How many warehouses are “enough” for a CPG supply chain?

The uncomfortable answer: “How many warehouses do I need?” is the wrong first question. The real trade-off is simplicity vs. cost vs. service.

Imagine you’re shipping ~$200M/year of product across the US. The naive answer is:

“Let’s just run everything out of one central DC.”

Simple? Yes. Optimal? Usually not. You’ll almost certainly overpay on freight:

• Inbound lanes get longer on average.

• Outbound to customers travels further, especially to the coasts.

• To maintain service, you end up paying for faster, more expensive modes.

As you add warehouses, complexity and inventory go up, but freight cost and service usually improve. The goal is to find the sweet spot.

Practical rules of thumb

• Add warehouses where you have dense regional customer demand to cut outbound freight.

• Choose co-man / production volumes based on distance to those warehouses, assuming capacity and availability are covered.

• Put in a rebalancing mechanism (inter-DC transfers) so you can cover gaps when demand spikes or supply slips.

So how many is “enough”?

For a mid-market CPG brand with roughly even national demand, a three-node setup (West, Central, East) is often a solid starting point.

Then you run the math: if the extra nodes can’t give you at least a low six-figure amount per year in net logistics savings (freight minus added overhead and working capital), you’re probably not ready for the extra complexity yet.

Now, how do you handle the complexity?

Obviously you don’t want to add new spreadsheets with new warehouses and new SKUs. That will just lead to more maintenance in your ops team, more meetings, and more potential errors, which in turn create inventory distortion – stockouts or overstock situations.

You need a sound S&OP process. And then you can solve the rest with Spherecast – any PO or TO you need is ready to execute. Run scenarios in one go. Let agents resolve exceptions for you.

With that, you can scale complexity dramatically while keeping your team as lean as possible.

Basically, just use Spherecast for that. 😉

-Leon