E-commerce Warehousing: Benefits, Tips, and Challenges

As a merchant, strategic e-commerce warehousing not only helps you save money but also puts you one step ahead of your direct competitor. This is because more and more merchants underestimate the value that warehousing adds to your e-commerce business in the long run. 

Through maximizing warehousing, you can:

1. Be closer to where your customers are;
2. Manage your inventory better, and lastly,
3. Monitor your stock levels more efficiently. 

For e-commerce business owners and decision-makers, common struggles and frustrations include outgrowing original storage space, misplacing inventory, and manually dealing with tracking socks. But with the trend of having multiple storefronts and online stores, these common problems grow more apparent and can start to affect your online business.

In order to succeed in omnichannel e-commerce, there is a clear need to invest in fulfillment infrastructure across technology, staff, supplies, and everything else that can enable you to have an e-commerce warehouse system that practically runs on its own. Plus, if you are aiming for a global presence, you will also need a flexible e-commerce warehousing infrastructure that has the ability to scale international fulfillment capabilities. 

So what should be your best approach? Is there any pre-set formula for success? What are the best practices? The possible challenges along the way and how to prevent them?

We answer all of these questions in this blog!

What is warehousing?

Warehousing is a crucial component of the supply chain process. It refers to the storage and management of goods and products before they are sold to customers. Warehouses are specialized facilities designed to safely store inventory in an organized manner. They play a pivotal role in facilitating the smooth flow of goods from manufacturers or suppliers to end consumers.

The concept of warehousing is nothing new. If you were to trace its history, you would go back to the ancient empires where food, cloth, and wine were stored to meet the need during distressing times. Fast forward to 2021, the significance of e-commerce warehousing still holds its ground strong–especially in the rising age of multi-channel e-commerce.

In a warehouse, products are typically received, sorted, organized, and stored until they are needed for distribution. They often employ various technologies and systems to efficiently manage inventory, such as barcode scanning, automated storage and retrieval systems (AS/RS), and inventory management software.

What is e-commerce warehousing?

E-commerce warehousing specifically caters to the storage and distribution needs of online retailers. With the booming growth of e-commerce, dedicated e-commerce warehouses have emerged to handle the unique requirements of online businesses. Unlike traditional warehousing, e-commerce warehousing focuses on efficient order fulfillment, quick inventory turnover, and seamless integration with online platforms.

E-commerce warehouses are equipped to handle large volumes of individual orders, as opposed to bulk shipments to physical stores. They are often strategically located near major transportation hubs to ensure prompt delivery. These warehouses are designed to accommodate diverse products, manage inventory in real time, and employ efficient picking and packing processes to meet the demands of online shoppers.

Common Challenges of E-commerce Warehousing

Before we decide on the right e-commerce warehousing model, it is necessary to learn the inherent challenges that are faced by e-commerce retailers. Let’s take a quick look at what they usually experience when it comes to warehousing: 

Bringing in new stock

At the start, bringing in new stocks might appear to be a pretty easy process. However, when you have to deal with multiple deliveries of multiple products, crossing them off the list when stock arrives at the warehouse, updating inventory, and physically transporting them to their designated place within the warehouse, it quotes both time and resources wasted.

Accurate order pickups 

Order pickups are the main driver of your e-commerce business. However, as you get more customers and receive more orders, things can grow hectic, and without the proper infrastructure in place to manage a large volume of orders, human error becomes inevitable. For instance, the order pick-up list might have missing items or items that are incorrectly picked. The outcome? Customer complaints, which means you will need to fix things by shelling out more money than expected. In short, it’s not good for business.

Efficient use of e-commerce warehouse storage

If your warehouse lacks optimum space to store items from your inventory, things can turn up cramped and will only add to delivery time as one needs to shift and shuffle products to get another out of the place. Racking systems available at larger warehouses are an excellent choice to overcome such difficulties and are usually preferred to boost inventory turnover.

Stock and inventory tracking

Regular stock prevents an e-commerce merchant from over or under-selling products from their inventory. However, physically counting may see human error creeping in from time to time.

Types of E-commerce Warehousing

When choosing your e-commerce warehouse model, you will need to keep in mind your needs and decide based on what suits your needs the best. Some of the popular models include:

E-commerce Warehousing From Home

There are several e-commerce businesses that began at home. In other words, they stock their e-commerce inventory at home and often use the garage or the living room in some cases.

Such a model is ideal if your order volumes aren’t that huge. Thus, transforming your home space into a makeshift e-commerce inventory lets you do away with the storage charges and ease of packing as well.

Distribution or Fulfillment Centers

Picking, packing, labeling, and shipping products usually involves a lot of time and can impact your timely order delivery. That’s where fulfillment centers make a difference.

More functional than typical warehouses, fulfillment centers are specially designed to give your e-commerce inventory a flying start, where you have dedicated professionals processing fulfillment orders working on your behalf.

On-demand Warehousing

This particular model of e-commerce warehousing is the one where you rent a storage space for a rather short period. As such, this kind of model solution is usually provided by tech firms who sign a contract with warehouses that have excess spaces to rent out.
For sellers who deal with seasonal products, on-demand warehousing is undeniably the best option. In essence, on-demand warehousing resonates with the idea of outsourcing fulfillment requirements to an organization that extends the process to another.

Dropshipping

Dropshipping is all about the product manufacturer controlling the supply chain that includes the production of items, storage, as well as shipping.

Now, when an order is received online, it is the manufacturer who ships the product directly from the warehouse to the consumer’s address. So as a merchant, you never have to worry about maintaining inventory yourself. However, the only downside to this model is its transit time which is ridiculously long, as it mostly applies to a product being shipped overseas.

Also, considering the fact that the merchant has no hold over inventory it might interfere with realizing the customer experience, especially in cases when the delivery takes over a month to complete.

E-commerce Warehousing Best Practices

Effective e-commerce warehouse management is all about embracing good warehouse practices, which in turn allow brands to save money, avoid order delays and enrich customer experience. Here’s a closer look at things that you should do as an e-commerce merchant:

Using a Warehouse Management System

Warehouse management system software offers real-time insights for your inventory as well as ensures product availability.

• Provide real-time insight into your inventory and product availability
• Manage and monitor e-commerce supply chain operations, from the manufacturer to the distribution center
• Forecast inventory to determine when your stock might run out
• Streamline the eCommerce fulfillment process and make your operations more efficient

Integrate Your e-commerce Store (And Other Tools)

Integration with your e-commerce store will make inventory management much easier. Using warehouse management software, your business will be able to determine stock availability in real-time, forecast inventory more easily, and set reorder points in advance before a shortage can occur.

Distribute Your Inventory

Distributing your inventory across multiple warehouses reduces shipping costs so that when an order is placed, it is automatically prepared and dispatched from the nearest distribution center to the customer. This can also improve the customer experience by providing a faster, more cost-efficient delivery.

Test Multiple Picking Systems to Find the Right One

E-commerce businesses have a multitude of picking systems to choose from. Small organizations that receive only a few orders per day may prefer the ‘one-order-at-a-time’ picking process. However, this method is not ideal for larger e-commerce businesses.

More advanced tools can enable batch picking and auto-generate picking lists based on the ordered items’ proximity to one another in an e-commerce warehouse to reduce the walking paths and time it takes to pick an order.

Set Inventory Minimums

Finding the right balance in inventory is always a challenge. Ordering too many products can bring harm to a business’s profits and lead to high inventory carrying costs, while not enough can lead to out-of-stock notices and angry customers that go elsewhere.
Thus, setting mandatory inventory minimums is a smart precaution for businesses to take. Any good software lets businesses set reorder points, so they can receive a notification once a product reaches a specific threshold.

Using a 3PL for your e-commerce warehousing

A third-party logistics provider (3PL) can be a valuable asset for e-commerce businesses when it comes to warehousing and fulfillment operations. Here are some key benefits and considerations when considering a 3PL for your e-commerce warehousing needs:

Benefits of using a 3PL for your e-commerce warehousing needs:

1. Expertise and Infrastructure: 3PLs specialize in logistics and have extensive experience in managing warehousing and fulfillment operations. They possess the necessary infrastructure, technologies, and expertise to optimize your e-commerce supply chain.
2. Scalability: 3PLs offer flexible warehousing solutions that can scale with your business needs. Whether you experience seasonal spikes or continuous growth, a 3PL can adapt its resources to accommodate fluctuations in inventory volume and order fulfillment requirements.
3. Cost Efficiency: Outsourcing warehousing to a 3PL can often be more cost-effective than establishing and maintaining your own warehouse facility. 3PLs leverage economies of scale and can spread costs across multiple clients, reducing your overall logistics expenses.

Things to consider:

1. Compatibility: Ensure that the 3PL you choose integrates well with your e-commerce platform and other systems. Seamless data sharing and real-time inventory visibility are crucial for efficient operations and customer satisfaction.
2. Service Level Agreements (SLAs): Establish clear SLAs with your 3PL to define expectations regarding order processing times, inventory accuracy, and shipping methods. Regularly review performance metrics to ensure compliance and make necessary adjustments.
3. Security and Transparency: Verify that the 3PL has robust security measures in place to protect your inventory from theft, damage, or unauthorized access. Additionally, ensure they provide transparent reporting and visibility into your inventory levels and order fulfillment processes.

By leveraging a 3PL for your e-commerce warehousing needs, you can focus on core business activities while entrusting your warehousing and fulfillment operations to experienced professionals. This partnership can lead to improved customer satisfaction, streamlined logistics, and ultimately, the growth of your e-commerce business.

Conclusion

E-commerce warehousing can be tricky, but you need a flexible warehouse dedicated to your e-commerce business in order to improve profits and scale. 

When researching warehousing options for your e-commerce business, consider that you’ll need retail supply chain experts on hand who can manage fulfillment and provide a great customer experience. In addition, you will require access to the best warehouse management systems, and the latest technology in the arena of logistics fulfillment.Therefore, as a small or medium business, your best bet might be to outsource these operations to a 3PL. If you really want to take your e-commerce warehousing to the next level, consider signing up with Locad. And watch your fulfillment systems go!

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