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While warehouses date back to second century BC Rome (to store grain, olive oil, wine, food, clothing, and marble), the concept of an ecommerce warehouse is a newer one.
Many ecommerce businesses rely on efficient warehousing to support future growth. But each time your business hits a new inflection point, ecommerce warehousing becomes much more complex.
There is no single path brands take, and there are a lot of variables that go into identifying the right ecommerce warehousing solution for you — and finding one that won’t need to be replaced within months (or even years).
To ensure that your business benefits from ecommerce warehousing, it’s important to implement best practices to optimise your supply chain, whether you keep it in-house or work with third-party logistics companies (3PLs) as needed.
In this article, we will examine the state of ecommerce warehousing and help you determine the ecommerce warehouse that is best suited for your business.
Table of Contents:
What is ecommerce warehousing?
Ecommerce warehousing refers to the process of storing and managing goods intended for online sales in a warehouse. Some ecommerce warehouses are owned and operated by the retailer, while others are managed by third-party fulfilment providers and 3PLs. Ecommerce warehouse management encompasses the management of all operations and processes in running an ecommerce warehouse. The most common ecommerce warehousing operations include:
- Taking appropriate safety and security measures for inventory storage
- Receiving and stowing inventory as it arrives in your ecommerce warehouse
- Managing bin, shelf, and/or pallet locations of each SKU for optimised warehouse slotting
- Performing warehouse audits and inventory audits
- Recording stock levels and running inventory reports
Why is ecommerce warehousing important?
During stages of growth, you may experience any of the following moments:
- Outgrow your first storage space.
- Have too much safety stock that needs to be stored in an overflow location.
- Choose to purchase land or lease a warehouse.
- Invest in fulfilment infrastructure including staff, technology, certifications, shipping supplies, forklifts, conveyors, and other equipment for the ecommerce warehouse.
- Introduce new sales channels and need multichannel inventory management capabilities.
- Open or expand into a second fulfilment centre to reduce transit times and shipping costs.
- Scale international fulfilment capabilities and become a global brand.
Types of ecommerce warehouses
There are a variety of ecommerce warehouse options that suit different businesses’ needs. The best ecommerce warehouses not only have the amenities and expertise to provide the digital fulfilment services needed but also enable brands to store inventory in strategic locations that are physically near their customer base for the quickest and most cost-efficient delivery.
Let’s take a look at some of the more popular ecommerce warehouse types and when they are useful.
Running an ecommerce warehouse requires the right tech to be in place. ShipBob has a best-in-class warehouse management system (WMS) for brands that have their own warehouse and need help managing inventory in real time, reducing picking, packing, and shipping errors, and scaling with ease.
With ShipBob’s WMS, brands with their own warehouse can even leverage ShipBob’s fulfilment services in any of ShipBob’s fulfilment centres across the US, Canada, Europe, and Australia to improve cross-border shipping, reduce costs, and speed up deliveries.
Warehousing from home
Many ecommerce businesses start out by storing ecommerce inventory at home (in their living room, basement, garage, office, etc.). This makes sense if your business has a small order volume. If you transform your home into a makeshift ecommerce warehouse, you won’t incur storage charges (though your house may fill up very quickly).
“In 2017, we had a breakout year. All I did was eat, sleep, and pack orders. We were operating out of my garage, which was filled exclusively with inventory.
I bought racks and organised all of the products. My garage was at maximum capacity — we couldn’t even fit another person in there. I knew I had to make a transition in order to scale and find a 3PL partner. I kept hearing very good things about ShipBob and went with them.”
Noel Churchill, Owner and CEO of Rainbow OPTX
Fulfilment centres or distribution centres
More functional than a traditional warehouse, a fulfilment centre or distribution centre is an ecommerce warehouse designed to receive and store your inventory and pick, pack, and ship your orders in a timely manner.
The most common type of fulfilment centres used amongst ecommerce businesses are outsourcing fulfilment to a 3PL like ShipBob or utilising Amazon for FBA. These professional fulfilment services handle order fulfilment on your behalf.
“It’s a pain to pick, pack, print labels, and manage storage. It would be a huge stress for us to do it ourselves, but the fact that ShipBob takes care of it all, both the savings in costs and time, is invaluable to our business.”
Founder of Ombraz Sunglasses
On-demand warehousing solutions
On-demand warehousing allows businesses to rent available storage space for short periods at a time. Most of these solutions are provided by technology companies that contract warehouses with excess, shared warehouse space to store your inventory.
This model can be good for seasonal sales or pop-up events. But because they don’t handle any order fulfilment services themselves, on-demand warehousing is kind of like outsourcing fulfilment to a company that outsources it to others.
“The [on-demand warehousing] technology company was unable to properly communicate amongst itself, both in regards to technology and people. We had to rely on a game of telephone and someone else to do everything for us.
Because of a lack of ownership of the entire fulfilment stack, it’s difficult to rectify, unlike with ShipBob who owns the entire stack: inventory and order management system, warehouse management system, and their ecommerce warehouses.”
Gerard Ecker, Founder & CEO of Ocean & Co.
Customs bonded warehouses are places where goods are stored before they are processed by customs. These goods are held in the warehouse until inspections are completed and the importer or customer pays the necessary duties. There are different types of customs bonded warehouses – from ones that are run by the state to ones that are privately owned and operated.
Dropshipping refers to when the product’s manufacturer controls the entire supply chain, including producing, storing, and shipping items. When a customer places an order online, the manufacturer ships the item directly from their factory to the consumer, so the merchant never handles inventory.
Since most dropshipping arrangements are done overseas, transit times are notoriously long. While this model can help prove out a business concept, the merchant has no inventory control or oversight of the customer experience.
“When we first got started, we were dropshipping. It was nice because we had no money tied up in inventory, but we also had no quality control. With no control over the customer experience and very poor shipping times, we quickly realised dropshipping was not a long-term solution. We had to move to a professional fulfilment company. To date, ShipBob has fulfiled over 10,000 shipments per month for us.”
Gerard Ecker, Founder & CEO of Ocean & Co.
Which ecommerce warehouse is right for my business?
The answer to this question depends on a number of factors, such as the size of your business, your available capital, and the resources you can dedicate to your ecommerce logistics strategy. If you have ecommerce warehouse space that caters to your inventory needs and complements your order management process, and only you can drive the customer experience you want to orchestrate, then managing your own ecommerce warehouse should suffice.
However, if you are a growing business looking to scale fast, then it’s probably time to consider using a 3PL’s fulfilment centre. There’s a reason that huge companies like Amazon and Walmart make extensive use of distribution centres to improve inventory management and streamline fulfilment.
The good news is you can leverage a 3PL’s ecommerce warehouses that makes it easy for small to mid-sized brands to offer the same service level.
“We see outsourcing fulfilment as a cost-savings and believe it will save you money in the long run. 3PLs negotiate rates, give you back all the time you’d spend stuffing mailers, and reduce the errors you’d make. We looked into opening our own warehouses and hiring employees, but couldn’t come close with what 3PLs charge for picking, packing, and shipping. We’d also be worried about scheduling fulfilment shifts, ordering boxes and shipping labels, and dealing with the extra headaches of running logistics. You should spend time doing what you do best, and fulfilment is an easy task to take off your plate.”
Gerard Ecker, Founder & CEO of Ocean & Co.
3 benefits of using an external ecommerce warehouse
Using an external ecommerce warehouse to store your inventory can be highly beneficial. Partnering with an established 3PL like ShipBob provides ecommerce sellers access to a number of external ecommerce warehouses to choose from. These state-of-the-art fulfilment centres can be used to reduce shipping costs and speed up delivery times (e.g., 2-day shipping).
Here are a few reasons why ecommerce warehousing is often best left to the pros.
1. Easier to stay organised
With more space and a better organisational system, you’ll have an easier time managing everything from inventory tracking to customer orders. A 3PL provider can take the tedious inventory management process off your hands and keep tabs on your products for you.
Moreover, ShipBob’s proprietary fulfilment software keeps ecommerce brands up to date with real-time inventory counts, shipment tracking, and much more.
“ShipBob’s technology provides cost savings. Other 3PLs pass fees onto the client for work they do related to manual processes because they lack the fulfilment technology needed to meet customer expectations. ShipBob’s technology has effectively eliminated the work of a program manager at other 3PLs, while providing immediate visibility into inventory and the ability to respond and make changes myself.”
Carl Protsch, Co-Founder of FLEO
2. More accurate picking and packing
In addition to ecommerce warehousing, 3PL services include warehouse picking and packing, taking much of the fulfilment process off your plate. They have highly specialized staff for each part of the order fulfilment process and others that work to identify supply chain optimisations. Their technology and processes help ensure the right products are packaged and delivered on time for a good customer experience.
“If I’m going to outsource one of the most important parts of my business, it needs to be in the hands of people who are honest, knowledgeable, and can do the job a lot better than me. ShipBob was the perfect fit.”
Tracey Wallace, Founder of Doris Sleep
3. Time to focus on growth
Successfully growing your business demands a significant amount of time, attention, and resources. By using a 3PL provider, you won’t get bogged down in the details of ecommerce warehousing. Instead, you can allocate your time and staff to other functions like expanding your customer base. Your ecommerce warehouse can even help contribute to growth.
“We are growing really fast and won’t slow down anytime soon. With ShipBob, we have the option to use more of their ecommerce warehouses to further reduce shipping costs. Because ShipBob has a lot of people to handle our orders and additional warehouses we can expand into, we can scale up with ease as we continue to grow quickly. If we ran our own warehouse, it would be much harder to hire people and we’d inevitably outgrow the space.”
Oded Harth, CEO & Co-Founder of MDacne
Ecommerce warehousing best practices
Implementing poor ecommerce warehousing processes can result in brands wasting money and even delaying orders. Proper warehouse management follows best ecommerce warehousing practices that improve your bottom line and provide a great customer experience.
Use a warehouse management system (WMS)
A warehouse management system is a specialized software that offers businesses features that optimise an ecommerce warehouse. A WMS can:
- Provide real-time insight into your inventory and product availability
- Manage and monitor ecommerce supply chain operations, from the manufacturer to the distribution centre
- Forecast inventory to determine when your stock might run out
- Streamline the ecommerce fulfilment process and make your operations more efficient
Integrate your ecommerce store (and other tools)
Integration with your ecommerce store will make inventory management much easier. Using warehouse management software, your business will be able to determine stock availability in real-time, forecast inventory more easily, and set reorder points in advance before a shortage can occur.
“Our website is built on Shopify, and Shopify and ShipBob work very well together. All I had to do was click a couple buttons and they were connected. The integration and visibility of the two systems keeps everything very simple. I really like ShipBob’s dashboard — it’s our backend logistics that keeps us up-to-date on everything that’s happening.”
Tim Fink, Co-Founder of EnduroSport
Distribute your inventory
Distributing your inventory across multiple warehouses reduces shipping costs so that when an order is placed, it is automatically prepared and dispatched from the nearest distribution centre to the customer. This can also improve the customer experience by providing a faster, more cost-efficient delivery.
“As we started to hit that first inflection point of growth, it became apparent we needed to look for a 3PL that could help us expand geographically in the US and also drive down shipping costs and expenses. We distribute inventory across ShipBob’s fulfilment network so we can be closer to major distribution hubs, shipping couriers, and more of our customers. Since switching to ShipBob, our fulfilment costs went down by 25%.”
Michael Peters, VP of E-Commerce Operations at TB12
Test multiple picking systems to find the right one
Ecommerce businesses have a multitude of picking systems to choose from. Small organisations that receive only a few orders per day may prefer the ‘one-order-at-a-time’ picking process. However, this method is not ideal for larger ecommerce businesses. More advanced tools can enable batch picking and auto-generate picking lists based on the ordered items’ proximity to one another in an ecommerce warehouse to reduce the walking paths and time it takes to pick an order.
Set inventory minimums points
Finding the right balance in inventory is always a challenge. Ordering too many products can bring harm to a business’s profits and lead to high inventory carrying costs, while not enough can lead to out-of-stock notices and angry customers that go elsewhere. Thus, setting mandatory inventory minimums is a smart precaution for businesses to take. Any good software lets businesses set reorder points, so they can receive a notification once a product reaches a specific threshold.
“ShipBob’s analytics tool is really cool. It helps us a lot with planning inventory reorders, seeing when SKUs are going to run out, and we can even set up email notifications so that we’re alerted when a SKU has less than a certain quantity left. There is a lot of value in their technology.”
Oded Harth, CEO & Co-Founder of MDacne
How 3PLs like ShipBob help unlock ecommerce growth
An ecommerce business that aspires to grow should partner with a 3PL provider. Managing the ecommerce fulfilment process yourself is time-consuming and demands a lot of human resources. Using an order filling service like ShipBob lets you focus on growth while not having to worry about ecommerce warehousing and many inbound and outbound logistics processes.
Here are some of the ways in which ShipBob’s experience, scalability, and tools can help.
ShipBob operates multiple locations across the country. You can utilise any combination of their ecommerce warehouses so that orders are delivered to customers on time and shipping costs are minimal.
ShipBob’s built-in inventory management software keeps you up to date with order data and inventory status across ecommerce warehouses in real-time.
“ShipBob continues to expand its geographic footprint. We use all of their fulfilment centres across the United States. There is a cost benefit to being spread out, as orders can be shipped from ecommerce warehouses that are closer to customers and delivered very quickly.
As we expanded our online presence into Canada, we knew we needed a trusted fulfilment partner with a physical presence in Canada. From our history through the years with ShipBob, it was a no-brainer to expand into other markets with them.”
Matt Dryfhout, Founder & CEO of BAKblade
Inventory isn’t the only thing that ShipBob excels at overseeing; we manage your orders just as well too. From the moment an order is placed, you can track its progress in the ShipBob dashboard. You can easily search for specific orders, look up shipping details, and automatically send customers ecommerce order tracking emails.
“ShipBob has done a great job of giving each store owner a feeling of complete control over everything. You can outsource your fulfilment while seeing what their ecommerce warehouse associates are picking. Inventory is automatically marked as accounted for, so it’s held until it’s shipped.
You can see all orders “in exception” on a shipping hold in one dashboard screen and hover over any order on that list and see why it was being held and resolve it directly within ShipBob.”
Gerard Ecker, Founder & CEO of Ocean & Co.
ShipBob gives ecommerce businesses the option to use customised packaging to enhance brand awareness. A unique unboxing experience is a great way to increase customer loyalty and market your business. You can utilise ShipBob’s packaging partners to create your own branded boxes or poly mailers.
“We’ve been doubling our growth year over year, and a major contributor has been fantastic delivery that increases satisfaction with the post-purchase experience. ShipBob offers the option to customise packaging and tell a story through our products when shipping to our customers, giving us more control over our business and brand. ShipBob helps us deliver on our customer expectations, and they are continually evolving to help us stay ahead of the competition.”
Matt Dryfhout, Founder & CEO of BAKblade
ShipBob offers business partners full transparency in the form of a free analytics tool that helps with everything from monitoring their own performance to providing year-end reporting. Merchants can assess data and learn how to make better supply chain management decisions.
ShipBob’s analytics tool also offers insight into matters such as which distribution centres to stock to save money and speed up deliveries, average shipping cost by delivery method selected, how running promotions will affect stock levels, and other distribution metrics.
“ShipBob’s analytics tool is a game-changer and it’s helped me grow my business tremendously. It’s so easy for any of my team members to pull data in real-time. I felt like I couldn’t grow until I moved to ShipBob. My CPA even said to me, ‘Thank God you switched to ShipBob’. ShipBob provides me clarity and insight to help me make business decisions when I need it, along with responsive customer support.”
Courtney Lee, founder of Prymal
Optimise your warehouse with ShipBob’s WMS
Already have your own warehouse? ShipBob’s best-in-class warehouse management system (or WMS) can help you manage inventory in real time, reduce picking, packing, and shipping errors, and scale with ease.
By leveraging ShipBob’s WMS (the same one that powers our global fulfilment network) in your own warehouse, your brand can improve efficiency, from receiving to fulfilment to shipping. With built-in automations, flexible picking options, and turnkey integrations with major ecommerce platforms and tools, the ShipBob WMS makes it easy to streamline warehousing operations.
Ecommerce warehousing can be tricky, but your business needs an efficient ecommerce warehouse to improve profits and scale. When researching warehousing options for your ecommerce business, consider that you’ll need retail supply chain experts on hand who can manage fulfilment and provide a great customer experience.
“Ecommerce companies who are approaching an inflection point will benefit from ShipBob because they allow entrepreneurs like myself do what we do best — create, sell, and grow! I’m proud to be a ShipBob partner. A lot of entrepreneurs underestimate the cost-savings and power of choosing your entire supply chain and partner network wisely. These choices will make or break your business.”
Courtney Lee, founder of Prymal
ShipBob is an industry-leading global 3PL. There’s a reason why thousands of fast-growing brands utilise ShipBob’s ecommerce warehousing and fulfilment solution. Contact ShipBob today by clicking the button below and learn how you can grow your business.
Ecommerce warehousing FAQs
Below are answers to the most common questions about ecommerce warehousing.
How do I set up an ecommerce warehouse?
There’s not necessarily a one-size-fits-all setup guide when it comes to ecommerce warehouses, but you’ll want to optimise the space you have (both vertically and horizontally) for the total number and units of SKUs you have, your inventory turnover rates, the fulfilment services provided, proximity of commonly ordered items, batch vs. custom orders or projects, and of course safety. Other considerations include the location of your loading docks and their proximity to other stations within the warehouse, how you will store and drive forklifts and other equipment within the warehouse, and how far your staff will have to walk to pick and retrieve orders.
What are the main types of ecommerce warehousing?
Leased warehouses and outsourced fulfilment centres (via a 3PL) are the most common forms of ecommerce warehousing, but there are also bonded warehouses, on-demand warehousing solutions, and even makeshift warehouses (e.g., using your own home).
What is the difference between a warehouse and a distribution centre?
While many people use the terms “distribution centre” and “warehouse” interchangeably, there may be a few key differences they are actually alluding to. A warehouse may refer to anything from a long-term storage facility, to an ecommerce warehouse or 3PL’s fulfilment centre. A distribution centre on the other hand is often used as a regional hub to get goods from a manufacturer to another (or final) destination (e.g., the middle point from a storage warehouse to a brick-and-mortar store).
When do I need an ecommerce warehouse?
Brands that need an ecommerce warehouse are often doing tens of thousands of outbound shipments per month. An ecommerce warehouse can vary in size but typically comes after storing inventory in an office or storage unit (and definitely after you run out of space in your own home or store) and instead of outsourcing fulfilment to a 3PL like ShipBob, who can handle the entire ecommerce warehousing and order fulfilment process for you.
What is the cost of an ecommerce warehouse?
This will depend on whether you lease a warehouse or purchase land and build your own ecommerce warehouse, in addition to the location of the warehouse (e.g., different state or country taxes, an urban vs. rural location, etc.) and the capabilities of the facility. You’ll also want to consider labour wages and other factors outside of just the rent owed on the ecommerce warehouse.