Warehouse investment can be a tricky game depending on what situation you are in. Deciding on whether to make higher cost, riskier investments vs low cost investments largely depends on the state of the company and the economic climate in general. In this article, we will be looking at the factors surrounding warehouse investment; when it’s best to invest more or less.
Should You Invest More Now or Adapt as Time Goes by?
Deciding on whether or not increased warehouse investment is a good idea largely depends on the current state of the company. Take for example a new business. You have just procured a warehouse and are looking to invest further. Investment could involve machines and equipment needed to produce your services.
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As a new business, there is likely uncertainty surrounding how much profit you are going to make. As a result, it is advisable to be conservative with your investment. Think second hand conveyor belts, cheaper racking, and leasing forklifts instead of buying. In the long-term, some of the equipment will have a shorter useful lifetime and may be more unreliable. However, this cheaper equipment should meet your services adequately for long enough until your revenue streams become stable and predictable. After this period, consider better warehouse investment.
On the other hand, you may be overseeing a period of expansion in your organisation, where business is booming and you are focused on delivering a high-quality service. Here larger investments become more justified. With already established streams of reliable profit into the business, spending more on equipment and services will have the advantages of reliability, longer useful lifetimes, and higher quality services.
Consider External Factors Affecting Warehouse Investment
Apart from the current needs and objectives of the company, the economic climate needs considering when deciding on warehouse investment. The investment game is all about risk management, and we are living in risky times. Political unease in the UK surrounding Brexit and the current situation government are significantly affecting the value of the pound. If your business is likely to be importing from or exporting goods overseas, the value of the pound can have a big impact on your continued profits. In this situation, conservative investment may be the wisest option. Once the economic climate settles down to a more predictable manner, larger investments can be thought about.