E-commerce is one of the fastest-growing industries and is continuously expanding worldwide. With the global e-commerce logistics market valued at $315.82 billion and predicting growth at a CAGR of 22.3% from 2023 to 2030, logistics plays a crucial role and forms the backbone of the industry.
Logistics is a thread that consists of various tasks that come together and build the whole operation. The backbone, aka logistics, comprises storage, warehousing, handling, packaging, utilization, inventory, transportation, and control.
Warehousing and management form the core of logistics needed to achieve your milestones. So, what exactly is warehouse management, and how it forms a crucial part of operations? This article will walk you through warehousing or e-commerce storage, analyzing how it is vital for any organization.
What is an E-commerce Warehouse?
An E-commerce warehouse is the storage space available to business owners. The company stores, handles, and manages its SKUs in one place. Warehouses help businesses accumulate their stock in one place so that the rest of the operations go smoothly. Some retailers build or rent their own warehouses, while others hire third-party fulfillment providers and 3PLs.
E-commerce warehouse management consists of operations and processes. The most common ones are:
- Taking safety and security measures for inventory storage
- Receiving and storing inventory when it arrives at the warehouse
- Supervise the items stored in bins, shelves, and racks
- Performing warehouse and inventory audits
- Keeping a record of stock levels and running inventory reports
Benefits of E-commerce Warehousing for SMBs
Making your garage or store room a warehouse is common and operatable for small start-ups. But for growing businesses, there are better ideas than this. E-commerce storage solutions for growing businesses have become crucial and offer multiple benefits. Some of these are as follows:
- It helps you organize SKUs: One of the biggest reasons to build or hire warehouse management is organization. As your business makes more sales, you start manufacturing more products. At some point, storing and managing all the inventory goods becomes difficult. That’s where warehouse management kicks in and organizes your inventory entirely.
It solves hurdles by undertaking activities such as– shipments, packaging, handling, and so on. A well-organized warehouse helps you accurately determine the record order.
- Saves time: If you use your home, garage, store room, or any living space, it would require too much time and labor to bring the items back and forth. Warehouse management is not just about storing the SKUs but involves the entire journey of items right when it comes to the warehouse till it reaches the end user.
Small warehouse spaces at the beginning save traveling time for the suppliers, 3PLs, and business owners. Moreover, a better-organized inventory takes less time to search for specific items.
- Reduce shipping delays: Hurdles such as wrong orders, delayed delivery, lost packages, and so on are common when you don’t have a separate warehouse. Leaving your customer unsatisfied could also affect your business in the long run.
Warehouses label each box, categorize different kinds of items, and keep the delivery items separate from the stock. This makes it easier for owners to dispatch and deliver the correct product to the rightful customer.
Understanding Your Business Model
There are different types of warehouses available for businesses. These are–
- Distribution centers: This warehouse facility sheds bulk SKUs for a limited time from multiple suppliers. The items are dispatched and shipped quickly to the customers.
- Climate-controlled warehouses: This warehouse facility specializes in storing temperature-sensitive items such as frozen food, vegetable, fruits, and so on.
- Smart warehouses: This warehouse facility is one of the most advanced and uses AI to automate the entire inventory journey.
- Bonded warehouse: This facility stores imported goods from all over the world.
- Consolidated warehouse: This facility is similar to a distribution center except that it stores small shipments from multiple suppliers and groups them into the more oversized shipment.
But how do you know which would be the best for your company? You can follow specific parameters by which you can make decisions about the warehouse that suits your business. These parameters could be as follows:
Assessing Your Needs
This includes a particular set of questions you can ask yourself. These could be:
- When did you start your business?
- What is the purpose behind your business?
- What milestones have you achieved so far? These milestones could be– the number of customers, revenue, profit generated, etc.
- What is the legal identity of your business– S-corp, sole proprietor, or LLC?
Answering these questions will conclude what type of warehouse is best for your business.
Analyzing Your Space Requirements
It means understanding the scalability and needs of your business. This also includes making a roadmap to analyze how much space would be needed if your business expands. Moreover, e-commerce storage space also depends on the type of product you sell. For instance, accessories may not cover as much space as an apparel brand. Once you’ve concluded, search for the warehouse that best suits your business requirements and fits the products well.
Setting Up an E-commerce Warehouse Management System
After answering all the questions and coming to a final warehouse facility, the next most significant step would be to structure your operations. This means planning your warehouse management system.
You could either have short-term or long-term processes. The former process comprises all the daily business operations tasks. Some significant components are– answering calls, scheduling shipments, invoices, payments, receipts, etc., every day. The latter talks about achieving a long-term milestone. Suppose you’re expected to gather 30K monthly customers and 100K revenue. These milestones would help you shape your warehouse operations and complete the process accordingly.
Growing businesses hire an entire management team to monitor the inventory. There could be no better option than hiring a management team if your business grows exponentially. The management team has high-quality experience with handling and storing SKUs. They also automate most of the processing to make it smooth sailing. The team includes 3-4 ground members and 2-3 mentors to guide and supervise the process.
How Does E-commerce Warehousing Affect the Operations of Your Business?
Ship to your customers faster
Setting up multiple warehouse facilities in the regions reduces time and ships the products faster. The more warehouses, the closer you are to the customers. Many businesses have started to provide same-day or next-day delivery services to their customers, leaving them happy and satisfied with the company.
Better organization of products
Warehouses are meant for organizing and storing SKUs. Using your living room, garage, store room, or guest room isn’t a good idea in the long run. E-commerce storage stacks the products one above the other according to the categories. It makes it much easier for owners to be clear about their SKUs.
Optimizing Inventory Management
Maintaining Appropriate Inventory Levels
Appropriate or optimum inventory levels mean keeping the inventory record ideal to always stack the right amount of products at your fulfillment centers. Perfect inventory management reduces possible risks related to SKUs to a great extent. Many businesses face too-high or too-little inventory obstacles which affect their overall business.
Storing too-much products takes up warehouse space, sits on shelves for too long, and could become unsellable at some point. Less inventory causes shrinkage, resulting in improper delivery service. This results in heavy customer loss and damages your business.
Here are a few things to consider while maintaining optimum inventory levels:
- It should be different for every brand
- Each SKU may need different inventory levels according to its demand
- The optimal inventory level doesn’t stay the same. It changes frequently.
Controlling Costs and Shipping Times
Although shipping costs sound like the lowest investment in the company, they could significantly impact its profitability. The increase in demand causes more bulk orders, making up for decent carrier costs. The distance between customers and the warehouse also affects shipping costs. Therefore, building multiple warehouses and spreading them across different localities is advisable to save as much money as possible.
Integrating with Supply Chains
Supply chain and warehouse management is an attached process that operates together. How you manage and store goods in your warehouse helps you regulate profound business strategy. There are usually two types of warehouses– general and distribution.
Seasonal products where customer service, handling, and transportation are confined go well with the general warehouse. In contrast, short-term rapid services are managed in distribution warehouses.
Entrepreneurs should look for factors while integrating e-commerce product storage with supply chains: adequate storage, strategic usage of locations (utilizing the warehouse at its maximum capacity), security, inventory accountability, value-adding operations, and risk management.
Improving Efficiency in the Warehouse Space
Here are some of the ways you can refine warehouse space. These are as follows:
Utilizing Vertical Space
As a savvy entrepreneur, you can evaluate whether your warehouse can extend the racks vertically or not. Warehouse management usually focuses on aligning all the boxes horizontally and not using much vertical space. It is mainly because vertical stacking heightens up the boxes, which makes them unreachable.
Let’s look at the various storage racks available for warehouses that help you store the inventory more efficiently. These are:
- Pallet Racks: It is made up of forklifts and pallets and is the most basic ones. Almost every industry has pallet racks to store boxes, as it is one of the best ways to stretch your storage space, especially if you have different kinds of inventories.
- Carton Flow Racks: These racks are made for first-in, first-out (FIFO) inventory storage. Carton racks have tilted panels that push the older boxes down, making them more accessible.
- Cantilever racks: Inventories such as piping, lumber, steel trusses, or long-shaped ones are made for cantilever racks. It has protruding arms where you can place an item. However, the employees who work closely with these racks should be careful each time they handle inventory.
- Mezzanines: This type of rack extends the storage space to a second level above your warehouse floor, which increases the actual warehouse space.
Implementing Real-time Visibility and Tracking Solutions
Warehouse management intertwined with specialized software has become a go-to for many entrepreneurs. A tool that consolidates the entire operations and makes it even faster– warehouse management system (WMS). Some of the most significant advantages of using WMS are as follows:
- It provides real-time insights into the inventory and its availability.
- Eases management and monitoring of the supply chain, from manufacturer to the distribution center.
- It gives you a heads-up before your inventory runs out.
- Streamlines the entire fulfillment process and makes it more efficient.
Enhancing Customer Experience and Satisfaction Designing Streamlined Processes
Proper warehouse management prevents mixing up orders while delivering them to customers. Customers feel satisfied when their correct order reaches them at the right time and in the right place. Perfect inventory management increases the customer base and makes their experience the best.
Evaluating Potential Locations
Discover the hidden spots or potential storage space in your warehouse that hasn’t been used yet. Entrepreneurs mostly use racks, shelves, lofts, or other similar storage spaces that are present upfront. They don’t realize that evaluating the entire warehouse room for space can help them store small items efficiently. This way, store owners can amplify the storage capacity and make room for slower-moving items.
Taking Advantage of Technology Solutions
Business owners can save a significant amount of time and avoid potential manual errors that may arise by leveraging tech-driven solutions. Processes such as inventory management, fulfillment centers, customer service, sales channels, and so on can be integrated into a software system.
Technology and software usage help you track real-time inventory and maintain accuracy at each level. For instance, built-in optimization tools, inventory tracking, automatic ledger, and many more prepare you for all the possible outcomes, offering an edge in the market.
Automating Operations Selecting the Right System
Warehouse automation involves the penetration of technology into the movement of inventory in and out of the warehouse to fulfill customers’ needs with minimum manual assistance. Warehouse software eliminates labor-intensive duties and ensures maximum accuracy.
Before integrating any automatic operations, align the system to the company’s needs. Warehouse automation technologies come in different shapes and sizes. These are:
- Goods-to-person: Includes conveyors, carousels, lift systems, and so on.
- Automated storage and retrieval systems (AS/RS): Includes equipment required to carry truckload materials, tote shuttles, and mini-loaders to the storage space.
- Automatic guided vehicles (AGVs): These include magnetic strips, wires, or sensors that help navigate the path throughout the warehouse.
- Pick-to-light and put-to-light systems: Utilizes barcode scanning technology synced to digital light displays. It helps to pick up and place selected items correctly.
Best Practices of E-commerce Warehousing
Incorporating the best e-commerce inventory storage practices can assist you in meeting your customer retention and satisfaction goals. Let’s explore how!
Determine the storage needed for your E-commerce space
Designing an ideal e-commerce warehouse demands estimating the warehouse space you need. E-commerce storage entails planning for possible future extensions and refinements. Such activities include receiving goods, designating where goods are unloaded, inspecting for quality, labeling, and arranging storage.
Use the right warehouse management software
Warehouse Management System comprises various features that aid in optimizing an e-commerce warehouse. Some of these features are:
- Inventory Control and Inbound Receiving: The warehouse management system (WMS) manages receiving products and taking inventory as they depart.
- Workflow Management: The system directs and schedules the warehouse workflows.
- API Integration: By setting communication between various software programs, WMS can easily be integrated within Application Programming Interface (API). Integrated APIs have the potential to scale your business globally, reaching customers worldwide.
Integrate your E-commerce warehouse systems
API integration with WMS assists KPIs to easily share business data worldwide. It increases business efficiency and opens up many global prospects by reducing costs. Some of the systems that require integration with APIs to create potential global scalability for your firm are listed below:
- Accounting System
- Shopping cart payment software or POS
- Shipping Scheduling and Calculator software
Share your inventory across warehouses
Distributing your inventory to numerous warehouses globally dramatically cuts down shipping and transportation charges, leading customers to receive products on time from their nearby distributing warehouse.
Implement mandatory inventory minimum points
Determining the appropriate amount of a product and stock can be challenging, and ordering more products than needed can hamper the business and customers’ experience. By setting a mandatory inventory minimum, you can counter these challenges. Additionally, effective warehouse management software alerts businesses when the stock exceeds a certain level.
Connect with a reliable shipping platform
Establishing a connection with reliable shipping can significantly assist in the exponential growth of your business. It also includes other advantages, such as lowered storage costs, space to store your inventory, and more staff to tend to orders and packaging.
Define KPIs for setting up your warehouse management system
Warehouse management, inventory turnover, shrinkage, inventory accuracy, carrying cost, inventory-to-sales ratio, and so on are some of the critical KPIs for e-commerce storage space. KPIs assess the stocks of products stored in your warehouse and help you monitor the overall movement of your inventory.
To summarise, e-commerce inventory storage is one of the most challenging and exciting parts of the logistics chain, demanding a different strategic approach for each step. Anyone working closely with warehouse management would know the tools, KPIs, software, WMS, and many more required to run a successful management system. By the end of this article, you will clearly understand how to run a successful and well-established e-commerce warehouse.
What is an SKU numberWhy is storage important for e-commerce??
Storage space offers you peace of mind by providing security, efficient space to store cargo, and organized management and operations. It also ensures that everything is controlled, reducing potential risks accompanying storage.
How does e-commerce warehousing affect the operations of your business?
Warehousing facilitates the shipment, fulfillment, and delivery of goods from your storage space to the end user. This processing makes it easier for owners to track and record. Additionally, it reduces transportation costs, enhances flexibility, and cuts down staffing needs.
Why are e-commerce strategies important?
The importance of e-commerce strategies is– it helps you understand your business, market trend, and competition. It gives you a heads-up for many factors that significantly affect your business. The impact of your business on buyers, sellers, and distributors can also be discovered with the help of e-commerce strategies.