Distributed or “split inventory optimisation refers to the practice of storing inventory and conducting fulfilment operations from various centres in different geographic locations. This is quite like setting up a Hub-and-Spoke Model for economic fulfilment rather than fulfilling the orders from a single location.
Big companies like Walmart and Amazon have their fulfilment centres. Even third-party logistics (3PL) operate their fulfilment centres. This ensures that the customers don’t have to pay upfront costs.
Also, these clients can have access to technology, warehouse automation and negotiated shipping rates. While it’s okay to manage your warehouse, with rising costs, split inventory might be the right solution.
Let’s see how.
What is the Need for Split Inventory Optimisation in an Ecommerce Business?
There are quite a few benefits when you distribute inventory across some or multiple warehouses:
Faster Shipping
When you move inventory closer to your customers, you can give them faster shipping time. Large 3PLs like that of ShipMonk have a reach of 96% of the US population with 2-day shipping. Also, they have fulfilment centres in Mexico, the UK, Europe and Canada, facilitating smooth international shipping.
Lower Shipping Costs
Shorter distances and using local or regional shipping carriers usually lower the shipping costs. If you sell heavy goods, you will get to see even bigger savings.
Built-in Backup
If one warehouse unexpectedly runs out of your bestselling shoe colour, another can step in to fulfil orders, ensuring faster delivery and a better customer experience than dealing with backorders with the help of inventory optimisation.
Increased Fulfillment Capacity
When it’s a time of peak sales periods, companies can distribute orders over multiple warehouses so that all orders do not go into one warehouse overwhelming it. Let’s see another need for inventory optimisation.
Reduced Cost of Returns
Just like routing orders to the nearest facility, returns can be directed to the closest location as well, cutting down on both shipping costs and time for you and your customers.
Can Easily Penetrate New Markets
Let’s say your business originated in Rajasthan and you are aiming to push into the east coast. When you partner with a 3PL that has fulfilment centres out east, it makes the entire process easy. With it, you can take advantage of local and regional carriers to save on shipping with inventory optimisation.
Cross-Border Solutions
Shipping across national borders is a challenge. It can be costly, low and complex. An offshore or near-shore fulfilment centre can solve this issue and eliminate the extra costs of taxes, customs, duties; etc.
These are some of the benefits of the inventory control system. By optimising your inventory, you can smart financial decisions in your businesses that save money.
Maintaining such inventory optimisation in multichannel retailing is a good measure. It ensures all business operations run smoothly.
Why Multi-Channel Retailing is Key to Attracting and Retaining Customers
Like a sceptical person, you too would hesitate to buy from businesses that you have stumbled across once. Also, if they come across your company just one time, then the chances of them remembering you are low. With only one sales channel, your customers will be forced to buy from you from that channel only.
This is okay when they have purchased from you earlier and trust you. But this process does not attract new customers. So, multi-channel retailing is the best option. The customers have multiple options to choose how they can buy from you. They can choose a method that aligns with their comfort and convenience.
This gives you a competitive advantage over single-channel businesses. Simply put, more ways to purchase = more customers.
So, with that let’s see some benefits of inventory optimisation in multi-channel retailing.
5 Benefits of Multi-Channel Retailing Inventory Optimisation
Multi-channel retailing is essential for optimizing inventory and boosting customer engagement. By offering various purchasing options, businesses can cater to different preferences and increase visibility.
This approach not only attracts new customers but also enhances convenience for existing ones, ultimately giving you a competitive edge and improving overall sales and inventory management.
Let’s look at some of the top benefits of how to optimise inventory.
Collect Data from Customer Purchases
With multi-channel retailing, you can collect more data on customers who make a purchase compared to single-channel. Through this, you can assess which channel of yours is performing better.
This allows you to see which specific parts of your business are working and which need to be improved. With that knowledge, you can effectively promote it. Also, with a single sales channel you cannot compare your sales to others since you only have one.
Comparing with several gives you more perspective. For instance, if you are selling on Amazon only, you have no level of comparison. But let’s say you started selling on Instagram and Etsy as well.
Now you can compare between three and see which brings in the most revenue. And you can also see the audience range in each of these platforms and their buying patterns and behaviour.
Enhanced Customer Satisfaction
When you split shipments you can ensure that the customers receive their orders promptly. Retailers can immediately dispatch items to the customers. This is better than waiting for a transfer between stock locations.
You need to inform customers about the split before delivery promises.
Higher Sales and Average Order Value
There is an inherent flexibility in split shipments that can become a powerful tool for retailers. It can help them to boost their bottom line. When customers know that their orders can be divided depending on what is available, they may place large orders. This increases average order value, a metric that significantly affects profitability.
Cost Optimisation
Inventory optimisation means optimising cost. One of the critiques of split shipment is the increased transportation costs. However, if you assess closely then you can see this process optimises cost.
It takes into account factors like weight and volume. With it, retailers can plan shipments to reduce overall expenses. This creates a balance where customer satisfaction is at its peak and operational costs remain optimised.
Inventory Management Flexibility
Successful retail operations depend on proper inventory management. They offer flexibility for inventory management. When they ship items as per availability, retailers mitigate the risks that come with overstocking or backorders. This streamlines operations and also allows retailers to respond swiftly if there’s any unpredictable demand.
For a seamless consumer experience, even in split inventory, effective customer communication is necessary.
Here are three communication omnichannel supply chain strategy that you can implement: timely notifications, detailed email confirmations and regular updates.
FAQs: Mastering Inventory Optimisation: A Guide to Split Inventory for Multi-Channel Retailing
How to create an omnichannel strategy?
Align all sales channels, unify customer data, personalize experiences, optimize inventory, and ensure consistent branding for seamless omnichannel integration.
How can split inventory help in managing seasonal demand fluctuations?
Such inventory positions the stock closer to demand centres. This allows faster response to seasonal peaks, reducing stockouts and excess inventory.
What technologies or tools are useful for optimizing split inventory management?
Some of these tools and software would include demand forecasting tools, inventory management software, warehouse management systems (WMS), real-time tracking solutions and automated order routing for efficient stock distribution.
What considerations should be made when deciding where to split inventory?
Consider demand patterns, proximity to the key markets, shipping costs, storage capacity, lead times and potential risks. Analyse customer locations and optimise for speed, cost efficiency and stock availability.
Conclusion
Incorporating split inventory optimisation in multi-channel retailing is crucial for modern businesses. By strategically distributing inventory across multiple locations, companies can enhance shipping speed, reduce costs and improve customer satisfaction.
Leveraging the right tools and thoughtful planning ensures operational efficiency, helps navigate seasonal demand fluctuations and positions your business for sustainable growth in an increasingly competitive market.
With Qodenext, you will always have the best solutions for your supply chain optimisation needs.
