Here is what is working for me:
It would appear that Shopify assumes you will carry out multi-location fulfilment in this way and only charges the single rate.
The only problem with this method is that you have to remember to change the fulfilment location to ensure your stock is correct at their respective locations... but I believe it would be wrong of Shopify to assume it knows where you actually fulfil the items without telling it.
So far this seems to be the way forward which allows inventory, ordering and flat rate shipping work together.
Hope this helps