- Roy Strauss
Supply Chain Profitability - Reducing the Cost of Moving a Business
When moving a distribution or manufacturing center to a new location, one can significantly reduce moving and other associated costs. The less product, materials, supplies, equipment, and raw materials moved, the lower the time and the total cost of the move will be. Ideally, one can sell and ship as many units as possible from the old facility so that product will not have to be moved to the new one. It may even pay to have a “pre move sale” especially for most costly items to move such as very heavy items, large items, bulky items or those requiring special handling during the move. As one gets closer to the move date one will therefore want to ship as much as possible from the old facility.
Often vendors will allow a customer to purchase products for a move with extended payment terms solely for the move and shipped to the new facility to allow one to have key items ready for manufacturing and/or picking even before the move begins. This is very important because if unforeseen problems occur during the move one will still be able to ship key items to customers (especially best customers) despite the problems. Note: only buy extra stock of the fastest selling items so you don’t get stuck with slow moving items that become over-stock later. Benefits include not worrying about having one’s best items ready to ship should there be any move difficulties; move less quantity of the items you stock the most units of; and the extended terms will eliminate the cost to do so. Additionally, normal receipts can be diverted to the new facility as one gets closer to the move date if there is enough stock in the old facility to satisfy orders until move time.
In conventional inventory models, many companies plan for 2 month’s inventory supply for product obtained from domestic and local sources and 3 month’s inventory supply for product obtained by import so one can also do numerous “pre-moves” before the actual moving date and startup of the new facility. This can be done on a priority and time basis. As mentioned before, it is essential to have all “A” movers or fastest moving product in picking locations for startup in the new facility. Starting with “A” movers, if one calculates how much stock is required in the old facility to satisfy customer orders on a sliding scale for each week before the move one can plan numerous pre-moves to the new facility without effecting customer service which will make the final move easier and less stressful.
Some companies move product that will soon be outdated or obsolete. If one calculates the cost to move these items and all other costs associated with storing them in the future vs. any potential profit from their sale, it is often beneficial not to move them. If the potential profit is equal to or slightly more than the cost of the product, is it worth slowing the move for them, clogging up the new facility with them, and risking a late opening of the new facility? Ideally one can return these items to the vendor; offer them “on sale”; donate them to charity; or worst case throw them out (they will not be saleable anyway), but don’t let them add to your overall costs and move time. The same can be said for obsolete or very old equipment or supplies that are not in future plans as well.
A proper move plan will increase the chance of success and reduce costs, stress, and the chance of hurting customer service.