Routing every order to the right warehouse by customer location sounds simple, until you sell through several channels and ship from more than one warehouse. Are you selling goods through online marketplaces? If so, fulfilling orders can become challenging when you have multiple warehouses. Without the right order routing setup, orders may be sent from the wrong warehouse, leading to higher shipping costs, slower deliveries, unnecessary fulfillment expenses and unhappy customers.
In this article, we look at the problem of warehouse order routing and how you can prevent it by integrating a custom middleware software solution.
Causes of the Problem of Warehouse Order Routing
Selecting the Wrong Warehouse for the Order
Whenever an order is placed, the business has to decide which warehouse will fulfill it. When that decision is made on incomplete information, or by a rule that no longer fits the business, the order ends up at the wrong warehouse for fulfillment.
Incompatible Customer and Warehouse Location
Ideally, the order should be routed from the warehouse nearest to the customer’s location. Since most businesses rely on predefined routing rules, it becomes impractical to apply the most feasible option for every order.
Unavailability of Stock
The warehouse selected for fulfillment may have zero stock for the product, which can lead to delayed orders and, in some cases, cancelled orders.
The Problem of Data Sync in eCommerce Systems
eCommerce stores use multiple systems for order handling. If real-time data sync fails, correct inventory data will not be available at the warehouse or at the marketplace end, which leads to overselling: orders for products that have zero inventory.
The Problem of Nearest Warehouses
Routing an order to the nearest possible warehouse seems like the easiest solution, but the availability of a warehouse depends on several factors:
- Availability of stock
- Shipping cost
- Order routing capacity
Order Split Between Multiple Warehouses
Orders with multiple products that are routed from multiple warehouses can lead to delayed shipping and an increase in shipping cost. Our guide to shipping and logistics best practices covers how to keep these costs under control.
Unavailability of the Complete Data
The biggest problem businesses face in warehouse order routing is the unavailability of complete data on:
- Customer location
- Inventory availability
- Product availability
- Warehouse capacity
- Shipping costs
- Delivery time
- Existing warehouse workload
Impact of the Problem of Warehouse Order Routing
Higher Shipping Costs
Orders may be shipped from warehouses located farther away from the customer, which in turn increases shipping and transportation costs.
Longer Delivery Time
Selecting the wrong warehouse can increase the order shipping time. As a result, customers may have to wait longer for their orders to arrive.
Increased Split Shipments
Poor routing may delay shipments of products that are routed from different warehouses. It further leads to increased shipment costs.
Increased Manual Work
Whenever an order is delayed by a routing error, manual work is needed to correct the warehouse allocation. This again increases the overhead required for order routing.
Order Processing Delays
Manual reallocation of warehouses corrects the routing problem but increases the time required to process the order. A well-configured order management system helps reduce these delays.
Inefficient Warehouse Management
With random warehouse allocation, some warehouses may receive orders beyond their capacity while others receive close to zero orders. See warehouse management basics for how to keep workloads balanced.
Negative Reviews and Feedback
With delayed orders and order cancellations, customers are likely to leave negative feedback and reviews. This further reduces customer satisfaction and trust in the business.
Loss of Revenue
Incorrect order routing leads to more order cancellations, which directly affect the revenue earned by eCommerce businesses.
Solution: Routing Orders to the Right Warehouse by Customer Location
Centralized Order Routing Logic
Instead of letting each system in the eCommerce business decide where an order should go, establish centralized order routing logic that makes routing decisions based on correct data.
Order Routing Based on Customer Location
The customer’s shipping location should be the main factor when selecting a warehouse for order routing.
Check Real-Time Inventory Data Before Initiating Delivery
Before assigning an order to a warehouse, check its inventory data. Accurate, real-time stock numbers are the foundation of reliable routing, as explained in our post on inventory management, overselling and stockouts.
Rule-Based Warehouse Selection
To avoid random warehouse selection, choose warehouses based on rules such as availability of stock and the warehouse’s route to the customer.
Use of a Custom Middleware Software Solution
For businesses using multiple eCommerce platforms, ERP systems and warehouses, a centralized custom middleware solution can connect these systems and make accurate routing decisions.
Frequently Asked Questions
Order routing by warehouse location is the process of assigning an incoming order to the most suitable warehouse for picking, packing and shipping.
Choosing the right warehouse requires businesses to evaluate multiple factors before assigning an order to a fulfillment location. Some of them are the location of the customer, the cost of shipping and warehouse capacity.
Custom middleware solutions act as a decision-making layer between eCommerce platforms, ERP systems, warehouse management systems (WMS), inventory software and shipping platforms.
