What is distributed SKU placement?
Distributed SKU placement is a supply chain strategy that involves strategically placing inventory across multiple distribution centers or warehouses, rather than consolidating inventory in a single location. This approach can offer several benefits to your supply chain, including improved order fulfillment times, reduced shipping costs, increased customer satisfaction, reduced risk of stockouts, and improved supply chain resilience.
Benefits of distributed SKU placement
Improved order fulfillment times
By placing inventory in multiple locations, companies can improve order fulfillment times. Orders can be fulfilled from the location closest to the customer, reducing shipping times and improving customer satisfaction. This can help companies differentiate themselves from competitors and build a loyal customer base.
Reduced shipping costs
Distributed SKU placement can also help reduce shipping costs. By strategically placing inventory in multiple locations, companies can reduce the distance between the product and the customer, reducing shipping costs and improving profitability.
Increased customer satisfaction
Improved order fulfillment times and reduced shipping costs can lead to increased customer satisfaction. By providing fast and reliable shipping, companies can build a positive reputation and increase customer loyalty.
Reduced risk of stockouts
Distributed SKU placement can also help reduce the risk of stockouts. By placing inventory in multiple locations, companies can ensure that they have enough stock to meet customer demand, even if one location experiences unexpected demand or supply chain disruptions.
Improved supply chain resilience
Finally, distributed SKU placement can help improve supply chain resilience. By spreading inventory across multiple locations, companies can reduce the impact of unexpected events, such as natural disasters or transportation disruptions. This can help ensure that products are available when customers need them, even in challenging circumstances.
Hypothetical scenario of distributed SKU placement
For example, an electronic manufacturing firm has a single distribution center located on the West Coast of the United States. Their customer base is located across the country, and experience shipping delays and increased shipping costs due to the distance between the distribution center and the customers. To solve this problem, the company partnered with WarehouseQuote to conduct distributed SKU placement analysis.
In the analysis, WarehouseQuote reveals that a majority of their customer base resides in three main hotspots: Los Angeles, Kansas City, and North Carolina. As well as the optimal SKU levels for each facility based on historical order data.
After review, the electronics manufacturing firm taps into WarehouseQuote’s hybrid warehouse network to add two additional distribution nodes in the East Coast and the Midwest region.
Resulting, improved order fulfillment times, reduced shipping costs, and increased customer satisfaction, reduced risk of stockouts, and improved supply chain resilience.
Conclusion
Distributed SKU placement is a supply chain strategy that can offer several benefits to your business. By strategically placing inventory across multiple locations, companies can optimize their supply chains and stay competitive in today’s dynamic supply chain landscape.