Expanding your ecommerce business by opening more distribution centers (DCs) can be a beneficial strategy for reducing shipping costs and delivery times. However, more isn't always better. The expenses associated with opening, operating, and integrating additional DCs can easily negate the cost savings and logistical advantages they provide. To figure out if the numbers will work in your favor, you should consider the following variables.
Number of SKUs vs. Order Volume
In general, the more SKUs you have, the more it will cost to coordinate with your suppliers to maintain inventory levels across multiple DCs. However, those costs can be offset if your order volume is high enough. As we previously mentioned, a new DC can reduce shipping costs (assuming it's closer to your customers, of course). The greater your order volume, the greater your savings on shipping. When determining the cost-effectiveness of acquiring a new DC, you'll want those shipping savings to exceed the added inventory and warehousing expenses.
Average Shipping Weight
The average dim weight of your orders should also be included in your cost/benefit analysis. Heavy orders will generate bigger cost savings when shipping from multiple DCs. Conversely, you may see minimal or no cost savings on lightweight orders.
Multiple systems may need to interface in order to properly count and route orders to the right distribution center. Can your order management system incorporate a new distribution center?
Improving your distribution network's size and efficiency by opening new centers can be a solid strategy for maintaining a competitive edge - but only if the pros, cons, and costs have been thoroughly vetted. Alternatively, a third-party fulfillment provider may be a better solution. You can reduce transit times, cut shipping costs, and increase order volume without taking on the risk of opening and operating a whole other distribution center. At Fulfillment Works, we utilize customized solutions to provide clients with full-service fulfillment including logistics management, data solutions, warehouse services (with facilities strategically located in Nevada and Connecticut), and much more. Contact us to learn how we can help with your distribution goals.
As part of events honoring Women Entrepreneurship Week, Fulfillment Works’ Co-Founder and CEO, Amy Cooper, led a roundtable discussion with aspiring students at Quinnipiac University's Center for Innovation and Entrepreneurship.
Speaking to a full house, Cooper recounted the initial founding, early history, and rapid growth of Fulfillment Works. She also spoke on her responsibilities as CEO, such as dealing with the challenges of client management, lead generation, and corporate marketing on a daily basis. During the discussion, students asked plenty of questions about work/life balance, tips for starting a successful business, and the accumulated wisdom from running a nationwide business for 18 years.
To this day, Fulfillment Works continues to grow and innovate thanks to Cooper’s diligence and expertise! Full coverage of the event can be read on Quinnipiac University's website.
If you've played (or still play) the iconic puzzle video game Tetris, you've probably noticed how similar the game is to working in an ecommerce warehouse. The basic goal of the game is to pack a non-stop flow of various geometric pieces into a finite space. Packing the pieces together neatly and efficiently filling empty spaces grants a high score, while the opposite reduces the size of the playing field and limits the options you have for setting new pieces. As the game goes on, the pieces need to be set faster and faster. Once you run out of space, it's game over. Sound familiar?
As ecommerce businesses gain more customers and add more SKUs to their inventories, some begin to struggle with the physical limitations of their warehouse facilities. Of course, growth is certainly a good problem to have. But running out of space can negatively impact in the speed and efficiency of your fulfillment operations – quickly undoing that growth. Unlike Tetris, you have many more options for utilizing your warehouse's "playing field." Before you decide to start a "New Game" by opening another distribution center, try these tips for optimizing your warehouse space.
Vertical stacking is bad in Tetris, but great for warehouses! Look up and check if you’re using all the vertical space available. If you can expand upward, ensure that your pallet racks can handle the extra top-weight. Assessing your vertical space is also a good time to consider installing mezzanines.
Width & depth
Redesign your aisles to be just wide enough to accommodate material handling equipment and personnel. Even a small reduction, multiplied across several aisles, can make a big difference. Similarly, consider “double-depth” racking to increase your depth of storage.
If you store the same product in multiple locations, consider merging the locations to utilize space more efficiently. But before you do, make sure that the merger won’t create a bottleneck of multiple pickers heading back and forth to the same spot.
Cut excess supplies
Reduce the amount of dunnage, boxes, and other packing materials you keep on site. Work with your suppliers to see if it makes more sense to get smaller, but more frequent deliveries of supplies.
Get help from an expert
When you get stuck in a video game, asking for help is the fastest path to progress! Fulfillment Works provides warehousing services out of our FDA-registered, climate-controlled, state-of-the-art managed warehouse facilities in Nevada and Connecticut. Contact us to learn more about the specifications, capabilities, and warehousing services of our East and West coast fulfillment centers.