Storing your inventory in multiple locations, across the nation, could have enormous benefits for your business.
What is Distributed Inventory?
Distributed inventory helps keep products closer to your customers. Instead of a single fulfillment location, multiple locations help orders get to their end destination faster and can result in cost savings.
Thanks to Amazon Prime, today’s customers expect deliveries to happen faster than ever. Two day or less is increasingly the norm. Having a faster delivery time than your competitor can give your company an advantage in driving sales and building customer loyalty. Fulfillment is at the heart of the customer experience, and speed-of-delivery is a big part of that experience.
Factors You Need to Consider
Analyze Your Existing Customers
The first step is to analyze your order history to spot where most of your sales are generated. Many eCommerce stores are not locally targeted; products that are not tied to a particular region are great candidates for inventory splitting.
Inventory Management Capabilities
Let your current fulfillment partner know you are thinking about splitting inventory, to see if that is a capability they have. Request software demos to ensure the system meets their needs. Find a provider with customizable software rather than an “off the shelf” system that may not be compatible with your business goals and logistical challenges. Analyze the methods your 3PL uses to manage inventory across multiple locations.
Potential Cost Savings
How far your shipment travels is a crucial factor in your shipping costs. Inventory that is closer to the customer can be fulfilled via road instead of air, saving you money. Shipping costs can also quickly add up for heavier items like furniture, auto parts, books and more. The heavier your product is, the higher your potential cost savings when your package has to travel less in the final stages of customer delivery. However, you will want to do a cost analysis to ensure the increased storage costs do not offset the savings in shipping fees.
Natural disasters and catastrophes can prevent shipping carriers from making it to the fulfillment center or cause delays while in transit. Floods, wildfires, hurricanes, snowstorms, or other forces of nature will likely impact some of your orders at some point in time. By splitting your inventory across geographic regions, you will have backup inventory in other locations to prevent delays or lost stock.
Should you split your inventory?
As your business grows, so do your needs, making it an important question to ask your logistics team periodically. By tracking shipping costs and sales volume by geographic location, you will have the ability to decide what is best for your company. Splitting your inventory can save you money and ensure you can meet consumers’ expectations for quick delivery, ensuring everyone is happy.