If you’re here, it’s probably because of one of these reasons.
1. Quick commerce has forced you to become efficient with last mile delivery logistics
2. Your seller ratings are under threat because of marketplaces’ regional utilization mandates
3. You’re smart and want to reduce logistical costs AND inventory costs
4. You’re expanding regionally and are debating if you need more warehouses
Or maybe you have all those reasons. Whatever your motivations for achieving a perfect regional utilization score, you’re in luck. By the time you finish reading this, you’ll know the ins and outs of regional utilization, find our best tactic to improve it and find out if it works for you. Let’s get started.
What is regional utilization?
Put simply, regional utilization (RU) is a measure of how well a brand’s warehouse fulfills orders in a given area. It translates to how well the brand serves its customers for brands on online marketplaces.
High RU scorers typically fulfill customer orders faster and more efficiently and give their customers a better overall experience. This is also why they get higher seller ratings on marketplaces and perks like better seller visibility and access to special events and promotions.
How to calculate regional utilization
Step 1: Have the following numbers handy.
a. Total orders placed
b. Total orders fulfilled locally
Step 2: Insert this data into the following formula
RU = (Total volume of orders fulfilled locally/Total number of orders fulfilled) * 100
Suppose you received three orders from Assam, two from Tamil Nadu, and five from Jharkhand. If you fulfilled one order from Assam, two from Tamil Nadu, and two from Jharkhand locally, your RU would be 50%.
RU = [(1+2+3)/10]*100
RU = [5/10]*100
RU = 50%Â
Factors influencing your regional utilization scores
Two factors impact your regional utilization scores, according to the formula.
a. Total orders placed
b. Total number of orders fulfilled locally
Both those factors, in turn, depend on the following:
I. Inventory distribution
II. Proximity to warehouses
III. Shipping route efficiency
IV. Efficient warehouse ops
V. Flexibility in fulfillment options
Let’s understand this better.
1. Inventory distribution
This refers to the spread of inventory across different warehouses or fulfillment centers. Brands that distribute inventory well don’t have to worry about overstock in some warehouses or stockouts in others. They can fulfill customer orders at all locations efficiently. That means more orders fulfilled locally, therefore a better regional utilization score.
2. Proximity to warehouses
Fulfillment will be faster if you have a warehouse in the same pincode as the customer purchasing your product. After all, you’ll route orders directly to the fulfillment center, show a quicker delivery date estimate, and ship orders well in time, increasing the total number of orders fulfilled locally.
3. Shipping route efficiency
Longer shipping routes don’t just mean higher logistics costs. They also mean longer delivery date estimates, customer dissatisfaction, and canceled orders. Additionally, longer routes increase the chances of unfulfilled deliveries due to items getting lost in transit.
Selecting the shortest shipping route helps you improve order fulfillment rates and facilitates regional fulfillment, thereby increasing your regional utilization score.
4. Efficient warehouse ops
Relying on systems, algorithms, and software for decision-making in a fraction of the time means your orders get dispatched quicker and fulfilled more efficiently. This increases the localized order fulfillment rate, thereby raising the regional utilization score.
5. Flexibility in fulfillment options
A flexible, offline + online order fulfillment model helps you reduce the reliance on shipping to fulfill orders. Customers can instead visit their local store to buy your product, increasing localized fulfillment and your regional utilization scores.
Increasing regional utilization then should be as simple as addressing all the above causative elements. But it isn’t, even though solutions exist for each one.
The #1 way to improve regional utilization? Better planning
Here’s why.
You’ll figure out how to increase operational efficiency with a warehouse management system and even set up new warehouses to address regional demand. But you won’t be able to fulfill existing local orders without live inventory ready to be dispatched.
Could you estimate demand and ensure inventory availability? Yes. And be assured of no understocking, overstocking, or overspending on said stock? Not really.
You need a data-backed plan for making inventory available regionally and enabling better fulfillment.
Here’s how you do it.
Steps to make a data-backed plan for better regional fulfillment
1. Identify pincode-specific customer demand patterns
Customer preferences change regionally, owing to different socio-cultural contexts. For instance, customers in tier-1 will have different product preferences and purchase patterns compared to tier-2 cities, and so on. Naturally, effective regional fulfillment requires a clear understanding of regional customer demand patterns.
The simplest way is to collect your regional sales records and segregate them by zone and customer preference. This will give you a view of existing purchase patterns that you can use to inform your inventory. Many advanced retail merchandising software today even have a dedicated module for mapped sales summaries. All you need to do is click a button to retrieve the data.Â
2. Enable demand based inventory distribution
Once you understand regional customer purchase preferences, you can plan inventory distribution based on it. This will ensure every local order gets fulfilled, helping you amp up your regional utilization scores.
To start demand-based inventory distribution, you’ll need to predict demand. You can do this by analyzing your customers’ past purchase behaviors and using moving averages or growth rates to make near-accurate predictions. Alternatively, predictive algorithms in retail merchandising software software to project demand accurately and request inventory accordingly.
3. Plan new style distribution
Brands often keep limited pieces with new styles to minimize production costs. However, they struggle when customers purchase new styles online and expect quick deliveries. The result? Unfulfilled orders and a lower regional utilization score.
To distribute new styles across your local warehouses effectively, you want to predict demand for new styles. This is difficult because new style demands happen quickly and come with no historical data to make predictions. Use your regional WoW sales data to make new style distribution predictions. Many retail merchandising systems allow you to do this out of the box.
4. Account for warehouse capacity and target reconsideration
While meeting demand is critical to achieving great regional utilization scores, you cannot force new inventory to a full warehouse. This is why you ought to account for warehouse capacity when optimal numbers of pieces are available. This will not only help you prevent overstock but also save you from inventory holding costs.
So, once you predict the number of pieces you’ll need to fulfill regional customer demand, run that number against your regional warehouses’ capacity. You should be able to fetch capacity data automatically from your merchandising software or warehouse management solution.
5. Remember to factor in offline sales
If you have physical stores in specific regions, make sure to factor in sales data from them to inform your predictions and allocate enough inventory to these stores as well. After all, physical stores become centers of regional fulfillment in an online + offline fulfillment model.
Note: You might have to enter store sales data separately to make accurate inventory predictions and plan store inventory separately to increase your localized fulfillment.
Improving your regional utilization scores is an iterative process
Your regional order fulfillment rate won’t be constant even if you optimize your shipping. After all, purchase and demand patterns are dynamic. So, regularly review your progress and stay on top of customer trends.
Remember that with solid data, even small adjustments to your regional fulfillment strategy can lead to big improvements in utilization rates. This will drive better business outcomes and customer satisfaction.
