Is your Warehouse Layout Up to Date? Receive an Updated Layout in 2 Weeks.
Blog February 12, 2025
How to Decide Between One, Few, or Many Distribution Networks
Distribution Network Strategy
How to Decide Between One, Few, or Many Distribution Networks
Author: Jen Hall
Feb 12, 2025 | 2 min read
Designing an effective supply chain starts with a clear understanding of the distribution network structure. As businesses grow and evolve, supply chain networks must adapt to shifting customer demands, regional constraints, and changes within the organization. While supply chain networks can be complex, when it comes to structuring your network, there are essentially three options: “one,” “few,” or “many.”
In other words, based on inbound and outbound transportation costs as well as service level requirements, you’ll need to determine whether your network should have one, a few, or many distribution centers. Let’s take a closer look at when each of these options is most beneficial for your operations:
Single Site Distribution Networks — “One”:
- Small Scale: Single-site distribution networks are ideal for smaller businesses with limited operations or a regionally focused customer base. With fewer customers to serve, businesses can streamline their logistics and reduce overhead costs by consolidating inventory and operations into one central location. This approach is efficient for managing a smaller scope of deliveries and ensuring quicker decision-making processes.
- Unique/Highly Specialized: A single-site network is especially beneficial for businesses offering unique or highly specialized products and services. Centralizing operations allows for better control over quality, inventory, and customer service, all while reducing complexity. This is particularly effective in less-competitive markets where differentiation is key, and businesses can maintain direct oversight without the need for multiple locations.
- High Inventory Value: For businesses dealing with high-value inventory, a single-site distribution network offers enhanced security and tighter control. Centralizing valuable goods in one location minimizes the risks associated with managing multiple warehouses and ensures that security protocols can be more easily enforced. This also simplifies inventory tracking and reduces the potential for loss or theft.
Networks with a Few Distribution Centers — “Few”:
- Regional Focus: For businesses in a growth phase that cater to specific regions or customer segments, a few strategically located distribution centers can provide significant advantages. These centers allow for more efficient inventory management and enable personalized service tailored to local needs.
Supply Chain Networks with Many Distribution Centers — “Many”:
- Critical Mass: Larger operations with extensive coverage need benefits from networks with multiple distribution centers. This approach helps businesses achieve the scale necessary to efficiently serve customers across a wide range of locations.
- Speed of Delivery and Style: A network with many distribution centers enables faster deliveries and provides businesses with the flexibility to offer diverse delivery options, meeting varying customer expectations for speed and service style.
Final Considerations for Optimizing Your Supply Chain Network
Even within a single site, complexity can arise. Whether it’s efficiently processing orders for large items like tractor tires or managing a wide variety of SKUs for a retail chain, the level of sophistication required extends across the entire network. As you navigate the decision-making process for your supply chain network, it’s crucial to consider factors like customer demand, geographical reach, market dynamics, inbound and outbound transportation costs, and service level requirements.
Why Network Studies Matter
Selecting the right number of distribution centers isn’t just about logistics—it’s about optimizing costs, efficiency, and customer service. A network study provides the insights needed to make informed decisions, ensuring your supply chain remains agile and scalable as your business evolves. You can learn all about network studies in this previous article by Jennifer.
LIDD Distribution Network Strategy
Need guidance on your distribution strategy? Connect with Jennifer Hall to explore how LIDD can help.
For more updates, follow us on Linkedin.
Related Posts
Success Story
Developing a Supply Chain Network Strategy
By Charles Fallon August 14, 2017 | 4 min read When business is expanding, it’s easy to be lured…
Blog
In Network Design & Optimization, Neglect Infrastructure At Your Peril!
Two interesting articles published recently discuss the challenges confronting consumer packaged goods (CPG) manufacturers as the retail landscape shifts.
Blog
Network Studies: Implementing the 50/50, 50/50 Rule
Explore the 50/50 50/50 Rule for distribution network optimization. Gain insights into balancing transportation and warehousing costs to achieve peak supply chain efficiency.
Blog
Network Studies and a Deep Dive on Service Levels
Dive into the role of service levels within distribution network strategy with Jennifer Hall. Discover how prioritizing service levels can maximize the efficiency and effectiveness of your distribution network strategy.
Blog
Connecting the Dots – Why & When You Need Network Studies
To thrive in today’s competitive business landscape, successful companies have recognized the importance of prioritizing supply chain efficiency and responsiveness. Discover why network studies play a crucial role in optimizing supply chain networks and when your company should consider conducting one.