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Comment by Closi

This approach is much more expensive in the U.K. at least - I’ve done these sums for retailers (I’m a logistics consultant who specialises in e-commerce and grocery) and it’s hard to make a distribution centre cost competitive if you have an established store estate that you don’t want to get rid of.

In short, a distribution centre gives you:

* improved pick efficiency (depending on the level of automation), offset somewhat by maintenance costs and the cost of capital.

* increased delivery/transport costs (stores are generally closer to the customer than the cross dock point / outbase, vehicles are already going to the store for the main delivery)

\ flowing more product through existing retail points reduces waste (expiring products).

* increased property cost (you have to pay for a distribution centre at c£9 per square foot incl rates etc, while in retail the space is more expensive but you are already* renting it).

The one thing a fulfilment centre does give you is better service though. You can hold more range, better track dates/batches so you can give your customers the expiry dates on the website and increase availability.

So the honest answer is that delivery from a central point isn’t a slam dunk, and can definitely work but probably won’t be cheaper.

parent Closi 5 years ago

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