E-commerce has become extremely popular in recent years, and the market is only expected to grow. According to Research and Markets, global ecommerce sales are expected to reach $6.07 trillion by 2024.
With so many businesses either switching to ecommerce, or starting their business ventures with ecommerce, it’s a good time to learn about how the business model works and what it requires. Running an ecommerce business has some specific requirements that are different from any other type of business. One such requirement, that is not always given the attention it deserves, is where to store ecommerce stock and how to effectively manage it: ecommerce warehousing and ecommerce warehouse management.
Some ecommerce businesses use traditional warehouses for their storage requirements, and traditional warehouse management systems for their managing requirements, figuring that traditional and ecommerce warehouse management involves similar processes. While this will work, traditional warehouses and warehouse management systems are not built to handle the specific demands of ecommerce, such as the amount of space and amenities needed, the type and quantity of orders received, and the fluctuations in demand. Being unprepared for these things may eventually affect your productivity, reduce your efficiency, and end up costing you more than necessary.
For this reason, many ecommerce warehouse managers choose to use specific ecommerce warehouses and ecommerce warehouse management systems for their processes instead. In this guide we will be walking you through what ecommerce warehousing and ecommerce warehouse management are, the different types of ecommerce warehouses, and how an ecommerce warehouse management system can help you as compared to a traditional warehouse management system.
What is ecommerce warehousing?
Ecommerce warehousing is the process of storing goods that will be specifically sold online, and ecommerce warehouse management refers to managing all the processes that are involved in running an ecommerce warehouse. This includes:
Managing all the employees that work in the warehouse.
Keeping track of all the equipment and inventory (raw materials and finished goods) in the warehouse.
Monitoring each process that takes place in the warehouse from the moment stock arrives to the time it is shipped off.
Forecasting customer demand to avoid overstocking or out-of-stock situations.
Maintaining necessary safety precautions to ensure all employees, inventory, and equipment are safe and to prevent any accidents.
What are ecommerce warehouses?
Ecommerce warehouses include all the different types of warehouses that can be used to cater to an ecommerce business’s storage requirements. In order to operate efficiently, it’s best to store ecommerce inventory in a dedicated ecommerce warehouse, but that still leaves a number of different types for you to choose from:
Private warehouses are warehouses that are typically owned by larger businesses. This includes wholesalers, distributors, manufacturers, large retailers, or, in ecommerce, online marketplaces. Private warehouses are more expensive to purchase or rent than public warehouses, because they are built to suit the owner or user’s specific needs. This could include the size of the warehouse, the specific amenities offered (like an updated warehouse management system), or the way in which the warehouse has been constructed to store specific types of products (for instance, private warehouses near the sea could be built with freezers for seafood storage). The long-term benefits that come with such a warehouse make it worthwhile to invest in, which makes them the perfect option for e-commerce SMBs, private distributors, and wholesalers.
Public warehouses are usually owned by government agencies and then rented out to businesses, so their rates and amenities offered are all controlled by the firm. Although they are less advanced in terms of size and functionality than private warehouses, they are definitely more affordable. Public warehouses are a good choice for short-term storage requirements for ecommerce startups.
Government-owned warehouses are similar to public warehouses, except they are only owned and managed by either the government. Government-owned warehouses generally provide a lot of security, so they are one of the best choices to store valuable e-commerce products.
Consolidated warehouses are warehouses that collect, combine, and then transport shipments from multiple suppliers, that are all to be delivered to the same city or area. Since most, if not all, of the inventory would be coming in from other sellers, this type of warehouse does not need to keep large quantities of inventory, which further reduces costs. This low price tag makes them the perfect option for ecommerce business startups.
Cooperative warehouses are jointly owned by several businesses that are involved in similar sectors or products, and therefore require similar storage needs. Basically, a cooperative warehouse is just a private warehouse with more than one owner. Cooperative warehouses can also be used by members that are in slightly different lines of work, but work together on a common project. The storage sharing concept also extends to the fees paid, so each member will only have to pay a part of the complete fee. Typically, non-members can also use the warehouse, but for a higher fee. Cooperative warehouses are a good choice for e-commerce businesses that are in partnership with other businesses.
Bonded warehouses are another type of government-owned warehouse. They’re specifically meant for importing businesses that need a place to store their products before they’re ready to pay customs duties for them. Typically, businesses are required to pay customs duties for imported goods right after they’re delivered. Storing the products in a bonded warehouse instead gives the owner the advantage of paying only when they remove the goods from the warehouse. Customs authorities, who manage and supervise the warehouse, issue a “bond” when the business begins to rent the warehouse, to serve as government-certified proof that the business is really using that space to store goods. This helps the business avoid any financial losses such as fines, for not paying customs duties right away. Bonded warehouses are perfect for ecommerce businesses that sell internationally.
Smart warehouses are advanced warehouses that use AI to help with their storage, fulfillment, and management requirements. Unlike in the other types of warehouses, in a smart warehouse, automation isn’t limited to software. Drones, AS/RS (Automated Storage and Retrieval Systems), automated vehicles and carts, and robotic arms are some of the kinds of technology that you may find in a smart warehouse. These warehouses can offer excellent efficiency and productivity since most of the work is being done by machines, but they definitely come at a very high price. Amazon’s fulfillment centers are a famous example of smart warehouses for ecommerce. Amazon uses several types of smart equipment including robotic arms, mobile apps, scanning technology, conveyor belts, and picking robots to help conduct their fulfillment processes smoothly.
What are ecommerce warehouse management systems and how can they help you?
An ecommerce warehouse management system is a version of the traditional warehouse management system, but it’s specially designed to handle an ecommerce warehouse. Here are a few areas where using an ecommerce warehouse management system can benefit you more than a traditional system:
Designed for single-item orders
Traditional warehouse management systems are used in warehouses that mainly deal with orders that contain several items. Therefore, they are programmed to work with pallets, racks, and other large equipment to fulfill orders containing several products. Ecommerce, however, primarily deals with single-item orders. According to Peoplevox, around 80% of orders that ecommerce businesses receive only contain one product. Therefore, ecommerce warehouses require a system that can handle fulfilling large volumes of single-item orders—this includes planning the quickest route to each item, picking the right item for each order, packing it appropriately, and shipping it to the right address. A traditional system may be able to handle this, but the work may not be as efficient as it could be when using a system designed for this volume of small orders.
Able to withstand demand fluctuations
All warehouses see fluctuations in consumer demand, which is typically caused by changing trends and seasonal demands. Depending on the type of business, the fluctuations could be for a specific product or a whole category. For instance, towards the end of the year, holiday-themed products are in high demand, but not so much during other parts of the year. Regardless of what is being purchased, changes in demand are usually expected and easy to manage in traditional warehouses. Ecommerce, however, experience the same changes as traditional warehouses, but demand rises and falls by a larger percentage. To cope with this, you need a system to handle all the orders you receive as well as a server that can handle the traffic of all the customers using your website. An ecommerce WMS can provide both of these features.
Accurate inventory management
Having an accurate count of your inventory is essential for any type of warehouse, but it is especially important for ecommerce warehouses. This is because these stock numbers are always directly reflected on your ecommerce website for your customers to see. Not knowing what you have in stock and displaying incorrect quantities can leave a bad impression, hurt your sales, and make orders time-consuming to sort out. With accurate inventory management, you can display how many products you have left in stock (like Amazon does), giving customers an incentive to buy from you before stock runs out. An ecommerce WMS can help you keep track of all of your incoming and outgoing inventory, and integrate with your ecommerce platform so that everything is synced and running smoothly.
Handling more returns
A typical return process in ecommerce starts when the buyer initiates the return, after which the business generates a return label, collects the returned item, updates their inventory and the order status, and finally notifies the customer of the return status and refund or exchanged product. Each of these processes needs to be executed in this order, on time, and correctly for the return to be fully processed. An error in even one of these processes messes up the flow for the rest.
Traditional warehouses don’t generally see a large number of returns, so they are not built to cope with all these steps in high volumes. A traditional warehouse management system may not be able to process multiple returns at once and that can lead to errors, which means more work for you.
Ecommerce businesses, on the other hand, track the highest number of returns of any type of business. Therefore an ecommerce system is specifically designed to handle many simultaneous return processes quickly and effectively.
Ecommerce businesses have unique requirements and processes. Using an appropriate ecommerce warehouse and ecommerce warehouse managing system can noticeably streamline your operations and improve your ability to handle frequent changes in demand, single-item orders, high return volume, and more.