This blog was contributed by Kristina Lopienski, the Content Marketing Manager at ShipBob. Kristina drives content strategy and writes various articles, case studies, and white papers to help ecommerce merchants grow their business.
Anyone in ecommerce understands the vital role shipping plays in the online shopping experience. The cheaper and faster your shipping, the more likely customers will be to buy from you.
More than half of US-based consumers say they have abandoned an order because the delivery was too expensive. And a quarter claim to have canceled an order because the delivery speed was too slow. In other words, it’s never been more important to offer customers enticing shipping options.
Small to mid-sized ecommerce companies have a few options to accomplish this. One of the easiest ways is to partner with a third-party logistics (3PL) company to outsource the order fulfillment process. Partnering with a 3PL gives ecommerce SMBs access to a network of fulfillment centers and integrated technology. They can also take advantage of the 3PL’s order volume. As a result, ecommerce businesses can offer more affordable and speedier shipping options than they could on their own.
Let’s dive into how companies can pull this off.
Utilizing multiple fulfillment centers to reduce shipping distance
Using a single fulfillment center to store inventory and pack and ship out orders can be limiting. It’s unlikely all your customers live in a single region. Realistically, you’re shipping from one side of the country to the other. This means you will likely have long shipping transit times with high fees .
Shipping zones are the predefined geographical areas carriers ship to. Carriers use zones to measure the distance a package travels in transit. Unlike flat-rate shipping, carriers use zones to calculate rates for certain services. This means the higher the destination shipping zone, the more expensive it will be.
The best way to save time and money is to distribute inventory to fulfillment centers in different regions. As you review potential locations, consider how many people live near each facility. A fulfillment center in the middle of nowhere won’t help you deliver to many of your customers on time. But a center in a major city that’s near a lot of the nation’s buying power can help expedite deliveries. Your fulfillment strategy should mirror the population density of the country.
Don’t pick cities at random. Instead, be data-driven in your approach. Analyze the shipping addresses of past orders to find the optimal distribution strategy. (Here is a free Excel tool that helps do the work for you: Inventory Distribution Calculator.)
Once you have inventory in multiple fulfillment centers, you can ship orders from the location closest to the customer. This means you can leverage ground shipping for faster options like 2-day shipping. You no longer have to use a more expensive expedited option that would require air shipping.
The addition of each fulfillment center helps you create a strategic geographic footprint. This ultimately helps you achieve a reduction in your average shipping time and cost.
Relying on analytics to inform decisions
Integrating your online stores with the 3PL’s technology automates the downstream steps of the fulfillment process. You can customize shipping options and match the 3PL’s carriers and services with what you offer on your shopping cart.
As soon as a customer checks out, the 3PL technology automatically routes the order to the appropriate fulfillment center. It then selects the carrier that can ship in the most efficient and cost-effective manner.
Technology must be a core part of the fulfillment process. It enables you to see the complete lifecycle of the order up until it arrives at your customer’s doorstep. Since the technology powers the 3PL’s network of fulfillment centers, it can also send critical information back to the store and customer.
Over time, you can see new patterns and insights using advanced analytics. This visibility helps eliminate guesswork and drive more effective supply chain decisions. Fulfillment software can also empower you through data and reporting. It shows you how to split products across fulfillment centers based on your customers’ locations.
Getting free 2-day shipping has become the norm in today’s consumers’ minds. It’s critical to be able to offer your customers quick and affordable shipping options.
Fortunately, smaller ecommerce merchants can compete with giant retailers by using a 3PL. 3PLs offer the advantages of a strong geographic presence and fulfillment expertise. Ecommerce SMBs can also use a 3PL’s integrated network to fulfill orders from multiple regions. As a result, each order travels as short a distance as possible and arrives faster.