• 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

required,and 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

the costliest items to move such as very heavy items, bulky items, or those

requiring special handling during the move. As you get closer to the move date

you will want to ship as much as possible from the old facility.

Often vendors will allow you to purchase product for a move with extended

payment terms just for the move to allow you to have key items shipped to the

new facility so they ready for manufacturing and/or picking in the new facility

even before the move begins. This is very important because if unforeseen

problems occur during the move, you will still be able to ship key items despite

them. Note: only buy extra stock of fastest selling items so you do not get stuck

with over-stock of slow-moving items later on. Benefits will include not worrying

about having your best items ready to ship should there be any move difficulties;

move less 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 as long as there is sufficient

stock in the old facility to satisfy orders until move time.

In conventional inventory models, many companies plan for a 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.

Some companies move product that will soon be outdated or obsolete. If one

calculates the cost to move these items and all other costs related to storing

them in the future vs. the potential profit from their sale, it is often cheaper not to

move them. If the potential profit is slightly more than the cost, is it worth slowing

the move for them and risking a late opening of the new facility? Ideally one can

return these items to the vendor; sell them on sale; donate them to charity; or in

the worst case throw them out (they will not be saleable), but do not 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. Be sure to get

proper insurance for the new facility before you begin.