How Demand-Based Inventory Distribution Helps Future-Proof Your E-Commerce Business
As competition intensifies across the e-commerce space, brands must offer faster deliveries and efficient order fulfillment to stay competitive. Being able to project demand accurately and maintain inventory levels according to customer expectations is crucial.
A major factor influencing customers’ perception of a brand is the time taken by a retailer to deliver an item to their doorstep. Efficient and accurate order fulfillment has become key to building a strong e-commerce customer base, and it is equally critical for small and large businesses. While global brands/large businesses need to maintain their brand reputation and customer base, smaller brands need to build their customer base with perfect order fulfillment.
These trends are closely linked to demand-based inventory distribution and help brands create more efficient supply chains, ensuring better customer retention, brand loyalty, and soaring revenues.
The need for optimized demand-based inventory distribution
Optimized, demand-based inventory distribution allows brands to not just save on unnecessary logistical costs, but also avoid frustrating delays. It has helped brands save 10-12% on logistics and enhance overall margins by 30%. There are four main ways in which maximum regional utilization supports demand-based distribution:
1. Faster deliveries
E-commerce customers these days expect same-day deliveries from brands. Storing items in the warehouse closest to the customers enables brands to fulfill orders quickly and maintain faster delivery cycles.
2. Low rate of returns
Fulfilment delays are one of the major factors behind order returns. Demand-based inventory distribution ensures delivery of items within SLAs and reduces the rate of returns significantly.
3. Splitting inventory smartly
Regional utilization allows brands to split inventory amongst warehouses in such a way that demand is always fulfilled from the nearest warehouses. Demand analysis is conducted at the pin code level and helps reduce order transit time, mishandling or damage in transit, and lower shipping costs.
4. Cutting down on logistics costs
SKUs suggested by smart RU solutions are based on the best possible Pincode level warehouse-products mapping. The algorithm runs by processing data such as regional demand, warehouse capacity, and seasonality.
Tools to optimize regional utilization
Increff Distributed Inventory Optimization tool helps distribute inventory in a smart way to enable faster shipments at lower shipping costs. It enables brands and retailers to optimize Regional Utilization (RU) at the pin-code level in a hassle-free way. Since inventory placement services can be quite complex for brands with a high number of SKUs and low depth, constant demand analysis, and in-depth logistics planning are required. With this module, brands can leverage smart inventory allocation across multiple warehouses, and achieve higher regional utilization by warehouse fulfillment outsourcing locally.
The role of distributed warehousing in demand-based inventory distribution
Distributed warehousing also known as cloud warehousing, allows brands to partner with third-party logistics (3PL) service providers, and rent warehouse space in different locations to stock inventory based on local demand. This provides several advantages to e-commerce brands including increased efficiency, reduced long-term rent, storage costs, shipping costs, and faster order fulfillment.
- Distributed warehousing helps brands minimize risks in case of local emergencies such as fire or natural catastrophe. Having products located at various locations helps insure against such risks.
- Distributed warehousing also allows you to enter new markets rather than be restricted to one region. As your capacity for fulfillment increases in a new market, all that is required is a marketing effort to establish a new customer base.
- When a product is located closest to the customer, it is very likely that it appears with the highest ranking on a marketplace. This is because the speed of delivery is one of the heaviest weighted parameters for product ranking.
- As you expand and start selling higher volumes across regions, the shipping costs from a single warehouse will exceed the cost of an additional e-commerce warehouse. Expansion across regions, therefore, necessitates distributed warehousing.
How cloud warehousing helps e-commerce businesses?
It helps brands avail outsourced warehouse distribution across geographies and benefit from higher visibility on the marketplace. Increff’s Cloud Warehousing service, for example, is an outsourced warehouse distribution service. This lies at the heart of smart inventory placement services through which brands can distribute stock to multiple 3PL warehouses across the country for better delivery to the end-consumer.
Warehouse outsourcing benefits brands in ways beyond just reducing logistical costs and minimizing delays. It offers the flexibility to switch from CapEx to OpEx model of operations and ensures efficient management of warehousing without additional operational bandwidth. It can be implemented within 7 days, and a pay-per-use model, resulting in immediately reduced lead time, inventory holding, logistics, and overall costs, leading to increased customer satisfaction, sales, and profitability margins.
As competition intensifies in the e-commerce space, brands are expected to be more responsive and proactive towards their markets. With the help of demand-based inventory distribution, you can future-proof your e-commerce business against fluctuating demand, stay competitive, and grow steadily.