When is the right time to add another fulfillment location?

As eCommerce businesses grow, they often face the challenge of managing an increasingly complex fulfillment network. One of the most critical decisions that eCommerce businesses face is determining when to add another fulfillment center location to their network. In this blog post, we will discuss the analysis and steps needed to determine when it's the right time to add another fulfillment location.

1. Conduct a Capacity Analysis

The first step in determining when to add another fulfillment location is to conduct a capacity analysis of your current fulfillment network. You’re essentially trying to see if you have enough volume to justify the next location. This analysis should include a detailed review of the following:

• Order volume: How many orders are you fulfilling on a daily, weekly, and monthly basis? Is this a meaningful amount for the providers you’ll be working with? 
• Inventory levels: Are your inventory levels sufficient to support your current order volume? Can you afford the additional cash investment needed? 
• Order processing times: How long does it take to process an order from start to finish? Are there any unique processes that may be hard to transfer? 
• Shipping costs: Are your shipping costs increasing as your order volume grows?
• Customer satisfaction: Are your customers receiving their orders in a timely and accurate manner?

By conducting a capacity analysis, you can determine whether your current fulfillment network is meeting your business needs, and identify any potential bottlenecks or capacity constraints.

2. Determine the Cost of Adding a New Fulfillment Location

Once you have conducted a capacity analysis of your current fulfillment network, the next step is to determine the cost of adding a new fulfillment location. This analysis should include a detailed review of the following:

• Real estate costs: How much will it cost to lease or purchase a new fulfillment center location?
• Infrastructure costs: What kind of infrastructure will you need to support a new fulfillment location, such as warehouse management software, conveyor systems, and other equipment?
• Hiring costs: How many employees will you need to hire to staff the new fulfillment location, and how much will it cost to train them?
• Transportation costs: What will be the transportation costs associated with shipping inventory between your new and existing fulfillment locations?

By conducting a cost analysis, you can determine whether adding a new fulfillment location is a financially viable option for your business.

3. Determine the Impact on Customer Satisfaction

The addition of a new fulfillment location can have a significant impact on customer satisfaction. By adding a new location, you can potentially decrease shipping times and costs, and improve order accuracy. However, it's important to consider the potential negative impact on customer satisfaction, such as the possibility of orders being split between multiple fulfillment locations, which can increase the likelihood of order errors or delays.

To determine the impact on customer satisfaction, you should review customer feedback and reviews, and conduct a survey to determine how customers feel about the addition of a new fulfillment location.

4. Consider the Timing and Location of the New Fulfillment Center

When adding a new fulfillment location, it's important to consider the timing and location of the new center. Factors to consider include the following:

• Geographic location: Where is the majority of your customer base located, and where are your inventory sources located?
• Transportation infrastructure: What transportation infrastructure is available to support a new fulfillment location, such as major highways or ports?
• Workforce availability: What is the availability of a skilled workforce in the area?
• Cost of living: What is the cost of living in the area, and how will it impact the cost of staffing the new fulfillment location?

By considering these factors, you can determine the best location and timing for a new fulfillment center.

5. Use Capabl to Optimize Your Fulfillment Network

Capabl has partnered with Izba (www.Izba.co) to create the Izba Exchange (www.IzbaExchange.com) which is the internet's largest database of fulfillment providers (over 2200). The list is fully searchable and is intended to be the first stop for a brand during their fulfillment search. Oh and it’s completely free.