2.4.24 Facilities: How many and where?


Facilities, how many and where?
0:04
When you build your logistics network you have to determine how many facilities do need, such as warehouses, terminals and so on. And where to locate them, that is a very important decision. And how to pick the right locations is really an art form, because you don’t know what your needs are going to be in the future. Nevertheless good planning pays off, so when we look at our logistics network we have to make the decision. Do we have one warehouse, two, three, four, or several dozens like some big companies do?
0:44
When you have fewer warehouses the advantages are that you locate your inventory in fewer locations, you pool your risk, and therefore are able to hold less inventory. When you have many facilities, you will carry more inventory, but your access to your customer is going to be much quicker, so the decision is a tradeoff. Do you want to save money building facilities and holding inventory, or do you want quicker access to your customers? I mentioned risk. The thing about inventory is that if it is in fewer locations, you need less of it, and that has to do with a safety stock.
1:28
Because you can spread your safety stock over a larger area. The risk of stocking out is less with fewer locations. If you have more locations, each location needs their own safety stock, thus we have more safety stock overall in the system. After you determine how many warehouses to build you have to determine where to locate them. And you typically follow a center of gravity approach that puts you as close to the customer as possible. But you also have to consider that you do not stock every item in every warehouse, because some items may be needed In certain locales. Such as, in the north we need more winter coats than we do in the desert. Another interesting way to think about it is that you can use your transportation network as a storage device. For example, carmakers sometimes put several weeks worth of inventory Into trains and rail yards before they get to the dealers. That gives them a storage option even though it is transportation, per se.

Jim Rohn Sứ mệnh khởi nghiệp