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Fulfillment Centers: The Plus-One Advantage

 Fulfillment Centers: The Plus-One Advantage

Speed of delivery is the top driver for customer contentment. Take a look at these order fulfillment findings:

• The acceptable fulfillment window dropped by a day last year. And 96% of consumers expect not only fast—but free shipping (Supply Chain Dive).

• About one-third of customers aged 18-24 are “frustrated” with the time it takes to receive online orders (Supply Chain Dive).

• More than one-third of U.S. consumers expect to be able to place an order between 5 and 9 PM and have it eligible for next-day delivery (The UPS Pulse of the Online Shopper™ Study). 

Of course, the one-day delivery service recently announced by Amazon (see MultiChannel Merchant, April 26, 2019) was followed by an announcement from WalMart about free, next-day delivery service to cover 75% of the U.S. population by year-end.

Multichannel Merchant sums it up this way: “Customer-centric ecommerce delivery now represents a key differentiation point for retailers looking to win the biggest share of consumer spend.” This is why so many retailers are expanding from one order fulfillment center to two. They can offer the service levels customers demand—and compete in a fickle marketplace. 

Adding a Fulfillment Center

New geography can place you closer to customers, potentially improving delivery windows and decreasing shipping costs. But a host of decisions and details drives success. Here’s what you need to know about adding a second order fulfillment center and capturing the “plus-one” advantage.

Inventory Plan

An inventory plan needs to address some key questions:

• Will you duplicate SKUs at a second fulfillment center, or place only your top sellers? Expert analysis of your shipping data, sales forecasts, and customer demographics can answer this question.

• How will you manage the rise in inventory carrying costs to ensure positive cash flow and steady profits? You may be able to devise offsets to carrying costs in the form of reduced freight expenses and improved buying power. Consider the customer loyalty factor, too: Your enhanced delivery turnaround can reduce abandoned cart rates and increase sales revenue.

WMS Systems

If you want to leverage the service and business benefits of an added fulfillment center, the technology side of opening a second fulfillment center is crucial: 

• Can your WMS track inventory across locations?

• Now you have more choices. Can your WMS support intelligent order routing to select the optimal fulfillment location based on transit time, freight cost, and other business rules?

• Can your WMS split order fulfillment between two locations to optimize service levels and provide a predictable, cohesive customer experience?

• How will your WMS manage back orders and inventory transfers?

Staffing Savvy

Expanding your fulfillment network means expanding staffing, including leadership positions such as general manager, warehouse manager, and team or department leads. Securing the right candidates can make or break the success of your high-stakes decision to expand. For example, can you find and retain a capable, reliable manager who will support and promote your company culture in a standalone location?

Typically, expansion also requires administrative or office positions and purchasing staff. You may need additional IT support. Of course, you will need customer-focused warehouse workers to pick, pack, and ship orders with care. Questions to consider include:

• Have you budgeted for new FTEs?

• Is there an adequate talent pool available in your new location?

• How will you recruit, screen, select, and onboard your team—and what will this cost your organization?

• How will you manage turnover?

Transportation Tactics

A best-fit transportation solution will help you save in freight expenses for outbound shipments. But here are more pieces of the freight expense formula:

• Will inbound freight expenses rise? If so, by how much?

• Do you need to add a second port of entry into the U.S. to reduce drayage costs to your second location?

When it comes to transportation, there’s no one-size-fits-all. A partner who’s well-versed in carrier and service options can help calibrate expenses against service levels. Often, retailers look to an expert partner to leverage carrier relationships. If your business strategy includes free shipping or minimal costs to the consumer, the right transportation solution can carve out new competitive opportunities for your brand.

Measuring Success

“If you don’t know where you’re going, any road will take you there,” according to the adage. At FIDELITONE, our focus is on your business growth goals. An advantage of choosing a qualified 3PL partner for order fulfillment services is collaboration with you on setting KPIs, applying proven processes to the customer experience, and ensuring dynamic accountability. (Learn more about how FIDELITONE manages the customer experience through a proven process.)

Another partnership advantage is the opportunity to flex and scale solutions, giving you nimble, customer-friendly capabilities designed to earn loyalty to your brand—even in the competitive ecommerce landscape.

Creating a National Network

FIDELITONE maintains a national fulfillment center network, with order fulfillment locations across the U.S., from Elizabethton, TN, to Reno, NV, to help optimize your business. Learn more about how to create a national order fulfillment network.

Beyond location, the 3PL expert team at FIDELITONE delivers the experience and tools to assess your requirements and design a right-fit solution for you that will keep your customers clicking and maximize business performance. We’d like to hear about your service level goals. Get in touch today!

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