Selling products from an ecommerce store is much more in-depth than simply setting up a website and adding products to your catalog. Figuring out how and where you’ll store merchandise is crucial for your supply chain, which is where ecommerce warehousing comes into play.
Get this right, and you’ll save time, make more money, and ensure your customers are happy. But if you get it wrong, your ecommerce operation can lose money quickly and have a snowball effect on the rest of your business. This in-depth guide will explain everything you need to know about ecommerce warehousing, including how it works, different types of ecommerce warehousing, advantages, and tips for success.
What is Ecommerce Warehousing?
Ecommerce warehousing is the process of storing and managing the products sold from an online store. It includes everything from securing the products, tracking where inventory is located, the number of products on hand in real-time, how long items have been at the facility, and more. It also extends to how products are packed and shipped from the warehouse.
Technically, any room or space that’s specifically designed to store, secure, track, manage, pack, and ship ecommerce inventory can be used for ecommerce warehousing. You don’t actually need a traditional warehouse to apply this concept. Many ecommerce startups begin warehousing in a garage or spare bedroom before ultimately scaling to a large facility that’s more equipped to handle a larger volume of inventory.
How Does Ecommerce Warehousing Work?
Ecommerce warehousing is much more involved than storing boxes of products. Warehousing is one of the most essential components of an ecommerce operation from a supply chain and logistics perspective because it’s the center of where your inventory arrives from suppliers and gets shipped to your customers.
Depending on the size of your ecommerce business and the type of warehouse you’re using, some common processes in ecommerce warehousing include:
- Making sure inventory is safe and secure
- Tracking all equipment in the warehouse used to move, store, and process goods for sale
- Training and managing all of the staff working in the warehouse
- Collaborating with suppliers for delivery logistics
- Working with shipping carriers for customer deliveries
- Tracking every piece of inventory in the warehouse
- Forecasting the supply and demand of products
- Scaling warehouse operations as demand rises
- Making sure all goods pass quality assurance checks
- Picking and packing orders for delivery
- Finding ways to automate repetitive processes in your workflow
Every ecommerce warehousing system will be slightly different. It all depends on the type of warehouse you’re using, the types of products you’re selling, and the volume of your business.
But every warehousing system must be able to track inventory when it arrives at the facility, manage it while it’s being stored, and process it for final delivery.
What Are The Different Types of Ecommerce Warehouses?
There are several different kinds of ecommerce warehouses. Ecommerce warehouses are classified by ownership, capabilities, usage, and functions.
Here’s an overview of the most common types of ecommerce warehouses:
- Private Warehouses — Large ecommerce organizations and retailers tend to own their own warehouse spaces. Examples include Amazon and Walmart. This is more common for wholesalers, distributors, and manufacturers that have the capacity to not only run a warehouse’s operations but also maintain the administrative side of owning the property.
- Public or Rented Warehouses — Public warehouses are owned by a third party, and businesses pay rent for the space used. Depending on the size of the warehouse, multiple ecommerce businesses can be renting space in the same building. Larger ecommerce shops may opt to rent out an entire warehouse strictly for their products.
- Cooperative Warehouses — Cooperative warehouses allow co-op members and non-members to store goods at a much lower rate. The facility is collectively owned or rented, but the technology is typically subpar compared to other options. This warehousing method is common for businesses in the same industry, like farmers in the same who plan to sell products online at the end of a harvest season.
- Smart Warehouses — Smart warehouses are built with the latest technology for machine learning, artificial intelligence, data storage, and robotics. These facilities are more expensive, but they improve the way businesses track and manage inventory. This is also a great option for businesses that need a better way to forecast inventory demand.
- Fulfillment Centers — Also known as distribution centers, the inventory at a fulfillment center is not stored long-term. These facilities are positioned at the downstream end of a supply chain, just before products are sent to customers. Picking and packing logistics is a crucial process at fulfillment centers.
- Government Warehouses — Government warehouses are typically used for unique industries, such as wholesaling B2B products online. The properties are owned and managed by government entities, and space is often leased at a more affordable rate to businesses. However, if the business fails to make payments, the government usually has the right to seize the products that are stored at the warehouse.
- Bonded Warehouses — A bonded warehouse is most commonly used for cross-border ecommerce sales. Items can be stored both short-term and long-term at a bonded warehouse while they’re waiting for customs to clear the order. The process involved with a bonded warehouse can often be lengthy and require lots of paperwork. But it’s a requirement if you’re selling certain types of products in specific countries, depending on where the goods originated from.
The vast majority of new ecommerce businesses and startups will be using private or public warehouses. In some cases, you may also be using a fulfillment center. But some warehouses can handle store and fulfillment at the same property.
How Does Ecommerce Warehousing Work With 3PL?
3PL stands for third-party logistics, which is a subject that’s commonly associated with ecommerce warehousing and order fulfillment. When you outsource fulfillment to a 3PL provider, you typically get inventory management and ecommerce warehousing handled for you.
This is an excellent option for any ecommerce business that does not have the means or desire to run its own warehouse. You won’t have to worry about renting space, training employees, or providing security for the products. Even most of the technical requirements will be handled on your behalf.
With 3PL, you can automate and manage your entire ecommerce supply chain and logistics through a single partner.
ShipBob and Red Stag Fulfillment are two popular 3PL solutions that provide ecommerce warehousing.
When you’re assessing a 3PL provider, it’s crucial that you look specifically at the warehousing solutions. Some options on the market are just better for fulfillment—meaning you still need to store your inventory elsewhere before shipping them to your 3PL provider.
But warehousing services, including long-term storage at an affordable rate, are a necessity if you want to completely outsource ecommerce warehousing to a 3PL provider.
What Are The Benefits of Ecommerce Warehousing?
Ecommerce warehousing has several advantages that can help any ecommerce operation succeed. Let’s take a closer look at the top advantages below:
- Lower Operating Costs — The right ecommerce warehousing system can quickly cut costs related to your supply chain and logistics. You can save money on labor, rent, equipment, shipping, and other key expenses that must be kept as low as possible.
- Improved Inventory Management — Tracking inventory effectively is a key part of any successful ecommerce operation. You should know exactly how much inventory you have on hand and be able to forecast when you’ll need to order more. Without ecommerce warehousing, it’s difficult to track your inventory at scale, and you’re more prone to errors.
- Fast and Flexible Shipping — Ecommerce warehousing makes it easy to identify products, pull them out of storage, and pack them for shipping. If you’re using a 3PL provider or fulfillment service, you can typically offer two-day shipping to your customers—keeping them happy and coming back for more. Beyond standard shipping options, you can often offer additional shipping options to your customers for expedited orders.
- Single Item Picking — Historically, warehouses were designed to manage bulk orders for wholesalers. For example, a warehouse might have been used to replenish the entire produce department of a supermarket, fulfilled by the truckload. But modern ecommerce warehousing makes it possible to facilitate single-item picking, where one product can be taken out of the storage area and shipped to a single customer.
- Scalability — You can only sell items out of your garage or living room for so long. Eventually, you’ll need a plan that will take your ecommerce business to the next level—allowing you to sell and process hundreds or thousands of items per day. Ecommerce warehousing makes that possible.
Overall, ecommerce warehousing makes your supply chain more efficient. It’s necessary for any ecommerce site that’s ready to scale operations and improve profit margins.
What is a Warehouse Management System (WMS)?
A warehouse management system (WMS) is a specific type of software that manages the daily operations of an ecommerce warehouse.
These tech-forward tools are designed to streamline the inventory management process and automate repetitive tasks.
WMS software works by integrating with third-party tools. This is typically configured by direct integration or open API. So all of your supplier orders and fulfillment needs can be tracked from a single source of truth, along with the orders coming directly from your ecommerce site. Everything will be automatically updated as items move through your supply chain.
Infoplus is an excellent warehouse management solution.
In addition to WMS software, they also provide solutions for 3PL, warehousing planning, inventory management, and quality control.
Fishbowl Inventory and Shipedge are two other quality WMS software tools to consider.
How Does a Warehouse Management System Improve Ecommerce Warehousing?
At its core, WMS software is a huge time-saver when it comes to ecommerce warehousing. Without this software, you’d be forced to track everything manually or use spreadsheets. Neither of these options is an effective use of time.
Warehouse management systems also reduce the errors associated with manual tracking and management. It helps ensure your inventory numbers are accurate and that no orders get lost in the supply chain shuffle.
Another great part of using WMS software for ecommerce warehousing is the simplicity. These tools consolidate lots of complex moving parts into a single dashboard where you can view everything at a glance. Lots of these tools even come with solutions for barcode scanning, which will really modernize your entire warehousing process.
Your WMS software will also improve the way you forecast and manage inventory. Most ecommerce businesses don’t want to have stock on hand for too long, as it’s an ineffective use of capital—especially if you’re paying for that storage space. But at the same time, you don’t want to run out of inventory, as you’ll be missing out on potential sales.
WMS software provides you with detailed reports and analytics about your inventory. You can use it to forecast sales and even use historical trends to determine when you’ll need more or less inventory based on your busiest seasons.
What Factors Should You Consider When Setting Up Ecommerce Warehousing?
There are certain considerations that you should keep in mind as you’re shopping around and comparing different ecommerce warehousing solutions. Here’s a quick checklist that you can use as you’re evaluating options:
- Warehouse Space — Do you need to secure an entire warehouse or just a portion of the facility? Consider how much storage space you need for your inventory, plus how much room you’ll need to manage deliveries, packaging, equipment, and more. Always leave yourself some room for growth so you don’t have to change your warehouse again in a year or two.
- Equipment — This includes shelving, racks, pallets, transportation, loading equipment, labels, scanners, boxes, and more.
- Process Automation — Look for a solution that makes it easy to automate repetitive tasks. This can include anything from barcode scanning to machines that break down boxes.
- Warehouse Guidelines — If you’re managing the warehouse yourself, you need to make sure you’ve established clear guidelines that align with OSHA safety requirements. Aside from the legal obligations and worker safety, you’ll also need to establish quality control standards and clear workflows.
- Technology and Integrations— You can use WMS software to simplify your warehousing process. You’ll want to make sure that any technology you use can seamlessly integrate with the tools you’re already using, including shopping cart software, ecommerce platforms, accounting systems, shipping software, ERP software, and more.
- 3PL Services — This is critical if you plan to completely outsource your ecommerce warehousing processes. A 3PL service can handle everything on your behalf and make your life much easier to the point where you never have to touch your inventory or step foot into a warehouse.
Since there is no one-size-fits-all ecommerce warehousing solution for everyone, the factors above must be taken into consideration as you’re planning the best option for your business.