What are the factors one needs to consider before expanding his business (warehouses) in multiple cities for B2B/B2C?« Back to Questions List

In pre-GST days, the number of warehouses ( stocking points) were largely driven by the tax structure of India. In post-GST scenario, it will change depending upon the company’s’ strategy and the trade-offs the company is willing to make in its supply chain. If the company doesn’t want to loose sales and is willing to keep inventory closer to the market for faster order fulfiment, it needs to have inventory at multiople locations which would increase the inventory carrying costs with better fulfilment rates. Alternatively, if the company wants to keep logistics costs lower, it might as well stock at few locations and fulfil over longer distances with the risk of not being able to fulfil orders on time, which eventually can result in customers walking away. However, it also depends upon how good is the company’s ability to forecast sales which is generally higher in B2B models and quite unpredicatble yet in B2C models

The company has to do extensive work before deciding the expansion plan of their warehouse presence in multiple cities as every warehouse is cost centre for a company(especially in B2B case).

Factors that matters:

– Company business plan
– Product life/category (perishable/ non-perishable/life-saving drugs/ medicine etc.)
– Whether the city/area/zone has enough sales potential that requires a local warehouse
– Sales volume
– Consistency of sales(decision should not be based on seasonal sales volume)
– Cost and availability of transportation for stock replenishment at local warehouse
– Cost and availability of skilled manpower and other resources
– Real estate cost of warehouse(in case of dedicated FC, it matters more)
– Tangible and intangible benefits of warehouse

Here are the different factors which play deciding role:

1. Speed to the market – if it’s a B2C operations, then customer will always expect a speedy delivery and that will only be catered if the company has warehouses in those cities to meet the expectations. Customers will always expect a fast process for delivery and returns and in B2C customer satisfaction is the ultimate goal.

2. Logistics cost – Sending a courier from Delhi to Maharashtra will always be costlier than sending a courier from Maharashtra to Maharashtra.

3. Increased operating costs – Adding another warehouse will always meet the expectations of clients but will also add up a numerous operating cost as the whole set up has to be setted up again.