As the complexities of supply chain operations continue to evolve, the multi-distribution center (DC) network remains a critical component for businesses aiming to meet growing demands for speed, reliability, and scalability. However, this approach comes with inherent challenges, particularly regarding out-of-zone shipments — goods shipped from a location that is not geographically optimized for their destination.
These inefficiencies drive up transportation costs, extend delivery times, and hinder resource allocation. Beyond the immediate financial implications, they can erode customer satisfaction and disrupt the operational cohesion of the supply chain. Addressing the root causes of out-of-zone shipments is essential for businesses seeking to optimize their logistics networks and maintain a competitive edge.
The root causes of out-of-zone shipments
Out-of-zone shipments often stem from three interrelated factors that disrupt operational efficiency:
A frequent issue in multi-DC networks, inventory imbalances occur when stock levels across warehouses fail to align with regional demand. These misalignments force companies to ship products from suboptimal locations, driving up costs and extending lead times.
Sudden shifts in customer demand—whether due to seasonal patterns, market trends, or external disruptions—can outpace inventory planning. To maintain fulfillment rates, businesses often resort to shipping from less advantageous locations, amplifying logistics inefficiencies.
Inaccurate demand forecasting is a primary driver of supply chain inefficiencies. When forecasts underestimate or overestimate demand, inventory placement suffers, leading to a higher volume of out-of-zone shipments to bridge the gap between supply and need.
Why out-of-zone shipments persist
The decision to ship from a less-than-optimal DC is rarely arbitrary. It is often driven by external pressures and operational constraints:
On-time, in-full (OTIF) compliance
Many large retailers have strict requirements for On Time and In Full (OTIF) shipments in order to reduce their receiving burden. OTIF requirements impose strict penalties for late or incomplete deliveries, making timely fulfillment a non-negotiable priority. In many cases, shipping from a suboptimal DC becomes necessary to avoid these penalties, even if it increases transportation costs.
Customer expectations for service levels
In an era of rapid delivery expectations, businesses cannot afford to compromise on service times. Long delivery windows caused by stockouts or delays can have lasting effects on customer satisfaction and loyalty, necessitating faster shipments regardless of geographic inefficiencies.
A high-level approach to addressing out-of-zone shipments
Addressing out-of-zone shipments requires a recursive data-driven approach backed by company leadership and often a dedicated resource. Advanced analytics tools can also help identify out of zone shipments and their root causes. A very high-level approach to addressing OOZ shipments is as follows:
How Argon & Co can support your logistics optimization
Argon & Co specializes in solving complex supply chain challenges, including the persistent issue of out-of-zone shipments. We offer state-of-the art analytics tools as well as a wealth of experience in solving difficult transportation and supply chain problems for our clients. Reach out to me to see if we can help your organization.