Distributed Logistics for Digital Commerce, Article 4: Regional Inventory Visibility

Regional inventory visibility : How to offer 1-2 day delivery while protecting margins.

Ecommerce marketers. What if I told you that you had a superpower? One you probably never heard of? And one your Ops guys would love to have but probably don’t know about?

It’s called “regional inventory visibility”. And believe me, it’s much more exciting that it sounds.

Here’s why.

As marketers we understand the power of Amazon Prime and its one-and-two day guaranteed delivery program.  

Walmart.com, eBay and other online marketplaces quickly followed Amazon’s lead and to offer their own programs. Now online shoppers expect fast, often free, shipping wherever they shop. Participating in these programs has become table stakes.

And the need to meet shopper expectations for fast delivery doesn’t just affect marketplace sellers. One study by Arvato showed that 24 percent of online shoppers would cancel their order if delivery estimates were not fast enough to meet their expectations.

The results of participating in marketplace accelerated delivery programs are dramatic: Amazon estimates that assigning the Prime badge to a SKU results in an average 52% lift in sales. Some studies have shown up at a 500% lift in other categories like perfume.

Basically there are two ways to participate in these programs:

  1. Amazon FBA. Solid, somewhat expensive and puts Amazon in control of your business. As recent events have shown, this became be a problem for some sellers when Amazon locked non-essential shipments out of FBA. FBA is a good alternative for the right products, but probably shouldn’t be your only option. And it’s pretty much limited to sales you make on Amazon, not sales made on your other marketplace channels.
  2. Do it yourself. Or have someone like a 3PL or fulfillment service do it for you. Here’s where it gets interesting.

Let’s say you have inventory in a distribution center in Salt Lake City. There is a geographic area around this DC where you can ship product profitability using two-day ground or other shipping options. In fact, you are probably already doing it.

So you need to create a “Shipping Template” that basically maps this area and communicates to Amazon and the other marketplaces that “for shoppers within this area, I want to participate in your guaranteed delivery program at this price. For shoppers outside this area, show my standard listing, price and shipping options.”

That’s your superpower; Superman’s super vision has got nothing on you. With regional inventory visibility, you’ve just boosted sales without spending another dime or wrapping shipments in dollar bills.

Now, if you were to take a look at a map of population density for the United States, you could see areas where you can leverage this concept using other sources of inventory like 3PLs or even your own retail locations. You can simply expand the program region by region, spending no more money on one-or-two-day shipping than you can profitably afford.

That’s where regional inventory visibility comes in – the process only works if you “know” you have inventory available in a location near the online shopper and then can communicate that to the channel so the channel can show the right listing based on your shipping template.

You can learn more about regional shipping templates in the video that accompanies this article.

There are four primary capabilities for making this work.

1. Inventory Visibility Across Your Network  

In a recent video, I discussed the idea of “distributed logistics” and managing all your sources of inventory as a single integrated network. That includes your warehouses and distribution centers, 3PLs and fulfillment partners, distributors and suppliers, in marketplaces like FBA, and at retail locations.

You need visibility to inventory by SKU each location across this network to see where your inventory is at a given point in time. Then you need to understand the shipping levels, carrier options and carrier service level for each location.

2. Dynamic Inventory Publishing

Realistically, Amazon or another sales channel doesn’t “know” to publish a Prime or guaranteed delivery listing for a given shopper. You need to tell the channel to publish the listing based on you knowing that you have inventory available near that shopper to successful and profitably fulfill their order.

3. Dynamic Pricing

Part of publishing a listing is publishing a price. You want to make sure you have a framework in place so you understand your total delivered cost from each location and can dynamically publish a price that protects your margins.

4. Distributed Order Management

As your inventory network expands, you are probably going to have a lot of overlap where an order could be filled from two or more sources of inventory. Distributed order management automatically routes the order to the best option that meets the delivery requirement at the lowest total delivered cost.

If this sounds complex, that’s because it is. But it doesn’t need to be complicated. That’s because with the right digital commerce operations platform and tools, everything can be integrated and automated to happen across all your channels, all your inventory locations, and hundreds – or in the case of some of our customers – thousands of SKUs.

You can learn more about regional inventory management and how it works in the video that accompanies this article: Distributed Logistics for Digital Commerce: Regional Inventory Visibility. It’s part four of an eight-part series on Distributed Logistics. To get started with the series, click here to view the first video Distributed Logistics for Ecommerce: A Change in Paradigm and Why it Matters on LinkedIn.

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