Closing a Distribution Center? Equipment Options to Consider

So, you’re shutting down operations at one of your distribution centers (DC). Your company invested a large amount of money in quality material handling equipment at this DC: pallet racking systems, shelving, forklifts, balers, conveyors, mezzanines, and more. How can you recoup some of that investment? 

There were plenty of vendors with ideas when you opened the DC. But, now that you are closing it, vendors and available options are much fewer. What path do you take and who can you trust to make this closing less difficult? 

Here are some options to consider when you need to dispose of material handling equipment while closing a DC.

Transport Your Distribution Center Equipment to Another Location

If you run another DC, the first thing to consider is which equipment may be useful at your other location. You might be able to update old equipment at your still-operational facility with newer, cleaner, or better models. Conduct an equipment audit at your destination facility to see whether any of your existing equipment fails to meet safety standards.

The cost of updating a pallet racking system at your warehouse could be thousands of dollars, which could end up being more than the cost to transport the equipment from your closing DC. 

To recoup the cost of transport, you could sell, auction, or scrap the older systems—all options we will discuss later in this list. The result could be that you get an unusually affordable systems upgrade for the team at your operational distribution center, leading to enhanced efficiency and employee satisfaction.  

Sell Your Warehouse Equipment for Scrap 

If you don’t have another facility that could benefit from your equipment, or if the equipment requires extensive repairs to be functional, consider scraping it. There is a good market for scrap metal. It may make sense to consider this option with your racking equipment under the right circumstances. 

Before making a decision to scrap, determine the condition of the equipment. Is it old and maybe a little abused? What would be the cost of repair—for either you or whoever uses it after you? If the cost of repairs is worth more than its overall value, then scrapping it may be the only alternative.

You will receive some compensation for the scrap metal, but be aware that this is a highly volatile market with prices fluctuating, sometimes significantly. If you decide to scrap your equipment, be sure you work with a trustworthy vendor. If you happen to have someone internally who is experienced in this area, even better. They will be able to help you navigate the process and ensure you maximize your profits.

If the equipment is in good condition, you should consider other options:

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Put the DC Equipment Up for Auction

Is your equipment still in good condition? Do you no longer have any use for it? Then placing it up for auction is a terrific way to reimburse your costs. 

Auctions have the potential to generate interest among prospects looking for a good deal and/or specific equipment. Will you get top dollar on your equipment? Geography may be a factor, but it will typically be more lucrative than selling the equipment for scrap. Most attendees of auctions tend to be local which, in a large metropolitan area, may work well for your cause. 

However, attendance and prices could be lower in a rural setting. As technology evolves, there is also the option to participate in an online auction, or to sell your equipment online on a digital selling marketplace. This could increase your chances of finding a buyer since the internet will allow you to reach more potential buyers which will drive up the cost of your equipment.

Finally, with many auctions, there is the issue of what happens with equipment that does not sell. Before deciding to place your material handling equipment on the auction block, be sure you understand the commitment. Discuss with the organizers what the process is for unsold equipment and create a contingency plan for this potential outcome. 

Include the Storage Equipment as Part of the Building

Including your equipment as a part of the sale is a great way to increase the value of the building. So long as the equipment remains in good condition, this is one option to consider.

This option is sometimes recommended by commercial real estate brokers. The thinking behind this is similar to leaving the range, dishwasher and refrigerator behind when selling a home: it could appeal to the new owner. 

The trouble with this rationale is material handling equipment frequently is designed for a specific application. So long as your potential buyers will have a use for the equipment, it will drive value. However, if they don’t, the buyers may see it as a nuisance.

For example, suppose the selling company used the facility for automotive parts and the material handling equipment was designed for those items. Unless the new owners also use the distribution center for the same kind of automotive parts, the racking and other material handling equipment probably won’t meet their needs. It may actually be a turn-off to potential buyers as the burden of removing the equipment would fall on them.

Discuss these options with your commercial real estate broker. You could include the equipment in negotiations if the buyer is in a similar industry, which would require a separate pricing model for the property catered to the specific audience.

Professional liquidators specializing in material handling equipment not only know the equipment better and understand the market; they have industry connections a generic liquidator may not possess.

Liquidate the Distribution Center Equipment Using a Knowledgeable Professional

This is one of the most popular options for dealing with your used equipment when closing a distribution center due to the convenience and cost benefits. The important thing to remember when going down this route is to work with someone who has direct experience working with your industry. 

Many companies claim they possess the ability to quickly move equipment but have no experience in the material handling marketplace. It is one thing to liquidate items such as a generic ½ HP electric motor because of its many potential applications. It is an entirely different process when selling pallet racking, mezzanine and conveyor systems designed for a product-specific distribution setting. 

Professional liquidators specializing in material handling equipment not only know the equipment better and understand the market; they have industry connections a generic liquidator may not possess.

This will allow you to maximize your profits and minimize any stress or complications.

Equipment Solutions for Closing a Distribution Center

Unless you choose to work with a professional liquidator, it’s likely your team will be forced to navigate a variety of these options. Be sure to calculate time costs into your budget when deciding which route to go with. 

The decision on how to deal with your used material handling equipment when closing a distribution center could affect the sale of the property and any return on the dollars spent purchasing the equipment. Learn how to maximize results by contacting a material handling professional who is experienced with all options when shutting down distribution centers.

If you’re looking for personalized liquidation solutions to make your distribution closing process easier, we’ve got you covered. 

At East Coast Storage Equipment, deliver excellent liquidation results for our clients. Contact us to see how we can improve the efficiency of your distribution center closing processes.

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