Whether you manage your fulfillment operations on your own or if you make use of a 3rd party fulfillment center, there will come a time when you will question whether setting up an additional center is a good idea. Making this sort of decision is not easy since getting additional fulfillment centers can start making more or less sense depending on numerous factors, market niches, or other forces. Take the following considerations into account when weighing the situation in order to get a better sense of the best direction to take.
What Are the Benefits of More Than One Order Fulfillment Center?
The two most significant benefits of having multiple order fulfillment centers are improved shipping times and reduced shipping costs. While delivering to the areas in the immediate vicinity of your fulfillment center is fast and easy, the time it takes will naturally go up the further away the customer is. Furthermore, longer delivery times mean more opportunities for delays and unexpected complications. Since shipping costs are also affected by distance, these expenses can add up unexpectedly fast.
In other words, while a single fulfillment center is often all you need when starting out, by the time you start getting customers on a national scale, cost management and customer satisfaction may require you to set up new fulfillment center operations.
Factors to Consider When Debating Multi-Warehouse Fulfillment Centers
Unfortunately, the decision of whether to open additional fulfillment centers is not just about saving money and improving delivery speed. There is a very real cost-benefit analysis that needs to be done based on the nature and scope of your current fulfillment center. Here are some key points to keep in mind when it comes time to formally make your choice.
SKU Volume
When you set up a second fulfillment center location, you naturally need to keep it stocked with enough product to meet customer demand. Depending on the amount of different products your business offers, this can add up very quickly. You may find yourself in a situation where the savings obtained from the extra fulfillment center are more than offset but there are additional labor, overhead, and storage costs. It may be necessary to only stock the most in-demand items in your second fulfillment center locations as a way to manage costs more easily.
Order Volume
When deciding whether or not to get an additional fulfillment center, take a look at the orders you are currently shipping out and sort them by location. By examining the different shipping zones at play and how many orders go to each one, you can determine if the amount of customers who could benefit from the additional center justifies the expenses and manpower that will go into its establishment.
Order Destinations
Similar to the above point, you need to keep in mind where your orders are getting sent when deciding whether or not to expand. If you send a large volume of orders out to distant markets but only a small number to any individual region, it may not be cost-effective to set up another fulfillment center since the benefits of being closer will not be as strong. There can be some exceptions to this when dealing internationally, but it will depend on your individual situation.
Technological Ability
Technology plays a huge role in order fulfillment services from warehouse management systems to real-time delivery tracking and order processing. Your existing web of information and technology will become more layered and complex with the addition of a new fulfillment center. It is therefore important to make sure your existing infrastructure is able to support multi-warehouse operations.
Look to APS for Third-Party Fulfillment Services
APS Fulfillment Inc. is a leading order fulfillment service company that operates out of Miami, Florida. Our integrative approach tackles supply chain management, real-time inventory management, warehousing services, shipping, and everything else needed to ensure your goods get to their destination. 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 by email at [email protected] for more ways third-party logistics services can support and grow your business.
