Today’s online shoppers expect fast order fulfillment and delivery, and successful ecommerce businesses looking to drive growth need to ensure they’re doing everything they can to lower the time between checkout and delivery at a customer’s doorstep.
Not being able to offer fast delivery to customers can result in:
- Lower conversion rates: 22% of online shoppers said that they had abandoned their cart during checkout because delivery was too slow.
- Customer retention issues: 65% of online shoppers stated that after two to three late deliveries, they would not order from a retailer again.
One challenge lies in rising customer expectations: delivery speeds keep getting faster and faster, and one-day or same-day deliveries—which several years ago would have been impossible—are increasingly common. Many ecommerce businesses struggle keep ambitious delivery promises to customers, while simultaneously keeping fulfillment costs down. For these businesses, third-party logistics (3PL) services can help.
Third-party logistics providers take on many parts of the fulfillment process for ecommerce businesses—including inventory tracking, stock management, and inventory stock management systems—and can help ensure a smooth, speedy delivery process by housing inventory in a network of warehouses and fulfillment centers and executing shipments through transportation resources. A 3PL partner can allow ecommerce businesses to pursue a distributed inventory strategy, where inventory is stored across multiple warehouses and fulfillment centers spread out across different geographic areas so they’re as close as possible to customers. Some providers, like Amazon Supply Chain Services (ASCS), a complete end-to-end suite of supply chain support, are spread across multiple continents and feature the latest warehouse and fulfillment technology and stock management techniques, allowing businesses to get their products to customers faster than ever before.
In this blog, we discuss the benefits of distributing your inventory across multiple warehouses and fulfillment centers and explain how a 3PL can help you optimize your inventory distribution.
The benefits of inventory distribution with a 3PL
Ecommerce businesses that partner with a 3PL and adopt a distributed inventory strategy can realize numerous operational and bottom-line benefits, including:
3PLs have faster shipping times
By strategically distributing and storing your products across a network of warehouses and fulfillment centers, a 3PL can position your products as near as possible to your customer base. When an order is placed, it is automatically routed through the warehouse or fulfillment center that is closest to the customer, which results in dramatically reduced shipping times. Third-party logistics services with a large global network, like ASCS, which utilizes Amazon’s fulfillment network with over 2,000 facilities (including 200 fulfillment centers), can enable fast shipping to a wide range of customers, wherever they’re located.
3PLs lower shipping costs
The shipping fees that many third-party logistics services and carriers charge depend on the distance the package needs to travel, in most cases, the longer the distance, the more expensive the shipment. By enabling you to proactively distribute your inventory across various locations, you can minimize shipping distances as well as costs and pass the savings on to your customers.
3PLs have been shown to improve customer satisfaction and retention
It’s no surprise that by offering your customers faster deliveries and lower shipping costs, you can increase customer satisfaction with effective stock management and inventory distribution. According to recent research, 74% of consumers will increase spending with a brand if they are pleased with its delivery services, and 82% will recommend that brand to friends and family.
3PLs improve your ability to scale
Many ecommerce companies face challenges expanding their business into new geographic locations, as they don’t have the necessary warehousing and fulfillment infrastructure and resources to support their growth in those new markets. A 3PL with a vast global network and advanced inventory tracking systems like ASCS can help you distribute and store your inventory in locations where you want to operate, now and in the future. This distributed inventory placement allows you to gain a foothold in new markets, making it possible for you to rapidly expand your ecommerce business around the world.
How a 3PL can optimize your inventory distribution
Many ecommerce businesses today partner with third-party logistics services to pursue a distributed inventory strategy, but few truly understand how their 3PL can achieve optimal warehouse inventory tracking and distribution. Achieving optimal stock management techniques requires access to your 3PL’s global fulfillment network, state-of-the-art technology, and an expert team.
One 3PL that excels in this area is ASCS through its Multichannel Fulfillment (MCF) service. Let’s look at the process that MCF follows to optimize the distribution of your inventory:
- After you send your stock to Amazon, we receive it in one of our fulfillment centers or other facilities in the Amazon Fulfillment Network.
- Our machine learning-based inventory stock management system automatically determines which products should be distributed to which fulfillment centers across our network based on several factors, such as:
- Your historical sales data, as well as Amazon’s historical sales data.
- Demand forecasts, which consider seasonal variations, supply bottlenecks, and other supply chain issues and dynamics.
- Your business plan and priorities. You can identify which markets you operate in or plan to expand into, and the system will take that input into account.
- Amazon strategically distributes your inventory across our fulfillment network, ensuring that you have the right products in the right locations to satisfy customer demand. It’s important to note that no matter where we place your inventory we charge you the same fee for shipping (in contrast to other 3PLs, whose shipping rates fluctuate depending on the distance that the shipment needs to travel to reach the customer’s doorstep).
- With our advanced stock management system your products are positioned as near as possible to your customer base, so that you can minimize shipping times, lower costs, and be more likely to achieve on-time delivery performance and customer satisfaction.
- You can see your inventory levels with our advanced inventory tracking system across the ASCS network in real time. Additionally, the system will tell you how many weeks of cover (WoC) you have based on current and forecasted sales, and alert you if your inventory levels are running low for specific products in certain locations so that you can replenish your stock.
- Over time, Amazon’s sophisticated inventory stock management system software will automatically learn more about your business, and the machine learning algorithm will retune itself so that it is continuously optimizing the distribution of your inventory across Amazon’s network based on the latest demand patterns and forecasts and your changing business priorities.
This is how MCF, which leverages the ASCS network, technology, and expertise, distributes your inventory across our fulfillment centers.
Although every 3PL’s process of distributing your inventory will be different, the aim is essentially the same: to reduce shipping times and costs and improve customer experience.
Does warehouse distribution optimization help ecommerce businesses?
For ecommerce businesses today, inventory distribution—the practice of spreading inventory out across numerous fulfillment centers or warehouses, storing it in those facilities, and shipping it to customers from those locations—can be an essential tool for growth and customer satisfaction. But to pursue a distributed inventory strategy, you need a network of fulfillment centers or warehouses as well as warehouse inventory tracking technologies and know-how, and a 3PL can provide this.
When you are choosing a 3PL provider, it’s critical to take the time to research and evaluate their global network—to ensure that they have a footprint in the locations where your customers are today, as well as the locations where you are looking to expand into in the future. This will enable you to effectively distribute your inventory, decrease shipping times and costs, and drive greater customer satisfaction and business growth. With ASCS as your 3PL provider, you’ll have reliable global fulfillment at your fingertips, plus access to additional supply chain services your business might need.
