When outsourcing order fulfillment to a 3PL, you may think the more warehouses you use, the more complexities you encounter. The reality is using a single 3PL with multiple locations offers many advantages.
When it comes to fulfillment center location, one of the most important considerations is if it’s near your customers. Since your customers likely don’t all reside in a single geographic region, using one fulfillment center can make it nearly impossible to efficiently reach the majority of people who buy from you.
Instead, using distributed inventory means each time an order is placed on your store, the fulfillment center closest to that customer will automatically fulfill the order. Read on to learn why many ecommerce companies store their inventory in more than one fulfillment center.
What is Distributed Inventory?
Distributed inventory is a strategy utilized to keep inventory closer to the end customer. In practice, it’s the spreading of physical goods across different fulfillment centers throughout the US (and potentially beyond) to achieve a lower transit time and cheaper shipping costs.
3 reasons to distribute your inventory across multiple fulfillment centers
Learn the top benefits of splitting your product into fulfillment warehouses in different regions of the country.
1. Spread risk in case of emergencies
Splitting inventory across warehouses helps you be prepared and have options in the event that your orders can’t leave a particular fulfillment center. The most common examples of delivery exceptions are due to bad weather.
There are many catastrophes and occurrences in nature that prevent shipping carriers from making it to the fulfillment center or cause delays while in transit. At some point, a winter storm, flood, wildfire, earthquake, or other force will likely impact some of your orders.
Though much less likely, there are possibilities of other disasters that affect what’s inside a warehouse, such as an electrical fire. When you split your inventory across geographic areas, you will have backup inventory in other locations. From preventing delays or lost stock, it can be better to be safe than sorry.
2. Drive down shipping costs
While you may choose to make a greater initial investment to purchase more inventory to have on hand at multiple warehouses than you would with only one fulfillment center, there are cost savings realized elsewhere.
When you ship from only one warehouse, it can take a long time to reach your end customer. With today’s standard and expectation of two-day shipping, a longer time in transit can prevent your customers from buying from you.
“ShipBob’s 2-Day Express Program has been phenomenal for us. Because of Amazon, our customers expect 2-day shipping and we couldn’t find other 3PLs that can provide that. If they do, you are going to pay a lot for it. Without ShipBob, it would cost more than $100 per order to ship that fast.”
Founder of My Calm Blanket
If they have the option to pay for expedited shipping, there is a significant cost to pay for the rush delivery. High shipping costs are one of the top reasons for shopping cart abandonment, creating an opportunity cost of acquiring customers.
Storing inventory closer to your customers helps lower shipping costs, because orders will travel a shorter distance. Almost always it is less expensive to ship an order 100 miles than 1,000 miles.
Of course, having access to a 3PL’s network of ecommerce fulfillment centers lets you use multiple facilities without paying for the infrastructure, staff, and equipment yourself in general.
3. Get your orders shipped to customers faster
For example, if you use fulfillment centers in hubs like Chicago or Los Angeles, you can reach a large amount of the population in different areas of the country. It is easy to get the package delivered the same day to people who live in these cities, because the inventory is already close by.
If your inventory is only in one of those cities, say, Los Angeles, then imagine how long it will take a package to arrive to your customers who live on the East Coast.
Ultimately, the quicker a customer gets their order, the happier they are. If you can offer a quick turnaround time – without using expedited shipping and it costing an arm and leg – you will likely see a surge in sales.
“The more fulfillment centers we have inventory in, the more potential shipping addresses we can offer this 2-day option to. And the more people that we offer the benefit of free 2-day shipping to, the more conversions we get. With ShipBob’s 2-Day Express Program, we’ve seen an 18% reduction in cart abandonment.”
Founder of My Calm Blanket
To be successful in the competitive ecommerce space, many online retailers send their inventory to multiple warehouses. A good outsourced order fulfillment provider can help you determine the optimal fulfillment center locations for your business based on your customers’ addresses.
Distributing your inventory to major metro areas can ensure your orders are delivered quicker and at less cost by traveling less distance. You also have backup stock in case of emergency.
Watch a video recording of the webinar, “How to Transform Your Logistics Using Distributed Inventory.”