“As an emerging brand, when will I be ready to distribute my products from multiple fulfillment centers?”
Third-party logistics providers hear this question all the time. It usually starts with someone reaching out on a form or email, already convinced that they need to distribute from multiple warehouses -most typically one on each coast.
Most retail-focused fulfillment centers cover eCommerce and wholesale distribution on both coasts out of their own facilities or through a partner network. Coverage is really not the hard part. The hard part is performing an effective trade-off analysis on the brand side. The question becomes, “What is the net gain in terms of time in transit and rates, versus any additional investment in systems, inventory, data capture, and the people to manage two or more inventories?”
For many brands and products, it’s an easy call. With a low SKU base and low mix rate (this ships with that, rather than this can ship with any of those) and a relatively simple supply chain (this item always comes in through the port in Charleston) – it’s not too risky to split inventories based on the location of your suppliers, customers, and wholesalers.
In those cases, the gain is significant enough that there is no regret when you need to bite the bullet and ship something from the less advantageous facility or pay freight out of two locations in order to satisfy the customer in an out of stock situation. You know you’ll make it up in carrier service level and freight cost.
The picture is a little different if you are an emerging brand. For example, emerging brands frequently change suppliers as their volume and price leverage grows. For them, the return on a bi-coastal strategy can be less assured. The desire to preserve capital with small-as-possible manufacturing runs may constrain the appetite for the levels of safety stock required to ensure fulfillment of multi-line orders from multiple warehouses.
The large product assortments that often accompany this period of brand discovery and growth also make it hard to predict order profiles from year to year and turn the positioning of inventory into much more of an art than a science.
There are a lot of factors to consider besides the ability to plan inventory and route orders to the correct facility. For example, many emerging brands ship by the post office or utilize services where the post office carries the package for the final leg of the delivery. In these cases, especially for light packages, the cost savings of shaving an average of one or two zones can be fairly limited. The primary benefit would be a reduction in overall time in transit, which may be outweighed by having to ship multiple packages to satisfy a complex order. The math looks different if you are shipping express services or sell heavier products.
The decision to ship orders from more than one fulfillment center requires a high level of confidence in your ability to predict and control supplier, product, and customer mix. Many brands have found that they are actually less able to quickly respond to internal or environmental changes after dividing their inventories.
That once celebrated sell into a major retail outlet becomes a painful fire drill when you have to piece together inventories from multiple facilities and figure out the least expensive way to satisfy routing requirements.
A good 3PL fulfillment provider will work to understand the level of technology and supply chain command possessed by new partner brands and help them arrive at the right positioning strategy. It is a reality that many emerging brands, after factoring in any potential cost savings and considering additional expenses in the form of added labor, packaging, and working capital, conclude that they lack the forecasting and supply chain stability to support this move.
If you have more questions about whether your brand is ready to distribute from multiple fulfillment centers, schedule time to chat with someone from our team by clicking here.