How an eCommerce Distribution Center Can Help Stores Grow

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ecommerce distribution center
Damien Bradford - ShipNetwork
Damien Bradford
Director of Operations
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Whether you sell to consumers or other businesses, your customers have gotten used to quick, accurate shipments. To provide good service and keep them coming back for more, you need to provide the same as they can get anywhere else, and even more. As your company grows, you may need the support of an eCommerce distribution center to keep up with the demand and to continue to grow your store.

Let’s take a look at what eCommerce fulfillment services can do for businesses just like yours.

What Is an eCommerce Distribution Center? 

An eCommerce fulfillment center gets online orders out the door to your customer promptly. Depending on how many orders you see and the size of your staff, it may be far too time-consuming to do this task yourself – and that’s where a distribution center comes in! 

These centers are designed to help eCommerce shops outsource their warehouse and shipping needs. Many times, distribution centers house goods from many different retailers, processing orders that have been placed online for a variety of goods and stores. When a customer places an order, the distribution center is notified via an integration with the eCommerce store to begin the process of packing and shipping orders. 

The Difference Between a Warehouse & Distribution Center

You may see the terms warehouse and distribution center used interchangeably, but there are a few key differences between the two. The one you want to use for your eCommerce shop will depend on exactly what you are looking for.

A warehouse and a fulfillment center are large buildings that store inventory. But a warehouse refers to a building where inventory is stored for a long period. This may be seasonal merchandise for retailers, or it may be parts for upcoming production runs. Using a warehouse frees up space so the company can store more relevant, timely products on hand, but gives them access to the goods when they need them.

Distribution centers store inventory for a business, but also serve other purposes like order fulfillment. The length of storage of inventory tends to be much shorter than in a warehouse. These buildings need to get the product out as quickly as possible when a customer places an order. 

If this still seems confusing, here is a simpler way to think about it. A warehouse is for storage. A distribution center is for shipping orders out (or distributing orders).

What do Distribution Centers do?

A distribution center serves as an order fulfillment provider for online businesses. To help eCommerce businesses grow, distribution centers follow the top best practices for inventory management, order fulfillment, and shipping. This means that they can be a great partner for sustainable eCommerce growth over the years. 

The way this often works is that an order is received from your customer, and the integration set up between your eCommerce platform and the warehouse management system (WMS) notifies the distribution center that it is now time to pick, pack and ship the order. This notification – called a packing slip (digital or printed) – kicks off the process so that your customer can get their order as soon as possible. 

Distribution centers often solve a few problems that many eCommerce businesses face. First, they solve that order fulfillment problem – which can be complicated and time-consuming, as well as costly. Then, they solve the shipping problem with a range of shipping carriers who can provide lower rates for online stores working with fulfillment centers. Finally, they solve the space issue, as inventory often needs a lot of storage space. The inventory is stored at the fulfillment center as it waits to be purchased and shipped.

Through all of this, eCommerce businesses will have better technology and expert help navigating the entire order fulfillment process. 

What Is an eCommerce Fulfillment Service?

Online order fulfillment is an entire process that starts when a customer places an eCommerce order and ends when they receive it (or return it, if necessary). While order fulfillment is often thought of by the average person as just packing and shipping the inventory, it involves so much more than that. 

When it comes to eCommerce, fulfillment is a critical part. Without effective order fulfillment, customers will not be able to get what they ordered quickly and accurately. An eCommerce fulfillment service helps to make sure this process gets done. 

There are many steps to order fulfillment that can get complicated for small or medium-sized businesses that have other things to worry about. A fulfillment specialist can provide a range of services to make life easier for eCommerce business owners:

  • Receiving inventory from online businesses.
  • Short-term storage of the product in warehouses and fulfillment centers.
  • Accurately picking an order from the designated inventory storage area.
  • Packing the order safely and securely for transportation.
  • Shipping out the order promptly.
  • Ensuring delivery to the customer with effective tracking.
  • Handling returns of orders. 

These things happen at distribution centers every day. By outsourcing fulfillment needs to the experts, eCommerce companies can focus on making products and developing new things to offer customers. As your business grows, it may become necessary to find the right distribution center that can help with all of these aspects of logistics so you can focus on the rest.

Benefits of Distribution Centers in Online Order Fulfillment

eCommerce fulfillment centers are designed to help businesses just like yours process, package, and ship orders out for their customers. 

Experienced Personnel

You will no longer need to employ order fulfillment staff because the distribution center handles that part of it – and they are experienced, well-trained fulfillment professionals. They stay up to date on the latest best practices for warehousing, inventory management, and order fulfillment and have access to the best technology to make it all happen seamlessly. 

Better Shipping Rates & Speeds

Most distribution centers have a variety of shipping options with different carriers, usually negotiated for lower rates than you can get yourself. You may even be able to begin offering international shipping or two-day delivery in the U.S. 

Higher Levels of Efficiency

Investing in technology can make order fulfillment more efficient, but it can be expensive. You may not want to take on this expense just for you, but with a distribution center, those systems, processes, and technologies are usually already in place, making filling orders quick and easy. 

Increased Inventory Accuracy

You know how important your inventory is. But ensuring that you do not oversell items on your website can be challenging if you manually handle your inventory tracking. With the technologies a distribution center has, you can keep a more accurate account of what is currently in stock so you can make sure you only sell what you have and restock on low inventory items.

More Visibility into Supply Chain

Increased visibility into the supply chain will give you better control of costs, a way to find efficiencies, identify supply chain issues in advance, and gain insight into potential opportunities for growth. 

Reduce Overhead Costs

When using a partner for inventory storage and fulfillment services, you can reduce shipping costs, manage warehouse space, and control inventory levels. By managing costs associated with warehousing and shipping, you will be able to see costs cut from your overhead. 

Encourage Company Growth

You do not have to go it alone, and when you have the right partner, you will be able to grow at an increased rate. With the support and tools a distribution center can provide, you will more accurately forecast demand, calculate inventory, and manage the shipping and transportation of your orders. 

Improve Customer Service

Good customer service is something that nearly all eCommerce stores strive for, as it leads to a positive customer experience. eCommerce store owners know that this is critical for returning customers and orders from friends or family of past customers. Distribution centers can support customer service, providing accurate order tracking and accurate delivery. 

What Makes a Great Distribution Center?

No matter what you sell, you need to have a good fulfillment strategy in place. It may be hard to go at it alone as you grow. With an increase in average monthly order volume, you will inevitably need to spend more time working on processing orders, packing them up, and getting them ready for the shipping carrier. When that time comes, you should consider finding a distribution center that can take over some of these tasks for you.

There are three main things a business owner should look at when searching for a distribution center:

  • Quick and accurate order fulfillment. 
  • Quality communication 
  • Reliable problem-solving processes.

A distribution center should get the right order packed up and to the customer in as little time as possible. The package that your customer receives should match what they order, down to the right size and color. 100 percent order accuracy means happy customers who will spread the word about your company – and the distribution center plays a big role in order accuracy.

You also should be able to ask questions of your distribution center and have a contact number or email that is monitored and responded to so you can get in touch when necessary. Their communication tools should also help you stay up to date on inventory levels so that you can send new inventory when needed. This is often automated, so integration into your eCommerce platform will make this easy. 

What to Ask When Looking for an eCommerce Fulfillment Center 

Your distribution center should make your life easier, not more complicated. As you start your research, keep the following questions in mind and ask a company representative if you need clarification on any of it. 

Where are the distribution center(s) located? 

Sometimes, distribution centers have a network of locations so you will be able to send your inventory to many locations, reducing shipping time for your customers.

What shipping options does the distribution center offer? 

A lot of times, you can get lower shipping costs or expanded shipping options when you use a fulfillment center. They will have negotiated rates for expedited or lower-cost options, meaning that you may be able to offer two-day shipping or free shipping for your customer.

Can the distribution center easily integrate with your eCommerce platform? 

Depending on your eCommerce platform (like Shopify, WooCommerce, or Magento), you should find a distribution center that seamlessly integrates so that orders are shared easily and inventory management is more transparent.

What does the inventory storage situation look like?

Your distribution center contract will include a cap on the number of items you can store depending on the space they have for you. If you will need to have a large amount of inventory on hand, you need to make sure the center can accommodate that. 

Do they offer additional services if you have unique products? 

Some distribution centers offer customization, kitting, or subscription services. This may be beneficial to your business if you currently sell or plan to sell anything that is kitted or recurring orders.

Do they handle returns? 

Let’s face it – your company has seen returned inventory in the past, and you will in the future too. Does the distribution center handle returns? They may be able to handle all of the returns, as well as order fulfillment. 

What kind of communication will you have? 

If there is a problem with anything related to your business, you need to know about it. Learning about communication methods is important for any business relationship, but especially so when they handle such an important part of your business.

Make sure you find out if you will have a dedicated contact, how to call or email with questions, and what kind of information and reports you can regularly expect.

What does the contract look like? 

If you are locked into a long-term contract right off the bat, without the ability to change inventory, shipping, or other things, it may impact your ability to grow. Finding a distribution partner who can grow with you will offer flexibility for your eCommerce store. 

What are the fees? 

Some distribution centers have start-up fees or other fees in addition to the standard fees you pay each month. Let’s take a look at how those costs might break down. 

Cost of eCommerce Order Fulfillment Services

When you are looking at what the distribution center offers, you may wonder about the cost your business will accrue. Order fulfillment is a big part of your business that already costs you money, but a distribution center can help you spend that money more efficiently. 

Whether you use a distribution partner or do it all in-house, you will have some of the same costs: website, eCommerce software, marketing and advertising, bookkeeping and accounting, inventory and parts, storage space, customer service, and shipping. 

If you handle your fulfillment in-house right now, it can be time-consuming and challenging, taking up even more time as you grow and see more orders each week or month. It’s lower cost but requires space for storing your inventory as well as packaging up orders. You need to have all of the tools and packing supplies, as well as knowledge of the best ways to package orders so they don’t get damaged during transit. You will also need inventory management practices and order fulfillment software so you can keep up with what is going on with your business.

The next step for many eCommerce businesses is often a third-party fulfillment service (or 3PL). If you have started to struggle with keeping up with orders as they come in, you may be looking for a better way to run your business. These fulfillment partners can help with storage in a network of warehouses across the country, packing and shipping orders for customers, and handling returned inventory as customers send things back.

Many 3PLs can allow custom packaging so that your logo is on the box or tape used to package your orders – and all of those shipping supplies are acquired by the distribution center, not your business. While it costs more, many businesses find that money is spent more efficiently and orders are packed more effectively than when done in-house.

Tips for Working With an eCommerce Distribution Center 

Is it the right time for you to make the switch from in-house order fulfillment to an eCommerce fulfillment center? When you are ready for that so you can better keep up with your orders, you need to find the right fit. Here are some tips that can help you develop a strong relationship with your distribution center. 

Average Order Volume & Size

Knowing the number of items you typically have in inventory and how many orders will need to be filled each month is a great place to start. You will need to find a distribution center that can store that much inventory with enough staff to fill that many orders.

Some of the things you should know to ease the working relationship with a distribution center include:

  • Number of SKUs your business sells.
  • Average monthly order volume that ships each month.
  • Predictions for future months’ order volume.
  • Your goals for order volume growth.

Technology & eCommerce Tools

Depending on what eCommerce platform you currently use and any inventory management tools you have, distribution centers may be able to integrate seamlessly, so order fulfillment can begin automatically.

Some of the key considerations for technology requirements that guide the distribution center and eCommerce store relationship are:

  • Where you sell online (marketplace, eCommerce website, both?).
  • What platform you use (Shopify, WooCommerce, etc.).
  • If you have inventory management software or if you currently handle this manually.

Location of Your Customers

Considering the location of your customers can help you and the distribution center determine where to house your inventory. This is especially important for distribution centers with many locations, where you can have items across the country. If your customers are everywhere, then distributed inventory is the way to go. If they are in a smaller region, you may consider a smaller network of warehousing options.

Here are the things to bring to your distribution partner’s attention: 

  • Where your customers are typically located (region, country, etc.).
  • How many international customers you have (if any).
  • What your most common shipping methods have been in the past.

Customization, Subscription, & Kitting Needs

As mentioned, some distribution centers can provide additional services that can take your business to the next level. If your business offers custom products, subscription boxes, kits, or if you plan to in the future, you want to make sure that all order fulfillment can occur at a distribution center.

What you need to think about to create a good relationship with the distribution center for additional services:

  • Made-to-order products, custom-made designs, or special gift-wrapping options.
  • Unique needs or kitting options and any subscription partners.
  • Whether customization is needed for your products.

ShipNetwork’s eCommerce Distribution Centers

While you have choices in eCommerce fulfillment centers, ShipNetwork brings groundbreaking one and two-day shipping at ground rates, so you can give your customers what they want. With customers across the country, ShipNetwork allows you to reach 98 percent of the U.S. within two days via ground shipping with a nationwide network.

We offer order fulfillment services with 100% order accuracy guarantee with a one-day turnaround, so that your customers get exactly what they ordered quickly. Our expert teams are also able to help your company with additional services, like kitting so that you can easily create, organize, and manage your kits. While not ideal, returns are inevitable and we can help you easily manage the process.

We also offer a range of other services, like temperature-controlled warehouses, lot tracking, and international freight – so that you can trust in our logistics partnership.

Grow Your Online Business with ShipNetwork

When it’s time for a 3PL partner to handle order fulfillment for your online store, shipping, logistics, and more, ShipNetwork’s eCommerce distribution centers are here. Our team of experienced fulfillment professionals makes sure that your customer’s expectations are met with accurate, timely order fulfillment. 

With U.S.-based support and 100 percent accuracy guaranteed, we integrate into the most popular eCommerce platforms, so that you can offer one-day fulfillment and two-day delivery to your customers. To learn how our teams are ready to help your eCommerce store grow, Request a Quote from ShipNetwork today.

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