Five rules to decide whether to store externally

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Five rules to decide whether to store externally
From time to time food manufacturers run out of warehouse space and are faced with the dilemma of either using outside storage or moving to a bigger,...

From time to time food manufacturers run out of warehouse space and are faced with the dilemma of either using outside storage or moving to a bigger, permanent warehouse.

I have five rules of thumb to help companies work out whether to use outside storage or seek a bigger, permanent home:

1. Never let your primary storage location get completely full because, as it approaches that position it will begin to fail. Its productivity will fall rapidly as congestion takes out working space; in fact it will behave just like the M25 that works well up to a certain point and then suddenly fails completely as the volume through it exceeds its design capacity.

2. Start to use outside storage well before saturation occurs in your main warehouse, even though the result is more expense than you think you might 'get away with' if you wait to the last minute.

3. Do not plan to store more than 15% of your total peak pallets in an outside store. If you do, please also plan to let your customers down! The right product of the right 'best before' rotation will probably be in the wrong place during the times of peak demand if you go much over the 15% limit.

4. If you think your peak stocks will exceed your main warehouse capacity by more than 15%, either plan to move to a second, full despatching warehouse or move to a new, bigger primary location. You need to plan this well ahead of time. If you store more than 15,000 pallets, allow 12-18 months to plan and execute such a change and do not change just before peak trading. If your storage needs are more modest you can afford a slightly shorter planning horizon.

5. Finally, remember that moving warehouses is enormously expensive in once-only costs of change and in the demands made on your management team. The most frequent cause of service failure during such a change is the hopelessly optimistic assumption that such a move is part of 'the day job' for the current team. A warehouse move is most certainly not of that ilk!

Tim Knowles​ is a partner at supply chain consultancy TKA

Related topics: Supply Chain, IT, Services

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