We are often asked, “when does it make sense to place inventory in multiple locations?”
Our response is that any business shipping 100 parcels or more monthly across Canada should seek the help of a qualified Third Party Logistics (3PL) supplier to explore the possibility.
If you currently have inventory in only one facility, you may be missing out on big savings that can be obtained by keeping a portion of the same inventory in two or even three 3PL facilities across the country. By using a simple technique that actually allows you to “zone skip” without shipping pallets of pre-packed orders across the country, you can pick, pack and fulfill orders at multiple sites and save anywhere from 20% to 50% on your shipping costs.
Let’s say that you currently house your inventory at one location in Vancouver and ship orders to consumers across Canada. If you ship a typical parcel through Canada Post Expedited Parcel to a customer in Montreal your cost would be in the area of $20.98 versus shipping the same parcel from a Montreal warehouse to the same customer at around $12.27 – a significant saving.
“How does it work?”
Your inventory is placed in two or more locations across the country. By doing so, you have a choice of which facility to pick, pack and ship to specific Canada Post zones across the country. The overall savings will be determined by your customer order’s geographical mix.
“Is it efficient?”
Not only do you save a valuable part of your shipping budget but you also enhance the overall delivery performance level, getting to your customers faster. The entire process can be automated so you never miss out on potential savings. If you have an e-commerce site where consumers place orders, your fulfillment provider pulls the orders from the site at pre-set intervals to a secure FTP site. Once in the hands of your 3PL partner, the data is run through a program matching the individual orders to the specific fulfillment centre that offers the most economical shipping lane based on Canada Post zones.
“What if I have hundreds of SKUS?”
The ideal candidate for this scenario has a limited inventory and preferably small items, allowing for easy and inexpensive replenishment in two or more locations. However, even if you have a thousand SKUS you can still take advantage of this technique by using the 80/20 rule. Meaning that typically 20% of your SKUS are responsible for 80% of your sales. By identifying your “fast movers” and placing only those items in two locations you will still see considerable savings.
“How do I get started?”
The first step is to contact your fulfillment provider and evaluate your order history data. The provider should be able to run a simulation based on order history to determine what kind of savings you can obtain by using multiple locations for your order processing. Remember to take the cost of replenishing two locations with inventory into the final calculations.