Are you wondering what ecommerce warehousing solutions are best for your business?
In this post, we cover what this aspect of managing an ecommerce business is and solutions you can use for inventory management and order fulfillment.
What is ecommerce warehousing?
Ecommerce warehousing is the practice of storing and shipping inventory that’s bought and sold on an ecommerce website.
Warehousing doesn’t just refer to how you store inventory.
Warehouse operations include the following tasks:
- Keeping track of how much stock you have of each item
- Ordering each item from suppliers in time to keep up with demand from customers
- Keeping inventory safe, clean and secure
- Packaging orders as they come in from your ecommerce store
- Arranging pickups from shipping companies
- Keeping track of sales well enough to know when you’ll need additional labor
- Building relationships with shipping carriers
- Ensuring your warehouse meets safety regulations
Why ecommerce warehousing is important
Ecommerce businesses that do not dropship need warehouses of some kind.
They need storage space for inventory, and they need to keep track of how much inventory they have and how often it moves. A well-run warehouse makes it incredibly easy to keep track of the supply chain.
Proper inventory management also makes it less likely for items to get lost, and it makes it easier to find items you need for shipments.
So long as everything is labeled correctly and in its rightful place, an ecommerce warehouse also makes shipping the wrong items to customers less likely to occur.
A proper ecommerce warehouse is also better for security. Warehouse buildings are harder to break into, and you can hire full-time security staff to keep employees and inventory safe.
Plus, you can purchase insurance for warehouses for when disasters do occur.
Insurance doesn’t just cover natural disasters. It also covers damage that occurs to products during storing, packaging and loading. It all depends on the policy your ecommerce business chooses.
Ecommerce warehousing solutions
These are the ecommerce warehousing solutions we’re going to discuss in this section:
- Home warehousing
- Private warehousing
- Third-party logistics (3PL)
- Public warehousing
- Cooperative warehousing
Home warehousing
Sometimes ecommerce warehouse management refers to the small stock of inventory you keep in a room in your house, garage or storage shed.
In this case, you likely manage stock demands, package orders and drop packages off at a shipping service yourself.
This is a perfectly valid warehouse space, especially if you can’t afford your own ecommerce warehouse space at the moment.
However, it does have its drawbacks, such as having inventory for your online store taking up half of the space in your house.
Pros of home warehousing
Storing inventory at home is a cheap ecommerce warehouse management system to use.
You don’t need to purchase warehouse space nor do you need to hire staff to handle warehouse management tasks.
You also save on commuting since, well, you live in your warehouse.
Unfortunately, these are the only benefits of managing your inventory at home. There are far more disadvantages to managing inventory in this way.
Cons of home warehousing
Having less space in your home is probably the biggest drawback of using your home as a warehouse for your ecommerce business.
You might lose your garage, at the very least. However, as your inventory grows, you’ll start to lose more and more rooms in your home.
If your inventory grows because your business does well, you’ll also need to ship out more and more orders. This may require hiring additional staff, who will need to work out of your home.
Inventory is also quite likely to get lost in a home warehousing environment. You’ll need to move inventory around quite a bit to get to your personal items, which may cause you to forget where you put your inventory or cause things to fall behind shelves and other items in your home without you noticing.
One of the biggest drawbacks of home warehousing is what happens when disasters occur. Your homeowner’s insurance may not cover your inventory, and you won’t qualify for warehouse insurance.
It’s also difficult to process returns in this type of environment. You shouldn’t use your home address as a return address, so you’ll need to purchase a PO box from the post office or a service like UPS Store, which means driving to this box often when you’re expecting a return.
Finally, when you use your home as a place of business, it can be difficult to separate your home life from your work life.
You may find yourself processing orders after dinner when you should be relaxing. Conversely, you may find yourself cleaning or taking care of your children when you should be processing orders during the day.
Private warehousing
Private warehousing is a warehouse facility you own and operate entirely on your own. The only third-party services you work with are the shipping companies who deliver your orders to customers, though you may also outsource cleaning and security duties to third parties.
This is one of the best ecommerce warehouse solutions you can choose for your business.
It provides more space and control than most other solutions on this list, but it costs a lot and is more difficult to manage.
Pros of private warehousing
One of the biggest benefits of owning your own warehouse is how much dedicated space you get access to.
This also makes it easier to scale, especially if you choose a warehouse that has more space than you currently need.
Products are also less likely to get lost in a private warehousing environment because they’ll have dedicated shelves where they’ll rest, which means you shouldn’t have to move them until you need to ship them to your customer.
You also get the opportunity to oversee your business’ entire logistics process when you operate your own warehouse. This allows you to keep track of processes that aren’t operating correctly and have the potential to negatively impact your business.
You’re also able to process returns from the same facility you use to store and ship products out.
If your business requires special warehousing needs, such as cold storage, you’ll be able to shop around for a warehouse or reconstruct one that’s capable of catering to these needs.
It’s also easier to expand your business into new markets when you operate your own warehouses as you’ll be able to copy what you do at your original warehouse in any additional warehouse you launch.
Finally, operating your own warehouse gives you the opportunity to build relationships with shipping carriers, which will allow you to negotiate deals in the future.
Cons of private warehousing
Private warehousing is very expensive. Not only do you need to cover the cost of the building you’ll be renting or purchasing, you also need to hire staff and purchase insurance.
You’ll also need to learn how to develop your own ecommerce warehouse management system on the fly.
This involves knowing how much inventory you need, knowing exactly how many employees you need and knowing the exact process employees need to follow to get orders out on time.
Third-party logistics (3PL)
Third-party logistics (3PL) providers are order fulfillment centers for ecommerce businesses. Services 3PL providers offer include stocking, packing and shipping.
They’ll even process returns for you.
In short, 3PL providers allow you to move your inventory out of your home and into a proper warehouse environment.
These providers have their own warehouse management systems in place, so you won’t need to hire warehouse staff or learn the ins and outs of warehouse operations.
You do lose quite a bit of control, though.
Pros of using 3PL providers
The obvious benefits of using 3PL providers are how much time and money they save you.
You won’t need to purchase your own warehouse nor will you need to hire staff and learn how to operate one. The fulfillment center your 3PL provider supplies will handle everything for you.
This also makes it easier for your business to scale.
If your business grows to the point where you need more inventory, you won’t need to purchase a bigger warehouse for it. You’ll just need to rent more space from your 3PL provider!
This also means 3PL providers are fantastic solutions for ecommerce businesses who are interested in expanding into new markets. Your current 3PL provider may even have fulfillment centers within those markets.
Finally, 3PL providers have insurance, so your inventory will be covered if disaster strikes.
Cons of using 3PL providers
Having a third-party handle such a crucial aspect of your business may sound good on paper, and for the most part, it’ll be pretty awesome.
However, you lose quite a bit of control when you use a 3PL provider.
The customer experience doesn’t just end when your customer clicks “Complete Order.” How fast their order gets to them and the condition it’s in when it arrives play huge roles in how a customer perceives your brand.
If your 3PL provider falters, your brand takes the hit. And because you’re not in control, you may not be aware of fulfillment issues until it’s too late.
Some costs associated with 3PL providers may also come as a surprise. These include taxes and tariffs among other fees that change regularly.
3PL providers may also not be able to accommodate special storage needs, such as cold storage.
Finally, when you use a 3PL provider, the sustainability of your business becomes dependent on the sustainability of your 3PL provider. If their business suffers from sudden collapse, you won’t be able to fulfill orders.
Public warehousing
Public warehousing is a cheaper warehouse solution for ecommerce businesses in which you rent storage space from a third party but handle order fulfillment yourself.
It gives you more control over order fulfillment without the cost of you having to purchase a warehouse facility on your own.
However, it can be difficult to operate, and it’s never going to offer everything your business needs.
Pros of public warehousing
Public warehousing saves a lot of costs. Purchasing a warehouse facility is expensive as is managing the upkeep. Public warehousing is far less expensive in comparison.
It’s also very easy to scale your operations and expand into new markets in a public warehousing environment. You just need to purchase more space from your current provider.
You also maintain control over order fulfillment, which lets you keep track of the quality of your business’ logistics.
A public warehouse provider may even be able to accommodate your business’ special storage needs.
Cons of public warehousing
Obviously, the biggest drawback of public warehousing is the fact that you’ll still need to handle warehouse management and order fulfillment on your own. This means hiring and training staff as well as learning the ins and outs of warehouse management.
You’ll also need to insure your inventory.
Plus, while public warehouses may be able to accommodate some of your storage needs, they won’t be able to provide everything you might need. This is a level of flexibility you can only acquire with your own private warehouse.
Finally, as is the case with 3PL providers, the sustainability of your business will be affected by the sustainability of the warehouse you rent from. If they go out of business and need to sell, you may need to move operations elsewhere with very little notice.
Ecommerce warehouse management tips
Make sure you account for potential growth in your ecommerce business before you decide on a warehouse solution. Predictive analytics tools can help.
One warehouse solution we didn’t cover is cooperative warehousing. This is a warehouse facility you partially own with other businesses. You either handle order fulfillment on your own or work with your business partners to share fulfillment costs.
It’s a cheap way to get into private warehousing, but it’s dependent on the other businesses you partner with.
Use warehouse management software for easier management of stock and order fulfillment.
Use vertical storage techniques to make the most out of your inventory space, and organize inventory based on item popularity so that your most popular items are easily accessible.
Finally, train warehouse staff properly, and make sure they’re prepared for every scenario.
