10 October 2023 Understand what the multi-DC strategy is, how it works in practice, what its advantages are, and for which companies it is recommended. The success of a company is directly linked to how it meets market demands and requirements, and at the same time, to its logistics management strategies that allow it to explore opportunities, always focusing on increasing competitiveness and productivity. Nevertheless, there is still a huge margin for growth and performance improvement in terms of delivery. In the current scenario, where consumer demands are constantly growing, the challenges faced by companies are no longer just excellent inventory management and high levels of productivity. There is also an increasing need and concern to offer faster delivery services at lower costs, while maintaining good quality. But how do you manage the supply chain, reducing time and costs, while prioritizing customer relationships and satisfaction? To tackle this challenge, leading market players have employed a series of actions, one of which, gaining strength in recent years, is the multi-DC strategy. Are you familiar with it? In this article, we will share everything you need to know about the multi-DC strategy, how it works in practice, the competitive advantages for your business, and how to implement it in your operations. Shall we proceed? What is a multi-DC strategy? Before understanding all the advantages that the multi-DC strategy can offer to your warehouse, let’s explain it very simply: Imagine you urgently want to reach a destination and have only two options: the first is to call a vehicle via a transport app, and the second is to wait for public transport. Which of these alternatives would you choose? It is likely that you chose the first option; after all, transport apps work by searching for and sending the nearest vehicle to you, reducing waiting times and, consequently, the time needed to reach the final destination. The second option, however, involves variables such as route, delays, schedules, and stops that can delay the fulfillment of the commitment. Following the above logic, we can say that a company, by decentralizing its distribution centers and distributing warehouses in strategic points and regions, can improve delivery performance and bring products closer to its customers. Therefore, it operates within the multi-DC strategy, being able to have its own warehouses or outsource storage and delivery operations. The multi-DC strategy is thus an effective way to offer increasingly shorter shipping times, as well as reduced shipping costs, which directly affect the purchasing decision. A study conducted by Capterra, a software comparison platform of the Gartner group, revealed that 73% of consumers expect e-commerce to offer ultra-fast deliveries. Is the multi-DC strategy suitable for my business? If your company operates in different regions of the country, wants to create new opportunities, expand the market, and serve on a large scale from one end to the other (or in much of Italy), this strategy is ideal for your business model. Since you are present throughout Italy, distributing your products in different and strategic distribution centers facilitates the logistics of receiving and shipping goods. Business models like e-commerce, for example, can optimize financial resources and increase competitiveness since, as we highlighted earlier, delivery times are a decisive factor at the time of purchase. On the other hand, if your company does not yet serve many regions of the country and is not interested in reaching new spaces and increasing market demands, the multi-DC strategy is not recommended, as it can represent a high investment in logistics and resources. How does the multi-DC strategy work? To better detail how a multi-DC strategy works in practice, we present an example: suppose you have a clothing company located in the state of Minas Gerais, and the distribution center can excellently serve the entire southeastern region of the country. However, in recent months, after a well-structured marketing campaign, your company has started receiving strong demand from customers in the Northeast. In this scenario, it would be important to consider, for example, a distribution center in Recife, capable of satisfactorily serving the region and further expanding sales. If your company had both DCs, as soon as the customer accessed the sales platform and completed the purchase, the buyer’s location would be identified, and the order would be forwarded to the nearest distribution center for delivery in the shortest possible time. In this sense, the multi-DC strategy aims to decentralize distribution centers and seek the best geographical locations based on request history and growth strategies. 6 advantages of implementing the multi-DC strategy in your company So far, we have better understood what a multi-DC strategy is, how it works, and if it is suitable for your business. Now it’s time to learn about the main competitive advantages for supply chain performance and the business as a whole. Follow below. 1 – Reduced delivery times Some companies already offer delivery in less than 24 hours in certain regions of the country. This competitive advantage is now possible only with the decentralization of its distribution centers, that is, warehouses distributed in strategic points of the Italian territory, favoring places with easy access and shipping, in addition to respecting the history of demands. Also known as lead time, delivery time is a decision factor for consumers at the time of purchase, therefore, the shorter the estimated shipping and receiving times by your company, the greater the chances of positioning positively in the market, retaining customers, and increasing customer relationships. 2 – Reduction of shipping expenses Another advantage when it comes to decentralizing a company’s DCs is the reduction of shipping costs. Since there are multiple warehouses distributed in different service regions, there will always be one close to the final customer. In this way, the cost of transportation will be greatly reduced, both for logistical planning, which can invest leanly in transport, and for the end consumer. 3 – Reduce risks and delays Since the multi-DC strategy reduces the delivery times of goods, it is also possible to mitigate the possibilities and risks related to delays in order fulfillment. Therefore, with products with shorter delivery times, in case of errors, it is possible to quickly resolve the issue, offering the customer a quality and efficient service. 4 – Better customer relationships One thing is certain: the consumption model has changed, and increasingly, the market demands record delivery times, with contained costs and quality service. And it’s not for nothing, right? Waiting days for an order you have already paid for can lead to a negative experience with some companies. The faster the delivery of products and the response to buyers’ requests, the greater the chances they will make a new purchase and trust your company. In marketing 5.0, the action word is to tell and promote positive experiences in search of increasingly loyal customers. 5 – Increased productivity One of the advantages of the multi-DC strategy is increased productivity. Since your company has several distribution centers operating simultaneously, with different teams in action, you increase efficiency and agility in fulfillment. The result is a less overloaded, more focused, and productive team. When inventory is automated with management systems like WMS and OMS, performance increases even further, allowing for greater growth opportunities for the company and high profitability. 6 – Reduction of inventory costs Problems with stock maintenance? With the multi-DC strategy, these problems can be minimized. By optimizing distribution centers and their operations, inventory becomes dynamic, with agile processes and intelligent management, meeting the demand of each region. It is also possible to exchange goods between hubs so that they do not become obsolete or remain in storage for a long time. How to implement the multi-DC strategy in two steps The first step when applying the multi-DC strategy to the supply chain is to understand all the details of your inventory. To do this, you can rely on advanced technological resources, such as the WMS system, which helps you, the manager, to control and obtain real-time inventory information. It is important to understand everything that arrives at the dock, everything that is sent to your final customer, and where the products are shipped. Additionally, it is essential to verify the sales volume in each period and in each service region. Consider collecting the following information: What sells the most in each region? What are the delivery times for each location? What is the order volume and the main sales periods? Who are the suppliers in each region? Consider investing in software that helps you answer these questions automatically, without errors or communication issues. The second step to implementing the multi-DC strategy is to create and standardize a model to analyze the information obtained in the first phase and then, based on these results, establish an operational strategy and decentralize distribution centers. In this phase, consider the following criteria for project analysis: What is the stock size required for each region? What is the investment for each distribution center? What is the volume of products in the inventory of each area? Is it possible to integrate systems (such as WMS and OMS) in the operations of all units? Regarding this last issue, we emphasize how important it is to have management software for the multi-DC strategy to succeed; indeed, it is essential to centralize warehouse data and automate order management (functions performed by OMS), as well as organize the entire material flow and monitor operations in real-time (WMS responsibilities). Finally, once the planning phase is completed, it is time to contact suppliers, choose the correct warehouse, understand maintenance costs, implementation deadlines, hire reliable partners, purchase necessary machinery and equipment, and conduct training with the new team in line with the company’s philosophy. Some of Deagor’s clients who have applied the multi-DC strategy in their operations, with the support of WWS that unifies all operations, have achieved excellent results. Talk to one of our consultants and start your own path to growth and success in the market! Multi-CD Strategy: Is It Worth Implementing? 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