Customer expectations are higher than ever, especially when it comes to ecommerce. Meeting these expectations is extremely important, but traditional supply chain and logistics networks weren’t designed for the direct-to-customer fulfillment process. Now, with this growing demand, businesses face pressure to redesign their fulfillment networks in order to offer what customers are looking for: faster delivery, free (or less expensive) shipping, online ordering, curbside pickup, a painless return process and more. If you are in the process of expanding your fulfillment and logistics network, these are a few things you need to consider.
1. Weigh all of your options for fulfillment network expansion
There are a lot of different expansion options to choose from, so before committing to a decision, make sure you understand all of your options for warehousing solutions. Common options for this include purchasing or leasing your own assets and warehouse space, hiring a third-party logistics (3PL) company, or using on-demand retail and fulfillment services. Which one you choose depends entirely on your business model, product demand, growth plans and volume. If you have generally predictable demand and enough volume, then owning your fulfillment centers might be a good option for you. High utilization of these facilities reduces the risks of fixed investments and gives you total visibility and control over your logistics process. However, if you experience high levels of seasonality or extreme peaks and valleys in your volume, then these fixed investments can quickly become unproductive, inefficient and costly. You may want to consider a flexible fulfillment option like on-demand warehousing if you have unpredictable demand. If you don’t have the capabilities internally to handle your own fulfillment and logistics, experience drastic changes in volume or need additional expertise and services lines then outsourcing your fulfillment and distribution needs to a full service 3PL might be the perfect option for you. For many companies, especially larger ones, a mix of all of these options and having a robust fulfillment network is often the best solution to ensure all needs can be accommodated.
2. Understand how you can meet growing customer expectations
Providing excellent customer service and experience can be key to your success, and thanks to companies like Amazon, it’s become increasingly difficult and costly to meet these high expectations. It’s essentially mandatory now to offer fast and free omnichannel fulfillment options. When you are expanding your logistics network, make sure that you keep your customers’ most important wants and needs in mind. Do you have a physical store that allows you offer buy online, pick-up in store (BOPIS) fulfillment for their convenience? What about free two-day shipping? Do you offer free returns? What do you need to do so you can offer these options to your customers? When considering your fulfillment network expansion, prioritize the needs of your customers and make sure the size of your network of fulfillment centers matches their demands. It’s also important to remember that maybe not every product you sell needs to be available for fast and free shipping. For example, it might make sense to only offer that for your best-selling products and put those products closer to your end customers through smaller fulfillment nodes in high demand areas to fulfill those orders faster. Analyzing your product demand by volume and frequency and implementing strategies like this will help you keep your customers happy and your business running smoothly and cost effectively.
3. Choose the right time to scale
The proper timing of a logistics network expansion is key, largely because long lead times are required in standing up new nodes, facilities or even large scale distribution centers, especially if you are leasing space or working with a third party logistics partner. Generally, after Q4 is a good time to look at the data from any peak season or holiday spikes in demand and how well prepared you were as well as potential growth opportunities. The explosive expansion of ecommerce has illustrated that you don’t have the ability to be prepared for everything, which highlights the importance of building flexibility and resiliency into your supply chain and logistics network design. Make sure you look at your own historical data and develop an extensive plan that will allow you to scale while continuing to prioritize your customers’ needs.
4. Consider the best areas for geographic expansion
Because getting your products to your customers in a timely manner is more important than ever, it’s crucial to position your distribution centers in strategic locations that will allow you to reach as many people as possible within two days. You can do this in a variety of ways depending on how many distribution nodes you would ultimately like to have. For example, ITS Logistics has one distribution center near Indianapolis, IN and one in Sparks, NV—allowing us to reach almost 90 percent of the US population within two days by truckload freight transportation. When designing your logistics network, consider the geographic infrastructure including proximity to interstates, ports, air hubs and rail yards that will allow you to reach more people quickly. Also be sure to investigate any financial incentives states offer that make for a business-friendly climate. Even if you aren’t ready to open your own warehouse facility, finding a third party logistics company with operations in locations that match your needs can help you accomplish this, too. By researching intently and determining the ideal locations for your distribution centers, you’ll be able to offer faster delivery times, improving your service to your customers and ultimately growing your business.
ITS Logistics can help you expand your fulfillment and logistics network
Expanding your fulfillment and logistics network to place inventory closer to your customers through new fulfillment nodes, add ship-from-store capabilities, or implement a full omnichannel distribution solution is no small feat. However, having a thorough plan to expand your network is key because it can offer you an effective way to get your products to your customers more quickly and affordably. As you are considering the best way to do this, remember to weigh the full range of your warehousing and fulfillment options, evaluate and understand your delivery time to cost ratio, and make sure your timing is right. If you are looking at hiring a 3PL to help with this undertaking, or simply just have some questions about the best way to expand your fulfillment network, our supply chain management experts can help. Give us a call today.