A distributed warehouse is a warehousing strategy that encompasses a business’ ability to fulfill, ship, and distribute from multiple strategically placed, small warehouses. The strategy’s goal is to be close to the customer and minimize shipping times along with costs, which may not be feasible from one or two large warehouses.
How Do Distributed Warehouses Work?
A distributed warehouse is an essential strategic piece for any online business, particularly small and medium-sized ones. Instead of building, investing, and managing their own warehouses, companies are finding it more manageable, cheaper, and more efficient to use the services of a distributed warehouse.
A distributed warehouse is normally owned and operated by a third party and is sometimes called a fulfillment center. The distributed warehouse will become a hub for the business to store, package, and ship goods to another location.
A distributed warehouse may work for your business if it has any of the following needs.
Your product has substantial weight. If your product travels less distance or shipping zones to your customer, you can make savings.
You have high volume sales such that your shipping costs outweigh the cost of a new warehouse. You can also ensure that your most popular products are in every warehouse, thus ensuring they are closer to the consumer and your less popular products aren’t taking up valuable space.
Your customers are in many geographical locations. The decision to locate warehouses should depend on how many customers will benefit from it.
You want to shorten your delivery time. The shorter the distance between your warehouse and the customer, the easier it will be to ship in one or two days.
Benefits of Distributed Warehouse for Retailers
Many retailers and small businesses are considering a distributed warehouse model. The primary benefits they seek are shorter delivery times and reducing shipping costs.
There can be a lot of uncertainty associated with making online purchases. Businesses should realize the importance of fast delivery to ease those tensions. Fast delivery is now a universal expectation from customers on every transaction they make. A distributed warehouse enables businesses to substantially reduce their delivery times, as the warehouses are closer to the consumer.
Delivering fast is always possible if the customer is willing to pay substantially above the market price, but most aren’t willing. So a distributed warehousing model enables the business to deliver and fulfill orders at a lower cost. The business will be able to meet customer expectations without substantially increasing its prices or tightening its margins.
Getting Started With Distribution
Creating a distribution channel that can reach customers quickly can become more challenging as you grow. Your options for distribution will generally be a self-funded distribution chain, an agency network, or using the services of national third-party fulfillment companies.
Buying or leasing a warehouse is a significant decision that’ll impact your competitiveness and ability to serve customers. Your choice will affect your company’s effectiveness, efficiency, and profitability. With a distributed warehouse system, it’s not enough to have multiple small warehouses; you need to consider several factors when choosing one.
When you choose a warehouse, you should consider the following;
Rent is a considerable cost factor when evaluating a warehouse. Although you would most likely want to go with the lowest rent, ensure that you consider hidden costs. You need to consider the rates and taxes of the location to have the whole picture. Hidden costs such as rates and taxes can offset any savings you make on low rent. You must also pay attention to local regulations and incentives.
The workforce and skills available in the location are important. The skills available will impact the quality of work you can expect and their productivity. Workforce availability will also affect your costs; low supply areas facing high demand for skills will cost more, leading to tighter margins and vice versa.
The warehouse’s accessibility is critical. You want a place accessible by road, with low traffic, especially if trucking is the primary mode of transport for outbound goods.
You will have to consider access to highways and exit ramps, highway interconnectivity, average traffic speed, traffic volume, peak hours, and road conditions. These factors will impact fuel consumption, accident rates, and time.
Be close to any inbound port like the airport, railway station, or seaport. The mode of transport that your goods enter the warehouse determines where your warehouse should be. This will help you reduce drayage costs and achieve a high container velocity level.
For example, if your goods mostly come in through air freight, you need to be close to an airport or located on a highway with direct access to the airport.
Proximity to producers, suppliers and the market is also something you should consider. It helps to improve lead times, enhance your responsiveness, and reduce your transportation costs.
Local weather and climate will affect your warehouse’s efficiency. You don’t want to locate in an area with frequent natural disasters or that doesn’t have good drainage should it rain.
Should things go well and you need extra space, you want to have the option to expand quickly. That can be land to build on or a bigger warehousing space nearby.
If you develop in the same area, you will retain your staff and utilities and minimize the frustrations of truckers or customers finding your new place. Once you have the above information, you will have enough data to analyze each option and make the best decision.
Use a Distributed Warehouse Model
Use a distributed warehouse system to reduce costs and better serve your customers. It is an effective way to expand to new markets without burdening your finances. Choose a network that will get your product to your customers quickly.