There is no shortage of misconceptions or misunderstandings about transportation and logistics, but we are here to clear the air! We gathered a couple of misconceptions and are steering shippers in the right direction.
More Is Better
Not true. We often see the misconception that the more fulfillment center or distribution center locations, the better. However, this is simply not true. Anyone familiar with the law of diminishing returns knows that at a certain point, the marginal return from one additional unit is not worth the expense. The same principle follows for quantity of distribution centers.
Many shippers feel the pressure to keep up with Amazon and offer two-day shipping to their customers. To achieve this speed and reach with economical ground residential service levels, it is necessary to have more than one fulfillment center to cover the continental United States. E-commerce shippers will often jump to having multiple fulfillment centers dotted around the country. This may look impressive and feel like a very safe option, but shippers can actually be very successful with just two strategically placed fulfillment centers.
We often refer to this as a bi-coastal model, meaning a shipper has two fulfillment centers, one near either coast. This could look like having a Los Angeles, California, location and a Lexington, Kentucky, location. This solution also helps shippers avoid the unnecessary expenses and complexity that come from adding several more fulfillment locations. For example, with each additional location comes the task of correctly distributing inventory, and even if a business has multiple facilities, if the inventory is incorrectly allocated, it will end up taking longer to reach the customer.
Simply having two well-placed facilities will allow a shipper to cover roughly 90% of the U.S. population in two days.
The moral here is that strategy is key, and more is not always better. It is critical to take a sophisticated look at what you are doing and why you are doing it, especially when it comes to product placement and fulfillment.
All Transportation Solutions are Created Equal
Not true again. Many transportation management solutions claim that they are the least-cost provider for shipping, but shippers should not blindly select a TMS based on this alone. ‘Trust but verify’ becomes a very important practice for shippers.
Specifically, shippers should look for a TMS/transportation provider that takes a holistic approach to their solution and considers their specific needs and goals. A TMS should truly work with your business and align with your business rules and execute your exact expectations.
Your TMS provider should also provide you with expertise and guidance. Shipping has become increasingly complex and e-commerce shoppers expect a seamless shipping experience that mirrors Amazon. If you are a growing company, bringing shipping expertise in-house could be a monumental expense, while instead, your TMS partner could be that source of shipping expertise, least-cost shipping, and visibility into your shipping practices.
As critical as shipping is to businesses, a transportation solution should not be a plug and play service that you never check again. It should be an evolving partner that works for your business and brings you the insight and visibility that you need to make critical business decisions.
Keeping in mind the strategy behind your decisions as well as what kind of partners you are bringing to your company should always be top-of-mind when running your business. Just because other players in the industry are doing it, or a solution is the most popular, does not mean that it is the correct direction or partner for your goals and vision. More is not better, and all solutions are not created equal.