Chapter 8: Finding a Warehouse Distribution Center

What’s the best place for a warehouse? Long Beach, California. What’s the most important requirement for your warehouse? Read on.

As you setup your businesses’ logistics, make this a goal: touch the product as few times as possible.

Ideally,

Have your supplier pack the product in a way that your freight company can deliver. Depending on your product’s dimensions, that usually means putting the product on a pallet. In contrast, your supplier will be focused on packing the maximum number of units in a container—because this is what everyone else wants.
Try to get photos of your product before the items are packed into the container. This helps you pre-sell them and increase your turns ratio.
The supplier will also wrap the product in a way to keep out the #1 ailment of international shipping—dust.

< photo1 of warehouse in the book…I don’t have it>

Speaking on the first bullet above, you can get the transport requirements from your freight company (like Yellow[1]), then impose those requirements on your Chinese supplier. Why not have your product put on pallets in China?

< photo2 of warehouse in the book…I don’t have it>

This will greatly reduce the chance of damage when the container is unloaded at your warehouse, for instance. Many warehouse accidents are forklifts driving their prongs into the product. This is prevented when the product is on a wooden pallet.

< photo3 of warehouse in the book…I don’t have it>

Additionally, consider having your supplier build a sturdier wooden crate around the product.

< photo4 of warehouse in the book…I don’t have it>

This will cost you a little more in China but a lot less in your home country[2].

Your Business Process

Here’s what you want your business process to look like:

Order a container-full of product
Product is shipped from China to your U.S. warehouse
Product is stored safely in the warehouse without being disturbed
Product is sold online and delivered, via freight company, to the buyer

Based on this simple explanation of the process, the following describes what to look for in your warehouse company.

What To Look For In Your Warehouse Company

First, you do not own the warehouse, but rather lease space from a warehousing company. This gives you the most scalability if your business grows, and minimizes your downside if the business is a flop. Many warehouses have a minimum billable of $300 per month—an amount which is much less than what you would have to pay if the warehouse were of the more traditional type.

Additionally, you do not have to have employees staffing the warehouse! The third-party warehouse does all the work for you, including pulling that pool table off the rack and giving it to the freight company for delivery.

Second, you need the physical location of the warehouse to be cost-effectively close to your port of entry. This usually means that your warehouse should be close to either the Long Beach or Los Angles ports, if your product is coming from Asia; or in Florida, if your product is coming from Europe. Of course, a Southern California warehouse can serve both Asian and European shipments, but the European product must come through the Panama Canal or be “railed” across the continent—a bumpy ride, I’m told.

For these two reasons alone, I recommend leasing warehouse space in or near Long Beach, California. For instance, Carson is a local town popular for warehousing.

One Carson-based choice is Schafer Bros Logistics. I’ve been in their warehouse at least ten times, where everything from wave-runners to beer is stored. Schafer Bros’ focus is on relationship building, and they can get the job done for you. See www.schaferlogistics.com.

For those of you wanting a more technologically-oriented company, with a higher level of service, capability, and price, Megatrux appears to be the answer. With everything from electronic data interchange (EDI) support to online inventory tracking, the offerings appear to be attractive. See www.megatrux.com.

<iUniverse: please insert a webshot of megatrux.com (was available in the first version of this book). I don’t have the original. I will continue to try to get another screen-shot, but as of Aug 20, their site is under construction>

The Most Important Requirement for Your Warehouse

This is an easy one: asset tracking. It may seem inconceivable to the lay reader, but warehouses can “lose” a motorcycle, pallet of beer, or piano with surprising frequency. Warehouses of the kind we’re discussing in this book have 100,000 or more square feet, and their ability to manage each asset accurately is your most important requirement.

For instance, let’s say you sell caskets. A customer in Provo, Utah orders a casket on Tuesday, and then cancels the order Wednesday morning before the shipment has left the warehouse. The casket was more than likely moved from the storage area in the warehouse to the outbound loading area. This is the scenario you want to present to each warehouse you are evaluating:

What is the process for your business to contact the warehouse to cancel the order?
How long will the product stay near the outbound loading area? Based on my experience, this area is the site of most accidents and product damage.
How quickly is the product returned to inventory (both physically and digitally)?
What is the charge for this transaction?

By asking these questions, you will have insight into how well that company can keep track of your assets. Asset tracking aside, you might also consider the following:

Will the warehouse let you set up a photo studio inside the warehouse, if required? How much would the monthly charge be for a 20’ x 10’ reserved photo space? (Note: taking photos in a warehouse is tricky because of the light conditions, which is why a photo facility might be necessary down the road.)

Can warehouse staff take digital pictures of an item on request, and what is the process and charge for this service? For instance, a customer may want a photo of the TV connections on the side of the Jacuzzi. You’re in Maui, remember? How else will you get a needed photo?

Ask about the frequency of damage claims and the processes for claims.

General security of the facility, and how you can get a repair done on your product. For instance, if your product is damaged in the container, you will process a claim with the insurance company—but you still need to get the product repaired by a local technician.

How the facility manages dust.

Can you be allowed to authorize a verbal order over the phone?

As a practical matter, you will be managing this business remotely. Despite the wide availability of internet cafes and RIM blackberry devices, you still will need, from time to time, the ability to manage your inventory with a verbal request. Set up verbal authorization for moves now, with a simple password, and your life will be easier. Speaking of moves, let’s move to the next chapter, which deals specifically with getting product from the warehouse to the customer.

[1]See www.myyellow.com

[2]Returns can bring an online company to its knees. Standard business legend states that returns cost 3x the product shipping. I did a consulting project with a 125+ store drugstore chain, and discovered that product returns cost a disproportionate amount of retail employee time; were frequently not scanned back into inventory; oftentimes could not be returned to the manufacturer (products like cosmetics and vitamins); and invariably through off their inventory management system.