3 reasons why businesses should consider a multi-warehouse strategy
Warehouses are used to store your products and are a pivotal point in your supply chain. Some businesses are directly involved in managing their warehouse locations, while others employ a third-party fulfillment warehouse to help manage their fulfillment process.
Regardless of whether you use in-house fulfillment, dropshipping, or outsourced fulfillment centers, consider having multiple warehouse locations; this helps you to scale your business, especially so if you have consistently high order volume.
Some vital signs that indicate that you should invest in additional warehouse locations:
- You want to improve your shipping time
- You want to reduce cart abandonment rates caused by expensive shipping
- You do not have a backup plan if your current warehouse location is closed due to unforeseen circumstances
Of course, there are other factors, such as having enough resources and order volume, to justify additional warehouse locations. However, if you have the means to do so and wish to grow your business, we list the top 3 benefits of having multiple warehouse locations below.
The top 3 benefits of multiple warehouse locations
1. Lower operational costs
If you have a secondary warehouse location within or closer to an area where a high concentration of your customers is located, this allows you to fulfill their orders at a lower cost. An additional warehouse also enables you to provide pickup options at more locations, removing the shipping cost altogether.
For example, you are a seller with a warehouse location in Delaware. However, 40% of your customers reside in California. Having another warehouse in California will allow you to cut down on shipping costs as compared to shipping your products directly from Delaware to California. As a bonus, potential customers in the West Coast area are more likely to patronize your store as they also enjoy better shipping rates.
The amount of cost savings is drastically higher if you deal with various intercontinental transactions and open a warehouse in the same country as your primary target audience.
2. Better customer experience
Having multiple warehouses covering a broader geographical range grants an edge over competitors that only have one warehouse. This is because customers are more likely to purchase goods from a provider that offers faster and cheaper delivery rates.
A 2020 survey reports that 50% of US adults (intending to buy products) abandoned the shopping cart when they realized that additional costs such as shipping or tax are higher than expected, and 18% cite slow delivery times for not completing an online purchase.
With multiple warehouse locations, you can offer more competitive shipping fees and delivery times that will entice more customers. Returning goods also become cheaper as they can choose to return goods to a warehouse closer to their location.
3. Spread significant supply chain risks
Having multiple warehouse locations allows you to mitigate the impact of unforeseen factors such as transport logistics delay, natural catastrophes, and internal disruptions such as a warehouse fire or flooding. Warehouses in different countries also ensure less disruption during local holidays.
One recent example is the massive impact COVID-19 had on businesses relying on China for manufacturing and assembly. With mass closure of factories, these companies struggled to find an alternative supplier or manufacturer in such short notice to continue operating at full speed.
Business owners with a high volume of orders should consider investing in additional warehouses as it allows them to provide a better customer experience with lower shipping fees and faster delivery speeds. Multiple locations also enable the business to avoid a potential bottleneck in the event of an unexpected disruption.
With multiple warehouse locations, order and inventory management can get out of hand without a reliable warehouse management solution.
Deskera Books is a cloud-based ERP solution that allows you to manage inventory from multiple warehouse locations. Check out our website here.
