Many online businesses start by keeping their eCommerce inventory at their primary location or in a warehouse nearby. However, as their businesses grow, it is soon time to outsource eCommerce fulfillment to a third-party logistics company.
When you’re choosing a 3PL, you’ve got many questions to answer about the services provided and the cost of fulfillment. But one of the most crucial questions is where you should keep your eCommerce inventory. It’s one of the questions we hear most often at Red Stag Fulfillment, so we asked RSF sales associate Cole Sweetser for his advice about choosing inventory locations.
Why eCommerce inventory location is critical
Where you place your eCommerce inventory can make a difference in delivery times, shipping costs, and fulfillment costs. The fewer shipping zones your orders must cross, the faster they’ll arrive at their destinations, and the lower your shipping charges will be. So, you want to choose warehouse locations that will let you ship to your customers quickly.
At the same time, you don’t want to divide your inventory among any more fulfillment centers than you need to. Spreading your stock too thin will increase your inventory costs and add complexity to your inventory management.
Here are Cole Sweetser’s tips for deciding where to place your eCommerce inventory.
7 tips for developing a successful inventory strategy
Sweetser’s least favorite answer to the question of where to keep eCommerce inventory is, “It depends.” However, the answer to that question usually depends on a variety of factors. What works for one company may not be suitable for another. With that in mind, he offered some general principles to guide your inventory strategy.
It may seem like a good idea to use 10 fulfillment warehouses because that will place your stock closer to your customers. However, Sweetser cautioned, each additional location comes with extra logistical headaches. You’ll have the cost to split each container 10 ways, and you risk running out of stock you need to fill orders.
Red Stag Fulfillment’s two national fulfillment warehouses reach 96% of U.S. addresses in two days or less. Our Salt Lake City location serves the West Coast, and our Knoxville warehouses serve the East Coast. And both warehouses provide fast shipping to the middle of the country.
You probably shouldn’t ship from one location on the coast.
The appeal of shipping from California or New York is obvious. If your products arrive by container ship at the Port of Los Angeles, it might seem like the easiest solution is to truck them to a nearby warehouse. And a fulfillment center on the coast will be close to major population centers to reach many customers quickly.
However, it’s expensive to ship from one coast to customers on the other side of the country, and your delivery times will be extended. Sweetser noted that many clients come to RSF because their shipping is too expensive. While there is a cost to ship products from a port to Red Stag Fulfillment’s locations, our clients get net savings because their outbound shipping costs are so much lower.
Plus, because of real estate costs in New York and California, you’ll probably pay more for fulfillment services as well. RSF’s Salt Lake City hub can reach most of the West Coast as quickly as a California warehouse could but at a much lower cost.
Don’t ship from one location in the center of the country, either
Companies that manufacture in the middle of the country may feel like their central location is perfect for shipping to all four corners of the U.S. from one accessible distribution center close to the factory. However, Sweetser said, “When you start to scale, it’s not sustainable. Shipping costs eat into your profits.”
The sweet spot for many eCommerce companies is a small number of well-placed fulfillment warehouses that don’t spread your inventory too thin or add too much to your shipping costs.
But do go where your customers are.
There are, of course, exceptions to the rule about eCommerce inventory placement. Sweetser gave the example of a surfboard company that ships 90% of its orders to California. In that case, a warehouse in LA might work well. However, if that surfboard company wanted to expand its East Coast sales, a location like Salt Lake City would provide good West Coast coverage plus cheaper, faster East Coast shipping than LA.
Look for eCommerce inventory placement that will give you maximum flexibility.
No two eCommerce businesses are alike, so choose a 3PL that has the flexibility to work with you and meet your needs.
That flexibility is vital to RSF. “We want to be easy to do business with,” Sweetser said. “It’s a partnership, and we can’t be successful if our clients aren’t.”
Use your sales history and advice from a fulfillment expert to determine the best inventory locations for your business.
Sweetser’s biggest tip for developing a successful eCommerce inventory strategy is to take the time to figure out the best solution for your business. Base your decisions on your sales history and knowledge of your customers, and consult with your fulfillment partner.
“Understanding your logistics from front to back is a daunting task,” he said. “I hope that’s why people reach out to us.” RSF helps its clients look at their eCommerce inventory placement from every angle to find the best solution.
What about using FBA for eCommerce inventory storage?
“If your business is set up for FBA, it can be phenomenal,” Sweetser said. However, if you’re using it only because you don’t know how to set up a supply chain strategy, FBA might not be a good match for your business.
He observed that Amazon tends to work well for smaller items, but not the oversized products that are Red Stag Fulfillment’s specialty. “Amazon is not flexible,” he said. “You fit Amazon’s model, or you do not.”
Red Stag Fulfillment can help you manage your eCommerce inventory
Your 3PL is your fulfillment partner. When your fulfillment partner has your back, you don’t have to understand everything about logistics to succeed in eCommerce.
“Red Stag Fulfillment is here to help you grow, help you succeed,” Sweetser said. “It’s up to us to be an extension of your business.”
More about eCommerce inventory locations:
- Choosing Your Fulfillment Warehouse Locations
- Can 3PLs Offer Useful Fulfillment Business Insights?
- Do You Really Need to Own Your Warehouse?