According to a survey, around 33% of customers have higher expectations for fast shipping, 40% for free shipping, and 42% expect a 2-day shipping option for every purchase. As customer expectations rise, e-commerce players face increasing pressure to provide more competent and efficient deliveries. This requires a new outlook toward backed processes and warehousing strategies. More and more companies are switching to the distributed warehousing model, as they provide the required flexibility and faster ecommerce fulfillment that today’s marketplace demands. In this blog, we talk about what distributed warehousing is and why ecommerce players are adopting it as a strategy.
Centralized vs Decentralized Warehousing
Both centralized and decentralized warehousing can be used as a distribution strategy depending upon business requirements, growth, and type of industry. Centralized warehousing means better inventory control, low operation costs, low inbound costs, high-quality standards, and customer service. On the other hand, it leads to high shipping costs for outbound shipments, increased shipping timelines, and a lack of business continuity. All these disadvantages can be covered by decentralizing your warehousing or opting for warehousing distribution.
Distributed warehousing is a business approach where a business fulfills, ships, or distributes goods from multiple smaller and strategically located warehouses. This enables businesses to locate the products as close to their end customers as possible, thus reducing the time and cost of delivery. Distributed warehousing allows brands to perform a number of functions, that is, storage, distribution, fulfillment, and cross-docking in a more flexible and efficient way.
When to go for distributed warehousing
As brands gain a larger market share geographically, the outbound costs of fulfillment from a centralized warehouse tend to rise as well. This is primarily due to the growing distance between the warehouse and the end customers. At one point, having a new warehouse close to the customer becomes more affordable as compared to fulfilling from a faraway centralized warehouse. Following the conventional cost-benefit wisdom, this is when businesses tend to make the switch to a distributed warehouse model.
How Distributed Warehousing Benefits Brands
As businesses expand geographically, managing the different aspects of a supply chain can become increasingly challenging. Packages may have to go through various locations or be routed through complex pathways before they reach the end customer. These complexities can be handled better by a distributed warehousing strategy.
Short supply chain
By shortening the supply chains and fulfilling locally, e-commerce companies can reduce their transportation costs, ensure quality in case of perishables, provide faster order fulfillment, and reduce transportation risks. It also allows businesses to rise up to the new challenges of same-day delivery. Besides, shorter supply chains are a step in the direction of sustainable business, as these involve lesser CO2 emissions, reduced transportation costs, and the least possible environmental impact.
Lesser shipping and fulfillment costs
Speed of delivery is crucial but the cost of delivery is even more so, from the commercial point of view. This is all the more important as customers increasingly expect free delivery from their trusted brands. In most cases, the cost of shipping is a function of the shipping distance. Therefore, by locating the warehouses closer to the customer clusters, businesses can cut their average shipping costs.
Robust Business Continuity Plan (BCP)
A number of unforeseen incidents or catastrophes such as fire, floods, pandemic, and conflict, can disrupt businesses and their supply chains. Having alternative storage and routing facilities in place, courtesy of distributed warehousing can support business operations even during emergencies. Glitch-free operations and on-time promised fulfillment can go a long way in maintaining customer satisfaction and upholding brand reputation.
Benefits of Outsourcing Warehousing Distribution
Distributed warehousing is well in line with outsourced warehousing as they allow the replacement of CAPEX with OPEX for an expanding business. 3PL providers in fact play a significant role in ensuring seamless operations while enabling brands to control their logistics costs. Their warehousing and distribution services are aimed at maximizing efficiency in terms of storage and distribution of goods. With outsourced warehousing, businesses can also enjoy greater scalability in times of peak demand or rapid business growth.
Outsourced warehousing and fulfillment takes the burden off the shoulders of the management, and allows them to focus on their growth strategy. As a substantial portion of supply chain management goes into the hands of the 3PL partner, they can bring in better integration, problem-solving, innovation, and integration.
How does WMS fit into the puzzle?
Managing multiple warehouses, keeping track of the collective inventory across warehouses, picking and shipping the right items, and tracing packages as they are routed through the increasingly complex supply chain requires an automated solution. A Warehouse Management System (WMS) takes care of all these processes which could appear rather overwhelming as distributed warehousing takes full effect. A WMS helps avoid errors, ensures high-level performance accuracy, and keeps your supply chain well-oiled.