Distributed inventory is a concept where inventory which needs to be sent to retailers is divided into multiple shipments. These shipments are sent separately to fulfill the requirement of the retailer.
Dividing inventory into many shipments allows goods to reach all places where inventory needs to be sent. Spreading inventory across different fulfillment centers keeps it closer to the end customer and reduces transit time to a great extent along with lowering shipping costs.
Distributed inventory uses a kind of hub and spoke model that aims at improving the efficiency of distribution efforts.
Fulfillment centers function as independent warehouses from where customer orders can be fulfilled from the nearest location. In fact, whenever there is a hike in a demand for a certain product at any one fulfillment center, others can help distribute inventory when required.
In case you’re not sure whether a distributed inventory system will work for your business, consider the following aspects to decide.
You should consider using distributed inventory when you are expanding to serve customers in different geographic regions, have to deal with seasonal fluctuations in demand, or when you have multiple suppliers or sourcing locations. Distributed inventory can also help improve customer service and your inventory management as a whole. Lastly, it can be used to mitigate risk from a natural disaster from one of your warehouses or help with ecommerce demand fulfillment.
Centralized inventory, also known as central warehousing or centralized warehousing, is an inventory management strategy in which a company stores the majority or all of its inventory in a single central location or warehouse. In this approach, the central warehouse serves as the primary hub for receiving, storing, and distributing products to customers, retail stores, or other distribution points.
The choice between centralized and decentralized distributed inventory depends on a company’s specific objectives, the nature of its products, its target markets, and its logistical capabilities. Many businesses may use a combination of both strategies, referred to as a hybrid approach, to balance the advantages of each method while mitigating their respective disadvantages.
In the distributed inventory system, inventory is distributed to multiple locations strategically chosen according to their proximity to the consumers. You can see which areas of your business have a high density of customers and if you have a fulfillment center near it.
That way you can significantly reduce transportation costs and delivery as you don’t have to fulfill orders from only a single location.
By placing inventory in various warehouses according to demand and location, you can practice tighter inventory control in those fulfillment center. Instead of worrying about the huge amount of inventory at a single main warehouse, warehouse managers can focus on the fulfillment center assigned to them and conduct better inventory management.
A benefit of distributed inventory is you don’t have to ship each order by yourself. You can collaborate with 3PL companies to fulfill orders efficiently. This gives you the opportunity to expand into new markets with the help of those 3PL companies.
With a traditional supply chain process, it is impossible to satisfy the demands of customers far and wide. A distributed inventory system makes inventory management simple, reduces delivery times, shipping costs and increases inventory control.