Your Guide To Improving Multi-Location Inventory Management [7 Strategies]

Juggling inventory needs across multiple warehouses is a massive challenge – but not with these seven best practices.

Most direct-to-consumer (DTC) brands launch with a single warehouse location where they pick, pack, and ship all their customer orders.

This setup works for a while. But as brands grow, their shelf space has to grow with them. So, most retailers will add new warehouse locations – scaling not just the business but its potential problems.

Yet, managing multiple inventory locations is necessary for retailers wanting to grow their customer base and move into new markets.

So, how can you do this while closely monitoring inventory levels across all your locations?

Settle in – we’re talking all things multi-location inventory management. Common struggles, solutions, and benefits included.

What is multi-location inventory management?

As the name suggests, multi-location inventory management is when a brand holds and controls stock at several warehouse locations.

The need for multiple warehouses is usually a sign a brand is doing well. That is, they’re growing so much they can’t fulfill all their orders from a single facility (and now need multiple locations instead).

Typically, businesses reach this point when they start selling on multiple ecommerce channels and marketplaces (think: Shopify, Amazon, Etsy, and eBay).

Since you can’t be in several places simultaneously (physically or mentally), most retailers rely on software (like Cogsy) to set up an inventory management strategy that can scale as they add new locations.

5 major benefits of multiple warehouses

Managing multiple warehouses might feel like more trouble than it’s worth. But multi-location management comes with several benefits, including faster delivery, reduced costs, better risk mitigation, and improved customer satisfaction.

Benefit 1: Faster delivery

Today’s consumers expect fast shipping. In fact, a 2021 CI&T survey asked customers how quickly they expect online orders to hit their doorstep:

• 36% said 3-4 days
• 30% said 2 days
• 18% said 1 day
• 9% said same day

The best ways to actually deliver on these expectations? Spread your stock out across several warehouses. But to do this, you’ll need to choose strategic warehouse locations that cater to your customers.

Shein, a global retail giant, recently announced plans to open US distribution centers in the Midwest and California. This is a far cry from their usual practice of shipping orders to US buyers from China.

One of these new distribution centers in Whitestown, Indiana, is already operational and could reduce shipping times for North American customers by up to 4 days.

A second Shein facility will open in southern California in spring 2023, further cutting down shipments for customers in the western US.

Similarly, when you situate warehouses close to large clusters of your target customers, you’ll naturally cut delivery times (since packages don’t have to travel as far).

For example, if all your inventory is stored in New Jersey, it’ll have to travel a long way before reaching California customers. But if your stock is split 50/50 between warehouses in New Jersey and California, you can reach customers on either coast within 1-2 days.

Benefit 2: Reduced costs

Shorter shipping distances also mean lower costs for both you and your customers. Let’s use that same example to discuss delivery costs.

If your only warehouse is in New Jersey, but you have a growing audience out west, the shipping costs to move inventory 3,000 miles add up quickly.

For that reason, having another facility in California can dramatically reduce your costs. Yes, even after you factor in the expenses of running a second warehouse.

Benefit 3: Better risk mitigation

If the last few years have taught retailers anything, it’s how important preparing for supply chain delays and disruptions is.

A 2021 McKinsey study found retailers will need to spend a whopping $39 billion to return to pre-pandemic inventory levels (since supply chain delays decimated inventory levels for many retailers).

For example, Target finished Q2 2022 with $15B of inventory (up 43% YoY). But they had only a ~.6 inventory-to-sales ratio. Meaning, the retailer was wildly overstocked and underperforming.

The good news is that having multiple inventory locations can be the buffer brands need to ward off future supply chain issues, natural disasters, and other unexpected emergencies.

Even if one location has a stockout or the inventory gets damaged, another warehouse will likely have some stock to tide you over (we’ll review how multiple warehouses can house safety stock in just a bit).

But beyond emergencies, multiple warehouses also support a continuous flow of goods so your brand can avoid costly inventory shortages (so you can keep selling despite inventory replenishment mishaps).

This makes multi-location inventory management just as essential to risk mitigation as it is to keep your customers happy.

Benefit 4: Improved customer satisfaction

Speaking of your customers… these folks are the backbone of your business. So, keeping them satisfied (and coming back for more) should always be the top priority for DTC brands.

As you know, running multiple warehouses helps guarantee faster delivery and lower shipping costs. And these are just the sort of things that can help customer satisfaction soar.

In fact, 62% of online shoppers in the US said fast delivery is the most important part of a positive customer experience.

Yes, customers love fast shipping. But offering same-day, 1-day, and 2-day delivery also makes customers more apt to tell their friends about your top-notch service.

Case in point: 82% of customers that are satisfied with your delivery service will recommend your brand to friends and family.

This kind of word-of-mouth referral can lift your sales while simultaneously building brand loyalty. That’s a win-win for everyone.

Benefit 5: Enhanced visibility

This benefit is reserved for brands that partner with a real-time inventory management software.

While more SKUs spread across more locations can be tough to keep up with, the right tool (a-hem, Cogsy) can give you inventory visibility at the holistic and warehouse management level.

But why is this a big deal? Keeping a close eye on your inventory means knowing when one location runs low on a SKU, and another is overstocked. That way, you can move stock between warehouses rather than purchase inventory you don’t actually need.

This strategy prevents potential overstocking (and dreaded dead stock). And it helps you redistribute excess inventory more efficiently, so you can maintain optimal inventory levels. All while freeing up cash flow.

The biggest challenges of multiple warehouse inventory management

As we hinted at above, adding new locations often introduces inventory management challenges. Luckily, knowing what these common obstacles look like makes them easier to sidestep.

Challenge 1: Communication and collaboration

Communication and collaboration are critical to inventory management—especially as you add more warehouse locations.

But sometimes, communication between locations is still lacking or disjointed. And these breakdowns in how information travels inevitably lead to mistakes and inefficiencies.

That’s because every location has its own unique inventory needs (this is what makes managing multiple warehouses such a challenge).

And all these differences between locations can result in gaps or lags in communication—which eventually cause errors and inaccuracies in your reporting and management. (This goes double when you transfer inventory or exchange workers.)

As such, you’ll need a plan for how information moves between multiple warehouses.

The easiest way to do this? Standardize your systems and processes across all locations. This can quash communication snafus or collaboration hiccups.

Alternatively, industrial equipment brand Cherry recommends you:

• Create a clear chain of command
• Ask workers to put on wearables, so you can track where they are in the warehouse
• Give staff radios or phones to easily communicate with one another
• Purchase a PA system for warehouse-wide announcements

Challenge 2: Inventory control

As you know, the more warehouses you manage, the more challenging it is to maintain inventory control.

For instance, you might not notice inventory losses in a timely fashion when you’re (literally) covering more ground with your fulfillment operations. This makes you more susceptible to stockouts and overstock.

That said, you don’t have to relinquish inventory control to scale your ecommerce business. You just need to implement a multi-location inventory system that provides the inventory visibility required to maintain that control.

For example, Cogsy’s multi-location support tool gives you unmatched inventory control by helping you visualize inventory per location, track in-transit orders, and forecast your inventory needs for individual warehouses.

With it, you can track inventory holistically or at a specific location 24/7. This gives you greater visibility into what your products are doing (and where they’re at) at any given time. So, you can make confident, data-back decisions that actually unlock growth.

Challenge 3: Delays and disruptions

Managing inventory’s much simpler when it’s all stored in the same place. After all, when it’s consolidated, you can easily run a physical count to confirm inventory accuracy.

However, counting inventory at multiple locations is challenging, especially if any of that stock traveled (is traveling?) between places. In this scenario, some units might look like phantom inventory without the proper documentation.

So, it’s no wonder why poor inventory management plagues brands with more warehouses (and logistics) to handle.

And unfortunately, lackluster inventory management puts you on the fast track to fulfillment bottlenecks (AKA, supply chain delays).

Think about it: Not knowing what’s at your warehouses is a recipe for stockouts or excess inventory.

Stockouts can trigger longer lead times (leaving your customers waiting). Meanwhile, excess inventory leads to overstock, higher holding costs, and shrunken profit margins.

So, this recommendation might start sounding like a broken record, but a great way to bypass delays or disruptions is with an inventory management solution.

The right ops tool can provide complete visibility into your stock levels and support real-time inventory, order, and fulfillment tracking for all your locations. Thus, kicking disruptions to the curb.

Challenge 4: Inconsistent standard operating procedures

Standard operating procedures (SOPs) is just a fancy name for step-by-step instructions.

When it comes to warehouses, SOPs detail how locations should receive, issue, store, and dispose of inventory from suppliers. And these guidelines ensure smooth, consistent workflows at all your facilities.

But maintaining that consistency becomes more difficult the more warehouses you have. This leaves room for errors to crop up—like delayed orders that disappoint your customers.

That’s why consistency is so integral to inventory management.

Using the same processes and procedures to operate all your warehouses puts you in a better position to meet demand and keep customers happy.

Challenge 5: Higher chances of error

Minimizing inventory errors is a non-negotiable for growing your DTC brand.

But the thing is, managing multiple facilities leaves you vulnerable to mistakes with fulfillment—such as duplicate orders—and miscommunications between your warehouses.

These situations are a recipe for supply chain delays and forgotten orders, which can wreak havoc on your bottom line.

Similarly, if your inventory records are chock-full of errors, you won’t know when (and how much) inventory to reorder. As you can probably guess, this kind of bad bookkeeping puts you at risk of (you guessed it) stockouts and overstocks.

Having too much or not enough inventory increases your expenses. But it also affects your brand’s ability to meet customer demand.

A staggering 21-43% of customers say when they encounter out-of-stock products, they’re likely to head right over to whichever competitor has what they want in stock.

Meaning, it’s crucial to accurately keep track of everything going on at your warehouses. That’s why many DTC brands use an automated system to get real-time data and insights into their stock levels.

Challenge 6: Lack of a centralized inventory management system

Just like it makes sense to have standardized SOPs for all your warehouses, it also makes sense to have a single source of truth for your inventory management.

What do we mean by that? Some DTC brands with multiple locations use a mish-mash of tools and methods to cobble together a view of their inventory levels.

Think about it: Managing inventory across multiple locations is hard enough. But relying on various tools (think: an Excel spreadsheet at one warehouse, ops software at another) makes it impossible to stitch together the bigger picture with any clarity.

That’s because these granular views make it tough to understand how much of a single SKU you store across all your warehouses (and where). So, that SKU might be out of stock at one location but overstocked at another.

Without quick access to these insights, you’ll likely reorder stock you don’t need or run into a stockout situation.

That’s why having a centralized system that provides inventory visibility across all your warehouses is so crucial. So you can see the full picture and zoom into the more delicate details at the touch of a button.

7 ways to successfully manage inventory in multiple locations

Thinking of making big moves to expand to multiple warehouse locations? These seven tactical tips and best practices can help you sidestep the challenges outlined above.

1. Choose warehouse locations strategically

Earlier, we mentioned how faster delivery and reduced costs are just some of the benefits of multi-location inventory management. But we only hinted that both perks hinge on where you set up your warehouses.

When managing inventory in multiple locations, you must choose those locations strategically.

Meaning, you should look for facilities closer to larger segments of your existing and prospective customer base. This will allow you to fulfill orders at a profit.

Let’s revisit the New Jersey-California example from before. The retailer with a warehouse in New Jersey does their homework on opening a warehouse in LA and soon realize the numbers aren’t adding up.

The company would spend more on running the second LA warehouse than they’d save on delivery. However, they could move that second warehouse to Phoenix and operate profitably (since real estate is far cheaper).

In other words, it literally pays to be strategic. Lower shipping costs leave more money in your pocket to reinvest into growing your business since you save on handling fees, freight costs, and order fulfillment timeframes (while simultaneously taking on more orders).

Plus, when you reduce your costs, you can offer discounted shipping. Not only will your customers love you for it, but it’ll also give you a leg up on the competition.

2. Improve warehouse layout

A well-designed layout can improve warehouse efficiency in no time at all. That’s because an optimized floor plan allows people and products to move in (and out) of the building uninterrupted.

Ideally, you can design your layout around your brand’s specific needs. Do you need to maximize available space for your pickers and packers? Or maybe you need easy access to your best-selling items and most popular SKUs?

Whatever the case, creating a warehouse layout that directly speaks to those needs is wise. Doing so keeps your warehouses operating at peak potential (i.e., getting orders out the door on time, every time).

On top of reimagining your layout, you can also improve organization.

For many retailers, organizing your warehouse can be as simple as using appropriately labeled stackable bins or trays. This basic storage trick can transform a cluttered workspace into one that runs like a well-oiled machine.

Another option is to invest in storage systems, like:

• Pallet racks. Used to hold inventory shipped in large boxes. Popular at small- or medium-sized facilities with a high inventory turnover rate.
• Static shelving. Occupies a consistent place at your warehouse. Meant for fairly lightweight inventory (meaning, it holds maybe a few hundred pounds per shelf).
• Mobile shelving. Slides laterally (and autonomously) over rails installed in warehouse flooring. This is especially helpful for refrigerated and deep freeze storage.
• Mezzanine flooring. Free-standing platforms create an extra floor between the ground and the ceiling. Helps increase storage and available working space.

Each system can make your warehouse more functional—but they also do wonders to improve safety.

Modern warehouse storage is engineered to be extremely safe, even more so when you reinforce these structures with supplemental equipment like partitions, guardrails, and rack guards.

3. Invest in employee training

Having multiple warehouses gives you a chance to scale up production and fulfillment. But keep in mind that as you take on more orders, all that extra shipping, packing, and storing means you’ll need more help.

In other words, more square footage means you’ll need more skilled workers to keep things running.

So, when you bring new people onto your warehouse team, invest in employee training. Training new crew members on your SOPs reduces errors and ensures your warehouse is more likely to operate safely and efficiently. Not to mention it boosts employee retention.

In fact, 54% of companies are increasing supply chain and technical training to retain and better protect warehouse workers. This training costs $1,200 per new employee (or 4% of their annual salary).

So, while hiring net-new team members has advantages, you can also open some warehouse positions to existing employees looking for more responsibility.

Promoting internally requires less training than hiring someone externally since existing team members already know your processes (lowering the company’s training expenses).

Plus, giving current employees a chance to climb the ladder also means they can better train newer, lower-level employees on all the ins and outs of their previous position.

4. Forecast demand

Managing multi-location inventory is much easier when you have reliable demand forecasts.

Making accurate forecasts not only ensures you have the right stock in place and increases customer satisfaction, but it also decreases your expenses (so you have more money to invest in retail growth and expanding facilities).

The most effective forecasts leverage real-time and historical data to anticipate future demand for everything you sell. You can then use your forecasts to plan production orders for all your warehouses up to 12 months out.

With accurate forecasts, you’ll know exactly what (and how much) stock you need to reorder. This ensures you meet customer demand without creating an inventory surplus at any location.

5. Optimize safety stock levels

Safety stock is another crucial aspect of inventory planning and multi-location inventory management. When your brand has the right amount of safety stock, you can prevent stockouts and even compensate for less-than-accurate forecasts.

Safety stock essentially acts as a buffer against long lead times and unexpected stockouts. (This is a huge help even if you have only one warehouse.)

That said, too much “safety stock” means you’ve actually just collected overstock (and increased your risk of obsolesce). And it can cost you a pretty penny in storage costs.

So, how much safety stock should you keep on hand? Calculate your ideal safety stock levels with the following:

This quick calculation helps you find the right amount of safety stock to keep on hand. But you’ll want to run separate calculations for each product at each warehouse.

6. Perform regular inventory audits

Inventory audits compare your actual inventory to your current financial records.

This process uncovers shrinkage and double-checks your accounting. And it ensures you have the correct inventory quantities at all times (and at all your warehousing locations).

Sometimes, audits are as easy as performing a physical inventory count of your existing stock.

Other times, you’ll need a third-party auditor to confirm whether your records and stock counts match.

Having a fresh set of eyes for an audit is the best approach when you have multiple warehouses since you’re working with a much larger volume of inventory.

In short, the more you perform inventory audits, the more accurate your records will be. But these audits can also make your warehouse more efficient since you’ll always know which products are available and where they’re located.

7. Automate as much as possible

Last but not least: You can better manage multi-location inventory by incorporating automation.

To let automation do more of the heavy lifting, you’ll need the help of a barcoding system, a warehouse management system, and multi-location management software to round it all out.

Barcode inventory management system

A barcode inventory management system makes managing bins and SKUs for multiple warehouses simple. This includes automatically generating barcode labels.

On top of that, warehouse managers can use barcode software to print detailed tracking information for increased inventory control.

Brands can track their assets for multiple warehouse locations and then sync all that data with their inventory management system. This makes barcoding tools essential for increasing accuracy and improving warehouse workflows.

Warehouse management system (WMS)

Warehouse management systems have a wealth of automated workflows to help get products from your warehouse into the hands of your customers.

For instance, modern warehouse management software, like ShipBob, automates everything from receipts and location management to picking, packing, and shipping customer orders. ShipBob also comes with extensive inventory analytics and reporting.

These features give you visibility into what your products are doing at any warehouse at any time. That way, you can make more informed decisions for the replenishment, storage, and shipment of your products.

Multi-location inventory management software

Like it or not, having multiple warehouses adds a layer of complexity to inventory management.

That’s why you need an advanced system to distinguish between identical items stored in different locations—and one that helps you choose the best location to receive supplies or fulfill orders.

Thankfully, the top multi-location tools are stacked with features to assist with reorder points, demand forecasting, inventory tracking, and real-time reporting. So, you can oversee all your operations at a glance or dig into warehouse-level specifics as needed.

Better yet, look for multi-location software that pulls all the data from all your warehouses into a central view like Cogsy. That way, you can offer more consistent customer service.

Mitigate multi-location inventory management issues with Cogsy

Cogsy is the end-to-end purchasing tool offering Shopify merchants full visibility into their stock movements.

With it, see your stock levels, restock needs, incoming shipments, and internal transfers at a birdseye level or by location. All in one actionable dashboard.

Plus, forecast demand with pinpoint accuracy (up to 12 months out) so you can stock up accordingly. You can even run “what-if” scenarios to identify your best-case, worst-case, and most profitable inventory strategies.

When you’re ready to restock at any of your inventory locations, Cogsy will send you a replenish alert, letting you know it’s time to take action.

The tool will also offer personalized restock recommendations to return all your locations to optimal inventory levels.

This might mean placing a purchase order (which you can do in less than five minutes with Cogsy’s restock recommendations) or transferring inventory from one location to another.

Either way, these recommendations ensure you avoid expensive mistakes (like stockouts and overstock) that keep you from reaching your revenue goals.

But don’t take our word for it — try Cogsy free for 14 days!