As the online shopping industry continues to grow, customers' expectations for speedy delivery have reached an all-time high. A recent study found that 49% of customers consider same-day delivery as an added value when making a purchase. This demand for quick delivery times is not just coming from consumers; retail giants like Amazon and Target have set the bar high with their speedy and reliable delivery options like same-day or next-day delivery.
Meeting these demands can pose a significant challenge for retailers who want to offer quick delivery without breaking the bank. That's where multi-node order fulfillment comes in as a game-changing solution. Rather than operating out of a single massive distribution center/warehouse, this approach makes use of extra “nodes” in the form of micro-fulfillment facilities, reducing shipping distances and times.
In this blog, we will explore the benefits and challenges of multi-node fulfillment, and how retailers can leverage this method to meet customer demands and stay competitive in the market.
What are nodes in the context of fulfillment?
Nodes, in the context of fulfillment, refer to the various points within a supply chain where inventory is stored and managed. These nodes can be warehouses, distribution centers, or even retail stores that handle order fulfillment. The more nodes a retailer has, the better they can distribute their inventory, ensuring faster and more efficient deliveries to customers.
Why Is a Single Node Not Enough in the Omnichannel Era?
In the omnichannel era, relying on a single node for order fulfillment poses challenges that hinder seamless shopping experiences and business growth, such as:
Longer Delivery Times: With a single node, orders may have to travel greater distances to reach customers, resulting in longer delivery times.
Increased shipping costs: As shipping distances increase, so do costs, potentially eating into your profit margins.
Limited scalability: A single node may not have the capacity to handle large volumes of orders, making it difficult to scale your business.
A winning warehouse strategy for US-based Retailers
To fully leverage the advantages of multi-node fulfillment, retailers may want to establish 3-4 warehouses strategically positioned throughout the US. As one prominent retailer with warehouses located in Fontana (CA), Laredo (Texas), Bloomington (CA), and Edison (New Jersey) has found, this arrangement can allow businesses to reach 80% of US customers within 2 days. The exact locations will depend on individual business requirements, but a carefully planned approach can enable your eCommerce enterprise to remain competitive and flourish in the omnichannel landscape.
Benefits of Multi-Node Fulfillment
Retailers who use multiple facilities for the fulfillment of their online orders stand to gain in significant ways:
1. Reduced order fulfillment costs and time: Micro fulfillment facilities are located closer to customers, enabling retailers to offer faster delivery without incurring excessive shipping costs. This approach enables retailers to compete with same-day or 2-day delivery options offered by large retail companies like Amazon, that have a vast network of warehouses and fulfillment centers.
2. Optimized inventory: By having inventory in multiple locations, retailers can be more selective about which SKUs to stock in which locations based on demand, ensuring inventory is going where it is needed and reducing the likelihood of stockouts. Retailers can also lower inventory holding costs by eliminating the need for large, centralized warehouses and expensive storage space.
3. Reduced carbon footprint/promotes sustainability: By reducing the distance that products travel, retailers can decrease the amount of fuel consumed by transportation vehicles, resulting in reduced emissions and a smaller carbon footprint. Additionally, optimizing inventory management can help retailers avoid overstocking, which can result in less waste and a positive impact on the environment.
4. Improved order fulfillment accuracy and reduced shipping damages and errors: When retailers store inventory in multiple fulfillment locations to pick, pack, and ship products from the location closest to the customer, products are less prone to damage during transit. By this, retailers can ensure order fulfillment accuracy and reduce errors and delays that negatively impact the customer experience.
5. Split shipments: By using multi-node fulfillment, splitting shipments for retailers becomes effortless. For instance, when an order contains two or more items available in separate fulfillment centers, retailers can quickly divide the shipments across multiple centers. This approach enables them to deliver products from the fulfillment center nearest to the end customer, resulting in lower shipping expenses.
Challenges of Multi-Node Fulfillment
While multi-node fulfillment offers numerous advantages, such as faster delivery and a broader reach, it also presents unique challenges that retailers must address to ensure seamless and accurate order fulfillment. Some of the most significant challenges faced by retailers employing multi-node fulfillment include:
A. Locating inventory: Implementing a multi-node fulfillment strategy requires retailers to track, synchronize, and orchestrate inventory across all nodes for accurate order allocation and fulfillment. Managing inventory across multiple warehouses can be challenging, especially for retailers with high volumes of SKUs and orders. Manual searching can be time-consuming and resource-intensive, leading to delays in order fulfillment. Retailers must implement a system that effectively tracks, synchronizes, and orchestrates all nodes for streamlined inventory management and optimized order fulfillment accuracy.
B. Order processing: Accurate and efficient order processing is crucial for retailers with multiple fulfillment nodes to avoid delays, errors, and dissatisfied customers. This process involves capturing order details, picking, packing, and shipping products to customers.
C. Returns management: Managing returns becomes more complex with multiple locations. Retailers must verify the condition and authenticity of returned items, check the reason for the return, and process refunds and exchanges. Failure to track returned items across multiple nodes can lead to confusion and loss of customer trust.
D. Demand planning: Accurate demand planning is vital for retailers with multiple locations to ensure proper inventory allocation and stock availability. Retailers must use past data, current trends, and market conditions to forecast future product demand, enabling informed decisions about inventory allocation and production. This helps guarantee that each location has sufficient stock to meet customer demand.
How to Optimize/Simplify Order Fulfillment Across Multiple Nodes
Effectively managing inventory and fulfilling orders from multiple nodes can be challenging for online retailers. To ensure accuracy and efficiency in order fulfillment, it is essential to have a robust inventory and Order Management System (OMS) in place. An OMS simplifies the fulfillment process, minimizes shipping costs, and enables faster delivery to customers by:
I. Automating inventory tracking and management: Shopify retailers can streamline their inventory management by implementing an automated system that consolidates inventory from multiple warehouses or distribution centers. This system updates inventory levels in real-time across all locations, providing retailers with a comprehensive view of their stock regardless of its location. It is crucial to synchronize the inventory with eCommerce platforms to prevent instances of underselling or overselling. This synchronization ensures that customers can only purchase items that are currently in stock and that all inventory available in facilities is accessible for sale on the eCommerce platform.
II. Strategically routing orders: An OMS routes orders to the most appropriate distribution center, considering factors such as inventory availability, shipping costs, and customer proximity. This results in optimized fulfillment and reduced delivery times.
In conclusion, multi-node fulfillment is an innovative solution to meet customer demands for faster delivery times. While it presents unique challenges, with the right technology and processes in place, retailers can optimize their inventory management and order fulfillment accuracy, reduce shipping expenses, and improve customer satisfaction.
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HotWax Commerce Order Management System connects with Point of Sale (POS), Enterprise Resource Planning (ERP), and Warehouse Management System (WMS) to keep track of inventory in real-time across all fulfillment locations. This helps to reduce inventory discrepancies and operating costs while ensuring maximum inventory availability and profitability. Additionally, through its smart order routing engine, retailers can customize routing rules, enabling them to have greater control over the shipping of their products.