Closing a Distribution Center? Equipment Options to Consider

So, you’re shutting down operations at one of your distribution centers (DC). Your company invested in a large amount of material handling equipment at this DC. 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 less. What path do you take and whom can you trust to make this closing less difficult. Here are some options to consider when you need to dispose of material handling equipment when closing a DC.

1. Sell the equipment for scrap. There is a market for scrap metal and 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? 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 unless you have someone internally who is experienced in this area.

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

2. Put the equipment up for auction. 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. Most attendees of auctions tend to be local which in a large metropolitan area may work well. However, attendance and prices could be lower in a rural setting. Then 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.

3. Include the equipment as part of the building. 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.

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.

4. Liquidate the equipment using a knowledgeable professional. 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.

The decision you make on your 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.

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