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Warehousing 101: What sellers need to know to optimize fulfillment operations

Whether you’re a small business storing stock in your spare room or an international brand distributing products across the globe, warehousing is a crucial and influential part of your eCommerce business.

But how much do you know about warehousing, its relationship with fulfillment, why it’s so important, and what to look for when choosing a warehousing network?

Let’s find out, in Warehousing 101.

What is warehousing?

Warehousing is the physical storing of goods until you sell them or distribute them elsewhere. It’s an essential step in the supply chain that sits between your suppliers and manufacturers, and your end customers – allowing you to hold stock to meet customer demand.

Warehousing typically includes the secure storage, organization, and tracking of goods. However, other value-add services include warehouse management, inventory management, and order fulfillment.

And it doesn’t just take place in large purpose-built buildings. If you’re storing products in your garage or spare room, that’s warehousing too.

What is a warehouse fulfillment center?

A warehouse fulfillment center is somewhere that offers both warehousing and order fulfillment. They receive, store, and organize your stock, as well as picking, packing, and shipping orders to customers.

A warehouse fulfillment center may operate by itself or as part of a network of warehouses, in conjunction with a fulfillment partner. For example, Deliverr strategically places your inventory closest to historical demand using their robust network of warehouses, to enable reliable and fast shipping. This is how Deliverr works.

Why is warehousing important

Warehousing is important for eCommerce sellers because it touches every step of the supply chain, impacting what products you sell, how quickly you deliver, and how much impact you make on customers.

Receipt of goods

Warehousing allows you to receive stock from your suppliers and manufacturers, and store it ready for sale. You can order and store enough inventory to meet upcoming customer demand, without delays or backorders.

Storage and security of goods

Warehouses physically protect your products from theft, damage, and spoiling – retaining product value and ensuring they arrive in pristine condition.

Shipping speeds, costs, and efficiencies

The proper organization and classification involved in warehousing powers you to pick, pack, and ship products quickly and efficiently. This not only saves you money but also allows you to offer customers fast shipping speeds.

Customer reach

The more diverse your warehouse locations, the more customers you can reach and offer fast shipping to. This is a quick way to increase your target audience and boost your customer numbers.

Inventory efficiency

Warehousing management tools and systems enable you to increase inventory efficiency by giving you accurate insights into stock levels, inventory turnover, inventory conversions, and historical performance.

What to look for when choosing a warehousing network

As mentioned, a warehousing network helps you place inventory across a range of locations to reduce shipping times, minimize shipping costs, and increase customer reach. Whether you’re choosing a warehousing network yourself, or using a fulfillment partner with their own network of warehouses, the following considerations are crucial.

1. Transparent pricing

Warehousing costs directly impact your profitability. When choosing a warehousing network, look for competitive and transparent pricing. In particular, be mindful of hidden costs such as set-up fees, account management fees, long-term storage penalties, and stock removal costs.

2. Locations

The benefit of using a warehousing network is having your products stored closer to your end customers, reducing shipping times and costs. Therefore, you need a distributed network of warehouses that allow fast shipping across the US.

3. SKU limits

Some warehouses have limits on the number of SKUs you can store, linked to your monthly order averages. For example, a store processing 8,000 orders per month might be allowed up to 2,000 different SKUs. Look for a warehousing network that can accommodate your existing SKU numbers and your future SKU plans.

4. Product-specific requirements

Depending on what you sell, you may have product-specific requirements. For example, do you need temperature-controlling, white-glove handling, or expiration-dated fulfillment? Ensure that your entire warehouse network can meet your requirements, and be mindful of product restrictions (such as hazmat or age-restricted items).

5. Flexibility

Different warehouses offer different levels of flexibility for lease terms and space requirements. If you work with seasonal stock or you’re planning for rapid expansion, look for a warehouse network that grows with your brand, as opposed to one with fixed spaces, leases, or pricing.

6. Technology

Your warehouse network must have the technology to integrate with one another, your sales channels, and your eCommerce systems. This includes a centralized warehouse management system or inventory software that receives and allocates orders in real-time and automatically updates stock levels. Only then can you prevent overselling and guarantee fast shipping speeds.

7. Partners

A warehousing network is only as successful as its partners. These might include:

  • A fulfillment partner with sales channel integrations, a reliable warehousing network, and intelligent distribution technology.
  • Shipping carriers that offer reliable expedited shipping services to deliver orders within one-day and two-days.

Services your warehouse partner may offer

Today, warehouse partners provide a range of services for online sellers, including:

Warehouse management

Warehouse management involves managing everything that comes with running a warehouse, including labor, health and safety, security, equipment, audits, and stock checks. Warehouse management also includes keeping up-to-date with the latest warehousing technology to increase efficiencies and generate cost-savings.

Intelligent inventory distribution

Intelligent inventory distribution is where your warehouse or fulfillment partner splits your inventory across a network of warehouses, based on historical performance and future forecasting. Intelligent distribution is crucial for anyone offering fast shipping speeds or looking to qualify for fast shipping programs.

Tip: look for a fulfillment partner and network that automatically qualifies you for Walmart 2-day, Wish 2-day, and other fast shipping programs.

Inventory management

Most warehouse partners offer an inventory management service that syncs inventory across sales channels, tracks stock levels, and generates data on inventory efficiency and product performance.

Order fulfillment

An order fulfillment service involves your warehouse partner completing all steps of the fulfillment process, including:

  • Storing stock
  • Managing inventory
  • Picking orders
  • Packing order
  • Shipping orders

Your warehouse partner becomes responsible for meeting SLA requirements and agreed KPIs for processing and delivering orders in full and on time.

Assembly and re-working

Specialized warehouse partners offer assembly and re-working services. A skilled team assembles products and completes minor repair or preparation work to make products fit for sale – for example, spot-cleaning, ironing, and sewing.

Returns

Finally, some warehouse partners allow end customers to return products directly to them. The warehouse returns team inspects and logs the return, and repackages the item for resale.

Typical warehousing costs

There are different warehousing fee structures, ranging from fixed fees for space, bins, or pallets to individual costs per-SKU or per-unit.

Typical warehousing costs depend on the warehousing partner you’re using and the services provided. The latest benchmark report by Warehousing and Fulfillment found the average warehousing costs in the US are:

Admin fees

  • Set-up = $336
  • Account management = $226.54/month
  • Receiving = $.25/unit, $7/pallet, $31.95/hour, $373.33/container, or $1.21/carton

Storage costs

  • $0.66/square foot
  • $5/cubic foot
  • $2.85/bin
  • $13.20/pallet

Fulfillment costs (pick and pack)

  • B2C $2.86/unit
  • B2B $4.17/unit

Tip: Use our fulfillment cost calculator to see how these prices compare to using a fulfillment partner with all-inclusive pricing.

Summary

Warehousing is a small word for a big term, encompassing everything from storing stock in your bedroom, to using a fulfillment partner and warehouse network for fast, cost-effective, and reliable deliveries.

Whichever level of service you choose from a warehousing partner, always look for transparent pricing, flexible terms, and a commitment to your growth.

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