It’s hard to remember a time when ecommerce retailers took 2-3 weeks to deliver orders.
Those days are long gone now, as the rise of Amazon and faster shipping services have accustomed consumers to lightning-fast delivery.
To keep up with the new status quo and satisfy customers’ expectations for 2-day or even same day delivery, more and more businesses are adopting a distributed warehousing model.
It might seem counter-intuitive to operate many warehouses — rather than just one or two — but through this model, ecommerce businesses can improve efficiency, reduce cost, and better service customers in today’s modern ecommerce landscape.
In this article, we’ll cover what distributed warehousing is, why ecommerce businesses are adopting it as a strategy, how to know if it’s right for your business, and how ShipBob’s distribution network delivers Amazon-level logistics to growing brands.
What is distributed warehousing?
Distributed warehousing is an approach to warehousing where a business fulfills, ships, and/or distributes goods from multiple smaller, strategically-placed warehouses (rather than from one or two larger warehouses).
The goal of distributed warehousing is to store inventory and fulfill orders closer to end customers, which minimizes shipping times and costs.
Distributed warehouses can perform a number of functions, including storage, fulfillment, cross-docking, and retail distribution.
Why retailers are going distributed
Retailers and small businesses alike are beginning to recognize that there are major benefits to the distributed warehousing model.
Here are some of the main reasons why companies use multiple distribution warehouses.
Meet consumer demands with faster shipping
According to recent reports, 67% of shoppers expect 2-day delivery, and 85% of shoppers are more likely to buy when 2-day delivery is offered. Thus, offering fast shipping is important not only to win new business, but to keep current customers satisfied.
This reduces the average distance that orders must travel, which shortens delivery time. In this way, businesses can provide 2-day delivery without springing for costly expedited options, such as air shipping.
“For us, changing from a 3 week lead time to 3 days through ShipBob is what drove our sales. Even now, one of the primary reviews we get on Etsy is, ‘My order arrived really quickly!’ Having the stock locally in the US means that lead times and shipping times are minimal, and that you’ll get higher conversion rates because you’re offering better lead times.”
John Greenhalgh, Co-Founder of A Year of Dates
Save on shipping & fulfillment costs
While speed of delivery is important to customers, cost of delivery is even more so. In another recent report, when given the choice between free shipping and fast shipping, a whopping 83% of customers opted for free shipping.
Shipping cost and shipping distance are directly proportional in most cases; the farther an order must travel, the more expensive it will be to ship. By placing stock closer to customers through distributed warehousing, you cut average shipping distance, which in turn cuts average shipping cost.
“We just expanded into ShipBob’s Pennsylvania facility and are also using ShipBob’s flagship fulfillment center in Moreno Valley, California. Storing inventory in different regions is key to reducing costs and transit times.
From expanding into a second ShipBob fulfillment center, we are excited to be 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. Speed is important to our customers.
We currently use Fulfillment by Amazon (FBA) for our Amazon orders, but there are limitations. We want to offer a custom experience for our customers and we can’t do that at a reasonable cost with Amazon.”
Pablo Gabatto, Business Operations Manager at Ample Foods
Which warehousing model should you pick?
Picking the right warehousing model for your business depends on many factors, including how much and how quickly you want to scale, the intention to scale, the size of your inventory, the lifespan of your merchandise, your available capital, your customers’ locations, and more.
Here is an overview of some different warehousing options to help you make a more informed decision.
If storage is not a huge need and you service a lot of channels, a cross-docking distribution warehouse may be right for you. In warehouses that practice cross docking, all the incoming merchandise is unloaded from delivery vehicles and directly loaded into outbound vehicles.
This strategy side-steps storage costs, saves time and warehousing space, and fast-tracks fulfillment.
Centralized in-house warehousing
Novice ecommerce businesses tend to rent or buy one or two large, centrally-located warehouses and manage operations on their own. While this traditional model can work in the short term, it’s neither flexible nor scalable.
Every time you look to expand your footprint, you’ll need to spend time and effort locating and setting up new storage facilities. The model also requires a lot of capital (to invest in properties and long-term leases) and attracts high fixed operating costs.
What’s more, since the warehouses are centralized, each shipment will need to traverse long distances, leading to slower order fulfillment.
On the other hand, this model does provide you complete control over warehouse operations. Managing warehousing processes will require a large internal team, but it helps ensure quality control.
On-demand distributed warehousing
In an on-demand warehousing approach, you partner with a company that connects you with warehouses that have excess, shared warehouse space to store your inventory.
This model suits businesses that have a very specific storage location in mind, but is not typically a long-term solution for growing brands. A permanent location is not usually guaranteed, warehouse management systems and practices differ between locations (leaving you more susceptible to fulfillment errors), and you won’t have much visibility into what’s going on in your warehouse space.
Outsource to a 3PL
In general, this is the best way to streamline fulfillment, as it offers the benefits of distributed warehousing without most of the drawbacks.
While you do commit to storage, fulfillment and shipping fees, you get access to a broader network of locations without having to invest in renting or buying those locations yourself.
3PLs also offer value add-ons, such as digital warehousing technologies that automatically distribute and manage your SKUs and streamline order processing and fulfillment.
“We are glad we can trust a 3PL that has a fantastic track record. We’ve been very happy with ShipBob over the last few years, and we look forward to continuing to grow the partnership.”
Matt Dryfhout, Founder & CEO of BAKblade
Warehousing & fulfillment is changing — are you?
The COVID-19 pandemic fast-tracked the ecommerce industry’s growth, and forced all its players to drastically adapt their fulfillment strategy.
In the fallout, 3PLs are rising to the occasion and offering smaller brands a new level of agility, enabling them to seriously compete with the likes of Amazon in fulfillment and delivery speed.
With the help of 3PLs, smaller retailers and DTC brands are accessing cutting edge technologies that optimize their supply chain management and delight customers.
If you haven’t already, it’s time to get up to speed on the latest in fulfillment and improve warehousing in general with smart warehousing and automation technologies such as ShipBob’s warehouse as a service solution.
How ShipBob is leading the charge in modern warehousing & fulfillment
When you partner with ShipBob, ShipBob’s warehouses are your warehouses. From strategically placed fulfillment centers in the US to an ever-expanding array of international locations, you’ll gain access to a wide network of distribution centers to meet customer demand.
In addition to our growing fulfillment distribution network, ShipBob combines logistics expertise with proprietary warehouse management system (or WMS) to help you scale your business more efficiently, with less work.
As a 3PL distribution partner, ShipBob offers optimized suggestions as to which warehouse your goods need to be stored to improve supply chain efficiency. Then, the moment an order is placed, it is automatically sent to our warehouses at locations closest to the customer.
ShipBob’s ecommerce warehousing solution then manages order processing, fulfillment, and shipping so that your team can focus on the more strategic business goals. It even tracks real-time inventory levels and provides full visibility into warehousing costs, transit times, and other analytics through a single dashboard.
Distributed warehousing FAQs
Here are answers to the top questions about distributed warehousing.
What is distribution warehousing?
Distributed warehousing is an approach to ecommerce where a business operates multiple, strategically-located fulfillment and/or distribution centers in order to reduce shipping times, lower average shipping costs, and meet customer expectations more effectively.
What is warehousing and distribution?
Warehousing encompasses all the processes involved in storing inventory in warehouses, fulfilling orders, and shipping them to end customers. Distribution refers to the logistics of allocating inventory across channels and locations as well as to end customers.
Should I use a distributed warehouse model?
While every business is unique, the distributed warehouse model offers you the bandwidth to meet the fast shipping demand of customers at lower fulfillment costs. Smaller ecommerce brands can partner with a 3PL to achieve distributed warehousing without harming their bottom line.