How a 3PL can help your ecommerce business drive growth with inventory distribution

Today’s online shoppers expect fast order fulfillment – and ecommerce companies are constantly striving to reduce the amount of time between checkout and delivery at customers’ doorsteps.

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 2-3 late deliveries they would not order from a retailer again.

The problem is that delivery speeds keep getting faster and faster, and one-day or same-day deliveries – which several years ago would have been impossible – are now something customers have come to expect.

It’s a constant challenge for ecommerce businesses to keep delivery promises to customers, while simultaneously keeping fulfillment costs down.

Indeed, many merchants struggle to meet customers’ delivery expectations – in an efficient and economical way – on their own, and engage third-party logistics (3PL) providers to help them with this.

A 3PL can help you rapidly deliver orders not only by providing transportation resources (such as trucks, vans, and planes), but also by giving you access to their network of warehouses and fulfillment centers (where you can store your goods before shipping them to customers).

Having access to a 3PL’s expansive network of facilities allows you to pursue a distributed inventory strategy, where you store your products in multiple warehouses and fulfillment centers spread out across different geographic areas – so that these goods are as close as possible to your customers.

In this blog, we will 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

Ecommerce businesses that partner with a 3PL and adopt a distributed inventory strategy can realize numerous operational and bottom-line benefits, including:

• 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 – and this results in dramatically reduced shipping times.
• Lower shipping costs: The shipping fees that many 3PLs and carriers charge depend on the distance the package needs to travel – and, 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 you can pass these savings on to your customers.
• Greater 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 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.
• Ability to scale your business: 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 – like Amazon Multi-Channel Fulfillment (MCF), which utilizes Amazon’s fulfillment network with over 2,000 facilities (including 200 fulfillment centers) – can help you distribute and store your inventory in those 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 a 3PL to pursue a distributed inventory strategy, but few truly understand how their 3PL is able to achieve optimal inventory distribution.

As you can imagine, achieving optimal inventory distribution requires access to your 3PL’s global fulfillment network, state-of-the-art technologies, and expert team.

One 3PL that excels in this area is MCF. Let’s take a look at the process that MCF follows to optimize the distribution of your inventory:

1. After you send your stock to Amazon, we receive it in one of our fulfillment centers or other facilities in the Amazon Fulfillment Network.
2. Our machine learning-based inventory management system automatically determines which products should be distributed to which fulfillment centers across our network based on a number of factors, such as:
   
   1. Your historical sales data as well as Amazon’s historical sales data.
   2. Demand forecasts, which take into account seasonal variations, supply bottlenecks, and other supply chain issues and dynamics.
   3. 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.
3. Amazon optimally 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).
4. Your products are positioned as near as possible to your customer base, so that you can minimize shipping times and costs and maximize on-time delivery performance and customer satisfaction.
5. You can see your inventory levels across Amazon’s 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.
6. Over time, Amazon’s software system 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 Amazon’s fulfillment network, technology, and expertise – distributes your inventory across our network of 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.

Conclusion

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 a valuable strategy.

Of course, in order to pursue a distributed inventory strategy, you need a network of fulfillment centers or warehouses as well as logistics technologies and know-how – and a 3PL can provide this.

When you are choosing a 3PL partner, it’s critical to take the time to research and evaluate their global network – to make sure 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.