With the rise in eCommerce has come an increased consumer expectation for faster order fulfillment. Though this demand can vary by product type, many online shoppers now expect the goods they purchase online nearly as quickly as if they’d bought them in a store. If your business is under pressure from customers to improve the speed of order fulfillment, you may need to change your fulfillment model.
Will More Warehouses Facilitate Faster Order Fulfillment?
Online sellers often hesitate to expand to a multi-facility fulfillment center model because they believe running more facilities unnecessarily drives up operating costs. This concern could be true – but you need to examine it in context. Realistically, the benefits of multiple warehouses often offset any additional cost. Some of these benefits include:
- Lower shipping costs. Parcel carriers rely on zone-based shipping models to calculate parcel rates. Dividing inventory between multiple facilities closer to big markets will significantly reduce parcel shipping costs compared to shipping nationally from one centralized fulfillment center.
- Faster order fulfillment to key markets. Having more than one warehouse means that you can strategically locate inventory closer to target markets, ultimately shortening shipping times and minimizing risk.
- Gaining competitive advantage. If you sell a commodity product, faster shipping speeds and lower parcel costs can help to give you an edge over competitors.
- Compliance with Amazon’s Seller-Fulfilled Prime rules. For eCommerce businesses that sell through Amazon but fulfill their own orders, faster order fulfillment is a must-have. Failing to meet strict shipping windows can cause a seller to lose its Prime shipping status, resulting in lost sales.
For any eCommerce business that needs to meet the growing demand for speedy fulfillment, distributing inventory across two or more strategically located warehouses could be your solution. Determining the correct number of warehouses can be challenging but worth the effort.
How much speed do we need?
Not all businesses need to worry about faster order fulfillment. Some eTailers can get away with fulfilling orders in 5–7 days if their products have certain characteristics. Here are some questions you can ask yourself to determine whether or not you need to hit the gas on order fulfillment.
How many SKUs do we have?
The more stock-keeping units (SKUs) you have in your product line, the more complicated it becomes to distribute your inventory across multiple warehouses to increase fulfillment speed. For example, if you sell 20 separate SKUs, it’s simple to stock them in several facilities. If you sell 2,000 individual SKUs, that’s more of a challenge. Do you create mirror inventories at each facility? This strategy could be quite expensive. But if you split the SKUs across multiple warehouses, you could end up fulfilling a multi-SKU order from different facilities. Not efficient.
The challenge of operating a multi-DC network with a large SKU count is certainly doable, but you’ll need excellent inventory management and forecasting capabilities to determine the best inventory strategy.
Do we have a niche product?
Like a skincare line with unique ingredients, is your website the only place your customers can find a product like yours? Or, can they go online and buy something similar from a competitor and have it delivered in a day or two? If the answer is the former, your need for speed decreases considerably. Your customers may be more likely to wait a few extra days to get a product they can’t get elsewhere.
If your product is more of a commodity, the issue of business continuity also becomes relevant. Multiple warehouses not only gets your product there faster, it provides a backup if weather or some other disaster prevents shipping for a few days or more. Customers of brands that sell commodity products will look elsewhere if you can’t ship – and they may never return.
Are we getting complaints about shipping speed?
If customers begin clamoring for faster order fulfillment in two days or less you have little choice but to make it happen. When your biggest repeat complaints are about slow shipping, it’s time to explore options for expanding your warehouse footprint and putting inventory closer to your customer base.
Do we need to scale to support sales growth?
You don’t want your operations engine to slow down your sales engine, so the ability to scale fulfillment operations is important. But pushing a higher and higher volume of orders through a single warehouse may not be feasible. You could expand in that same footprint, but do you really want to invest in expansion without, at the same time, gaining the advantage of faster service to some customers?
A fulfillment 3PL with a national fulfillment network can make this scale question moot.
What’s the right warehouse network strategy for your brand?
In a recent episode of the Unboxing Fulfillment podcast, Jeff Haushalter, partner at Chicago Consulting, said that the pandemic slowed the desire of many brands to win the race for faster order fulfillment. Today, while speed remains critically important, profitability tends to win out. Depending on the characteristics we’ve reviewed in this article, expansion to multiple DCs could enhance or detract from profits.
To determine what’s right for you, reach out to Amware Fulfillment. If you need to expand warehouse locations, we have fulfillment centers across six U.S. campuses—Atlanta, Chicago, Dallas, Los Angeles, Phoenix, and New Jersey. Our fulfillment experts can work with you to determine the fulfillment network that makes the most sense for your brand.
