Information About Expanding Your Distribution Network
In the fast-passed world we live in, consumers are expecting goods to be delivered to their doors quicker and quicker. As promises like free shipping and two-day shipping become the norm, the need to deliver goods both cheaper and faster is increasing rapidly. For distributors to meet these demands, that might mean expanding on your distribution network.
Why Expand Your Network in the First Place?
- Customer Demand– As previously mentioned, consumers not only want faster and cheaper service, many consumers expect it. If upholding that promise to your consumers is important, then it might be time to consider expanding your network.
- Outgrowing Your Current Space – As your business grows, so do your needs. If you are already reaching max capacity, or if you are coming close to doing so, it is the perfect time to consider expanding your network. This is one of the most common reasons to do so.
- Saving Money – When planned correctly, adding additional distribution centers to your network can actually save you money. The closer the product is to the consumer when they place the order, the less it costs to deliver their order to them. In fact, research suggests that the final segment of the delivery process can make up to 28% of the transportation costs.
Things to Think About When Expanding Your Network
- Profit – One of the most important things to consider when deciding whether you should expand your distribution network is the potential increase in profit. The location where you expand your network is going to play a major role in potential profit. The research is clear that most consumers consider delivery times before purchasing items online. Consider the shipping options you currently offer to get an indication whether or not being able to offer quicker options will result in more profits.
- Inventory – It is always challenging to manage inventory, so what do you do when you now have multiple fulfillment centers? Depending on your situation, splitting up inventory equally between warehouses may not be the most cost-effective. Instead, consider your top-selling products and stock those in both, while keeping less frequently purchased items at one of the other.
- Demand – Another thing to consider is where the demand is. Ask yourself questions like, where are you delivering to more consumers? Fewer customers? What are you delivering to these consumers, and what is the average weight of their orders?