Building a Distribution Center from Scratch on a Shoestring Budget
Faced with budget constraints but needing to further optimize our supply chain, I took an unconventional route that epitomized the startup spirit—resourcefulness and ingenuity. We had a 6,000-square-foot lease in Harlem that was initially intended for a store but was no longer needed for that purpose. Recognizing an opportunity, I proposed transforming this space into a makeshift distribution center.
With minimal funds and a tight three-week timeline, we set to work. We repurposed existing equipment, rented additional coolers (thanks to surplus from our scaled-back expansion plans), and hired two drivers. The setup was far from ideal—we lacked a loading dock, and there was no designated loading zone, resulting in daily parking tickets as we loaded our trucks. Yet, we pressed on.
The primary objective was to break down bulk inventory into quantities that matched the sales velocity of individual stores. For example, instead of forcing a single store to take a full case of 24 peaches (which might lead to spoilage due to low demand), we could distribute that case across multiple stores. This approach not only reduced waste but also ensured fresher products for our customers.
The impact was immediate and significant. Waste was reduced by an astounding 88%, and our inventory days on hand dropped from nine to just over four. Stores no longer struggled with overstocked backrooms, and the products on shelves were fresher and more appealing to customers. Our small team operated with incredible efficiency, turning inventory almost daily—our peak saw inventory turning over in less than a day.
Recognizing the success and scalability of this model, I sought approval to expand. I reconnected with a contact from my earlier commercial real estate endeavors, who informed me of a 17,000-square-foot facility in Long Island City that was available for sublease. The facility was perfect—it even came with existing racking from the previous tenant.
We secured approval for the lease at the end of April 2022 and moved in by July 1st. This rapid transition was possible because we had meticulously planned every detail in advance. We knew what refrigeration units we needed, where to source forklifts, how to scale our trucking operations, and had contingency plans in place.
The new distribution center handled about 70% of our company's goods. Our in-stock rates soared to 96%, and waste was further reduced to approximately 7.5% of sales. Inventory days on hand stabilized at a healthy 1.9, indicating optimal stock levels without overcommitting capital to inventory.
This venture was more than just an operational success; it was a morale booster. Store teams appreciated the smoother operations and better product availability. Vendors found our processes more streamlined. Even finance was pleased with the improved margins and reduced waste. It was a holistic win that showcased what could be achieved with creativity, determination, and collaborative effort.
Building this distribution center from scratch, on a limited budget and under tight timelines, remains one of the most rewarding accomplishments of my career. It exemplifies how unconventional solutions can drive significant improvements and set the stage for sustainable success.
