Distributed Inventory is an eCommerce fulfillment strategy that involves outsourcing to a single 3PL fulfillment company with multiple distribution centers. When a customer places an order online, the seller’s 3PL partner taps its warehouse that has the closest proximity to the buyer to handle product delivery.
Partnering with a fulfillment center for distributed inventory services effectively maximizes profit by reducing storage and shipping costs. This is especially applicable to retailers who have a broader target audience in terms of geographical reach.
When you’re outsourcing order fulfillment to a 3PL, it’s common for our potential prospects to think “multiple warehouses mean more complex distribution.” While that is often the thought process, the truth of the matter is this: Using a single 3PL with multiple locations can be extremely beneficial. In this article, we’ll explore the advantages you need to know.
When it comes to choosing a fulfillment center location, one of the most important considerations is if it’s near your customers. Since your customers likely don’t all reside in a single geographic region, using one fulfillment center can make it nearly impossible to efficiently reach the majority of people who buy from you.
Instead, using distributed inventory means each time an order is placed on your store, the distribution center closest to that customer will automatically fulfill the order.
What is distributed inventory?
Distributed inventory is the splitting of physical goods across different fulfillment centers that are strategically chosen to keep inventory closer to the end customer. This way, it is nearby when it’s ready to be shipped to achieve a lower transit time and cheaper shipping costs.
Instead of using a single fulfillment center and centralizing inventory, distributed inventory lets a merchant leverage the locations that are most optimal for the business, enabling each order to be routed to and shipped from the closest fulfillment center.
4 reasons to distribute your inventory across multiple fulfillment centers
Learn the top benefits of splitting your product quantities into fulfillment warehouses in different regions (and how to know which locations are the best for your brand). Note: While you can do this with an on-demand warehousing solution, there are many risks. A professional fulfillment company that actually runs their own fulfillment centers is best.
If you’re using a single fulfillment center and centralizing your inventory, distributed inventory is what will allow to start leveraging multiple locations that a large 3PL fulfillment center like Thill Inc. can provide. There’s a long list of benefits – we’ll cover the most important next.
(1) Start reducing shipping costs
Initially, you’ll likely need to spend more money on inventory to get it to different fulfillment centers. While you have that initial expense, there’s a lost of different ways you can save on cost.
Think about it – if you’re shipping from just one warehouse, it can take a long time to reach your end customer. Here in 2022, customers want their orders fast. If you’re not delivering a fast shipping experience to potential customers, you can bet your bottom dollar that you’re leaving money on the table. Even worse, you’re losing customers that would have been repeat business. Additionally, high shipping costs are one of the top reasons for shopping cart abandonment.
Having stored inventory near your customers is going to help your company lower shipping costs, the travel distance is a lot shorter in that scenario.It is almost always less expensive to ship an order 30 miles than 3,000 miles. Of course, having access to a 3PL’s network of ecommerce fulfillment centers lets you use multiple facilities without paying for the infrastructure, staff, and equipment yourself.
(2) Get orders shipped out quicker
These days, customers expect a quick turnaround. In fact, many of them expect a 2 day turn around – this is why having multiple warehousing and storage locations is a huge benefit. This is what allows us to help our clients reduce delivery times.
If you use fulfillment centers in New York or Houston, you can reach a large amount of the population in different areas of the country. It is easy to get the package delivered the same day to people who live in these cities, because the inventory is already close by. If your inventory is only in one of those cities, say, Los Angeles, then imagine how long it will take a package to arrive to your customers who live on the East Coast.
Ultimately, the quicker a customer gets their order, the happier they are. If you can offer a quick turnaround time – without using expedited shipping and it costing an arm and leg – you will likely see a surge in sales.
(3) Helps with risk management
Splitting inventory across warehouses helps you be prepared and have options in the event that your orders can’t leave a particular fulfillment center. A common example of a delivery exception is bad weather that delays an order.
There are many catastrophes and natural disasters that prevent shipping carriers from making it to the fulfillment center or cause delays while in transit. At some point, a flood, wildfire, hurricane, earthquake, snow storm, or other force in nature will likely impact some of your orders.
Though much less likely, there are possibilities of other disasters that affect what’s inside a warehouse, such as an electrical fire. When you split your inventory across geographic areas, you will have backup inventory in other locations. Whether to prevent delays or lost stock, it can be better to be safe than sorry.
(4) High order volume capabilities
Many retailers struggle with trying to scale their business due to shipping and warehousing costs. If is very expensive to store your own inventory. That doesn’t include what you’re paying out for your warehouse, staff, equipment, utilities, and everything in between. The most cost-effective solution is to run operations from multiple fulfillment centers. Taking advantage of strategically located warehouses is a smart way to manage inventory since best-selling items can be stored and shipped from additional warehouses, while less popular products do not have to collect dust at company expense.
Online stores with high volume orders can also get access to better inventory management as 3PLs with multiple warehouses typically have their own software for transparency and efficiency purposes.
In order to be successful in the competitive landscape of ecommerce, many ecommerce companies need to distribute their inventory to multiple warehouses. A good outsourced order fulfillment provider can help you determine what fulfillment center locations will be best for your business. We have fulfillment centers throughout the United States to help you reach your customers quicker and save money on shipping.
Talk to one of our fulfillment experts today
Thill Inc. is one of the most experienced retail fulfillment partners for direct-to-consumer brands and companies. With a full fleet of fulfillment centers, best-in-class technology, and advanced analytics to help you make better business decisions, we help you optimize your supply chain while providing you with the best possible customer care in the industry.