The Strategic Importance of Fulfillment Center Locations

How much does a fulfillment center's geographical positioning matter in the grand scheme of things? And what role does third-party logistics, or 3PL, play?

To understand what is a 3PL, let’s go over their basic task: 3PL providers offer services that encompass the entire supply chain management process, which includes warehousing and fulfillment.

As competition intensifies, businesses are increasingly leaning on 3PL providers to handle their logistics needs. Locations of these fulfillment centers are critical as they have a huge impact on costs, delivery times and customer satisfaction. Let’s see how.

Reason No. 1: Reduced Shipping Costs

One of the biggest drains on retail logistics is the cost of shipping. Choosing the right location for a fulfillment center can dramatically lower these costs and expedite delivery times.

Imagine an online gadget shop with a massive customer base spanning both the East and West coasts of the U.S. If the shop only has a fulfillment center in California, shipping products to East Coast customers becomes costly due to the longer distances and transit times.

However, if the shop starts working with a second fulfillment center on the East Coast, it could slash those long cross-country trips and significantly improve delivery times for those customers.

Being close to major transportation hubs, like seaports and airports, also helps speed up the delivery process. This not only accelerates delivery times but also results in significant shipping cost savings by reducing first-mile transportation and inventory holding costs, while increasing operational flexibility.

Reason No. 2: Improved Delivery Times

A wide geographic reach through a well-spread network of fulfillment centers allows businesses to serve a larger customer base swiftly and effectively.

For example, a national furniture store has a central warehouse in the Midwest. If a customer on the West Coast places an order, the delivery time is lengthy and spoils the customer's experience.

On the other hand, if the furniture store had fulfillment centers sprinkled across key geographic locations, it could deliver orders quickly no matter where the customer resides. This could cut delivery times from several days down to just a day or two.

Spread-out fulfillment centers are especially beneficial when you have deep insights into localized markets. For instance, the furniture store could stock more patio furniture in its Southwest centers if it notices or expects a higher demand from consumers in that region, further slashing delivery times and boosting customer satisfaction.

Reason No. 3: Enhanced Customer Experience

Fulfillment centers' locations play a pivotal role in enhancing the customer experience. When customers expect deliveries within two days or less, speedy and reliable shipping is of utmost importance — especially now when customers are getting spoiled by same-day deliveries.

For example, an online clothing store has fulfillment centers near major population hubs. It can deliver products quicker, thus elevating the customer's shopping experience.

However, the benefits don't stop at swift deliveries. A well-positioned fulfillment center minimizes the chance of delayed or missed deliveries — a crucial factor in building customer trust.

Consistency in delivery performance breeds repeat business, fortifies customer loyalty and, over time, enhances the retailer's reputation for trustworthy service.

Parting Thoughts

Through thoughtfully chosen fulfillment center locations, businesses can optimize their supply chain, slash shipping times, cater to a wider customer base, and deliver superior customer experiences.

As businesses grow and customer expectations shift, how will the strategies around fulfillment center locations adapt to these evolving demands? As we look forward to the future of retail and e-commerce, this question offers a road map for further investigation.

Alex Selwitz is the director of SEO for Red Stag Fulfillment, an e-commerce fulfillment warehouse that was born out of e-commerce.