Customer expectations are higher than ever, especially when it comes to ecommerce. Meeting these expectations is extremely important, but traditional 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: fast 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
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 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. However, if there’s a level of uncertainty or seasonality in your business and demand, 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. 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 is extremely important, 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 to 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 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 or even facilities, especially if you are leasing space or working with a 3PL. 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. The continued growth of ecommerce means you might not have the ability to be prepared for everything, which illustrates the importance of building flexibility into your supply chain. Make sure you look at your own historical data and create an extensive plan that will allow you to scale while continuing to serve your customers the best that you can.
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 omni channel 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, we can help. Give us a call today.