Warehousing and distribution are critical components of any supply chain, impacting both cost efficiency and sustainability. Two main strategies have emerged: port-centric and customer-centric warehousing. Both approaches have their merits, but understanding the key differences and benefits of each can help businesses make informed decisions that work for their unique requirements.
We will explore further how strategically utilising a hybrid approach may be relevant to certain businesses, but first, let’s explore the concepts.
Port-Centric Warehousing: Delivering Flexibility in Complex Supply Chains
If you have multiple customers scattered across the country, each requiring shipments of varying sizes at irregular intervals, this can be where port-centric warehousing shines. The port-centric model involves receiving goods at port from their manufacturing origin and storing them at a warehouse at port.
How port-centric onward distribution works:
- Goods arrive and they are stored in a warehouse located at port.
- As orders come in from various customers, the warehouse compiles and organises the requested items.
- Partial loads are shipped to customers at different locations and different times, offering flexibility and cost savings.
Benefits of Port-Centric Warehousing:
- Flexibility: The port-centric approach allows for easier management of diverse customer demands with varying order sizes and delivery frequencies.
- Location: As the stock stays at port, this approach ensures that stock is not transported to an alternative warehouse, then sent back on itself when travelling to multiple final destinations.
- Cost-Effectiveness: By consolidating shipments at a central location, goods are only sent out when customers order them, minimising the number of journeys.
Customer-Centric Warehousing: Prioritising Efficiency and Sustainability
In contrast, the customer-centric model is all about bringing goods closer to the end user. When companies have a significant concentration of customers in specific regions or cities, this approach becomes highly beneficial. Goods are taken in full container loads from the port and then stored in warehouses closer to the end users.
How customer-centric onward distribution works:
- Full container loads of goods arrive at the port from suppliers.
- These goods are transported to strategically located warehouses near key customer bases.
- Smaller, regular deliveries are made from these nearby warehouses to the customers.
Benefits of Customer-Centric Warehousing:
- Improved Sustainability: By reducing the distance goods travel to reach the end customers, carbon emissions associated with transportation are reduced, contributing to a more sustainable supply chain.
- Efficient Last-Mile Delivery: With goods stored closer to the customers, the last-mile delivery becomes more efficient, reducing lead times and enhancing customer satisfaction.
- Economies of Scale: Taking goods in full container loads often allows for better utilisation of transportation capacity and potential cost savings.
Making the Right Choice
Selecting the appropriate warehousing strategy depends on various factors such as the nature of your business, the geographical distribution of your customers, and the frequency and size of orders. Some companies may even find that a combination of both strategies, a hybrid approach, works best for them.
The decision between port-centric and customer-centric warehousing revolves around striking the right balance between flexibility and efficiency. For businesses with scattered customers and irregular orders, port-centric warehousing offers adaptability and cost savings. On the other hand, customer-centric warehousing prioritises sustainability and efficiency for businesses with concentrated customer bases.
By understanding the unique advantages of each approach, companies can make informed choices to optimise their warehousing and distribution operations, reduce costs, and contribute to a greener and more sustainable future.
There’s no one-size-fits-all answer, it is all about compromise to find the best solution. Our on-demand warehousing solutions deliver a hybrid approach with the agility and flexibility to allow customers to benefit from the advantages of both models.
Contact our expert team to discuss your specific needs and to find the warehousing strategy that aligns perfectly with your business goals.