With the rise of e-commerce, investing in warehouses has become an attractive option for retailers looking to expand their logistics capabilities. However, building and operating warehouses requires significant upfront investment. This article will explore effective approaches for companies to invest in warehouse capabilities without breaking the bank. We will cover how third-party logistics providers and strategic warehouse locations near metro areas can help retailers offer faster shipping times to stay competitive. Proper planning and smart partnerships are key to successfully investing in the warehouse infrastructure needed to meet customer expectations in 2023. Both emerging e-commerce brands and omnichannel retailers have much to consider when deciding how to invest in warehouses in a profitable way.
Third-party logistics optimize warehouse investment
Third-party logistics (3PLs) are an effective way for retailers to invest in warehouse capabilities without owning real estate or operating facilities themselves. Large 3PLs like UPS and FedEx offer nationwide warehouse networks that can provide fulfillment services and discounted shipping rates. E-commerce focused 3PLs like ShipBob cater their services and pricing specifically to the needs of smaller merchants. Platforms like Amazon, Walmart and Shopify now offer fulfillment services tailored for sellers on their marketplaces. While 3PLs charge fees for their services, they allow flexibility and eliminate large fixed costs. The key is finding the right 3PL provider for your business’ size, order volume and multichannel needs.
Strategic warehouse locations drive speed
When investing in warehouse capabilities, location is critical for enabling fast shipping times. While 2-day shipping can be achieved from almost anywhere in the continental US, 1-day shipping requires inventory much closer to population centers. Analysis of customer demand and optimal facility locations is key. For nationwide businesses, a distribution network with around 15-20 locations in major metro areas provides significant coverage for 1-day ground shipping. Proximity to key logistic hubs also helps 3PLs reduce transportation costs. Businesses must balance proximity with affordable real estate prices and labor availability when investing in warehouse locations.
Increase inventory levels to enable fast shipping
In addition to warehouse locations, companies aiming to offer one-day shipping need to strategically increase inventory levels for faster-moving products. Amazon Prime’s move to 1-day shipping required both expanded warehouse capacity near metro areas as well as billions in additional inventory. For omnichannel sellers, placing the right products in forward-deployed warehouses can make 1-day possible without multiplying inventory. Advanced analytics to coordinate fulfillment across stores, warehouses and online inventory is key. Inventory visibility and planning tools ensure you have the right items in the right places.
Compare fulfillment costs across warehouses and stores
Retailers with existing brick-and-mortar stores need to optimize order fulfillment across both their physical and digital networks. Fulfilling online orders from a local store may provide faster and cheaper last-mile delivery over shipping from a distant warehouse. Inventory and order visibility tools can determine optimal sourcing. Some stores are also being retrofitted to function as mini-warehouses in urban areas. Ship-from-store and in-store pickups provide flexibility to serve customers from the most efficient location.
In today’s era of fast shipping, investing strategically in warehouse capabilities is crucial for retailers to profitably meet customer expectations. Leveraging third-party logistics, optimal warehouse locations, increased inventory and omnichannel coordination are key factors for success. With the right approach, companies can invest smartly in the warehouse infrastructure needed to enable one-day shipping and stay competitive.