Distribution centers are large warehouses that stock huge quantities of products ready for distribution. Large companies looking for ways to stock their various retail outlets own and manage their distribution centers. Companies like Wal-Mart and Office Depot fall under this category. Individuals and small businesses looking for ways to buy products in bulk from manufacturers and sell them to wholesalers and retailers in their area also own their distribution centers. Here is how to start a distribution center.
Decide the type of merchandise you want to distribute. This will determine the type of distribution center you will start and how much investment you’ll need to make. If you are distributing food or beverages, for example, your distribution center needs a freezer or other cold storage systems.
Decide if you will be distributing products manufactured locally or overseas. Locate manufacturers and establish business relationships with them. Ask for their catalogs and price lists. Confirm their minimum ordering quantity, shipping cost, insurance, return policy and product guarantee. Place sample orders to determine their delivery efficiency. If you are ordering from overseas manufacturers, visit the United States Customs website and calculate import duties on your products using their Harmonized Tariff System (HTS). See Resources below for additional information. You need this information to determine your final cost.
Find a suitable location for your distribution center. Distribution centers require large spaces, so they are usually located in rural areas or in warehouses off the beaten path. Find a warehouse with adequate space and good communication. Consider your transportation needs and find a location with easy access to loading docks and a large pool of potential warehouse employees.
Furnish your warehouse. Warehouse distribution centers need computers, telephone and broadband services, fax machines, printers and other equipment, including forklifts to move your goods. Consider order flow throughout the warehouse, as these will affect the efficiency of your business. Invest in accounting and management software. You need them to run your distribution center effectively.
Locate wholesalers and retailers in your area and visit their warehouses and stores. They are your customers. You can do this through the Yellow Pages website. See Resources below for additional information. Speak with the owners or managers and introduce your distribution center business to them. Build a website for your business and sell your products worldwide.
Create a marketing plan for your business and implement the plan. Open your distribution center for business.
Before opening for business, register it with your local county clerk’s office and obtain your Doing Business As (DBA) certificate. You can also visit your state comptroller’s website to incorporate your business and obtain your Article of Incorporation. Your state comptroller issues resale permits. Obtain one from them free so you don’t pay taxes on your business purchases. Obtain an Employer Identification Number from the IRS if you hire employees or if you incorporate. See Resources below for additional information. You need a bank account for your business. Open one with your local bank and ask them for a business line of credit.
Distribution centers require lots of capital to open and run. Be sure you have enough funds to operate the center for three months or more before you open.
- monkeybusinessimages/iStock/Getty Images