Splitting your inventory, or distributing inventory, is a strategic business concept that refers to spreading out your inventory across multiple third party logistics (3PL) fulfillment centers to keep your products closer to your customers.
Inventory distribution offers many advantages. When you work with a 3PL warehouse that has several locations, you can match the service of the largest retailers without diving into your budget to build your own infrastructure. This helps in reducing the order transit time and distance and save on shipping costs.
3PL warehouses factor in various situations to build their warehouses which helps any business who uses their services by splitting inventory. Below, we explain a few important reasons why certain businesses should split their inventory and what benefits it provides.
When to use multiple 3PL fulfillment centers
There are various reasons for why a business would split there inventory across multiple order fulfillment centers.
Drive down shipping costs and deliver orders faster It's quite common that customers exist across multiple time zones, and you may receive orders from any of those international customers. The shipping fees vary with distance: shipping to customers in multiple cities from a single location will attract zonal and national level shipping fees. However, with the help of distributed inventory, you will obtain a reliable infrastructure across your supply chain. Shipping from a facility that is near your customers reduces transit time. Reduced shipping distances will attract local or zonal level shipping fees, making it the most cost-effective option.
Tap into newer markets By using multiple 3PL fulfillment centers across various regions, you get the opportunity to tap into newer markets. Let's say your inventory is currently available in New Jersey; it is highly likely that you would have an established customer base in the north-eastern region of the US. Now, when you store your products in Texas, you can start building brand awareness in the south. It will help you target potential customers who are based in different regions of the country.
Ship high volume of orders When starting a business, it is likely too expensive to use multiple fulfillment centers, especially if your products are small and don't require excess storage space. However, once your business grows enough to a point where the shipping costs exceed the cost of additional warehouse space, then it may be time to consider splitting your inventory across various fulfillment centers.
By utilizing multiple e-commerce warehouses, you can strategically select the locations that are near your customers. Storing inventory closer to your customers helps to reduce the shipping costs, as orders will travel a shorter distance when shipped.
When splitting inventory, you should also limit to sending your most popular or best-selling products to additional warehouses, rather than storing inventory for every single product you sell. This way, your less popular items won't just sit and take up warehouse space without selling quickly, and you won’t be stuck paying for storage.
Consistently offer affordable 2-day shipping
Expecting fast delivery times appears to be the norm for today's average online consumer. By using multiple fulfillment warehouses, you can significantly and affordably reduce last-mile delivery times so that whenever a customer places an order, that order will be fulfilled by a warehouse location closest to them.
Splitting your inventory allows you to compete with major retailers such as Amazon and their free 2-day Prime delivery service to meet customer expectations with convenient and affordable delivery options.
You have heavyweight products and orders
Shipping distances have greatly influenced shipping price ever since the January 2019 update to zone-based pricing for packages sent via USPS First Class Mail. Heavier products would benefit from less transit and shipping time to reduce shipping cost, which means it would be smarter to store your heavier items closer to your consumers.
Your consumers are spread out across various geographical regions
When selecting the locations for 3PL fulfillment centers, it ultimately comes down to where your customers are based. Orders are delivered more quickly and at less cost when your packages have to travel less distance. To justify an additional warehouse, you must find out the proportion of customers who would benefit from the shorter distance.
Knowing your consumer base and where they're located will help you select the right 3PL warehouse location to fulfill your orders.
Rank higher in marketplace search results
When a buyer searches for any item, the online marketplace usually displays the product results as per highest to lowest ranking. This ranking algorithm always decides the position in which your product will appear. One of the heaviest weighted parameters for product ranking is the speed of order delivery to the consumer. So, when you distribute your inventory across multiple fulfillment centers by using the warehouses of a 3PL service provider, you increase your product visibility and consequently increase your overall sales.
Minimize the risk in case of emergencies
It is always better to be safe than sorry for delaying your orders! In case of a catastrophic event such as a natural calamity, splitting inventory may save your business. It allows you to minimize losses, restricting it to the affected fulfillment center. Even if some of your merchandise is compromised, you will always have multiple back-ups available at the other warehouses of your 3PL logistics partner.
Things to consider when choosing 3PL companies to split your inventory
Effectively and efficiently distributing your inventory is tricky, and various factors need to be considered. Strategically planning and distributing your inventory involves consideration of the following:
Analyzing the most demanding zone
With the help of past order history, analyzing the regions where most of your orders are coming from will help you plan your inventory distribution according to these high-demand zones.
Identifying heavyweight products
Identify your heavier products and distribute them to fulfillment centers that are closest to your target consumer base.
Identifying the high-selling SKUs
Identifying your most popular or best-selling products can help you identify which SKUs to send to other 3PL warehouses for inventory storage and order fulfillment. If you are starting fresh and don't have sales data to identify top performers, then distributing inventory of your flagship products is the best option.
Deep diving into seller panels
Marketplaces like Amazon and eBay or any e-commerce website have seller panels that can provide you with performance reports. You can analyze those reports to identify the most prominent zones to store your inventory.
Analyzing the costs
It's also important to consider the cost of splitting your inventory. This may require visualizing your customers' delivery demographic for a better idea of how to distribute your inventory across the fulfillment centers that ship your orders for a specified period and the total shipping costs you incurred.
Utilizing 3PL fulfillment warehouses to help split your inventory may be a good business investment especially when your business and consumer base is expanding.
Let ShipBots store, pack and ship for you!
ShipBots is a third party logistics fulfillment center that stores and ships your products on your behalf. Our network of fulfillment warehouses is strategically located on both coasts to ensure the quickest turnaround at reduced cost. Split and manage your inventory across our fulfillment centers and we’ll select the location that maximizes efficiency and affordability. Request a pricing quote today to see if our network of warehouse locations would be a good fit for your business.