Moving to a new fulfillment center is a daunting task, but it’s often necessary—to continue scaling, get better rates, be more efficient, or just escape an underperforming 3PL. Moving warehouses requires careful planning and timing to ensure orders continue to go out on time, even as inventory is changing hands.
We’ll get straight to the point outlining reasons for moving and tips for making your warehouse relocation a smooth process, but read on to understand how to choose the right warehouse location for your business.
Moving warehouse inventory is no one’s first choice, so chances are you’ve explored other solutions first, like negotiating better rates with your 3PL or making operational changes to maximize efficiency in your current warehouse location. But when all else fails, switching 3PLs or moving to a new warehouse may be the best option for your business.
These are the main reasons ecommerce brands decide to move to a new warehouse:
All 3PLs promise the same things: reliable fulfillment, speedy shipping, and low prices. That makes it difficult to truly evaluate their services until you’ve sent them your inventory and witnessed whether they can put their money where their mouth is. On average, DTC brands research eight to twelve 3PLs before making a decision—so it’s costly and time-consuming to make a change.
But 3PLs are notorious for being unreliable. For every high-performing, trustworthy fulfillment partner, there’s a handful that levy hidden fees and consistently miss SLAs.
The bottom line is that if your fulfillment provider is losing inventory, consistently sending orders late, or charging unpredictable and ever-changing fees, it’s best for your business to move on—quickly.
Whether you’re running things in-house or outsourcing fulfillment to a vendor, if your business is scaling, you’ll likely hit a point where your current warehouse isn’t able to keep up with demand.
With some 3PLs, this is as simple as expanding into an additional warehouse run by the same provider. But if your 3PL can’t handle your order volume or your owned warehouse is bursting at the seams, it’s likely time to move into a more suitable location that’s prepared to support your company’s continued growth.
Your fulfillment center’s location has an enormous impact on your shipping costs and delivery speed—both for outgoing orders and incoming inventory. If your warehouse is improperly located, you may be sending orders across several shipping zones to reach customers. Alternatively, you might spend an arm and a leg just to get inventory from an overseas manufacturer into your warehouse. Finding that sweet spot where your incoming and outgoing shipping expenses are optimally balanced may require moving to a better geographic location.
Once demand for your product has hit a point that you can support using two or more warehouses—or if you ship exceptionally large or heavy products—multi-warehouse shipping offers the potential for huge cost savings. Under a multi-warehouse strategy, inventory is stored in strategically placed fulfillment centers, and orders are automatically routed to the warehouse closest to the order’s destination, further reducing shipping costs.
Mom-and-pop fulfillment centers tend to have too few locations for multi-warehouse shipping to be effective. Even some standard 3PLs with multiple locations struggle to execute multi-warehouse strategy because they don’t have the technical ability to route orders to the appropriate location or manage inventory across locations in a single database. If multi-warehouse shipping is your goal, you may need to move to a new provider to make it happen.
If you’re sending a high volume of orders to international markets, it may be time to explore warehousing opportunities closer to those customers. Localizing distribution with a fulfillment center in the EU, for example, can reduce per-order shipping costs by as much as 85% because you’re only paying customs fees on freight shipments of inventory, as opposed to on every single order.
Relocating a warehouse requires careful monitoring of several moving parts to ensure orders continue to go out on time and you don’t end up with backorders because of dwindling (or inaccessible) inventory. Here’s what you need to consider to make sure things keep running smoothly.
During the relocation process, you’ll want to start fulfilling orders from the new warehouse before you’ve fully ceased operations at the old one—that way, you’ll be able to continue selling without disrupting order fulfillment. You can either start sending all new inventory to the new warehouse and sell off the remainder at the old warehouse without restocking, or you can split your restock orders between the two to give the new warehouse time to ramp.
If you choose to send all restock orders to the new warehouse, be sure to carefully monitor the inventory left at the old warehouse so you don’t end up with backorders. A robust warehouse management system (WMS) should help with this—for example, Airhouse’s inventory and restock dashboards make it easy to monitor inventory levels in real time, set automatic notifications when inventory reaches a certain threshold, and send restock to multiple destinations.
I’ve worked with 3PLs that had archaic systems, but Airhouse has really clean software that’s on the same level you’d find at any modern tech company. That makes it easy to dive in, see where your inventory is, and not stress about logistics. – David Bronkie, cofounder of Siblings
During the warehouse transition, you might want to reserve inventory, meaning the actual SKU count at the old warehouse is greater than the available units for sale in your ecommerce store. Once you’ve hit that sales threshold, you can start directing all sales of that given SKU to the new warehouse.
For example: Company A has 100 umbrellas stored at the warehouse it’s moving out of. The company sets the number of umbrellas available for sale in its ecommerce platform at 90. Once 90 umbrellas are sold, Company A begins directing new orders to the warehouse it’s moving into.
Once you’ve fully moved all fulfillment to your new warehouse, you’ll need to remove any leftover products from the old one. There are two ways of doing this: you can either send a freight shipment from warehouse A to warehouse B, or you can sell off the remaining inventory at a discount (to speed up sales) until all of your merchandise has been depleted from warehouse A. If you’ve been splitting restock orders between the two during your transition, you’ll likely want to opt for the freight option, as there will be more product to liquidate.
Every fulfillment company will have its own timeline for integrating with your other systems, like your ecommerce store, ERP, and so on, with their WMS. Be sure to account for this delay when determining where to send restock orders—if you send all of your new inventory to your brand-new warehouse before it’s integrated with your online store, you won’t be able to fulfill orders as they come in, causing delivery delays.
It’s likely your manufacturer’s lead time will change, either because the inventory will be traveling to a new destination or because your new warehouse has different receiving procedures—or both. Don’t forget to account for this change. Plan to revisit your reorder point formula and adjust your ROPs accordingly.
Unless you’re moving to a new warehouse run by the same 3PL, your shipping rates will change since each fulfillment provider negotiates their own rates with the major shipping carriers. Even if the rates are similar, you may see your average shipping costs rise or fall based on the warehouse’s location. You may need to audit your preferred shipping methods and packaging procedures to be sure you’re still using the most efficient modes of shipping that will meet customer expectations while minimizing costs.
Keep in mind that the costs associated with things like warehouse storage, receiving, pick and pack, and projects like bundling or kitting are also likely to change. Switching 3PLs or moving warehouses impact every line item in fulfillment.
Third-party logistics companies vary in the services they offer at the fulfillment center. Your old warehouse may have offered bundling services that were more cost-efficient than pick and pack fees for multiple items that are sold together, but your new one might have a low pick fee and a high labor cost for pre-bundling the items. Revisit your processes to keep your costs as low as possible.
If you’re going through the trouble of relocating your warehouse, you’re probably looking for better service agreements and operating procedures—or maybe you’re just looking for a 3PL that can keep its promises. Either way, be sure to evaluate how your new warehouse’s promises differ from the old one and adjust your operations to match.
You may want to notify your customers that you’re moving to a new warehouse. While customers typically won’t care much about where their orders are coming from, they will care if their orders are going to take longer to get to them. Plus, communicating a change proactively may save you customer service headaches later, because your customers will know there could be delays. You don’t have to tell them you’re moving, but hey—who doesn’t like a heads up?
You already know your warehouse’s location is a crucial component of your overall expenses, so it’s going to be one of the primary factors you’ll want to consider before relocating. These are the elements that will determine if a warehouse is the right fit for your business.
The fewer shipping zones your orders must pass through, the lower your shipping costs will be.
If your customers are concentrated in a particular region, you may want to move to a warehouse that’s closer to them so the orders have to travel a smaller average distance—saving you money on shipping costs and pleasantly surprising customers. On the other hand, if your customers are evenly distributed across the country, you may opt for a centrally located warehouse in Chicago or Kansas City.
The same logic that can be used to lower domestic shipping costs applies to brands that are expanding into international markets. Partnering with a warehouse in the UK or Australia means you can localize distribution, so you’re only paying import fees related to customs and tariffs on freight delivery of inventory, rather than on a per-order basis. Fulfilling international orders from a warehouse on the same side of the pond can bring shipping costs on a standard direct-to-consumer package down from as much as $40 to as little as $5.
Depending on your product and where your manufacturer is located, you may choose to move to a warehouse that is closer to a port or has better receiving processes and rates. For example: if you are importing goods from a manufacturer in Mexico, you might opt for a warehouse in Texas, since it’s near the border and in a fairly central location for fulfillment. But let’s say your inventory is coming from China, and your fulfillment center is on the East Coast—then you’re incurring freight costs to bring inventory into the country and to move it from the West Coast port to the East Coast. If this is the case, and if changing manufacturers isn’t an option, you might want to look for a warehouse in Los Angeles, instead.
Warehouses aren’t immune to regional real estate costs. Fulfillment centers in expensive areas like Los Angeles or New York will likely charge more in storage fees than those in more affordable places like Kansas City or Memphis.
It might be tempting to pick a warehouse in a less expensive region, but if you’re spending more on shipping, it’s a moot point. You’ll want to do a cost-benefit analysis to determine if you’ll save more money by moving the warehouse to a cheaper area or by lowering shipping costs by placing your inventory closer to customers or ports.
Your warehouse’s zip code is a big deal, so chances are you’re looking to go somewhere specific. With Airhouse’s managed warehouse network, you can easily move from location to location or expand into new markets without having to switch providers and forge an entirely new relationship with a vendor.
Here’s where Airhouse has fulfillment centers as of 2023, with more planned.
Airhouse can help. With fulfillment centers in 11 states and five countries, our managed network was designed to empower ecommerce brands to grow. To learn more about Airhouse locations and availability, contact our team.