How to Choose the Best Location of a Fulfillment Center When You Outsource to a 3PL
January 27, 2020
What do you want to learn?
There are many questions you should ask when evaluating potential third-party logistics (3PL) providers. Aside from aspects such as pricing and ecommerce store integrations, another very important consideration is location.
Where are their fulfillment centers? Do they have multiple locations?
While these questions might seem straightforward, their answers have implications you must think through. The reality is the location of a fulfillment center has a major impact on shipping costs and can be either a barrier to or enabler of scalability for ecommerce brands.
Read on to learn how geography affects your order fulfillment strategy, and gain tips to make the best decision for your business.
How do you choose the best location of an order fulfillment center?
The biggest factor in choosing a fulfillment center location comes down to one question: Where are your customers?
This is because shipping carriers use shipping zones to calculate rates for services. Shipping zones are the geographical areas that carriers ship to, which measure the distance a package travels from the point of origin to the destination.
The way zones work, the less distance a package travels, the quicker it gets delivered to your customer and the less money you have to pay for shipping. And the more you sell, the more time and money you’ll save over time compared to orders that have to travel a farther distance.
Today’s consumers not only crave convenience and speed with deliveries, but also expect it. Being near the majority of customers, or located near major hubs or metro areas that can reach large volumes of customers, will help ensure shoppers get the quickest turnaround time possible, helping you get closer to offering free 2-day shipping.
Do you need to be located close to your 3PL’s fulfillment center?
No, being near your 3PL is not a requirement (though there is nothing wrong with it). In other words, if you’re an Atlanta-based ecommerce merchant, your fulfillment center does not need to be in Atlanta.
Similarly, another consideration is whether you should choose a fulfillment center that is close to your manufacturing plant. Though it may cost less money to ship your products to the 3PL from the manufacturer when they are nearby, this isn’t how you should make your decision.
For products that are manufactured overseas, it’s unlikely that the majority of your customer base is all that close to the manufacturer. Importing to a coastal city or port city is an added bonus when inventory is coming from across the ocean, but should not be the only factor in making a decision.
When should you use more than one fulfillment center?
When you are first getting started, working with a single warehouse may be all you need or that makes sense until you reach a certain scale. As you grow, you may need to send inventory to other strategically located fulfillment centers (or distribution centers). This concept, known as distributed inventory, has become a game changer for ecommerce merchants.
Splitting inventory across warehouses has several benefits, especially as many online shoppers expect two-day delivery. You can choose to send only certain SKUs (e.g., the most popular or highest selling products) to certain fulfillment centers.
If one fulfillment center ever runs out of a product, you still have the others to serve as backups.
Distributing inventory across fulfillment centers doesn’t mean using multiple 3PLs. Choosing a single 3PL with multiple locations will help unify systems, technologies, and communication. This helps ensure greater accuracy, transparency, and consistency in service.
The key to understanding when and where to send inventory is to continuously analyze your order data. This includes paying attention to any geographic shifts and growth. You must let the data guide your decisions.
“Storing inventory in different regions is key to reducing costs and transit times. From expanding into a second ShipBob fulfillment center, we are able to offer 65% of our customers with 2-day shipping, up from 32% by only having a single West Coast facility. Soon, this will be 100%. Not only is this better for our customers, but we also gain a 13% savings to our bottom line.”
Pablo Gabatto, Business Operations Manager at Ample Foods
How ShipBob helps you choose a fulfillment center location
Outsourcing fulfillment to ShipBob means you get access to our network of fulfillment centers, best-in-class technology, and more data than you’ve ever had about your inventory, orders, and customers.
When you’re first starting out with us, we help you understand which fulfillment center to get your inventory in. We can even provide a time in transit analysis from your historical order zip codes to see the locations that are most ideal for you based on where your customers reside.
Once you’ve started shipping with us, we have a distribution metrics and reporting tool that examines all orders you’ve processed through ShipBob to provide major insights into your ideal inventory allocation and distribution.
You can compare your current fulfillment center(s) and shipping costs to any combination of our other fulfillment centers and how much it would have cost to ship your orders out of those locations. This helps you make informed decisions around which fulfillment centers you should stock to best leverage ShipBob’s network of fulfillment centers.
You can easily visualize where your customers are in the maps we provide.
You may find that the majority of your orders are shipped from locations that are nowhere near your customers, costing you more money and causing your customers to wait longer for their deliveries that they’d like.
With ShipBob, you can also get answers to the following questions:
- What is the average cart value and shipping cost by shipping method?
- How much inventory do I currently have on hand at each ShipBob fulfillment center?
- How many days of inventory do I have left before I run out?
- If I run a promotion on my store, how will this affect my available inventory levels?
- What would my shipping costs be if I went from one fulfillment center to two (or two to three, and so on)?
- How are my sales affected by different seasons and months?
- Where are my customers shipping to most often?
If your customers are like most consumers, they want a fast turnaround after they check out online. If you want to succeed, you need to make customer preferences a priority.
Fulfillment center location plays a crucial role in meeting these expectations. The closer your product is to your end customer, the less distance it travels, the less money you and your customers have to pay for shipping, and the faster it arrives at your customer’s doorstep.
Request a quote from ShipBob
In need of an ecommerce fulfillment partner? ShipBob owns several fulfillment centers across the continental US, with many more in the works. In addition, ShipBob’s free software provides:
- Analytics on the optimal locations to send your inventory
- Reports on how many days does it take for orders to be delivered
- Real-time visibility into inventory levels across fulfillment centers
- Automatic, proactive notifications when stock gets low at each fulfillment center so you can restock inventory
- And much more!
Get in touch with ShipBob today and learn how you can simplify retail fulfillment and meet customer expectations. Visit the button below to get a fulfillment quote from ShipBob and see if we’re a good fit.