This is a guest post by Nate Gilmore.
What is Outsourced Storage and Fulfillment?
If you sell goods to buyers over the Internet, the process of product storage, purchase by an end-buyer, packaging, labeling and finally shipping the product is called “order fulfillment”. It is no secret that as your business grows you may find this process becoming incredibly time-consuming, costly, as well as distracting. When outsourcing your needs to the “professionals” you can concentrate on marketing your product and growing your business. This is where outsourced order fulfillment services start to look compelling.
In a nutshell, outsourced order fulfillment is defined as storing your inventory in a third-party warehouse (3PL or third-party logistics) where you route your orders for processing. This outsourced fulfillment provider will take your order then pick, pack, and ship the order to your customers in a way that you define.
The Power of Multiple Warehouse & A Global Warehouse Network
For online e-tailers selling product nationwide or globally, this is critical. Location is key to shipping price savings; however don’t settle for one (1) good location; you need multiple locations that are geographically close to major population centers and your buyers.
Why Multiple Warehouses Are Better For Your Business
If you ship 25% of your orders to the U.S. West Coast, 25% to the U.S. East Coast, 25% to Canada and 25% to Europe it is very probable that most of your shipments will go to major population centers where buyers are, (LA, Chicago, New York, Toronto, London, Paris, etc). If your current warehouse is in Portland, you’ll only be outsourced and optimized for only 25% of your orders, if you are lucky.
A better solution would be to spread your inventory out into 5-6 warehouses in LA, Chicago, Toronto, Vancouver and the UK or mainland Europe. Move inventory globally using bulk freight shipments and local warehouse storage close to major population centers. Shipping orders out from the warehouse closest to the end-buyer results in lower parcel delivery costs, faster delivery times and true shipping cost savings.
Multiple Warehouses Reduce Costs
If you strategically place inventory in multiple locations, you can decrease delivery time and costs.
Now if you were thinking, “I would have to pay to move my inventory to my second warehouse.” Consider this. Bulk freight shipping, those 18-wheelers seen on the interstate, is cheap compared to the outbound piecemeal parcel shipping of FedEx or UPS. An 18-wheeler filled with 10,000 stuffed animals will cost less than $5,000 to ship from NYC to LA, that’s $0.50 a stuffed animal, in return for $3.00, $5.00, or more in savings for each stuffed animal you would ship individually – not to mention your buyers get faster delivery times.
Therefore, the rule is to strategically place inventory closer to the end-buyer, and always try to shorten the last leg of the parcel delivery by the carriers. In industry jargon, this is sometimes known as “forward warehousing”; think of it as real savings. Alexander the Great actually invented the concept; he called it a “forward supply depot.” Whatever you call it, it means real savings to you.If you want to know more about outsourcing your order fulfillment including checklists and questions to ask potential vendors please see our guide to outsourcing order fulfillment.
About the author: Nate Gilmore is VP of Marketing at Shipwire Product Fulfillment, with warehouses in the U.S., Canada and Europe.