Six Ways to Optimize Your Ecommerce Fulfillment Center Network

Ecommerce sales in North America grew by 18.1% in 2020, according to Shopify, and at the height of the pandemic, 10 years of ecommerce growth occurred in just 90 days. eMarketer’s Global Ecommerce 2020 Report indicates that retailers in the US are expected to continue their success in furthering their ecommerce reach in 2021. 2021 is an opportunity for brick-and-mortar retailers to up their game and secure a profitable place in the ecommerce economy.

Gearing Up: ecommerce fulfillment for retailers

Ecommerce is a high-demand channel for retailers. It requires flexible and robust fulfillment operations that can scale with growth and meet intensive direct-to-consumer customer expectations. At FIDELITONE, we work closely with clients to optimize ecommerce fulfillment operations. Expanding your ecommerce reach? Here are 6 ideas to help retailers  design the optimal ecommerce fulfillment center network.

1. Examine fulfillment center geography

Defining locations can affect your service levels and your order fulfillment expenses. Your fulfillment center network should allow you to reach a large percentage of your customers within 1-2 days, so identifying the right locations is important based on where your retail sales originate.

Order cycle time can vary based on fulfillment center locations. Ask yourself what service level is acceptable – and viable – for your business. Should 70% of your customers receive their order within 1 day? Should 98% of your customers receive their order within 2 days? 99% within 3 days? Most ecommerce customers today expect to receive orders within 1-2 days, and timing factors into competitive advantage and ongoing customer loyalty. These service level goals will influence decisions.

2. Consider your freight costs

Ecommerce fulfillment center locations will have a significant impact on freight costs and your expense as a percentage of revenue. What matters is not only the freight cost at each service level, but also your inbound freight expense of supplying the fulfillment center with products.

Analyzing costs by location and order patterns is imperative. In some scenarios, the savings in outbound freight costs can more than offset the cost of inbound shipping to a particular fulfillment center. Zone skipping can also reduce freight expenses when there are multiple fulfillment centers.

For retailers new to the ecommerce space, FIDELITONE can act as a transportation partner in managing parcel shipments. We tap into robust service capabilities on your behalf, balancing rates and service requirements. Consolidated billing of all your parcel services into one invoice lets you streamline internal accounting and devote your attention to your core business.

3. Analyze your SKU count by location

It is not always cost-effective to duplicate all SKUs across all fulfillment center locations. Sometimes this introduces unnecessary expense. Careful analysis, the right technology and order management can help you determine the inventory levels to carry at each fulfillment center.

4. Finetune your order management processes

By now, it’s clear that desired service level, freight costs, and inventory levels all influence efficiency and order fulfillment expenses. The most effective order management processes take all these components into account to generate optimal procedures, balancing customer loyalty with operational expense management. Possibilities are endless when we apply the right technology to your specific business requirements.

5. Evaluate your sales and growth projections

Knowing when and how much to invest in building a fulfillment center network is important. Timing is everything. In turn, capacity-building is driven by sales projections. You need to be able to identify the right type and size of fulfillment centers so your operation can scale up in response to spurts in ecommerce sales. Consider, too, the ability to expand quickly and cost-effectively. Analyzing tomorrow’s growth up front will influence the decisions you make today and position you for maintaining a positive customer experience. How will you continue earning customer loyalty and ensure uninterrupted growth in ecommerce revenues?

6. Conduct an order fulfillment network analysis

A mosaic of data points and what-if scenarios makes decisions about establishing and optimizing order fulfillment centers a staggering task. Wondering where your operation stands?

Take a look at our Order Fulfillment Services ROI Checkup. Realize, too, that as emerging logistics trends take hold, having a strategic partner can help you navigate changes and seize opportunities.

FIDELITONE: 3PL ecommerce fulfillment service provider

FIDELITONE offers comprehensive order fulfillment services, including D2C, B2B and omnichannel fulfillment services Partnering with an ecommerce fulfillment expert like FIDELITONE can help you design and implement the optimal ecommerce fulfillment network. How can we help you? Call 800.475.0917 or contact us online.