, then you’d much rather pick centralised inventory, where your attention is more localised to one site. Decentralised inventory works best for multi-store companies, where your attention – and resources – are a lot more spread out.
However, you don’t have to worry about bearing any kind of setback. With a good inventory management software, like that offered by Oscar, you can analyse stock levels for all your stores on a single, intuitive dashboard. You’ll prevent menaces like overstocking, low stocks, and even pilferages. All in all, you’ll have a more vigilant eye over your entire inventory.
Every business is different, and yours might need a unique inventory solution. Whether you want a single warehouse or several can only be decided through serious assessment of data and resources. After that, the sky’s the limit.