4 Things to Consider Before Opening Another Warehouse Location

Your business is growing, sales are booming, and your warehouse is overflowing. You may be asking yourself:

Should my business open another warehouse location?

Adding another warehouse location means reaching more customers, but it also means higher inventory levels and multiple locations to manage. Setting up a new warehouse takes a lot of preparation, and we want to make that process a little easier for you. Before we dive deep into how software makes it easier to manage your business (which we will discuss in future blogs), we spoke with some of our customers about their approach when they opened up their second or third locations.

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 We hope that these interviews give you a real look into what goes into adding more warehouse locations.

Meet the industry experts:

Michael Clay, President at Miller Welding. He discussed how his company added warehouse locations based on market needs. And he gave helpful insights on what goes into opening multiple locations and what has made his company successful in doing so.

We also spoke to Chris Cumming, Vice President of Operations at Charter Industries. Chris discussed how the proper software made it easier for his company to add warehouse locations, utilize a transfer warehouse, and run reporting functions. He also shared tips on collecting useful customer data from existing markets.

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Thanks to their insight, here are a few things for you to consider.

What are the needs of your target market?

To start, you must consider if there is an opportunity for your added location in the market. Gathering data is always important.

Chris from Charter utilized customer data from larger logistic companies like FedEx and UPS to gain an understanding of where their services were needed. This data allowed them to map out and validate geography. This visibility then helped them understand territories, and when combined with their own customer data, helped them decide where to add another warehouse location. According to Chris, working with those logistic companies also helped them price what it would take to move their inventory once they added the location. This helped them when planning for future costs.   

A heads-up: based on your current size and the number of dollars spent by the logistic companies, they may charge you for this service.  

Consider the cost.

If you are thinking about opening up another warehouse, you’re probably already thinking about cost. It’s no big surprise that you need to consider what costs may go up, and that you must determine if your company can financially support these changes.

Michael Clay cautioned anyone that is considering this to understand all operational expenses, which include rent, staff, time, training, etc. He highlighted that it will take time for your new location to be profitable, and that you need to consider the time it will take to capture a market share.  

Is your team prepared?

This relates to costs, but considering the size and capability of your team is imperative. Adding labor is another cost, and you may have to examine if your team can sustain the labor of an added warehouse.

Both Michael and Chris spoke about the ongoing prep it takes to add that next location.  Each highlighted the prep work and teamwork it takes to:

  • Update and ramp up on minimums
  • Order the correct stock
  • Convert customer and vendor data
  • Possibly handle drop shipping 
  • Maintain full visibility into their inventory

The proper inventory management software will make this process less overwhelming, and it will also allow you have visibility into all of your locations. Which leads us to our next question:

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Will your current software sustain this addition?

Your warehouse, in our opinion, is the most valuable aspect of your business. It would be extremely unfortunate to lose inventory counts or important reporting functions. That’s where a functional and effective software comes into play.

Some important functions of your software are:  

  • Handling replenishment
  • Batching sales orders
  • Utilizing multi-bin warehouses
  • Transferring between warehouses for full visibility
  • Uploading and stocking locations
  • Reporting warehouse activities
  • Communication between locations

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Business decisions and measurable goals

Your first goals are more than likely new sales and brand awareness, which are both a great place to start.

For example, Michael helped move Miller Welding into a market where the competitor had created a void. He knew that void gave them the ability to capture customers that were left behind. This was a strategic decision because they knew Miller Welding could fulfill the needs of the competitor’s lost customers.

They knew their team’s services were needed in that specific market, understood demand, and defined measurable goals to hit in order to capture that market. No matter what your decision, the key takeaway is to have visibility both into your inventory and into whether or not you made the right decision to open another location.

We will continue creating beneficial content on this topic for your reading pleasure (a.k.a we got more blogs coming for ya!). Don’t see anything you like? Comment below and let us know what questions and concerns you may have.

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