While nothing can travel faster than the speed of light, Amazon is pushing for the business equivalent with two-day, one-day and – in some zip codes – same-day delivery. If the majority of your customers expect you to match that standard, you need national fulfillment services.
It’s common sense: the closer your warehouse is to your customers, the faster you can get product into their hands. But the U.S. is a big country. If you’re shipping from just one warehouse – even if it’s centrally located – it’s difficult to ensure two-day delivery to every area.
Nevertheless, a single fulfillment center may work fine for you if the products you sell are unique or hard to find (although imitators may make that advantage short-lived). Ditto if you have a premium brand. And there are still buyers who don’t mind waiting longer for their orders if they can get free shipping.
In determining whether to add a distribution center to your network, you need to consider how much of your market falls into the “I can wait” category, versus the “gotta’ have it now” camp.
Other advantages of national fulfillment services
Along with faster delivery, there are other reasons to expand your distribution network.
- Reduced shipping costs. If you go from one distribution center to two or three, you can basically eliminate the higher-distance, higher-cost shipping zones of the parcel carriers. Even after factoring in the additional facility, labor, inbound shipping and inventory costs, adding one or two distribution centers can save you 5% to as much as 30%.
- Lower risk of business interruption. There is risk in having just one fulfillment center for national fulfillment services. What happens if your warehouse operations are temporarily shut down by an earthquake, hurricane, winter storm, fire or even a pandemic like the one we’re living through now? With one facility, you have no backup and won’t be able to fill your orders. With multiple facilities, your customers will still get their goods, even if it takes a little longer.
So how many fulfillment warehouses do you really need? There’s no one right answer for every company. In addition to the considerations just discussed, you have to look at other variables, like your SKU count.
More SKUs equal greater complexity, and greater complexity equals higher costs. How much of each item should you keep at each location? How quickly does each item sell? How much safety stock do you need to keep on hand?
Is your business at a point where you have the historical data, order volumes, systems and revenue growth to justify expansion? And, if so, do you have the capital you need to pull it off?
Outsourcing nationwide fulfillment taps into existing expertise and infrastructure
One way to get the advantages of national fulfillment services without spending your company’s capital on additional infrastructure, equipment and staff is to use a third-party logistics and fulfillment company. Outsourcing lets you get up and running from a new location quickly, and you’ll only pay for the space and services you use. If business temporarily slows, you’ll pay less. If sales suddenly spike, your 3PL will have the resources on hand to take the higher order volume in stride.
That’s all well and good, you’re thinking. But we have more control over order fulfillment if we keep it in-house.
Not necessarily. Businesses often overlook or tolerate their own inefficiencies because they aren’t sure of the underlying causes or don’t know how to address them. If they pay a fulfillment specialist to do the job, they can demand – and get – the best possible service. Warehouse fulfillment KPIs are established up front and reported regularly. And technology lets you monitor inventory and order status online. So you get the benefits of using an expert partner, without losing control.
If you’re considering expanding your distribution, or are just wondering if your order fulfillment services are good enough, get in touch with Amware Fulfillment. With 11 fulfillment facilities nationwide for 1–2 day delivery to 98% of the U.S., we help companies scale fulfillment operations through every stage of their growth cycle.