How to Improve Regional Utilization and Optimise Demand-Based Inventory Distribution in 2023 for Faster eCommerce Fulfillment with Accuracy & Lower Inventory Holding Costs?
Brands must provide faster deliveries and effective order fulfillment as competition in the eCommerce sector heats up. It is essential to be able to predict demand effectively and keep inventory levels in line with consumer demands.
The amount of time it takes an eCommerce business to deliver an item to a customer’s door has a significant impact on how customers perceive a brand. It is essential for both small and large businesses to fulfill orders quickly and accurately if they want to grow their eCommerce consumer base. Smaller brands must increase their consumer base through flawless order fulfillment while larger companies and international brands must preserve their brand reputation and existing customer base.
To make delivery quicker and more cost-effective, eCommerce businesses are practising regional utilization. Optimizing regional utilization can help ecommerce businesses reduce shipping costs, improve delivery times, and increase customer satisfaction. It can also help businesses better manage their inventory and reduce the risk of stock-outs or overstocking. Let us get a better understanding through this article.
- What is Regional Utilization?
- How to Calculate Regional Utilization?
- Why Should an eCommerce Business Figure Out Their Regional Utilization?
- 7 Ways to Improve Regional Utilization & Optimise Demand-Based Inventory Distribution in 2023
- Conclusion: How to Optimise Inventory Distribution and Regional Utilization with WareIQ for Faster Order Fulfillment?
- Regional Utilization: FAQs
What is Regional Utilization?
Regional utilization (RU) is an eCommerce calculation term which reflects the percentage of local and zonal order fulfillments out of the overall order fulfilment. It is a measure of how well the fulfillment center is able to meet the demand for orders within a specific geographic area.
Giant eCommerce players consider regional utilization (RU) as a significant factor in determining the seller account status. Electronic brands and sellers often prepare their stock for some of the most awaited eCommerce season sales like Amazon’s Great Indian Festival or Flipkart’s Big Billion Day. Regional utilization (RU) ensures faster delivery and reduces additional logistic costs.
WareIQ, an eCommerce fulfillment company, empowers online brands with a superior-tech platform to compete with Amazon like service levels by bringing their average delivery timelines from 5-10 days to 1-2 days.
How to Calculate Regional Utilization?
To calculate regional utilization, you will need to gather data on the volume of orders being placed in a specific region and the efficiency of your fulfillment center in servicing those orders. Here is an example of how you could calculate regional utilization:
- Gather data on the volume of orders being placed in the region. This might include the number of orders placed per day, week, or month and the average order size.
- Gather data on the efficiency of your fulfillment center in servicing those orders. This might include the number of orders being fulfilled per day, week, or month, as well as the average time it takes to fulfill an order.
- Calculate the regional utilization rate by dividing the number of orders fulfilled by the fulfillment center by the total volume of orders placed in the region.
For example, if your fulfillment center is fulfilling 1,000 orders per month in a specific region, and the total volume of orders placed in that region is 2,000 per month, your regional utilization rate would be 50%. This means that your fulfillment center is fulfilling half of the orders placed in the region.
The following illustration shows the regional utilization (RU) formula:
Let’s see, with the help of an example, how regional utilization (RU) is calculated.
Suppose you have 10 fulfillment centers across India and the following factors are at play:
You received 25 total orders in the month of July, 5 from New Delhi, 5 from Mumbai, 5 from Bangalore, 5 from Pune and 5 from Chennai. Out of 25, you managed to fulfill 15 orders locally.
Therefore, your regional utilization (RU) = 10/25 X 100 = 60%
Why Should an eCommerce Business Figure Out Their Regional Utilization?
Businesses calculate regional utilization (RU) for a variety of reasons, including:
To Get Faster Order Fulfillment
When inventory is stored in close proximity to your customers, their orders can be fulfilled at a faster rate due to the less amount of distance that needs to be traversed and less time needed to travel that shorter distance. For instance, if your company has fulfillment centers located in Mumbai and Pune and you get the majority of your orders from those 2 cities, fulfilling orders will be much faster than if your fulfillment center was located in Nashik.
To Achieve a Lower Amount of Returns
If there is an unforeseen delay in the fulfillment of an order or delivery timelines are generally longer due to the physical distance between the fulfillment center and the customer, there is a higher chance of customers initiating a return. When businesses take advantage of regional utilization, they reduce the wait time that customers have to endure and thus, reduce the number of returns that are initiated.
To Save on Shipping Expenses
By making use of regional utilization, you can save immensely on your shipping costs because prices increase along with distance and if the distance is shortened due to goods being located to the customers that order them, shipping expenses automatically decrease.
To Increase Profit Margins
Regional utilization not only reduces shipping and logistical expenses, it also increases the efficiency of fulfillment operations, including saving money on returns management. All these elements when put together lead to an overall increase in your company’s profit margins.
Some more important uses of regional utilization are listed below:
- Finding the inventory allocation across the country according to demand
- Creating a successful strategy for effective deliveries
- Changing to a low-cost shipping module
- Increasing product visibility better helps your seller account on online marketplaces to perform better
- Reducing RTOs
- Increasing customer satisfaction by meeting their expectations
- Offering same-day delivery
- Storing different inventory items at different locations as per their order volumes
7 Ways to Improve Regional Utilization & Optimise Demand-Based Inventory Distribution in 2023
To improve regional utilization (RU), eCommerce businesses can adhere to 6 methods mentioned below:
Keep Warehouses at Multiple Locations
A centralized warehouse is easy to manage, but it increases the cost and delivery time, affecting your revenue and customer satisfaction. It is always better to have decentralized inventory at multiple warehouses across the country to reach customers faster, that are located in any nook and corner of the country.
Use a Demand-Based Inventory Model
Instead of keeping all of your inventory in a single warehouse, consider using a demand-based inventory model that allows you to store inventory closer to your customers. This can help reduce shipping times and costs, and improve regional utilization.
Have a Trained Resource Pool of Warehouse Operations & Delivery Personnel
Trained human resources in warehouse management & last-mile delivery can make regional utilization easy, as they will ease operations and smooth your delivery processes. They can personally handle any task with great effectiveness.
Opt to Partner with 3PL
Partnering with a trusted 3rd party logistics company helps you to take more and more orders and then easily fulfill them. A few fulfillment partners come with the feature of same-day and next-day delivery and have micro fulfillment centers scattered across the country, which increases regional utilization.
Never Risk Stock-Out of Inventory
Always keep a minimum amount of inventory with you to deliver orders swiftly instead of risking stock-outs. MOQs, reorder quantity and reorder level can help you to avoid stock shortage and purchase it as per your demand, in addition to improving regional utilization.
Optimize Data and Forecast Demand
Data is the equivalent of gold in the digital market. In today’s world, every business is collecting leads. Data will help your company to forecast its demand and improve regional utilization to offer better order fulfillment. You will not be overloaded with inventory or face shortages during seasonal sales. (You can learn more about this here, seasonal demand)
Look at data on where your orders are coming from, what products are selling the most, and when orders are being placed. This will help you understand your demand patterns and identify opportunities to optimize your inventory distribution.
Use a Warehouse Management System
A Warehouse Management System (WMS) is a high-tech software mainly used for warehouse management. It automates multiple warehouse processes which makes fulfilling orders faster and less prone to errors and mistakes. Inventory across multiple fulfillment centers and sales channels can be managed from a single dashboard.
Suggested Read: 6 Steps for Effective Physical Distribution
Conclusion: How to Optimise Inventory Distribution and Regional Utilization with WareIQ for Faster Order Fulfillment?
Regional utilization (RU) is now the standard industry indicator for measuring the effectiveness of eCommerce companies, whereby shipping orders from the same area might greatly raise the market’s profit margin. An increase in regional utilization (RU) can address the unbalanced dynamics of supply and demand, enabling quick fulfillment, significantly reducing shipping costs and enhancing the customer experience. By focusing on regional utilization, businesses can reduce shipping costs, improve delivery times, and increase customer satisfaction, which can all contribute to long-term success.
We at WareIQ personalize your deliveries according to their demand, priority, locations, etc. We offer branded shipping and micro fulfillment centers across the country to enable regional utilization in most cities and towns.
WareIQ is an eCommerce fulfillment platform that offers Prime-like logistics to online brands for same/next day delivery.
You can split your inventory in-house or you can use a tech-enabled 3rd party fulfillment company like WareIQ to get access to fulfillment facilities that are strategically placed all over India.
We combine a nationwide fulfillment & shipping network, a highly-skilled warehouse operations team and our vertically integrated tech platform & inventory planning product to drive:
- Over 30% accelerated sales with same/next day delivery options across 20+ marketplaces/D2C platforms
- 80%+ regional utilization & 40% lower holding costs
- 100% compliance with marketplace SLAs with 0% leakage claims in processing returns