Many
manufacturers have dedicated distribution centers where all the space,
equipment and resources are established solely to serve that manufacturer’s
particular needs. This can, and does
work very well in many circumstances. But in some cases, working within a
multi-client distribution center setting may be the better option. How can a
manufacturer determine which model will better fit their business? Let’s take a look at a few things a
manufacturer should take into consideration when determining which distribution
model they should use.
1) Size:
Sometimes a manufacturer’s needs are too small to justify a dedicated
facility without a significant cost penalty.
In other words, certain fixed costs are just too great for the
manufacturer to carry alone; as is done in a dedicated setting. For example, for a typical 100,000 square
foot facility, a full time manager is needed. The same full time manager is
also needed for a 200,000 square foot facility. In either scenario, the raw
labor cost is essentially the same; but the cost per unit is much better in the
larger facility. The same is true for the software related to a Warehouse
Management and Inventory Control system. The base cost is similar for any size
building. Now, if two or more
manufacturers share a space that is between 250,000-1,000,000 square feet, even
though the space is larger, there will be a significant cost advantage, because
all fixed costs are being shared across the companies, and their respective
volumes.
2) Occasional Specialty needs: Some manufacturers have “occasional”, yet
consistent, needs for specialty equipment or capabilities. While they may not need them daily, they need
them available at some point every month.
Examples might include rail access, secondary packaging capabilities, or
certain material handling equipment or attachments. In a dedicated facility, the entire cost of
this type of specialty asset or capability must be borne by one user. In a multi-client setting, higher utilization
of such equipment by multiple users can drive lower costs for all.
3) Commonality: A manufacturer should be able to partner with
a provider that already has existing customers with similar needs. This may
take the form of a common customer base, carrier base, or the need for similar
specialty handling equipment. This not only creates the opportunity to share
costs within a multi-client facility, but it also opens the door for collaboration
between the manufacturers. For example, there may be an opportunity for pooled
transportation to common consignees or the shared transportation by matching up
shipments where one manufacturer’s “light” product can be packed on a truck
with another manufacturer’s “heavy” product being shipped to a common location.
4) Scalability/Flexibility: Certain manufacturers have a product with a
demand profile that includes a high degree of variability. This can be driven by seasonality, new
product launches, or promotional support.
Larger, multi-client facilities are better equipped to handle this need
to flex up or down temporarily. Working
within a larger facility can provide some extra space that can be ready for
such volatile demands. If a manufacturer in 100,000 sq ft dedicated facility
needs to surge 20%, the equivalent of 20,000 sq ft, it can be difficult. Such a
surge represents a very large percentage of the base space. Now, that same
20,000 sq ft need to surge in a 500,000 sq ft multi-tenant building only
represents 4% of the total
capacity. Since most providers of
multi-client services plan on surges, a 4% surge is not only easily handled, it
is welcomed.
A
multi-client facility may not be right for every company, but it can be a very
cost effective and flexible solution for the right set of circumstances. This
type of setting can deliver both a cost advantage and quality to the supply
chain for a manufacturer whose distribution network fits the characteristics
mentioned above. It is also important to
partner with a provider that will focus on quality and continuous improvement
to help find efficiencies wherever possible.
http://blog.ryder.com/2013/07/multi-client-dedicated-distribution-center-business/