We get calls all the time with all sorts of inquiries, but one question seems to come up more than others: “Do you have multiple warehouses?”
The real question should be, “Do I need multiple warehouses?” or “Will I – and my customer – benefit from using multiple warehouses?”
These questions can best be answered with…maybe? Maybe you do, maybe not. You see, it all depends on your business, products and a variety of other factors that all contribute to whether or not shipping to multiple warehouses is right for you.
Signing up with a fulfillment company with multiple warehouses may be the wrong decision for some businesses, but a good fit for others. Before you make your decision, consider some of these factors.
With lightweight products (typically between 1 to 5 pounds), using USPS First Class and Priority Mail will get orders to your customers within 1 to 3 days anywhere in the United States. Plus, their shipping rates are significantly lower compared to other shipping carriers. With these lightweight orders, flat rate shipping is possible; so multiple warehouses may not offer you any real cost savings.
However, if your orders are indeed heavy (above 10 pounds) taking advantage of multiple warehouses could help you avoid high shipping costs of sending your orders to shipping zones far from your location.
If the majority of your orders are in the U.S., a multiple warehouse solution may not be your best option. Your savings in shipping costs may not outweigh the increased cost associated with sending goods to each additional warehouse.
It also makes sense to look at what you’re selling and to whom when making this decision as many products can be location-based, demographically. For instance, if your main product is a winter coat, does it make sense to ship from a warehouse in southern California? No, because your customers are not there. If you manufacture surfboards, would it make sense to have several warehouse located in the Midwest? No, because your customers are on the coasts.
If a good portion of your orders are international, setting up multi-warehouse distribution could afford you some savings in shipping cost and the time it takes for your customers to receive their order. It can also help you offset European Union VAT (Value Added Taxes), which can range from 15% to 27%, depending on country.
If you carry a high number of SKUs, the cost of doubling or even tripling your inventory will most likely eliminate any cost savings with multi-warehouse distribution as your inventory will need to be stretched to occupy all warehouses. Besides having your cash flow tied up with the need for extra inventory, you will also be paying for shipping of stock to each separate warehouse to boot.
Situations may arise where stretching your inventory could result in a business loss. For instance, we’ve seen cases where companies get an influx of orders and their local warehouse may only have a small count of product; whereas the bulk of their product is in a warehouse in another country. Now what? They have to ship from overseas to fulfill domestic orders, taking a huge loss on shipping costs.
Each state has its own tax rules and regulations which you will need to follow for each warehouse your inventory resides in. When utilizing warehouses in multiple countries, you will need to follow their tax regulations and possibly register as a separate business. These kinds of complexities may be difficult for small to medium businesses to handle, as SMBs tend not to have the higher-level resources and infrastructure.
Additionally, warehousing in different countries brings with it each country’s custom regulations, which, again, may be difficult to navigate for an SMB and bring unanticipated duties and delays.
An overlooked factor is to take the warehouse’s order receiving cut-off time for same-day shipping into consideration. Your customers could actually be losing time on their orders going out. For example, if a warehouse has an order cut-off time of 6:45, by the time they receive your customer’s order, it won’t be processed and sent until the next morning. Here at Fulfillrite, we will ship orders the same day if they’re received by 1:00 PM EST, one of the most generous cut-off times in the industry.
When fulfilling via multiple warehouses, you will also have multiple people handling your account. Trying to track down orders, and get in touch with support at each warehouse may prove difficult. In contrast, when you are signed with a single owner-operator fulfillment house, you will have dedicated support that is well versed with your account and status.
Many of the larger fulfillment companies outsource; your inventory is sent to contracted warehouses around the world. If your business would prefer to know whom they’re working with and to develop a good relationship with, perhaps a larger multi isn’t for you.
In conclusion, instead of comparing how many warehouses a particular order fulfillment center has, it’s more important to consider how fast they can process your orders and get them out the door. After all, it’s all about speedy delivery, order accuracy and not having to pass extra expenses on to your customers.