For companies that need to store goods, the decision between a centralized or decentralized warehouse is an important success factor. In the end, in addition to storage costs, factors such as delivery times, product availability and flexibility and responsiveness depend on this. This article gives you a compact overview of the advantages and disadvantages of the two camps as an important basis for decision-making for your business organization.
1. Central warehouses are less expensive but less flexible
• Central warehouses are particularly suitable for small and medium-sized businesses
2. Decentralized warehouses tie up a lot of capital
• In return, they offer faster delivery routes
• They are suitable for large retailers
A central warehouse is a single location where all of a company's inventory is collected and managed. From this central warehouse, the products are shipped to customers in various regions. In contrast, a decentralized warehouse has several warehouse locations to which stocks are distributed. These decentralized warehouses can be located close together but can also be spread across Germany, for example.
E-commerce is currently experiencing an unstoppable boom. According to data from the Federal Statistical Office, online retail generated 1.3 billion euros in turnover in 2000. Ten years later, it was 20.2 and in 2023, an exponential increase to 89.4 billion euros was recorded - and the trend continues to rise. At the same time, the expectations and demands of customers who order something online are also increasing. They expect fast delivery of their order and the lowest possible delivery costs. In some cases, retailers can even offer same-day shipping of the ordered goods. At the same time, the importance of environmentally friendly transport is also increasing. Long delivery routes should be avoided and packaging materials saved.
As a result, e-commerce is under high pressure to meet these end customer expectations. Online retailers must adapt their logistics and warehouse organization accordingly and choose their locations in such a way that they are close to customers. Of course, transport costs and general operating costs must be considered. Technologies such as warehouse management systems and order processing systems are often used for greater efficiency. The question of whether centralized and decentralized storage is better must be carefully considered and thought through accordingly.
All orders and shipments are processed here from a warehouse location and the receipts — whether from the supplier or production — are recorded in a single incoming goods receipt. The result is therefore a correspondingly large envelope, which places high demands on warehouse logistics. Automation solutions are therefore used very frequently in central warehouses, for example in the areas of order picking, inventory management, communication and the efficient organization of short transport routes. It is particularly important here that there is a good infrastructural connection to the warehouse location in the form of motorways, railways or ports.
A key advantage of the central warehouse is the comparatively low investment costs. It is only necessary to set up one warehouse location instead of setting up a warehouse space at several locations. There are also other advantages for this type of storage:
• Very high readiness to deliver
• Low need for personnel
• Lower storage costs
• High level of automation possible
• Low minimum inventory required
• High standardization of warehouse processes
• Easier optimization of warehouse equipment is possible
• Easy connection to IT-based systems (ERP)
A central warehouse is best suited for small and medium-sized businesses that have manageable inventories and can better organize the distribution of their items from one location.
Choosing a suitable warehouse location is particularly important here. In order to save transport routes to customers, companies should choose a central location, preferably in the middle of Germany. Such a storage space is naturally scarce and usually entails correspondingly high costs.
• Less flexibility in delivery
• Higher transport costs when delivery routes are long
• Limited storage capacity
• Higher risk of supply disruptions
Since the delivery flexibility of a transshipment warehouse is correspondingly lower, customers have to wait longer. In the end, the longer distances to customers also have an effect on the prices that companies have to calculate for transportation.
Larger companies in particular are deciding to set up several warehouses to which they can distribute their product range. The decision for this type of warehouse is often based on customer requests, for example when they ask for faster delivery. In this case, distances between warehouse and end customer must be reduced in order to be closer to customers.
Larger companies with a very high inventory in particular benefit from this type of warehouse. Compared to the central warehouse, this offers significant advantages.
• High delivery flexibility
• Delivery possible several times a day
• Quick delivery times
• Better customer service
• Lower transportation costs
Communication between warehouse locations and corporate headquarters is very important for this warehouse to function well.
The more storage space is set up, the more inventory is needed and the higher the investment costs in the end. It is therefore all the more important to also keep an eye on the disadvantages of this type of storage.
• Higher investment and operating costs
• Higher capital commitment
• Complex coordination
• Larger minimum stocks required
• Misallocations possible
• High personnel costs
The decentralized warehouse is therefore particularly worthwhile for larger companies that are looking for scalable and flexible delivery solutions and want to be at the forefront of the competition for the best customer service.
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The company ratioform is a leader in Germany in the trade of packaging for shipping, warehouses and offices. Storage is also a key issue here, because customers want to be delivered quickly while keeping an eye on the budget for shipping costs.
DominikSager was head of logistics at ratioform for a long time and explains in an interview how the company handles large volumes of turnover:
“In 2015, we perfectly adapted [logistics] to current requirements. Standard packaging is shipped nationwide from the central warehouse in Pliening near Munich; for special packaging, our six regional warehouses also come into play. All special packaging that is in demand by local customers is available there. ”
The company thus uses both storage options. There is a central warehouse from which the largest transshipment takes place. Everything else is handled via regional warehouses. This allows ratioform to meet its own claim of delivering 97% of packaging within 24 hours.
Warehousing is so important today so that products are available on time, orders can be processed quickly and customers are satisfied with fast delivery times and good service.
Warehousing is primarily about storing and managing products. This includes storing goods and monitoring inventory so that the right products are available at the right time. Fulfillment in e-commerce, on the other hand, includes not only warehousing but also the processing of orders, packaging and shipping to customers. Fulfillment service provider Take care of all steps from order entry to picking the products from the warehouse to packaging and shipping to the end customer.
