Network Optimisation – DC and Warehousing: How Many, How Big and Where
For many Australian and New Zealand organisations, the distribution centre and warehousing network has evolved over time rather than being deliberately designed. New sites are added as the business grows. Temporary solutions become permanent. Leases roll over. Service issues are patched rather than solved. Before long, the network becomes complex, expensive, and increasingly misaligned with customer expectations.
Network optimisation is the discipline of stepping back and asking some deceptively simple questions:
- How many distribution centres or warehouses do we actually need?
- How big should each facility be – today and in the future?
- Where should they be located to balance cost, service, risk and growth?
When done properly, network optimisation can unlock step-change improvements in operating cost, service performance, working capital, resilience and sustainability. When done poorly – or with the wrong incentives – it can lock organisations into expensive, inflexible decisions that are very difficult to unwind.
This article explores how organisations should think about DC and warehousing network optimisation, the common traps to avoid, and why independent, solution-agnostic advice is critical to getting it right.
Why network optimisation matters more than ever
Supply chains across Australia and New Zealand are operating in a fundamentally different environment than they were even five years ago.
Customer expectations around speed, reliability and visibility continue to rise. E-commerce and omnichannel fulfilment have shifted order profiles and delivery patterns. Labour availability and cost pressures are persistent. Transport markets are volatile. And boards and executives are paying closer attention to resilience, risk exposure and sustainability.
At the same time, DCs and warehouses represent some of the largest and least flexible cost commitments in the supply chain:
- Long-term property leases or owned assets
- Fixed labour and overhead structures
- Embedded technology and automation decisions
- Transport and inventory dependencies that cascade across the network
Once a network decision is made, it often shapes the business for a decade or more. That makes getting the fundamentals right – how many, how big and where – critically important.
The three core questions of network optimisation
1. How many DCs or warehouses do we need?
There is no “right” number of DCs. The optimal answer depends on the trade-off an organisation is willing to make between cost, service and risk.
At one end of the spectrum, a highly centralised network can deliver scale efficiencies, simpler inventory management and lower fixed costs. At the other end, a highly decentralised network can reduce transport lead times, improve service responsiveness and enhance resilience.
Key factors that influence the optimal number of facilities include:
- Customer service expectations – delivery speed, cut-off times, order frequency
- Product characteristics – size, weight, value, shelf life, handling complexity
- Demand patterns – geographic dispersion, variability, seasonality
- Transport economics – linehaul versus last-mile cost trade-offs
- Inventory strategy – safety stock policies and service level targets
- Risk tolerance – exposure to single-site disruptions
A common mistake is assuming that “more DCs equals better service” or that “fewer DCs equals lower cost”. In reality, both extremes can be sub-optimal if not supported by data and a clear operating model.
Network optimisation provides a structured way to test different scenarios and understand the real cost-to-serve and service implications of each option.
2. How big should each facility be?
Warehouse size decisions are often driven by what is available in the property market or what feels “safe” for growth. This can result in facilities that are either constrained from day one or materially oversized for years.
Sizing a DC correctly requires a deep understanding of:
- Current and future volume profiles (units, pallets, cartons, orders)
- Peak versus average demand and how peaks are managed
- Storage and handling requirements by product category
- Operating model assumptions – shifts, labour productivity, automation levels
- Inventory policies – days of cover, decoupling stock, buffer strategies
- Growth scenarios – organic growth, range expansion, channel shifts
Oversized facilities lock in unnecessary capital and operating costs. Undersized facilities drive congestion, inefficiency, safety risks and costly short-term workarounds.
Effective network optimisation links facility sizing directly to demand forecasts, inventory strategies and operational assumptions – not just high-level growth percentages.
3. Where should facilities be located?
Location decisions are among the most sensitive and visible outcomes of a network optimisation exercise.
In Australia and New Zealand, geography plays a particularly important role. Long distances, population concentration in major cities, regional service requirements, and limited labour pools all shape the optimal answer.
Key considerations include:
- Proximity to customers and service time commitments
- Access to transport infrastructure – road, port, intermodal
- Labour availability and cost
- Property market dynamics – availability, lease structures, escalation risk
- Exposure to risk – natural hazards, congestion, single-point failures
- Alignment with upstream suppliers or downstream partners
Location optimisation is not about picking a suburb on a map. It is about understanding how location interacts with transport cost, service performance, workforce sustainability and long-term flexibility.
Beyond cost: what good network optimisation really delivers
While cost reduction is often the initial trigger for a network review, the most successful programs deliver value across multiple dimensions.
Improved service performance
Well-designed networks reduce lead times, improve DIFOT performance and create more predictable service outcomes. This is increasingly important as customers expect tighter delivery windows and greater transparency.
Lower working capital
Network structure has a direct impact on inventory duplication and safety stock requirements. Optimisation can materially reduce working capital without compromising service when inventory is positioned deliberately rather than organically.
Greater resilience
Events over recent years have highlighted the fragility of overly centralised or poorly designed networks. Network optimisation allows organisations to test disruption scenarios and design in resilience where it matters most.
Better labour sustainability
Facility location and size decisions influence access to labour, turnover, productivity and safety outcomes. A network that looks efficient on paper but cannot be staffed reliably will struggle in practice.
Clearer investment decisions
Network optimisation provides a fact base for decisions on property, automation, systems and outsourcing. It ensures that downstream investments are aligned to a future-ready network design rather than locking in today’s constraints.
Common traps in DC and warehousing network decisions
Despite the strategic importance of network optimisation, many organisations fall into avoidable traps.
Letting property availability drive the answer
Choosing locations or sizes based primarily on what is available in the market often leads to compromised outcomes. Property constraints should be tested against the optimal network – not the other way around.
Optimising in isolation
Network decisions are sometimes made without fully considering inventory strategy, transport design, labour models or systems capability. This leads to local optimisation that underperforms end-to-end.
Over-reliance on rules of thumb
Heuristics such as “one DC per state” or “X square metres per pallet” can be useful starting points, but they are not substitutes for data-driven modelling.
Designing for today only
Networks designed around current volumes and channels can quickly become obsolete. Scenario testing and future-state thinking are essential.
Taking advice with embedded incentives
Perhaps the most significant trap is relying on advice from parties whose commercial interests are linked to a particular outcome – whether that is property development, automation deployment or technology selection.
Why independent, solution-agnostic advice matters
Network optimisation decisions shape millions – and often billions – of dollars of future cost and investment. The stakes are too high for advice that is not truly independent.
Independent, solution-agnostic advice means:
- No incentive to recommend more buildings than necessary
- No incentive to oversize facilities to sell automation or technology
- No incentive to bias location decisions towards specific property assets
Instead, decisions are driven by what is genuinely optimal for the organisation’s strategy, service promise and risk profile.
For executives and boards, this independence is critical. It provides confidence that recommendations are grounded in evidence, not sales targets or asset pipelines.
The role of data and modelling in network optimisation
Modern network optimisation goes well beyond simple spreadsheets. Effective analysis typically combines:
- Demand and volume forecasting by region and channel
- Cost-to-serve analysis across transport, warehousing and inventory
- Scenario modelling across different network configurations
- Sensitivity testing for growth, service and disruption scenarios
Importantly, the outputs of modelling should not be treated as a black box. The value lies in understanding the trade-offs and assumptions behind each scenario, not just the “optimal” answer.
Good network optimisation balances analytical rigour with practical operational insight.
Network optimisation is not a one-off exercise
One of the biggest misconceptions is that network optimisation is something you do once every ten years.
In reality, leading organisations treat it as a repeatable strategic capability, revisited as conditions change:
- Growth or contraction
- Channel shifts
- Changes in service strategy
- Cost pressure or margin erosion
- Mergers, acquisitions or divestments
Regularly revisiting network assumptions allows organisations to make proactive decisions rather than reacting under pressure.
How Trace Consultants can help
Trace Consultants supports Australian and New Zealand organisations to design DC and warehousing networks that are fit for purpose today and resilient for the future.
Our approach to network optimisation is grounded in a few core principles.
Independent and solution-agnostic
Trace is not linked to property developers, automation vendors or technology providers. This allows us to provide genuinely independent advice, focused solely on what is best for your organisation.
End-to-end perspective
We design networks in the context of the broader supply chain – integrating demand planning, inventory strategy, transport design, workforce considerations and systems capability.
Practical and implementable
Our recommendations are grounded in operational reality. We focus on designs that can actually be staffed, operated and scaled in the Australian and New Zealand context.
Scenario-led decision making
Rather than presenting a single “answer”, we help executives understand the trade-offs between different network options and make informed decisions aligned to strategy and risk appetite.
Support beyond the model
Trace supports clients from initial network strategy through to business case development, stakeholder engagement and implementation planning – ensuring that network decisions translate into real outcomes.
When should organisations consider network optimisation?
While every organisation’s context is different, common triggers include:
- Rising warehousing or transport costs
- Declining service performance
- Capacity constraints or congestion
- Major lease expiries or property decisions
- Growth into new regions or channels
- Mergers or organisational restructuring
- Increased focus on resilience and risk
If these signals are present, it is often a sign that the network has drifted away from what the business actually needs.
Final thoughts: getting the fundamentals right
“How many, how big and where” may sound simple, but these questions sit at the heart of supply chain performance.
Network optimisation is not about chasing theoretical efficiency. It is about deliberately designing a DC and warehousing network that supports your strategy, your customers and your people – now and into the future.
For Australian and New Zealand organisations facing ongoing cost pressure, service expectations and uncertainty, there are few levers with more impact than getting the network right.
Independent, solution-agnostic network optimisation provides the clarity needed to make confident, long-term decisions – and avoid locking in tomorrow’s problems.
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