Centralized or decentralized storage: which is better?

There are two main types of storage solutions in e-commerce: centralized storage and decentralized storage. Both systems have their own advantages and disadvantages and it is important to understand where exactly the respective advantages and disadvantages lie. Because when you are considering which storage system is best suited to your company, you need to weigh up which advantages will benefit you the most. Unfortunately, there is no generalized statement as to which system is generally better in practice. You will understand why this is the case after reading this article!

The decisive factor for or against central warehousing is your sales, logistics or distribution strategy: Do you want to rely on rapid delivery to the end customer and have a geographically very wide sales market? Perhaps even across different national or customs borders?
Then decentralized storage is more suitable for you! However, if you want to keep storage costs low, absolutely clean inventory management is essential and you can quickly penetrate your sales market logistically, then you should opt for centralized storage of your goods.

Advantages & disadvantages of centralized or decentralized storage

In logistics, the decision on one central or several decentralized storage locations plays a strategic role. In addition to a delivery promise to the end customer that can be formulated in different ways, the costs incurred contribute significantly to the decision-making process! In general, a single location is “cheaper” to operate than several warehouse locations, possibly spread across different national borders.

If all of a company’s items are stored centrally at one location, it is easier for the logistics provider to meet item-specific warehousing requirements or certain standardizations – it is also generally easier to manage the items. Thanks to a high degree of automation, goods can be picked faster in the warehouse, and administration is much leaner in comparison. For value-added services, too, centralized storage of all e.g. This makes it easier and therefore more cost-effective and efficient to customize articles.

The major and central advantage of decentralized warehousing is the availability of supplies and the promise of delivery to the end customer at short notice. Only if the majority of fast-moving items are already stored close to the end customer can the last part of the supply chain be bridged quickly by transport companies to the end customer. However, this advantage comes at the cost of significantly higher administrative and control costs as well as considerably more storage capacity and article usage. Decentralized storage of items is therefore of interest to all customers who want to speed up their transport routes and have larger quantities of individual SKUs.

The advantages of a central warehouse:

• Lower storage & location costs
• Clearer and simpler control & management of storage areas
• More efficient inventory management
• Lower item costs due to lower minimum stock levels
• More efficient control of internal pick & pack processes
• Lower personnel costs & requirements
• Automation much easier to achieve
• High article availability

The disadvantages of a decentralized warehouse:

• Very well thought-out site selection necessary to fully exploit the advantages of decentralized storage
• Significantly higher investment and operating costs in comparison due to multiple locations and more staff
• Significantly higher and more complex control effort at several locations
• Comparatively higher minimum stock levels due to distribution to decentralized storage locations

Decentralized branch or transshipment warehouses as a good compromise

How you can benefit from the advantages of centralized and decentralized structures

There is no general answer to the initial question of whether centralized or decentralized storage is better! The individual advantages and disadvantages are too different for both versions to be simply implemented without reflection. If you now want to take advantage of both systems, you may have to Rethink and change your distribution strategy: away from the question of whether one or the other is the better solution and towards the question: “How can I combine the advantages of both systems in my individual case in such a way that I

• can deliver my most popular items faster
• can link my logistics costs more closely to revenue
• reduce my CO2 footprint sustainably through more efficient logistics?

As unlikely as the answer may sound, combining the advantages of centralized and decentralized warehousing is certainly possible – but only for brands and retailers who want to send several hundred orders per day to a wide delivery area and, ideally, already have local stores with a minimum amount of storage space.

The secret lies in exploiting decentralized structures for fast-moving items. These small store warehouses are supplied from a central warehouse location with only the TOP sellers, which saves storage volume and space, but brings the core product ranges closer to the end customer. Being close to the end customer also means reducing transportation costs for the last mile of delivery to the end customer – alternatively, “Click & Collect” systems can also be established with local stores. In the process, e.g. A central web store with a connected and intelligent merchandise management system links the stocks of all local stores or smaller storage areas. The end customer can then decide during the ordering process whether to collect the ordered items themselves or have them conveniently delivered at short notice.

Conclusion: centralized or decentralized warehouse?

In order to take a noticeable step forward in the question of correct warehousing, you should therefore focus more on your current situation, your existing resources in terms of centralized or decentralized storage options and your strengths and weaknesses in distribution.

Based on this inventory, you can adapt the existing distribution strategy or, if necessary, change it completely. If you realize that you can implement area-wide distribution logistics with the existing structures of local stores and RHIEM’s central warehouse capacities, using RHIEM as a central warehouse and supplying your stocks in the stores, you have successfully combined all the advantages of central warehousing with those of decentralized structures.

Alternatively, you can use RHIEM as a central warehouse and estimate added value from other services close to the end customer. RHIEM flocks customized jerseys on behalf of major sports clubs or stores high-quality wines in special warehouses under a protective atmosphere before the valuable bottles are shipped to the end customer in protective cartons specially designed by RHIEM for wine bottles. As you can see, RHIEM can start exactly where you are logistically stuck. Together we develop the perfect distribution strategy and implement it efficiently and sustainably!