For providing great products or services, it is vital that you attend to your back end operations activities just as vigilantly as your front end operations activities. In fact, more significant operations happen behind the curtains. And one of the most important processes to focus on is storage. The popularity of POS retail cloud based system has made people shift towards centralized inventory management but there actually are a few disadvantages of it too! I am not saying that it’s not a good system, but like every technology, it has advantages and disadvantages!
In fact, the type of business you are operating is what determines the style of inventory you use. Do you keep products for all your stores in one single warehouse or do you house it in different locations for different stores? Does your store provide the same items across all locations or do you have a specific list of items for a specific location? So, once you answer all these questions, you can decide between the two types of inventories; centralized or decentralized.
The Centralized Inventory:
Centralised inventories should be used by retailers who have one single, big warehouse where all their products are houses. Products for all locations are stored using the same process and personnel. Following are the advantages of it:
It’s much easier to manage a single storage place than multiple warehouses. It’s feasible too as the warehouse contains all the equipment, staff, managers, and bills in one place.
You can save a lot of money on maintenance and staff. There’s only one place to maintain so your maintenance costs are cut down, plus, you don’t need to hire different staff for different places.
The transportation costs are cut down by a lot as you can just rely on a single vehicle to transport goods to and from the premises.
It’s much more convenient to manage your stock from a single location. You don’t promise anything to the customers you don’t have and never have disappointed customers as a result.
Here are the disadvantages of it:
There is no ideal solution available that can fit the needs of all the products available in a single place. Companies who use this method often face overstocks because of miscalculation and mismanagement.
The processes which are too simple, diminish the area for growth and development.
Systems that promise to manage all your products in one, large warehouse are expensive.
Decentralized Inventory:
This type of inventory management involves using multiple warehouses, in different locations. Due to this, more staff and processes are required to manage it.
Here are the advantages of decentralized inventory style:
It’s much easier to stock in warehouses that are far away from each other. It removes geographical barriers like mountains, oceans, traffic, etc.
You can have warehouses close to your stores so customers can get their products timely.
When your products are travelling long distances, they can get damaged because of rain, fire or some other disaster.
Here are the disadvantages of it:
The more the warehouses, the more staff and expenses.
The cost of transporting using different vehicles from different locations increases as you need to take care of a greater number of vehicles and hire more drivers.
Unless you have an excellent digital solution, managing inventory from different locations can be full of errors. And security is another problem as you won’t know what you are missing until it’s too late.
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