Choosing between a centralized or decentralized inventory model is a major strategic decision for building material distributors — especially those managing multiple warehouses or yards. The decision impacts everything from delivery speed and stock availability to operational costs and workforce efficiency.
In this case study, we explore how one distributor in the construction supply industry evaluated both models — and ultimately leveraged the best of both through smart technology and ERP-driven planning.
The Company: Mid-Size Building Materials Distributor
This distributor operates across six regional yards in three states, supplying construction companies with:
Lumber, piping, and sheet goods
Adhesives and fasteners
Special-order items like precast elements and structural steel
Their challenge? Balancing stock availability across locations without tying up too much working capital or risking frequent transfers.
The Initial Setup: Decentralized Inventory Model
Each yard operated independently, maintaining its own inventory based on local demand. This led to:
Overlapping stock in some regions
Stockouts in others, requiring urgent transfers
Limited visibility into slow-moving or obsolete items
While the decentralized model offered local autonomy and faster response times, it created significant inefficiencies in procurement, forecasting, and space utilization.
The Shift: Exploring Centralization
To address growing costs and inconsistent service levels, the company piloted a centralized inventory model for two of its yards, using one primary distribution hub to supply both. Early wins included:
More accurate forecasting at the hub level
Reduction in safety stock by 18%
Better vendor negotiation through consolidated purchases
However, centralization also introduced new challenges — especially with longer lead times to satellite yards and added pressure on transfer logistics.
The Hybrid Solution: Centralized Planning, Decentralized Fulfillment
Using an industry-specific ERP system, the company found success by combining the strengths of both models:
Centralized planning and procurement allowed better bulk purchasing and stock optimization
Decentralized fulfillment ensured fast delivery from regional yards
The ERP provided real-time visibility across all locations, enabling smarter transfer decisions and live inventory updates
Key system features that made this hybrid model work:
Demand forecasting by region based on historical and seasonal trends
Automated stock replenishment rules based on yard-specific thresholds
Inter-yard transfer workflows with live tracking and approval logs
The Results After 6 Months
15% overall reduction in inventory carrying cost
22% decrease in inter-yard transfer frequency
99.4% order fulfillment rate without increasing stock levels
Improved decision-making through centralized dashboards and SKU-level analytics
By finding the right balance between control and flexibility, the company not only improved its bottom line — it also created a more agile, scalable supply chain.
Final Takeaway
The choice between centralized and decentralized inventory isn’t binary. With the right systems in place, building materials distributors can tailor a hybrid model that maximizes both efficiency and responsiveness.
Technology — especially ERP software tailored to multi-location inventory management — makes this balance possible, unlocking smarter planning and leaner operations.
