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Why You Need a Solid Fulfillment Center Location Strategy

by Mike DeFabis on 2015-03-16 17:16:00

Optimizing the location of your ecommerce fulfillment center will result in the single biggest cost savings move you can make operationally.

This is an extremely bold statement (literally and figuratively), but it is true.  Finding the ideal location for your fulfillment center can prove to significantly cut costs in your supply chain and it can also dramatically improve customer service. The main goal of placing your fulfillment center in the optimal location will result in lower outbound and inbound shipping costs and lower transit times. This blog will give you ideas and tips on what factors to use when determining where to place your fulfillment center. locationstrategy

Customer Density

For many small to middle sized companies, looking at your customer density might be a little eye opening.  This will most likely reveal that certain areas of the country might order your product more than other areas.  This means that you want to place your fulfillment center closer to that region of the country. 

For larger companies, the customer density is most likely going to be laid out much like the U.S. population density.  In this case, placing a single point fulfillment center in the Midwest, or more centrally located, can provide lower shipping costs and transit times.

Economic Factors

There are several economic factors that should be looked at when deciding where to place you warehouse.  Two of those factors are the cost of labor and the cost of space.  Locations like California and New York are going to be far more expensive than a Midwest location, such as Indianapolis, IN, or a West Coast location that is further inland, like Salt Lake City, UT.

Also, factor in the skill of the work force and how readily available is labor. If you have seasonality to your business you will want to make sure that you can obtain good labor quickly.

Inbound Transportation

While outbound shipping should be the major factor when looking at fulfillment locations, you should also factor in your inbound transportation costs.  Close proximity to vendors or to ports can help save on the inbound costs.  Generally most of your costs are on the outbound side so do not put too much weight into the inbound side, but it should definitely be a factor.

Finding the optimal location for your fulfillment center can result in tremendous cost savings on inbound and outbound transportation, labor and storage space.  Keep in mind many cities will also give new businesses tax incentives to open a fulfillment or distribution center.  Weigh all your options before making the big decision of where to place your fulfillment center because it could be the difference between a good year and a GREAT year!

For more information on how IDS can help provide fulfillment solutions for you, Contact Us Today!

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