Warehouse Consolidation Offsets $1M Cost Increase — With Long Term Operational Upside

A mid-sized manufacturer of personal care and healthcare products operated across multiple facilities spread throughout a large U.S. city. Its production operation relied on a network of warehouses and inventory sites supporting the main manufacturing floor. When lease renewals brought sharply higher per-square-foot costs, the company faced a critical decision about how to respond.

Challenge

Rising facility costs triggered an operational redesign.

When leases came due across its dispersed facility network, the company confronted a stark reality: remaining in its existing footprint would cost roughly $1 million more per year. Operating 3 to 5 miles apart across multiple sites had long created inefficiencies — redundant transportation runs, duplicated supervisory coverage, and fragmented material handling — but those costs had been manageable. The new lease environment changed the math entirely and prompted action.

The company identified two satellite facilities that could be vacated and their functions absorbed into a single unified campus anchored by the primary production plant. The challenge was not simply moving boxes — it was designing the right operational structure from scratch, one that could absorb the added square footage and complexity while simultaneously generating enough savings to offset the $1M cost increase. The stakes were clear: get it right the first time, because there was no room for missteps. The buildings they were vacating would not be available for do-overs.

This is when TBM entered the picture.

Solution

From Value Stream Mapping to Full Operational Design

The engagement began not as a consolidation project but as a focused value-stream mapping (VSM) exercise where a material usage variance project proved successful to drive down material costs. As we worked through that entire VSM process, it became quickly apparent how much cost the company stood to absorb from the coming lease renewals. So, we reframed the conversation: rather than simply map the current state, why not use this moment to ensure the entire operation is optimized before it moves?

That reframing set the scope for what followed — a structured, multi-month effort built around our 2P process (Production Preparation Process).

Results

Operational Improvements That Offset the Cost Increase

The consolidation moved the company from three dispersed facilities to a single unified campus. What had been a projected $1M cost increase became, in essence, a cost-neutral outcome, with projections suggesting the ultimate savings may exceed even the initial estimates as the new operating model matures.

The categories of additional savings tell the story:

  • Material handling equipment
    • Fewer forklifts and handling of assets
    • When everything operates on one campus, inter-facility trucking disappears and equipment is shared more efficiently across functions
  • Transportation
    • The changes eliminated the ongoing cost of running trucks between sites located 3 to 5 miles apart
  • Labor
    • Realized meaningful synergies across both hourly and supervisory roles
    • Material handlers were given the opportunity to transition into production plant roles
    • Supervisory positions were evaluated on role necessity rather than headcount, with options to shift to hourly roles where appropriate
  • Warehousing and inventory
    • Reduced warehouse footprint in a premium real estate market and streamlined inventory positioning to directly support production flow – improving both operational efficiency and cash flow

Frequently Asked Questions

How does warehouse consolidation improve operational performance?
Warehouse consolidation improves manufacturing performance by bringing inventory, logistics, and production support into one coordinated operation. When facilities operate on a single campus, companies reduce transportation, material handling, and delays—creating faster material flow, better visibility, and more predictable production support.
Can warehouse consolidation offset rising facility costs?
Yes. Many manufacturers offset rising lease or facility costs through warehouse consolidation. By eliminating inter-facility transportation, reducing duplicate supervision, sharing equipment, and improving inventory positioning, companies often convert higher real estate costs into neutral—or even lower—overall operating costs.
What is the most important step before consolidating warehouse operations?
The most important step before consolidating warehouses is detailed operational planning. Manufacturers should evaluate material flow, inventory placement, transportation distances, labor structure, and equipment use. Modeling multiple layout scenarios helps identify the design that minimizes handling, improves flow, and supports long-term operational efficiency.

Topics in this Case Study

Performance ImprovementWarehouse Consolidation/Optimization

At a Glance

Client

Leading contract manufacturer developing and producing personal care, health care, and fragrance products for brand owners.

Results

  • Consolidated three facilities into one unified campus.
  • Designed optimized plant layout and process improvements.
  • Generated savings that offset a $1M lease increase.
  • $1M+ additional savings projected as operations mature.
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