How to choose the best fulfillment center location: 6 things to consider

Location, location, location.

This is a common cry from real estate agents, but it's just as relevant to your order fulfillment strategy.

There are a lot of discussions out there about how e-commerce fulfillment should take place and what capabilities to look for in a 3PL, but the question of 'where' is often overlooked.

While it's easy to look for fulfillment locations close to home or at the nearest port city, there are a lot of other considerations at play to ensure that shoppers receive their orders as quickly as possible. In this guide, we're going to cover what you need to consider to choose the right fulfillment locations as your business grows.

What is the location of fulfillment?

Location of fulfillment refers to the place where the fulfilling of online orders is carried out. In most cases, this will be a fulfillment warehouse or distribution center run by a third-party logistics (3PL) provider. An order fulfillment center will coordinate the end-to-end process of fulfilling orders, including order processing, picking and packing orders, and shipping to the end customer.

Why does your 3PL’s fulfillment center location matter?

Location is essential for a fast turnaround to delivery

It's impossible to meet customer expectations for offerings such as two-day delivery or same-day delivery on online orders if your fulfillment center is located a long way from your end customer. If speedy delivery is part of your value proposition, it's essential to choose a fulfillment center location close to major hubs of customers. The less distance that goods need to travel, the faster that customers will receive their orders.

Location determines your shipping costs

In addition to making delivery faster, strategically located fulfillment centers will help to keep your shipping rates lower by avoiding costly, cross-country deliveries. In sum, fulfillment center location plays a crucial role in your overall shipping strategy by ensuring that large volumes of your orders are within a reasonable radius of the place of fulfillment.

Location is key to your future expansion plans

If your ecommerce business is growing quickly and you need to scale up your fulfillment operation, adding additional fulfillment warehouses to your network may be necessary to meet demand. The location of any new fulfillment center is a very important consideration to ensure that you are providing the experience that customers expect.

3 Common myths about choosing a fulfillment center location

Choosing a fulfillment center is made challenging by the number of unfounded assumptions surrounding what makes a fulfillment location strategic or valuable to a brand. We're going to debunk the most common myths about fulfillment center locations:

I need to be close to my fulfillment center

It can feel a lot less risky for businesses to choose a fulfillment location close to their head office. While this will make it easier to visit your 3PL and meet with your accounts team in person, a good 3PL partner can give you real-time visibility over your inventory levels, order processing, and fulfillment costs at a distance. When your 3PL is equipped with the technology systems to make this possible, being right next door is no longer necessary. to stay in the loop:

"The Ryder platform offered us this unique interface where we could see what was happening in the warehouse in real-time. It made us really comfortable to make the switch because we knew that we didn't need to be close by to monitor what was happening," Eric Girouard, Founder and CEO of Brunt Workwear.

My 3PL should be in a central location

Choosing a fulfillment warehouse located in the center of the country does offer several benefits. For one, it allows businesses to standardize their shipping costs (because orders are passing through roughly the same number of shipping zones). This protects your operation against rapidly rising fulfillment costs, in the case that your customer base undergoes geographic shifts as you grow.

However, this makes little sense if your customers are overwhelmingly based within one region and you don't have plans to expand domestically or internationally. In this case, the best fulfillment center location is one that is as close as possible to your customers.

It's cheaper to use one fulfillment center

For smaller ecommerce brands, using one fulfillment center location is satisfactory for their order fulfillment needs. Given the high running costs, rapidly-growing brands may be reluctant to consider expanding to multiple fulfillment centers. However, the lack of flexibility in a single location can result in much higher costs.

Since it's tough to predict exactly where your customer growth will be, centralized fulfillment strategies often end up leaving a lot of money on the table.

For example, an East Coast fulfillment center could end up posting orders to customers on the West Coast, leading to unsustainable shipping costs and a long delivery time.

By distributing inventory across multiple locations, you can keep transit time down and ship products for far less money. Check out our guide on how a multi-node fulfillment strategy could benefit your brand.

6 factors to help you choose the right fulfillment center location

Where are your customers based?

Customer location is the most important factor of all when it comes to choosing fulfillment centers that enable swift, smooth order fulfillment.

How fast/expensive your orders are to ship is entirely dependent on how far they need to travel to reach the end customer. The more shipping zones that a package needs to cross, the more it's going to cost you.

By ensuring that your fulfillment center location is near major highways or metro areas with high customer density, you can keep your transit time as short as possible.

Here are some questions to help you choose your ideal shipping hubs:

• What percentage of your orders are being shipped to what areas?
• How long is it currently taking for orders to reach different customer hubs?

What shipping timeframes do you want to be able to offer?

It's no secret that online shoppers expect faster and faster delivery timeframes. If you want to make rapid delivery easily accessible to your business, this starts by choosing fulfillment centers that are in the right location - as close to your customers as possible.

In some cases, shipping timeframes aren't just about instant gratification; it can also be about the product itself.

Speedy delivery is very important to Ryder customer Rad Power Bikes, because they are also shipping replacement parts and accessories in addition to the bikes themselves. In sum, rapid delivery is essential to get customers back on the road as soon as possible:

“Rad Power Bikes has seen massive growth every year since the company was founded, and as demand and interest for ebikes has surged, we needed the ability to scale quickly. With a Seattle presence and a nationwide operation, Ryder was a clear choice for a fulfillment partner that allows us to deliver an unrivaled customer experience.” Mike McBreen, Chief Operating Officer at Rad Power Bikes.

Do you plan on offering free shipping?

Deciding to offer free shipping to your customers usually involves shouldering some - if not all - of the cost of shipping. This means that your warehouse locations are integral to keeping these shipping costs as low as possible.

For example, if you have a fulfillment center in New York, you may decide to offer free next-day delivery to all customers located in metro areas within the state. This ensures fast delivery to a large number of customers while optimizing for cost. If you want to offer free shipping to all of your customers, it may be necessary to use multiple warehouses.

How many/what kind of SKUs do you need to house?

Your fulfillment center must be able to store enough inventory to satisfy consumer demand. The amount of warehouse space you require will depend on several factors, including:

• How many fulfillment centers do you have
• What products you're storing
• Where your products are coming from
• How heavy/light your products are

If your business is planning on using only one fulfillment center location, you need to make sure that any prospective facility can house your entire product catalog.

Alternatively, using multiple locations enables you to send inventory between fulfillment centers and tailor your inventory levels to the regional demand. However, this will require you to dive into your sales data. For example, it makes little sense to store heavy winter coats in a Florida warehouse that most shoppers won't be interested in buying locally.

If your products vary from lightweight to heavy, this should be a major factor in where you choose to store them. It makes sense to keep SKUs with a high DIM weight close to your customers to avoid shipping across multiple zones, while lightweight products can be stored outside of metro locations due to cheaper shipping costs.

Are there any seasonal variations in where orders are being placed?

Most ecommerce businesses are seasonal in one way or another, especially when it comes to the holiday season rush. This means there can be drastic changes throughout the year in where your orders are coming from.

Transferring large quantities of inventory from one fulfillment center to another can get expensive, especially when using priority shipping. Inventory management and sales data can be used to monitor the seasonality of your orders and where your customers are based to ensure that your fulfillment centers can weather peaks and troughs in the calendar and be assigned the right inventory from the outset.

Do you require any value-added services?

Value-added services refer to customizable fulfillment services designed to increase brand visibility and/or meet unique product specifications. This includes:

• Branded packaging
• Product kitting/subassembly
• Return label inserts
• Labeling
• Folding/repacking

It's important to note that not all fulfillment centers will offer a full spectrum of value-added services, as these are typically more expensive and time-consuming for 3PLs to execute. If your business has boxed sets as part of its SKU base or requires special packaging for orders, you'll need to prioritize this when you choose a fulfillment location - even if it means being further away from your customers.

“When we started to look seriously at scaling our ecommerce fulfillment operation with Ryder, it was their embroidery capabilities that won us over. The ability, experience, and willingness to adapt that Ryder has shown via their value-added services has made them the ideal 3PL for us. We bought in the hardware, while they bought in the operators who we trained. It really is a true partnership.” Steven Feczko, Senior Director of Operations at Hedley & Bennett

Looking for a fulfillment center? Check out Ryder E-commerce

With 24 state-of-the-art fulfillment centers in strategic locations across the United States, Ryder is the ideal e-commerce fulfillment partner to help your business thrive in a dynamic and competitive marketplace. No matter whether your focus is expedited shipping, value-added services, or multi-node fulfillment, Ryder can assist you in enabling faster, sustainable growth.