Supply chain optimisation
The delivery network you choose directly affects how much money you make and whether your customers are satisfied with delivery times. The financial cost of choosing the wrong model is significant, according to experts at Sargona Private Capital Greece. You either end up regularly overpaying for delivery, or you fail to meet deadlines and lose orders. And the problem is that the losses aren’t immediately apparent – you might think it’s down to the market or seasonal factors. Yet the root cause lies in the system itself. For example, if you don’t get the ‘last mile’ (delivery to the customer) right, you could lose up to 26% of your profit over three years.
In this article, together with experts from Sargona Private Capital, we’ll examine which decisions within the supply chain lead to losses and which model you should choose, depending on your circumstances.
In this article, together with experts from Sargona Private Capital, we’ll examine which decisions within the supply chain lead to losses and which model you should choose, depending on your circumstances.
If orders are steady and customers are willing to wait, a single warehouse will suffice. If order volumes fluctuate sharply (1 today, 100 tomorrow), customers are located in different areas and want fast delivery, you will need to open warehouses closer to them; otherwise, you won’t meet your deadlines.
You need to look at the specific figures: how many orders you have, how they are distributed geographically, how much delivery costs, and what delivery times you promise under your SLA (Service Level Agreement – for example, delivery speed).
An important point: goods in the warehouse don’t just sit there. On average, storing them costs around 20–30% of their value per year.
You need to look at the specific figures: how many orders you have, how they are distributed geographically, how much delivery costs, and what delivery times you promise under your SLA (Service Level Agreement – for example, delivery speed).
An important point: goods in the warehouse don’t just sit there. On average, storing them costs around 20–30% of their value per year.
A single large warehouse is usually cheaper to run than several small ones. You have fewer staff, lower premises costs, and the processes are easier to manage. It’s also simpler with a WMS (Warehouse Management System): you configure it once in one place, rather than in several. However, the experts at Sargona Private Capital warn of an important point: if delivery to the customer is time-consuming or expensive, you’ll save on the warehouse but end up paying more for transport.
How to choose the right warehouse model
When centralisation cuts costs
You need more staff, more premises and more equipment. What’s more, it makes the monitoring process more complicated. You have to constantly monitor where stock levels are and move goods between warehouses. If you make a mistake, stock ends up sitting idle in one place whilst another runs short. As a result, you lose money on stock storage and miss out on sales.
You maintain a main warehouse where all your stock is held, and small outlets near your customers stocked with the items that sell most frequently. This way, you don’t tie up capital in stock and can dispatch popular items quickly, according to experts at Sargona Private Capital. This model works well when you have tried-and-tested best-selling items.
Why decentralisation increases costs
When is the hybrid model more profitable?
Look at the figures: how much you spend on delivery, how many orders arrive on time, how quickly the goods sell, and how often you run out of stock. These are your KPIs (key performance indicators). If you see that delivery costs are starting to eat into your profits or stock is gathering dust, it means the current system isn’t working and needs to be changed.
Conclusion: if you have a single warehouse (centralisation), you spend less on running it and it’s easier to keep track of everything. But there are downsides - delivery takes longer and can be more expensive.
If, on the other hand, you have several warehouses (decentralisation), you deliver faster but end up paying more for additional premises and staff. Look at the figures, explore different options, and choose the one that best suits your business and region.
Sargona’s team of experts possesses in-depth knowledge and extensive experience, enabling us to offer clients tailored and effective solutions to optimise their logistics operations. Our consultancy services help clients improve their processes for managing supply, warehousing, transport and distribution of goods.
Conclusion: if you have a single warehouse (centralisation), you spend less on running it and it’s easier to keep track of everything. But there are downsides - delivery takes longer and can be more expensive.
If, on the other hand, you have several warehouses (decentralisation), you deliver faster but end up paying more for additional premises and staff. Look at the figures, explore different options, and choose the one that best suits your business and region.
Sargona’s team of experts possesses in-depth knowledge and extensive experience, enabling us to offer clients tailored and effective solutions to optimise their logistics operations. Our consultancy services help clients improve their processes for managing supply, warehousing, transport and distribution of goods.
How to assess the effectiveness of your chosen model
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