How Cost and Speed Factor into Fulfillment

Online order fulfillment is multi-faceted, meaning that no one specific method works right for every single company – at least on its own. As a result of this, more companies than ever before are attempting to get faster shipping at lower costs by combining methods or even outsourcing their order fulfillment and inventory management. Here, you can learn more about the ways in which cost and speed can impact fulfillment so you can make better choices for your business needs. 

The Bottom Line

Before choosing the best fulfillment method for your needs (or the best combination of methods), it’s important to think about which options will get packages into your customers’ hands at the best possible rates. Sometimes, for small businesses, this means leaving the entire process of picking, packing, shipping, and processing returns or exchanges to outside third parties. For others – and namely larger companies – this means leveraging their preexisting brick-and-mortar locations to create miniature distribution and fulfillment centers that can improve shipping times without driving up costs significantly. 

Target’s Transition

Of all the retailers who have made the decision to utilize their retail locations as distribution centers, Target is arguably the most successful. In fact, after making this transition, the company announced that it cut costs by roughly 40%. They’ve been utilizing this method for well over a year, and they claim it even works well for their holiday shipping. Target simply utilizes outstanding technology to track their orders and inventory and invests in things like scales and scanners for their retail stores to turn them into distribution centers. 

The Main Benefit of Retail Stores as Distribution Centers

Square footage is expensive, and that includes the square footage required for inventory management and order processing. Rather than spend money building new centers, and rather than buying existing warehouses and converting them to work with Target’s chosen technology, the company saves money by planting the necessary tools inside existing Target stores and paying a few extra employees to pick and pack right off the store shelves. 

Should Small Businesses Use This Method?

Though mini distribution centers work well for companies that already have retail stores across the country, this is not an ideal choice for smaller companies that have not yet branched out. Most of the companies utilizing the model today are large and well-known retailers, but it may be possible for smaller retailers to utilize the same sort of setup as long as they sell a narrow range of standard merchandise that is the same both online and off and they have the profit margin for handling the costs associated with last-mile delivery. 

If your business is just getting started, the best option is to hire an outside company offering on-demand warehousing and order distribution. However, as your company grows, if you decide to start opening retail locations, you may find that turning those locations into mini distribution centers can work well for you, too – if you offer a relatively small selection of standardized items that are roughly the same no matter which channel sells them. 

By | 2019-09-24T13:23:29+00:00 September 24th, 2019|Categories: Fulfillment|Tags: , , , |0 Comments

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