What Is Multi-Location Fulfillment?
Many e-commerce businesses look to order fulfillment as an area in which they can possibly excel over their competition. Having the ability to ship to a consumer faster and for cheaper rates makes a real difference in determining customer retention and loyalty.
One option that becomes attractive to businesses as they grow is multi-location order fulfillment. What this involves is building additional distributions centers in closer proximity to the customer base so shipping becomes more efficient. Like any other business decision, there are advantages and disadvantages of multi-purpose order fulfillment centers. We discuss some of the pros and cons of multi-location order fulfillment below.
Additional Costs for Multi Location Order Fulfillment
Before deciding on whether or not adding another multi location order fulfillment center is right for your business, one of the first factors you must consider is the cost. Multi-location order fulfillment costs can put a damper on your expansion plans if they aren’t managed properly. You’re likely considering including another distribution center because your business is expanding, which means more revenue. But you must be careful in balancing the numbers so you don’t end up losing when opening another fulfillment center.
Technology
Multi-location order fulfillment means you need the technology that can effectively structure a cohesive system between all centers. There will surely be an initial cost to making this work. There will also be ongoing IT costs to maintain the system that’s been developed. The goal is to utilize the technology so it is an advantage to you and your customers. Knowing what that will cost is crucial to determining just how far you can take your technology.
Transportation
One big advantage to multiple order fulfillment locations is that you get to save money on shipping costs. However, you must be careful because your inbound shipping costs actually increase. You’ll now be bringing in inventory to multiple locations. This means each location will have specific shipments, which inevitably increases the cost of transport.
Shipping
As mentioned, shipping is why you want to open multiple distribution centers in the first place. The cost savings associated with being in closer proximity to your customers can make a positive difference in your bottom line and for your customer relations. The key to ensuring that you take full advantage of these savings is being thorough with your inventory. You want to limit the situations in which a product is only available at a warehouse that is furthest away from its shipping destination. For those companies that are just starting out, managing inventory can be a bit challenging. Getting inventory under control quickly is a must and makes a big difference in how much your business actually benefits from adding multiple fulfillment locations.
SKU/Inventory
When adding another fulfillment location, the cost of managing inventory must be taken into account. This is in regards to the manpower needed to correctly run the SKUs and balance the inventory. There is also technology involved in managing inventory that must be accounted for. Businesses shipping hundreds of SKUs are particularly susceptible to making mistakes and need to keep the inventory in line to avoid any unnecessary losses.
Advantages of Multi-Location Order Fulfillment
Like with anything else in life, there are definitely good sides and bad sides to multi-location order fulfillment. Let’s start with the advantages.
Reduced Shipping Costs
Simply put, saving on shipping costs is the main reason any business would consider multi-location order fulfillment. Being in closer proximity to your customers means fewer dollars spent on transportation and less time on the road for your shipping partners overall.
Faster Delivery
Right behind the fact that your business will be saving on shipping costs is the fact that it will be able to deliver packages to customers more quickly. This is a huge advantage as customers today expect nearly instant deliveries at little or no cost. Setting up in close proximity means you can match customer expectations and get their deliveries out within a speedier time frame.
Accuracy in Fulfillment
Organizing your industry across multiple locations presents your business with the opportunity to be more accurate in its deliveries. Your shipping partner should have a system in place that suggests from which location each package should be shipped. Higher accuracy means a higher percentage of happy customers.
Disadvantages of Multi-Location Fulfillment
Can’t Escape Fixed Costs
One of the biggest downsides of multi-location fulfillment is the fixed costs. There’s nothing you can do to escape this. The cost of adding another physical location and the resources it takes to maintain that location is a reality you’ll have to deal with. Handling costs, energy costs, labor, and technology are all financial challenges that must be considered.
Inventory Management
It’s difficult enough creating a system that effectively manages the inventory for one distribution center. Opening up another location only magnifies that challenge. You’ll need to be able to forecast product purchasing patterns to ensure that the right products are at the right distribution center ready to be shipped.
Cost of Infrastructure
We touched earlier on the importance of creating the right fulfillment infrastructure that will allow your business to successfully expand. This takes knowledge and application of technology and the understanding of how to design physical structure for optimal output. Setting up these systems can come with a hefty price tag. You need to assess your business needs before settling on any one multi-location fulfillment order fulfillment infrastructure.
Get Multi-Location Fulfillment with APS Fulfillment, Inc.
The best solution to taking advantage of all the pros and dealing with all the cons is working with established multi-location order fulfillment companies. APS Fulfillment, Inc. is ready to help you through all of the challenges and can ensure your business thrives once it does make the decision to add another distribution location.
APS Fulfillment, Inc. is a leading e-commerce order fulfillment service company that operates out of Miami, Florida. Our integrative and careful approach will ensure that our clients’ products will get to their destination quickly, affordably, and in top condition. We’ve stored, sorted, delivered, and quality-assured products of all shapes and sizes for all kinds of companies across a wide variety of industries. Contact us by phone at 954-582-7450 or reach out to us by e-mail at [email protected] for more ways our fulfillment services can support your e-commerce business.
