Distributed Inventory: When Should You Consider Splitting Inventory Across Multiple Fulfillment Centers?

Reading time:  4 min 20s 

For most ecommerce retailers, having a fulfillment center, even if it’s just one, will almost always be better than self-fulfillment. But then again, you’ll find that one warehouse is almost always insufficient.

Established 3PL providers like ZhenHub offers distributed inventory service that makes it possible to split your inventory across multiple warehouses and fulfillment centers. This service helps you compete against the biggest retailers easily, without the need to build massive warehouses and fulfillment infrastructure.

 

Why distributed inventory?

Distributing inventory makes it easier to ship out customer orders from fulfillment centers nearest to them. ZhenHub boasts multiple strategically-located warehouses across the US, and in seven other countries in four different continents. At a time when most consumers want fast delivery at the lowest possible costs, this greatly helps to reduce transit time and shipping costs.

This service also makes 2-day shipping across the US much more realistic.

While most ecommerce businesses stand to gain a lot from distributing inventory across multiple fulfillment centers, how exactly can you determine whether this makes sense for your business?

This guide explains everything there is to know.

 

When should you consider distributed inventory?

If you’re running an online store, you know that developing good ecommerce strategies will be key to your success. Key among these will be your ecommerce fulfillment strategy.

You’ll have to critically access your current business needs alongside your future plans. These will be important to help your business stay relevant and successful.

Considering these? Is right now a good time for you to switch to a 3PL provider so you can benefit from the added value that comes with distributed inventory? Below are some of the indicators you should watch out for;

 

  1. You’re consistently shipping out high-volume orders

When you’re starting and have only just begun receiving and sending out a couple of orders, you’ll most likely be okay with just a single warehouse. Using multiple warehouses at this point, may not make so much business sense, considering the costs.

However, if you’ve grown to a point where you’re now sending out a high volume of orders to many customers, doing this from a single warehouse may make shipping costs higher than they should be.

By distributing inventory across multiple warehouses, you can easily store popular products closer to your customers to significantly reduce logistic costs as well as transit time when these orders ship out. Think about it, sending a package over a 100 miles will most likely be cheaper than sending it out over a thousand miles.

 

  1. You want to ship orders fast and at low costs

Consumer delivery expectations are at an all-time high but to stay relevant and successful, it’s important to meet your customers’ demands for fast and affordable delivery.

 

Reasons for Shopping Carts Abandonment During Checkout

Image Credit: Baymard

 

According to Baymard, 18% of abandoned carts are down to slow delivery.

A much higher 50% of the total abandoned carts are also due to unexpected extra costs. By distributing inventory across multiple fulfillment centers, customers can easily have their orders fulfilled from the nearest warehouses to their locations. This goes a long way to help reduce delivery times and costs simultaneously.

ZhenHub is well-positioned to help ecommerce retailers achieve these. With Amazon’s two-day shipping now the standard for most retailers, ZhenHub is in prime position to help make standard two-day shipping possible and affordable on a consistent basis.

 

  1. You’re shipping orders to customers across different regions

If all of your customers are concentrated in a particular geographical region, then having a fulfillment center located very close to your customer hub makes sense.

There’s however a challenge when your customers are spread across different areas. This is when distributed inventory makes sense so that customer orders can be fulfilled from the warehouses nearest to each customer.

 

Here’s a scenario;

Take for instance you’re selling religious paraphernalia to a particular religious sect. It’s expected that your highest orders would come from areas where people of this sect are most concentrated.

The case will be different when you’re selling a product that’s needed by the general public, say, for instance, kitchenware. While it may become challenging to fulfill all orders from your single warehouse location, outsourcing order fulfillment to a reliable 3PL like ZhenHub that gives room for distributed inventory would make order fulfillment much faster, cheaper, and efficient.

  1. You’re shipping out heavy products

Fulfilling oversized product orders come with significant costs challenges.

Early 2019, USPS adopted zone-based pricing for both heavy and lightweight packages sent via the First Class Mail package, so every order you send out now will be affected by distance, regardless of the weight. But then, while shipping heavy items across a long distance will cost you more, you’ll find out that shipping these same heavy goods across shorter distances will cost far less since the shipping zones will be significantly reduced.

 

Bottom Line

Deciding to split inventory and fulfill orders from multiple warehouses come with lots of benefits and advantages. It’s bound to help you and your customers save valuable time and money.

But there are still a lot of things to consider as explained above.

A critical consideration of the above factors will help you determine whether the additional costs of warehousing, the costs of transporting products to multiple fulfillment centers and the stock-keeping units you have would be truly worth the backup inventory, added speed and reduction in shipping costs that come with inventory distribution.

 

Finally, if you’re considering a 3PL provider for distributed inventory, it has to be one that will give you access to the right technology to make multi-warehouse order fulfillment a success.

ZhenHub is designed to such that multiple systems can easily integrate so you can easily handle orders across a variety of channels and to ensure that customer orders are forwarded to the appropriate distribution centers with regards to inventory and shipping destination.

You may want to try out ZhenHub to see what value distributed inventory can make to your order fulfillment and overall business success.

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If you need assistance with reducing logistics costs, you can reach out to our specialists – hello(a)zhenhub.com or submit an enquiry here.