Using a multi-center distribution fulfillment service provides you with the ability to get products to customers faster and at a lower cost.
That said, each time you add a distribution center, you add another level of complexity across each order fulfillment center. Not to mention your overall inventory management process.
To maximize inventory management efficiency across multiple distribution centers, there are four things you need to consider. When you utilize the following inventory management tips, you’re ensured savings on shipping times and costs when teaming up with a multi-center distribution fulfillment service.
1. Don’t Run Out Of Inventory In A Particular Location
One way to keep your shipping costs at an absolute minimum when partnering with a multi-center distribution fulfillment service is by never running out of inventory at any individual warehouse.
However, it should be noted that if your inventory management didn’t have enough product at a particular location, that’s okay. Your multi-center 3PL provider would ship your product from the next closest location. While this has some impact on time-in-transit and shipping costs, that cost is nothing compared to completely running out of inventory and having to backorder an item. Backordering an item incurs a much larger expense for you business.
2. Be Sure To Consider Sales And Corporate Income Tax
There could be extra tax implications by having products shipped from various locations in various states, so be sure to check with your tax advisor first. Two taxes to take into consideration:
- Sales Tax: Current ecommerce sales tax laws require you to collect sales tax from the residents of any state you have a physical business presence in.
- Corporate Income Tax: There could be some extra work for your accountant to divide the corporate income tax between states instead of just the state the company is incorporated in.
Generally speaking, however, the savings your direct response business realizes from a multi-center distribution fulfillment service far outweigh the extra tax implications.
3. Don’t Send Every SKU To Every Order Fulfillment Center
If your direct marketing company carries a large catalog of SKUs that are slow moving, it’s usually better to stock that group of inventory in one location. This way you may send your current fast-selling items to multiple locations, providing the biggest bang for your buck.
Keep in mind, however, that if a customer places an order for two different products that are located in two different warehouses, you then have to pay for two different packages. This reduces the savings of using a multi-center distribution fulfillment service, and actually makes that order cost more than if shipping from one center alone.
To avoid the pitfalls of the above scenario, it’s important to understand what combinations of SKUs get purchased together, and make sure that those combinations of products are located in the same warehouse. Your 3PL provider or order management software should be able to provide you with this information so you are capable of achieving the highest savings.
4. Simplify And Save With Your 3PL’s Inventory Management Systems
Inventory management across multiple distribution centers benefits greatly from order management software. Many 3PLs are not advanced enough to offer order management solutions, so if they don’t, make sure your order management software can handle this. Be sure your 3PL provider has technology that’s advanced enough to help manage the selection and routing of customer orders.
An advanced inventory management system is going to optimize your savings on shipping, especially when inventory is getting low in a particular location.
Additionally, with an advanced inventory management system, your 3PL provider should provide you with high-level reports of your small parcel shipping costs. With this data, you and your 3PL provider are capable of analyzing costs and to reveal savings in time and shipping expenses by including additional locations.
A 3PL provider with multiple order fulfillment centers comes with many great benefits, so long as your inventory management strategy and approach are aligned. By implementing the above tips, you achieve satisfaction for both your customers and your bottom line.
Ready to learn more about inventory management across multiple order fulfillment centers? Call 800-808-3304 or click here to speak with a 3PL expert at Moulton Fulfillment.