When to Split Inventory Across Multiple Fulfillment Centers

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While centralizing inventory and using a single fulfillment center is much more effective than self-fulfillment for many online merchants, one warehouse alone may not be enough for some sellers.

Splitting your inventory across fulfillment center locations, also known as distributed inventory, offers many advantages. When you work with a 3PL that has multiple warehouses, you can match the service of the largest retailers, without having to build your own infrastructure.

For example, ShipBob has fulfillment centers across the globe to help merchants reduce the shipping costs, transit times, and distance packages travel.

“ShipBob has been a great ally as they have fulfillment centers all over, facilitating a 2-3 day delivery time. This is helpful especially when weather challenges happen; being able to have different locations to ship from allows for a more seamless supply chain.”

Andrea Lisbona, Founder & CEO of Touchland

But is this strategy right for every ecommerce business?


When should you use more than one fulfillment center?

Learn when distributed inventory should be utilized  and when it should not be  as part of an ecommerce shipping strategy.

1. You ship a high volume of orders

A single warehouse may be all you need when you are first getting started, as it will likely be too expensive to use multiple fulfillment centers. If you grow enough to the point that the shipping costs exceed the cost of additional warehouse space, then it would be more cost-effective to split your inventory across fulfillment centers.

By utilizing multiple ecommerce warehouses, you can strategically choose locations that are near your customers. Storing inventory closer to your customers helps lower shipping costs, because orders will travel a shorter distance when shipped. In other words, it’s cheaper to ship a package 20 km than it is to ship it 2,000 km in most cases.

Similarly, it may make sense to send only your most popular or best-selling products to additional warehouses, rather than store inventory for every single product you sell. This way, your less popular items won’t sit there taking up warehouse space without selling quickly, and you won’t be stuck paying for storage.

2. Your products and orders are heavy in weight

Often, the heavier items are, the more you will realize significant cost savings when your package has to travel less distance or shipping zones.

Take weighted blanket company, My Calm Blanket, whose products are up to 11.3 kg in weight.

“Shipping a heavy blanket is not the same as shipping a t-shirt. That’s why we knew that shipping from only one or two fulfillment centers wasn’t going to cut it. Luckily, ShipBob has fulfillment centers all over.”

Founder of My Calm Blanket

My Calm Blanket has distributed their inventory to ShipBob’s fulfillment centers in several locations to be near their customers.

3. You want to consistently offer affordable 2-day shipping

In today’s online shopping world, most consumers expect two-day delivery (especially in the American market). Using multiple warehouses lets you significantly and affordably reduce last-mile delivery times. Each time a customer places an order online, the order will be fulfilled from the warehouse that’s closest to them.

This lets you compete with major retailers and offer Prime-like service to meet customer expectations with convenient delivery options.

I’m most impressed with ShipBob’s commitment to driving improvement and technology, which drives reductions in delivery time. I knew a shorter transit time was going to become more and more important. Customers get accustomed to a certain service level at a low price — often free — and want it faster over time.

Michael Peters, VP of E-Commerce Operations at TB12

4. Your customers don’t all reside in one geographical region

When it comes to choosing the location of a fulfillment center, it ultimately comes down to where your customers are. This is because orders are delivered quicker and at less cost when your packages travel less distance. To justify an additional warehouse, you must find out how many customers would benefit from it.

For example, if you sell merch or kits for a sports team in Melbourne, the majority of your customer base will largely be contained within Melbourne. It’s unlikely that you will ship high volumes of product to people who live in Perth thus, eliminating the need for a warehouse on the West Coast.

“While we’re based in the US, a quarter of our sales are international. It looks like international sales will overtake US sales in a few short years — so we are definitely using ShipBob’s international fulfillment centers!

We’ve found that there is consistent demand for our products abroad, and ShipBob’s ever-expanding global fulfillment network enables us to tap into that demand much more cost-effectively.

Currently, we have stock in ShipBob’s fulfillment centers in the UK, Canada, and Australia. We’ve also just begun moving into ShipBob’s fulfillment center in Poland, as we have customers in Germany as well!

With new locations being added all the time, ShipBob will help us service customers in more and more countries around the world over time.

Aaron Patterson, COO of The Adventure Challenge

Alternatively, if you sell skincare products and your customers reach all corners of the country, then distributing your inventory to major hubs or densely populated areas would be a more efficient option.

Conclusion

When it comes to whether you should split your inventory between ecommerce fulfillment centers, there is not always a clear-cut answer. Under the right circumstances, shipping orders from multiple warehouses can save you time and money, creating a win-win for both you and your customers.

However, you must consider whether warehousing costs, transportation costs to fulfillment centers, and the number of SKUs you have would be offset by the reduced shipping costs.

Learn how ShipBob helps you understand your optimal inventory distribution

Outsourcing fulfillment to a 3PL allows you to keep your product closer to your end customer while freeing up time and space without needing to invest in your own warehouse. However, unlike an on-demand warehousing company that only helps you find excess warehouse space, a 3PL like ShipBob is the expert in fulfillment.

ShipBob has a free analytics and distribution metrics tool for all customers that lets you explore your ideal inventory distribution so you can best leverage ShipBob’s network of distribution centers (or fulfillment centers). Using your historical order data, you can:

  • View which fulfillment centers shipped your last 1,000 orders and the total costs.
  • See which fulfillment centers would have shipped your last 1,000 orders and how much it would have cost you if you used all or a selection of ShipBob’s fulfillment centers.
  • Visualize where your customers’ shipping destinations are for a better understanding of how to split inventory across ShipBob’s fulfillment centers to potentially save money.

Request a pricing quote for ShipBob’s fulfillment centers below to see if ShipBob would be a good fit for your business.

Written By:

Kristina is the Director of Marketing Communications at ShipBob, where she writes various articles, case studies, and other resources to help ecommerce brands grow their business.

Read all posts written by Kristina Lopienski