Benefits of Inventory Splitting

In today’s eCommerce world, consumers expect speedy delivery. This can cut deeply into profits if not done strategically. One strategy to help ensure timely delivery is inventory splitting, sometimes known as multi-warehousing. 

What is inventory splitting?

Inventory splitting is the practice of distributing inventory across multiple locations to get it as close to your customers as possible. The purpose is to help reduce transit time and save on overall shipping costs. 

Benefits of Inventory Splitting

1. Minimize risk - Splitting inventory allows you to minimize losses in case of an emergency such as a natural disaster. Even if some of your inventory is compromised, there will be back-ups available at a different location. 
2. Lower shipping costs with faster delivery - Shipping fees grow as the distance between your customer and distribution center grows, especially if you are selling heavy items. Sending orders from a warehouse near your customers lowers transit time and enables you to offer faster shipping. 
3. New markets - Multiple warehouses allow you to tap into new markets. You can start building brand awareness by targeting potential customers in different regions. 
4. Potential to win Amazon Buy Box - The Buy Box is the button that says “Buy Now” when customers are adding items to their cart.  If you can offer next-day delivery, you have the potential to win the Amazon Buy Box. This is not just given to any seller, so it is important to have speedy shipping to help you win it. 
5. Possibility for more orders - One warehouse is sufficient if you are only serving a handful of customers. As your business grows, you will find that shipping costs continue to rise and it is worth it to invest in another warehouse location to get closer to your customers. 

When should I avoid inventory splitting?

Splitting inventory has a number of advantages that can help lower costs, minimize risk, and ultimately grow your business. 

When deciding eCommerce strategies, it is important to analyze your customer base. It would not be a great option to split inventory if you are only serving one region, or don’t have enough sales volume to justify the costs. You can analyze high sale zones and see if it is worth it to have your inventory in multiple locations or if one is sufficient. 

How do I decide which products and how many of each go where?

Distributing inventory across more than one warehouse can be tricky. First, you will need to analyze which zone is the most demanding. This means that you will find out where most of your orders come from, and this will be your high sales zone. Next, you will need to determine which of your products are the highest-sellers in each zone and distribute them to the warehouses accordingly. 

Keep in mind, you don’t have to split all of your inventory. Let’s say you sell a high volume of SKU #1 on the east coast and never sell any to the west coast. You can split inventory for SKUs that sell on both coasts, then only have SKU #1 at your east coast warehouse. Ultimately, you know your products and customers the best and will have to make a strategic decision of what inventory to put at each location.

Inventory splitting is one of the best ways to stay competitive in the eCommerce world. It is important to look for a logistics partner, like Brandfox, that can help you make strategic inventory distribution decisions. Contact us today to hear more about our binodal warehouses and how we can help you with your inventory management!