Why e-commerce retailers must implement a multiple facility shipping model

by Milton Amaya | eCommerce, eCommerce Fulfillment, eCommerce Strategy

The world of e-commerce is in a constant state of flux. The age of consumerism is here, and customers have numerous choices of how and where to buy products. Technology has greatly influenced the e-commerce industry, creating a link between online purchasing and order fulfillment.

With the emergence of faster, smarter and more flexible e-commerce business models, online retailers can now operate and reach customers on a global scale. However, such scale comes with a lot of challenges, especially in the area of order fulfillment.

With the “Amazonification” of the e-commerce business model and the rise in consumer demand for fast, reliable delivery of products, e-commerce retailers must look for ways to effectively fulfill customers’ orders.

One of the best ways to do this is by leveraging multiple distribution facilities. To help you get started, let’s look at why you should consider having multiple shipping facilities for your e-commerce retail business.

Minimize costs

For most e-commerce retail businesses, it’s more cost-effective to fulfill orders from multiple distribution centers. When you utilize multiple order fulfillment facilities situated in strategic locations, you reduce the cost associated with shipping inventory from warehouses to its last mile consumer destination.

This also helps speed up and reduce the cost of order fulfillment since inventory can be requisitioned and sent from the facility that’s closest to the customer.

Mitigate risk

With multiple facilities, e-commerce businesses can mitigate the risk associated with having all their inventory in one location. Disaster can strike at any time and cripple all order fulfillment operations if you happen to operate from only one area.

Spreading inventory across multiple shipping facilities reduces the risk of lost products and profits (in the event of a disaster) and helps ensure that you can still fulfill customer demands, no matter what happens.

Zone charges

Since carriers use zones to calculate shipping rates, it’s cost-effective for e-commerce retailers to fulfill orders from a facility in the same zone as the customer. As such, having multiple facilities in different shipping zones can help reduce total shipping costs.

Weight charges

For e-commerce retailers selling products with higher than average order weight, having multiple distribution facilities in strategic locations can drastically reduce shipping costs. The heavier your products, the more you have to pay to ship them to customers. By keeping your inventory in multiple shipping facilities, you can fulfill orders from a facility that’s closest to the customer, thereby reducing shipping costs.

Order volume is increasing

With the growth of the online shopping industry, e-commerce retailers are experiencing increased order volumes. If the average number of orders you ship every month is increasing, you may need more shipping facilities. However, you should first analyze average order volume by destination or by shipping zone to determine if the use of multiple shipping facilities is your best move.

Competitors utilize technology to support multiple facilities

Aside from increasing the speed of order fulfillment and decreasing operational and logistics cost, implementing a multiple facility shipping model is a great first step towards scaling and growing your e-commerce retail business. However, you must bear in mind the challenges that come with managing and facilitating multi-warehouse order fulfillment.

Your competitors are utilizing technology to support multiple facilities. Combing multi-channel selling and multi-warehouse distribution is a tall order that only the best-in-class technology/integrated solution can handle. You need the right technology to properly collate the streams of orders coming from various channels and ensure that the orders are sent to the right distribution center based on shipping destination and inventory levels.

As an e-commerce retailer, you should think more and more about maintaining multiple shipping facilities. Not only is it vital for you to control skyrocketing zone-related transportation expenses, but you’ll also need multiple fulfillment centers to provide the rapid response your online customers increasingly expect.