Ecommerce metric refresher—Regional Utilisation

Regional Utilisation (RU) is an ecommerce metric defined as the percentage (%) of local and zonal shipments out of your overall shipments. Top marketplaces consider RU as a significant factor in determining the seller account status. For example, Flipkart gold requires RU>20%.

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It can be calculated by the illustrated formula:

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For example,

1. Let's assume you have 2 fulfilment centres across India (New Delhi and Mumbai)
2. You received total 10 orders in the month of July, i.e 2 from New Delhi, 2 from Mumbai, 2 from Chennai, 2 from Kolkata, and 2 from Assam
3. Out of 10, you managed to fulfil 4 orders locally
4. Therefore, your regional utilisation = 4/10 X 100 = 40%

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Note: A higher RU% indicates that you are selling more zonal and local orders out of your overall orders or generating more demand locally.

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Why should businesses calculate regional utilisation?

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There are many reasons for businesses to calculate regional utilisation, such as:

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• Determine demand-wise distribution of inventory across the country
• Formulate an effective plan for faster deliveries
• Switch to a cost-effective shipping module
• Improve the status of your seller account on marketplaces by boosting product visibility

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Benefits of improving regional utilisation

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1. Lightning-fast fulfilment
   When you store your inventory closer to your customers, you can get orders delivered to them faster. It helps you reduce the shipping distance and order transit time. For example, you are an ecommerce merchant with warehouses in Mumbai, Jaipur, and New Delhi. You receive 6 orders from Mumbai, Chandigarh, New Delhi, Faridabad, Jaipur and Indore. By shipping these orders from regional or nearest warehouses, you can delight your customers with speedy deliveries.
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2. Significant savings on shipping cost
   Shipping cost is majorly dependent on the shipping distance. By improving regional utilisation and fulfiling orders from the nearest fulfilment centres, you can reduce shipping distance, and subsequently, save on shipping cost.
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3. Low rate of returns
   When there's a delay in product delivery, there are chances your customers might not need it. In such situations, customers return the item. By enabling regional utilisation, you can ensure timely order deliveries and prevent returns which arise due to this reason.
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4. Increased overall margins
   Storing your inventory closer to customers not only reduces shipping cost but also improves the overall operational efficiency. It helps you significantly save costs on returns and improve customer satisfaction. These factors ultimately lead to an increase in profit margins.

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How to improve regional utilisation?

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Regional utilisation is the key to achieving lightning fast fulfilment and improving the status of your seller account on sales channels. To improve your regional utilisation, you need to split your inventory across multiple fulfilment centres and store your products closer to your customers. This will help you fulfil more local and zonal orders. Make sure you analyse your product demand in different locations before deciding where to split and store your inventory.

If you have a network of storage facilities, you can split your inventory in-house or you can leverage a tech-enabled 3PL like Eshopbox to get access to strategically located fulfilment centres across India.

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Bottom line

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Regional utilization has become the industry metric of efficiency for ecommerce businesses. Wherein shipping orders from the same region can significantly improve the bottom line for the marketplace. An improvement in RU can tackle the uneven demand-supply dynamics, enable fast fulfilment, cut down shipping costs remarkably, and improve the customer experience.

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