Efficient fulfillment strategies are an integral part of success for any ecommerce business. It’s how these brands satisfy customers while maintaining margins big enough to grow the company. Most ecommerce brands achieve peak efficiency through a multi-warehouse shipping strategy.
Multi-warehouse shipping refers to the use of multiple warehouses strategically located across a region—or the globe—to fulfill orders. Companies big and small use this strategy, but it’s especially effective for online direct-to-consumer (DTC) brands. Going a step further, multi-warehouse management refers to the system in which these warehouses are all maintained and managed simultaneously through a common software platform. Multi-warehouse management is not simply using a handful of warehouses instead of one; it also implies that those warehouses operate together, under the same umbrella.
Using a multi-warehouse approach has benefits ranging from cost savings to scalability. The strategy primarily benefits ecommerce businesses through more efficient fulfillment and simpler warehouse management. Further, this strategy can be even more useful when the warehouses are part of a warehouse network, which we’ll define in this article.
To understand the benefits of multi-warehouse shipping, compare the use of one warehouse on the East Coast with the use of three spread across the East Coast, West Coast, and in a central location like Texas or Illinois.
A warehouse’s location is critical because of shipping zones: the factor that determines the bulk of the cost of shipping a package. The zones are determined by the distance traveled from the package’s origin (the warehouse) to its final destination (likely your customer). The further the package must travel, the more expensive it is to ship. So, if you only have a single warehouse on the East Coast, sending packages to California will be expensive. Alternatively, a single, centrally-located warehouse allows an ecommerce company to minimize shipping to regions that fall into the higher (and more expensive) zones.
But with a multi-warehouse strategy, warehouses are strategically placed across the country, and orders are automatically routed to and fulfilled by the warehouse closest to the customer’s address. This saves both shipping time and money.
Multi-warehousing is even more critical for brands that are looking to expand internationally. To send individual orders overseas can be prohibitively expensive for most brands unless they have warehouses in the countries they’ve expanded into. This eliminates the complexity of duties and customs for each order and cuts the cost of shipping to a fraction of what it would be to ship across continents.
Now that we’ve established the core difference between single- and multi-warehouse shipping, we’ll explore the benefits of multi-warehousing for the ecommerce businesses that use this strategy.
The most obvious cost savings associated with mutli-warehouse shipping is the elimination of higher shipping zones, because orders can be fulfilled by the warehouse closest to the customer. But there are other savings associated with this strategy, too.
Warehouse locations also affect the cost of delivering inventory from the manufacturer. Multi-warehousing opens up the possibility of using local freight carriers, which means fewer stops and less mileage from port to destination, reducing costs even further.
Pro-tip: These savings can then be reinvested to grow the business or to offset the cost of offering free shipping to customers.
Offering customers free shipping is one way to demonstrate how valuable they are to the brand. It’s also a good method for increasing customer conversion rate and reducing shopping cart abandonment. Multi-warehouse shipping further contributes to increased customer satisfaction because it allows businesses to deliver orders faster. Remember, when a package is fulfilled by the warehouse closest to the customer, it has a much shorter distance to travel.
Established ecommerce brands don’t just use multiple warehouses to reduce costs—they also need a lot of space to hold inventory. Working with a logistics provider that can execute an effective multi-warehouse strategy is an excellent opportunity for high-growth companies, because when multiple warehouses are at play, it’s easier to make space for a growing number of SKUs—allowing a brand to grow exponentially.
Under multi-warehouse management, it’s easy to expand into even more warehouses as the business grows. Because these warehouses are managed by a common software platform, they operate under similar protocols, with similar reporting methods, and using the same interface and integrations. This tech enablement makes the once long and arduous process of getting set up in a new warehouse manageable in about a week’s time—or even less—allowing rapidly growing companies to expand full-throttle.
This is probably the biggest and most noticeable difference when using multiple warehouses under multi-warehouse management. When the warehouses operate on a unified software platform, business operators can find all relevant fulfillment information in one place. No reconciling conflicting reports, keeping track of disparate warehouse management systems, or manually migrating data from one system to another: each warehouse’s data is available with a single login.
Even better, this data is updated in real time, meaning operators can see the exact state of operations at any given time, whether it’s inventory count, order fulfillment status, or restock deliveries. Businesses can keep a finger on the pulse of their logistics operations even as they’re happening simultaneously across time zones and borders.
Multiple warehouses enable businesses to shift stock from location to location as determined by demand, to avoid overstock in one location and the expense of sending a SKU that may be out of stock at one location from another that is much further away. Under multi-warehouse management, this can be set in motion with the click of a button, because those warehouses are all integrated with the same fulfillment software.
Fulfillment is often plagued by unpredictable circumstances like the weather or the COVID-19 pandemic. If some warehouses are inundated with a hurricane or forced to shut down operations due to an emergency mandate, having multiple warehouses ensures sales can continue and orders will still be delivered.
Warehouse networks take multi-warehouse management a step further. Under a warehouse network, the warehouses are not owned by the logistics company that is using them, as is the case with a third-party logistics (3PL) provider. Instead, a fourth-party logistics (4PL) provider partners with various warehouses and uses a combination of technology and on-site operations managers to oversee operations on their customers’ behalf.
Airhouse uses a unique warehouse networking model to achieve our multi-warehouse management capabilities. This model affords our customers several advantages.
Without the overhead responsibilities of owning warehouse infrastructure, 4PLs that manage warehouse networks can invest heavily in support and technology. Because they are viewed as a partner—and the largest customer—of each of the warehouses in the network, these 4PLs are usually able to leverage top-notch customer service on behalf of their customers.
What’s more, if one of the warehouses in the network is underperforming, the inventory it holds can be easily moved to another high-performing warehouse. If the under-performer does not improve, it can be dropped from the network. These deep-seated problems are more difficult for the warehouse’s owner—typically a 3PL—to fix.
Without the enormous infrastructure investment warehouses require, 4PLs can invest heavily in the technology that enables multi-warehouse management across a warehouse network. A better user interface allows the ecommerce brands that use it to have a better understanding of their logistics operations and to manage multiple warehouses from a distance without the need for long chains of emails, manual data entry, or folders of spreadsheets. Everything these operators need is readily available through that technology, which is constantly monitored and updated by in-house software engineers.
Many 3PLs and 4PLs will refuse to work with ecommerce brands until they’ve reached a certain size, typically measured through monthly expected orders (MEOs). With the Airhouse network, there are no minimums, meaning businesses get access to top-performing warehouses regardless of their size.
It’s significantly easier to bring a new warehouse into a network than it is to construct one or acquire one. For this reason, warehouse networks offer much more flexibility and agility than 3PLs.
Because the warehouses in a 4PL’s network aren’t owned by the 4PL, the logistics provider has the freedom to be more solution-oriented on the ecommerce brand’s behalf. Instead of seeking a solution that works best within an established warehouse framework, 4PLs can find the best solution for their customer and identify the warehouses that can make it happen.
The 4PL managing a warehouse network can seek out a diverse array of warehouses with unique experience handling specific types of products. That could mean oversized items, cold storage, or anything an ecommerce brand may need to store.
To learn how Airhouse can address your unique needs, schedule a call with us today.