Ecommerce Warehousing 101: Definition, Fundamentals, Types, Benefits, Best Practices & More

Want to know about an ecommerce warehouse and why you might need one for your business? This article gives you everything you need to know.

Ecommerce Warehouse

What is Ecommerce Warehousing?

3PL

Ecommerce warehousing is the process of storing inventory for an online store. Once a customer order is received from a connected ecommerce platform, the system can send it to the warehouse, where it is picked then shipped to the customer.

Ecommerce businesses need to carefully manage their inventory to ensure that they have enough products to meet customer demand across all sales channels without overstocking and incurring unnecessary costs.

An effective ecommerce warehousing strategy can help businesses save money, improve customer satisfaction, and boost profits.

Types of Ecommerce Warehouses

Public Warehouses

Public warehouses are storage facilities available for use by the general public. These warehouses are usually owned and operated by businesses, but they can also be owned and operated by governments or other organizations.

Public warehouses offer a variety of benefits, including the ability to store large quantities of goods, the ability to store goods for long periods, and the ability to store goods in a safe and secure environment.

In addition, public warehouses usually have insurance coverage in case of damage or loss. The cost of using a public warehouse is typically based on the required size and type of storage space.

Private Warehouses

Private warehouses are storage facilities that are owned by individuals or businesses. These warehouses store goods and merchandise for various purposes, such as selling them later or using them for manufacturing. 

You can find private warehouses in many sizes and locations, and they often have specific features that make them well-suited for certain types of goods.

For example, some warehouses have special refrigeration units for storing perishable items. Others may have high ceilings and wide open spaces to accommodate large items like vehicles or machinery.

In addition to their physical features, private warehouses also have different rules and regulations regarding access, security, and insurance.

Government-Owned Warehouses

The United States government owns and operates several warehouses across the country. These warehouses are used to store a variety of items, from food and medical supplies to military equipment. Government warehouses are typically large facilities that are not open to the public.

However, they are sometimes used to distribute emergency supplies in the event of a natural disaster or other emergencies. In addition to storing supplies, government-owned warehouses can also host events or hold excess government property.

Cooperative Warehouses

A cooperative warehouse is a type of business owned and operated by a group of people who share a common interest. These businesses are usually formed to give members access to goods and services they would not otherwise have.

Cooperative warehouses typically offer their members discounts on products and services and the ability to purchase items in bulk.

They often have special events and programs that allow members to interact with each other and learn more about the products and services that they offer. By pooling their resources, cooperative warehouses can provide their members with significant advantages.

Consolidated Warehouses

A consolidated warehouse is a single facility that stores inventory for multiple businesses. The inventory is managed by a third-party logistics (3PL) provider responsible for receiving, storing, and shipping the products. The benefits of using a consolidated warehouse include cost savings, lower inventory levels, and improved order accuracy.

Consolidated warehouses are often used by companies that sell various products but need storage space or personnel to manage their own inventory. In some cases, businesses may also use consolidated warehouses to store seasonal or overflow products.

Distribution or Fulfillment Centers

How Fulfillment Works

A distribution center is a type of warehouse that is used to store and distribute goods. These facilities are typically large and located near transportation hubs, such as ports or rail yards. Distribution centers play an important role in the supply chain, as they help to ensure that you can quickly and efficiently deliver goods to retailers and end customers.

In recent years, the rise of ecommerce has led to an increase in the number of distribution centers, as online retailers need somewhere to store and ship their products. Fulfillment centers are typically highly automated, with robotic systems used to move and sort goods. This helps to improve efficiency and reduce operating costs.

On-Demand Warehousing

On-demand warehousing is a new way of storing goods that allows businesses to rent storage space only when needed. This business model is becoming increasingly popular as companies look for ways to reduce inventory costs.

It can be especially beneficial for businesses with seasonal or fluctuating storage needs. One of the main advantages of on-demand warehousing is that it gives businesses more flexibility in their storage space.

Businesses can quickly and easily adjust their storage requirements as their needs change. This can help businesses save money by avoiding purchasing or leasing extra space they may not always need. Additionally, on-demand warehousing can help businesses reduce their environmental impact by eliminating the need to travel to multiple warehouses to retrieve goods. This can lead to fewer emissions and less traffic congestion.

Smart Warehouses

Smart warehousing is a type of storage facility that uses advanced technologies to streamline operations. This can include automated inventory management, real-time tracking of shipments, and predictive analytics.

Using these tools, businesses can gain a competitive edge by reducing costs and increasing efficiency. In addition, smart warehousing can also help to improve customer service levels by providing greater visibility into the supply chain.

As the world becomes increasingly connected, businesses must adapt their operations to stay ahead of the curve. Smart warehousing is one way to do just that.

Bonded Warehouses

A bonded warehouse is a storage facility where imported goods are held until duties are paid, so it is much more common for importers than other types of businesses. Bonded warehouses are regulated by customs authorities and typically operated by private businesses.

Goods may be stored in a bonded warehouse indefinitely, and there is no limit on the types of goods you can store. Bonded warehouses are often used to store high-value or perishable goods, as well as goods that will be exported later. To store goods in a bonded warehouse, businesses must obtain a bond from a surety company.

The bond guarantees that the business will pay the duties on the goods when they are eventually removed from the warehouse. Businesses must also obtain a license from the customs authority to operate a bonded warehouse.

Home Warehouses

Home warehouses are often located in the basement or garage of a house, and they can be either rented or purchased. A home warehouse is a type of storage facility typically used to store large items that are not needed daily. These items may include seasonal items, such as holiday decorations, or larger furniture that are only used occasionally.

In terms of ecommerce, many business owners start using the spare space in their own homes to store inventory and manage their fulfillment operations.

What is Ecommerce Warehouse Management?

Ecommerce warehouse management involves the management of inventory and picking and putting the products into totes. There are several strategies that You can use to manage inventory and pick and pack orders efficiently.

One of the most common strategies is batch picking, which involves using one picker to collect multiple orders and separate them into separate totes. This helps reduce pickers’ time and speed up delivery times.

Warehouse Management System

Warehouse Management System (WMS) for ecommerce is a powerful tool for managing inventory, picking, and shipping processes. It integrates operations with your ecommerce channel and shipping provider to ensure that customers always receive the goods they want. This software also includes tools to manage people and process labeling and documentation.

Using WMS for ecommerce can streamline the ecommerce fulfillment process and reduce costs. A WMS can also make a warehouse more efficient by allowing you to create custom layout plans that help you manage stock.

A more efficient fulfillment process means fewer mistakes, disasters, and safety hazards. And a streamlined warehouse means faster fulfillment and lower processing costs. Whether running a small or large business, the right WMS can help you run a successful business.

Many WMS also include inventory management software that provides statistics on inventory counts, inventory turnover rates, product variations, forecasting, and more. It makes it easy for ecommerce businesses to see where they have excess inventory, so they can better control stock and costs.

Benefits

Ecommerce warehouse management provides many benefits for your ecommerce store. These include faster fulfillment, greater security, and more control over your growing inventory.

Effective inventory and vendor performance tracking: Ecommerce warehouse management can help you track performance with key performance indicators (KPIs). This information is critical for gauging vendor performance, delivery accuracy, and customer experience. The ability to monitor these metrics is crucial for the growth of an ecommerce business. It’s important to ensure that your warehouse is equipped to handle increasing orders.

Increased profit margin: Ecommerce warehouse management helps increase profit margin by eliminating operational costs. The costs of operating an inefficient warehouse are high and can affect the bottom line of an ecommerce business. Data shows the average order fulfillment cost is 70% of the average order value.

Consequently, having an efficient warehouse management system is important for your company’s profitability. Using an ecommerce warehouse management system will allow you to maximize space and improve the efficiency of your supply chain.

Unless you’re handling fulfillment in-house and shipping orders yourself, you don’t need a WMS – your partner will take care of that.

What to Look for in an Ecommerce Warehouse Space

Security

Ensure they have an on-site security team when looking for a warehouse location. This deters casual thieves and helps ensure that no intruders are in the warehouse while security cameras are not in operation. Manual security patrols are also helpful in reducing large-scale theft risks.

A good security plan will also include proper lock-down of high-value inventory. Proper warehouse management involves securing these items with security cages or access control systems to keep products secure.

Check to be sure there’s a secure parking lot and perimeter fencing around the ecommerce warehouse space. There should also be gated entrances and keypad access doors to prevent unauthorized access.

Market Accessibility Proximity

When determining the optimal location for an ecommerce warehouse, market accessibility and proximity are the most important factors to consider. To save money on shipping costs, you should store your ecommerce inventory in warehouse locations close to the majority of your online shoppers live.

For many companies, this means spreading inventory across a network of distribution centers by outsourcing to a fulfillment services company like ShipBob. Working with a third-party fulfillment solution ensures scalability and your business grows.

If trying to start your own ecommerce warehouse, opting for a location in a major city is more expensive but speeds up delivery to better meet customer expectations.

Adequate Space

As the volume of online orders and SKUs grows, it is important to plan for adequate storage space. 

Ecommerce retailers typically need three times as much warehouse space as traditional warehouse clients, partly because they are handling more products and need them to be immediately available. By leasing available warehouse space on a flexible, on-demand basis, these businesses can manage seasonal inventory levels more effectively.

Beyond having ample space for inventory, a warehouse must also accommodate warehouse employees. The right warehouse space is vital for ensuring efficient order fulfillment and shipping. Warehouses should be equipped with advanced accessibility and temperature control systems.

Knowledgeable Staff

Whether starting your own ecommerce warehouse or trying to find an established company to store your products, you need knowledgeable staff. Not all companies have staff on-site, and not all employees will know what’s going on with your account. A knowledgeable staff makes for smoother warehouse operations.

FAQs

Choosing the Right Ecommerce Warehousing Option for Your Business

Growing a successful ecommerce business takes more than just a great product. You also need to be able to store and ship your product in a way that is efficient and cost-effective. For many businesses, that means working with a warehousing and fulfillment partner.

You may consider using a shared warehouse if you have a limited budget. This can be a good option for startups. However, it’s important to know that you will have less control over your inventory and shipping procedures.

You may want to lease or purchase your own warehouse if you have a larger budget. This gives you more control over your operation but also requires more up-front investment, which may not make sense if you have a low order volume.

Ultimately, the best option for your business will depend on your specific needs and goals. You can choose the right ecommerce warehousing solution by taking the time to evaluate your options.

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