Decentralized vs Centralized Inventory Management: Advantages and Disadvantages

6/24/20 10:30 AM

Within warehousing, there are key issues that are relative to Inventory Replenishment Management when it pertains to companies with multiple warehouses or distribution centers. 

Decentralized vs Centralized Inventory Management: Advantages and Disadvantages

Do you allow each of these locations to manage inventory, or are there inventory replenishment purchase orders centrally for each location with very little input needed from each separate location? This is where you may be attempting to understand whether to choose centralized or decentralized warehousing and how much control you really seek to have over your operation. Within this blog, we are going to discuss the advantages and benefits pertaining to decentralized and centralized inventory management and how each of these concepts can benefit your overall operation. 

Advantages and Disadvantages of Decentralized Inventory Management 

Within decentralized inventory management, there are various benefits and advantages that can greatly enhance your overall operation. The overall most important key advantage pertaining to decentralized inventory management includes being local and closer to the consumers that you are attempting to sell to. This allows for there to be further insight into location events, promotions, and trends within the local community that can greatly aid with developing a strategy for that particular location. Allowing another location to manage your inventory can be an effective and worthwhile approach that could be desirable. 

By far the most substantial disadvantage pertaining to local control is that local personnel may lack well developed inventory management skills and operate on a rather subjective basis, even if there are sophisticated tools that are made available. Local personnel may have a difficult time developing a “global” feel and see the bigger picture when it comes to a business and managing inventory - which can be the downfall of adequate inventory management. Overall, local inventory personnel may lack the skills needed in order to properly manage inventory. 

Advantages and Disadvantages of Centralized inventory Management 

In terms of centralized inventory management, you have total control over your inventory situation and can provide the trained personnel that are needed to adequately handle your inventory. These individuals can be trained in both the general principles of inventory management and the overall philosophy and system that is being utilized to drive the ordering process at your company. Special buying opportunities can also be much more effectively explored considering that the information for all locations reside in the central system and the individual is able to adopt a “big picture” mindset. 

A software that can aid a production facility with generating the appropriate amount of product needed within the timeframe requested in PlanetTogether’s Advanced Planning and Scheduling (APS) Software. Advanced Planning and Scheduling (APS) Software is a must for manufacturing facilities that are seeking to enhance operational efficiency and ultimately take their operation to the next level in terms of profitability and waste elimination. 

Advanced Planning and Scheduling Software 

Advanced Planning and Scheduling (APS) software has become a must for modern-day manufacturing operations due to customer demand for increased product mix and fast delivery combined with downward cost pressures. APS can be quickly integrated with a ERP/MRP software to fill gaps where these system lack planning and scheduling flexibility and accuracy. Advanced Planning and Scheduling (APS) helps planners save time while providing greater agility in updating ever-changing priorities, production schedules, and inventory plans.

  • Create optimized schedules balancing production efficiency and delivery performance
  • Maximize output on bottleneck resources to increase revenue
  • Synchronize supply with demand to reduce inventories
  • Provide company-wide visibility to capacity
  • Enable scenario data-driven decision making

Implementation of Advanced Planning and Scheduling (APS) software will take your manufacturing operations to the next level of production efficiency, taking advantage of the operational data you already have in your ERP.

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Topics: Inventory Management

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