Complete this sentence: We’re going to need a bigger ______.
Not surprisingly, most movie buffs’ automatic response is “boat.”
If you sell online and want to prepare your business for exponential growth, the best answer might be: “We’re going to need a bigger order fulfillment warehouse.”
Here are five scenarios that strongly suggest you may have outgrown your current warehouse or fulfillment network:
1. When Your Warehousing KPIs Begin to Sink
Even the best-operated warehouses will occasionally miss a shipping deadline or ship the wrong item. However, if these lapses suddenly begin to happen with greater frequency, it could be a sign that your existing order fulfillment warehouse is either out of its depth or doesn’t have the sea legs to accommodate the growing order volumes you’re throwing at it.
In some cases, a collaborative meeting with that facility’s management may be enough to right the ship. However, if your discussion fails to do the trick, it’s probably time to consider taking your fulfillment business elsewhere – and to think bigger rather than smaller.
2. When a Local or Regional Warehousing Strategy is Insufficient to Meet Customers’ Service Level Expectations
Amware just completed research with mid-tier online sellers and learned that about 50 percent of the 100 companies surveyed fulfilled orders from a single distribution center. That may not cut it if you’re under pressure to offer shorter shipping times or to reduce your zone-to-zone parcel expenses.
If your single DC is run by a 3PL provider that offers nationwide fulfillment capabilities, you can easily and quickly expand. But if you run your own facility or work with a partner that can’t scale, fulfillment operations will become a barrier to growth.
3. When You’re Adding More Sales Channels
Whether you’re expanding your online channels or making your products available at more brick-and-mortar retail locations, adding a new sales channel is more than a matter of simply increasing your inventory levels and square footage.
Ultimately, everything from your storage and picking configurations to your packaging and compliance requirements become more complex in an omni-channel world. And some fulfillment centers are far better-equipped to handle this complexity than others. It’s always important to do a pre-expansion pulse check to ensure that your current order fulfillment warehouse still has enough physical capacity and operational expertise to navigate your newer and more complex waters – and to seek help if the answer is no.
4. When Your Parcel Costs Get Out of Control
We’ve said it before and we’ll say it again. Smaller isn’t better when it comes to negotiating rates or better pick-up times with Fed Ex, UPS or even the USPS.
On your own or through a local warehouse partner, you may not have the volume leverage to negotiate good parcel rates. But by partnering with a national warehousing and fulfillment 3PL, you gain the benefits of that company’s aggregate parcel spend, which will almost always equate to significantly better discounts for you.
5. When You Need to Invest in Your Fulfillment Infrastructure
Fulfillment is, by its very nature, a hands-on, labor-intensive process. However, as online companies grow, the role of robust technologies like WMSs and automated equipment will become increasingly essential in order to control labor costs, inventory, and even order quality.
That means investing money if you run your own fulfillment operations, or partnering with a 3PL that either has the automated systems in place or is willing to invest in them on your behalf. If you believe that fulfillment is a core competency of your business, then investing your capital to improve your internal operations makes sense. If not, it may be wiser to partner with a fulfillment company that can provide the infrastructure and expertise to support your growth.
Take Our Ten-Question Quiz
There are many more scenarios we could add to this discussion. But we’ve flapped our “jaws” enough. If you’d like to take a deeper dive into this subject, we encourage you to take our 10-question quiz: “Can Your Fulfillment Operations Scale?”
Here’s hoping all of you have a happy, healthy, and shark-free 4th of July!
