Today, the retail industry is experiencing a massive transition. Many traditional businesses are being modernized into e-commerce businesses. Thanks to millions of active internet users, the e-commerce industry is growing rapidly. By 2024, its sales are expected to reach $6.07 trillion globally.
With so many businesses shifting their base to the digital world, it is important to learn the effective requirements of this business model. The specific requirements are quite different from traditional businesses. One of the most important aspects is e-commerce warehousing. It is sometimes overlooked. However, its importance lies in keeping the product safe and increasing customer satisfaction. Get answers to queries like what is warehousing, types of e-commerce warehouses, and their importance here.
What is E-commerce Warehousing?
E-commerce warehousing is the strategy of storing goods that will get exclusively sold in the digital world.
Many retailers use traditional warehousing methods for their e-commerce businesses. They implement traditional warehouse management systems for managing inventory and requirements. However, traditional warehousing and management systems provide limited help to the e-commerce demands. It is not built for demand fluctuations, space and amenities requirements, and order quantity and type.
Thus, e-commerce businesses often opt for specific e-commerce warehousing and management systems.
Benefits of Warehousing Your E-commerce Products
Warehousing e-commerce products can provide you with multiple benefits. However, investing in e-commerce warehousing may be difficult if you start out. Some key benefits include the following:
- Shipment to your customers faster
Same-day delivery of products has become the standard norm of many e-commerce businesses. Hence, the business has started picking goods in bulk from the nearest e-commerce warehouse based on the delivery location. The products are delivered faster and cut shipping costs. Faster delivery increases both customer loyalty and sales.
- Better organization of products
E-commerce warehousing helps businesses to manage inventory and avoid item loss. Hence, training staff members for stock storage is mandatory in the warehouse for e-commerce companies. They often use reliable 3PLs to access storage materials and communicate if stock levels are low. You can easily stock your goods in an optimized way, increasing product management efficiency.
- Less stress
Organized e-commerce warehousing and knowing the products are in good hands makes e-commerce warehousing less stressful. From product management to delivery to customers, real-time tracking occurs using advanced technology. The scope for human errors is almost negligible when you opt for e-commerce warehousing.
- Time savings
The 3PLs examine past order data and find the best locations to store your products. It mostly warehouses products in the shipping zone where your e-commerce store is most popular. This strategy reduces the shipping time significantly and increases customer satisfaction.
What Happens Without E-commerce Warehouse?
E-commerce warehousing and inventory management are the keys to a successful e-commerce business. Multiple things can go wrong if you do not set up a proper e-commerce fulfillment warehouse and management system. A few of them are:
- Inventory gets lost
E-commerce warehouse uses modern technology to keep track of products.
It saves some time through a tracking list to locate where the product is in the warehouse. Without such a tracking list, inventory will likely be misplaced and lost. This can, in turn, lead to monetary loss to the company.
- Wrong inventory gets shipped
Customers receiving their products adds up to customer satisfaction. A good happy customer adds up to a loyal customer base which is profitable. Warehousing for e-commerce businesses prevents you from sending the wrong products to your customers.
- Storage runs out
E-commerce warehousing offers a modern and technologically advanced storage system. With the help of technology, you can easily strategize to store products in an optimized manner. In an e-commerce business, a lack of storage capacity may arise if you try to implement traditional warehouse methods.
- Stock-outs or over-purchasing inventory
E-commerce warehousing helps tremendously in strategic inventory management. It helps you to indicate the exact number of products required for your business. Running low on inventory can result in stock-outs, leading to the loss of potential customers. It can also overburden your inventory with outdated products.
Types of E-commerce Warehouses
There are multiple types of warehousing available in the e-commerce market. Choose the one efficiently which suits your needs.
- Public warehouses
The government owns public warehouses. But private firms are responsible for taking care of their management. Equipped with less advanced facilities in terms of size and functionality, public warehouses are easily accessible and affordable. They are ideal for e-commerce startups.
- Private warehouses
Private warehouses are typically owned by wholesalers, distributors, manufacturers, or large retailers. As these warehouses cater to the owner’s specific needs, they are more expensive than public warehouses.
Some factors that make it a costlier operation include the size of the warehouse, built-in special amenities, and the construction of these warehouses to store some particular products. Investing can be quite costly for such a venture, but the long-term benefits are endless.
- Cooperative warehouses
Cooperative warehouses are private warehouses with multiple owners. Warehouse sharing occurs among several business owners involved in similar sectors or with slightly different work lines. The fees paid for the warehouse get divided among the members making it affordable. E-commerce businesses that partner with other companies often opt for cooperative warehouses.
- Government warehouses
As the name suggests, the government owns and manages these warehouses. Shipping ports and railway courier stations are some fine examples of government warehouses. Government warehouses are affordable and provide top-of-the-line security. Note if you fail to clear the dues on time, the government has the right to seize and sell your inventory.
- Fulfillment centers
Fulfillment centers or distribution centers are a bit different from warehouses. They are an integral part of the supply chain and handle all logistic processes. Receiving, processing, and fulfilling customer orders occur in a timely fashion using fulfillment centers, relieving e-commerce businesses of additional pressure.
- Smart warehouses
The use of AI for storage, fulfillment, and management of inventory is mandatory in smart warehouses. Automation is not limited to software like other warehouses. Implementation of automated vehicles, drones, robotic arms, and AS/RS (Automated Storage and Retrieval Systems) are also present. As smart warehouses offer magnificent productivity and extreme efficiency, it comes at quite a high price.
- Bonded warehouses
Bonded e-commerce warehousing is popular among businesses that operate in cross-border trading. The government owns bonded warehouses. The e-commerce business owners can store their imported goods until they find a buyer. Bonded warehouses provide great security and help avoid financial losses that can occur through fines or for not paying customs duties.
- Consolidated warehouses
The collection, combination, and transportation of shipments from various suppliers that need delivery in the same area or city occur through consolidated e-commerce warehousing. Large quantities of inventory are not required for these warehouses as most of the products come from sellers.
How Does Warehousing Fit into E-commerce Fulfillment
E-commerce warehousing and order fulfillment go hand in hand and are an integral part of the e-commerce ecosystem. These function together through:
Order picking is one of the most labor-intensive processes and the first step in fulfilling the customer’s order. In large warehouses with massive and multiple SKUs, it can be quite challenging to pick the desired item quickly.
Modern e-commerce warehousing comes with upgraded, robust technology that helps pick items efficiently and accurately. The use of single order picking, zone picking, batch picking, and many such facilities occur to attain flawless procedures.
Kitting & assembly
Once an order is picked, it is moved to the station within the distribution center. The order is accompanied by additional items before getting packed, labeled and shipped.
Assembly refers to the collection of various items and accumulating them into one. Like electronic products, combining a few parts and even updating the software comes under assembly. The act of adding several items in a single order is kitting. Packing a smartphone with accessories is one such example.
The action of kitting and assembly occurs just after the order picking. Warehouses for e-commerce companies with modern IT frameworks can only handle assembly and kitting seamlessly.
Shipping & receiving
Labeling for shipping products occurs once all the components are correctly boxed. All fulfillment centers have carrier pickups multiple times a day. Businesses can decide the carrier type depending on the product amount being picked and the delivery location. The requirement for designated space for loading and unloading, docks and stations, multiple types of vehicles, and many more such facilities must be present.
Modern-day warehouses take care of these shipping and receiving procedures effortlessly with their upgraded technological system. Some warehouses have even implemented slot booking times at each dock to avoid congestion and save time.
While returning a product, customers often face multiple problems. This can lead to customer dissatisfaction and reduce customer loyalty. This occurs for companies that lack an advanced warehouse to accommodate returned products. Companies with suitable e-commerce warehousing provide refurbishment for returned items, exchange options, and real-time tracking for both the seller and the client.
What to Consider When Using An E-commerce Warehouse
Crucial decisions can either make or break your business. Keeping this idea in mind, consider a few key points.
- What kind of products do you sell?
E-commerce offers the opportunity to sell a variety of products. Depending on some key specifications of the product, you require a warehouse to store them. If you have a small order volume, you do not need an advanced warehouse capable of handling high-frequency orders and vice versa.
Again if you have a business in a specific niche, you require a customized warehouse and not the standard one. Choosing the right warehousing for e-commerce will not only help in cost reduction but will also help to increase efficiency.
- How much can you afford to spend on logistics?
The efficiency and productivity of all e-commerce warehousing require an optimized workforce that easily integrates with technology. Make sure to select a warehouse where the staff members are already trained and follow standard operating procedures (SOPs). The more you can spend on logistics, the more uniform and top-quality service you will get.
- Does the warehouse logistics system work with your other e-commerce software?
Selecting a warehouse with an integrated inventory management system, warehouse management system, and sales channel is mandatory. This will not only streamline order management but will also maximize the fulfillment process. Warehouse for e-commerce companies must also implement automation to reduce manual operations and increase efficiency.
- Can the warehouse guarantee fast shipping?
Selecting a proper e-commerce warehouse location is crucial for a brand to grow. An optimum location guarantees fast shipping and helps in cost reduction.
Quality is true of extreme importance, but with a fast-paced lifestyle, so is the delivery timing. Fast shipping can also enhance customer experience and help you to build a loyal customer base.