Warehousing 101: What It Is, It’s Role In Logistics, And Warehousing Services
Updated: August 11th, 2021
Warehousing is one of the most important components of your supply chain. While it’s a topic that’s often overlooked or not discussed, warehousing and storage affects everything from efficiently managing inventory to getting orders delivered to customers on time.
Though the basics of warehousing hasn’t changed much in decades, warehousing solutions have evolved a lot. With new technologies and the ever-growing world of online shopping, warehousing has become a hot topic. In fact, it’s become so popular, we’re currently experiencing a shortage of warehouse space available.
In this guide, we’re discussing the ins and outs of warehousing logistics and how it can play a key role in running a successful business. Let’s get started!
What Is Warehousing?
Warehousing is going to refer to the storage of physical goods before they’re sold. These warehouses are secure and safe to store products in an organized way where they can be tracked and accounted for. With the right warehouse software, you can find any product that’s being warehoused and you’ll know exactly how long it has been there in a matter of seconds.
With ecommerce, products are left in the warehouse until an ordered is placed. Once the order goes through, the product will be shipped to the customer from the facility where it’s stored. Retailers that have a brick and mortar store will often store inventory in a warehouse before being shipped to their physical store.
For those of you that are just starting or have a small operation, warehousing is likely done in your home or home office. Some business owners are forced to use storage units for storing products until they’re profitable enough to find a better solution. At some point, a business will have to rent storage space, lease a warehouse, or outsource logistics to a third-party and store inventory in their facility.
The Key Components Of Warehousing Logistics
If you sell physical goods, warehousing logistics is a key pillar to your success. A few of the most important elements of warehousing include warehouse management, warehousing operations, and warehouse management systems.
(1) Warehouse Management
Warehouse management refers to the strategic day-to-day operations to efficiently run the warehouse at the highest level possible. Managing a warehouse involves managing the staff, training, inventory, equipment, safety, security and shipping carrier relationships.
- Forecasting and management of volume and labor
- Responsible for the proper safety gear and best safety practices are followed
- Maintaining compliance and requirements for regulations
- Securing the proper licenses and certifications for operations
- Ensuring goods are safely stored, secure and accessible to the team
- Planning and managing operations as the company grows
- Recording both inbound and outbound shipments
- Providing clear steps for receiving, unpacking, retrieve, packing, and shipping inventory
- Setting up bins and other storage spots in optimal places to minimize the effort required to move between destinations
(2) Warehouse Operations
Warehousing operations refers to the processes that take place in a warehouse focused around the movement of inventory. This includes functions such as receiving inventory, placing SKUs into a dedicated storage location (e.g., in a shelf, bin, or on a pallet), and sending product to the next destination.
Efficient warehousing operations help with:
- Lowering cost
- Keeping staff productive
- Inventory received and shipped on time
- Ensuring equipment is used effectively
- Sufficient quantities of product on hand
- Space below capacity
- Keep customers happy and coming back
- Storage optimized and aisles clear
- Equipment used effectively
(3) Warehouse Management Systems
A warehouse management system (WMS) is a type of software that provides the tools necessary to manage warehouse operations and inventory movement to save time and eliminate manual processes. Warehouse management systems help optimize inventory storage and tracking, warehousing operations, workload distribution, and shipping.
These types of warehousing solutions give you unprecedented visibility and real-time insight into every action that’s happening in the warehouse. A good warehouse management system will even help generate pick lists based on orders that have inventory stored close to one another to decrease inefficiencies.
Warehousing And Your Supply Chain
Supply chains have came a long way with advancements in technology, allowing them to fulfill orders faster than any other prior time, and warehousing logistics plays a direct role in making that coming to fruition. Most inventory is shipped from a manufacturer, often from overseas, to a warehouse to move product through the supply chain.
Some warehouses are used for longer-term storage while others conduct the entire order fulfillment process, turning inventory over very quickly. Unlike warehouses that are strictly storage facilities, a fulfillment warehouse handles warehousing but also continuously picks, packs, and ships orders to customers. This can be managed in-house by an individual retailer or outsourced to a third-party logistics company that manages fulfillment for many companies.
How Warehouses Integrate With Ecommerce Operations
When you go online and place an order, it ends up arriving at your home. Before it gets there, there’s a high probability that it was stored in a warehouse. Ecommerce is driving logistics to deliver orders placed on websites and marketplaces in record speeds — but how do they make it happen?
(1) Storing Inventory
The storage of inventory is a lot more than just having product in a warehouse. These warehouses are usually strategically placed in key areas to ensure products get to where they need to be fast. Each SKU you sell should have its own storage spot within the warehouse. Warehousing and storage makes it possible to:
- Find the exact location for all items
- Calculate the amount units on hand
- Processes for responding to product recalls, expired goods or damaged inventory
- Ship out older inventory first
(2) Shipping And Receiving
Shippers send inventory to a warehouse where products are received, stowed, and arranged in a way that makes for efficient movement to keep operations running smoothly. Warehousing operations must be optimized to accept incoming inventory in a timely manner by knowing which products are arriving and how many units of each.
After the inventory has been stored and is ready to be transported again, shipping carriers such as DHL, USPS, and UPS pick up orders from the warehouse and ship them to their next destination.
(3) Distribution Centers
Distribution centers are most often used by big box companies that have both a physical and online presence. Another example of this is with subscription box businesses. They are best for shorter-term storage until products are needed, at which point it is typically sent directly to retail locations, wholesalers, or consumers. Distribution centers are certainly demand-driven, they need to move product fast.
(4) Managing Returns
Warehousing logistics also includes being prepared for returns, we call this returns management, especially when there is no in-store return option. While we’re seeing this far less than in the past, some companies still have return policies like that.
Warehousing operations must be able to receive, assess, and process each returned item. You may even aim to provide customers with prepaid return labels, share return tracking and refund information, and make it as painless of an experience as possible for customers.
Logistics And Supply Chain Solutions Compared
At Thill, we provide a wide range of core services to care of major logistics and supply chain functions for ecommerce companies. However, there is often confusion about these services differ from one another. Here’s how we define these terms.
What it is: The storing of inventory for an extended period of time. Storage facilities can range from large warehouses with equipment such as forklifts, containers, shelves, and docks, to smaller storage spaces to hold excess product. Lease terms vary from short-term to long-term commitments. Warehousing may include temperature control or even assist with wholesale or B2B orders where large quantities of inventory need to be shipped. Warehouse management systems can be used to mange these operations.
Not For – There typically aren’t additional services outside of storing and organizing inventory.
The Purpose Is – Managing inventory is the monitoring of a company’s stocked goods. Activities include tracking inventory levels, ordering and restocking inventory, and forecasting future demand to ensure you never run out of stock. Inventory management software helps businesses easily obtain this information without having to manually track or calculate it.
Not For – Picking, packing, and shipping orders.
Order fulfillment services
The Purpose Is: All the steps in the fulfillment process including:
- Managing inventory
- Kitting inventory
- Picking items in an order
- Packing boxes and putting shipping labels on packages
- Shipping orders
- Facilitating the returns process
Not For – Long-term storage.
The Purpose Is – This refers to outsourcing your logistics. A 3PL handles order fulfillment services for you including warehousing, inventory management, picking, packing, shipping, and other services you may need to get your orders to customers fast. 3PL companies have a wide range of tools, technology and capabilities that integrate with your ecommerce store to send orders as they are placed, manage orders, inventory, and a lot more.
Not For: Fulfilling and shipping orders yourself, renting or buying warehouse space, hiring fulfillment staff, or purchasing equipment, workers comp, and liability insurance.
Handling fulfillment in-house
The Purpose Is – You’re in charge for the entire fulfillment process yourself, including warehousing, managing inventory, packing boxes, going to the post office or having carriers come to you, and investing in, building out, and planning the fulfillment infrastructure you’ll need over time.
Not For – Outsourcing fulfillment or sharing warehouse space with anyone that would be outside of the business.
Before Choosing A Warehousing Solution
There’s a lot you have to consider when choosing a warehousing solution. Be sure to think through each of the following when researching warehousing solutions to find one that is right for you.
1. Storage costs and number of SKUs
SKUs help you keep track of your inventory and plays a big role in managing your inventory. However, they can also help you accurately estimate storage fees and how much space you’ll need in a warehouse.
If you sell jackets, you’re going to need a separate storage unit for every size you have (XS, S, M, L, XL, XXL, etc.) in every color (black, red, gray, blue, green, etc.) and every style (button, zip, pocket, etc.), and you will need to pay an individual storage fee for each variation. So yeah, it can get a little complicated.
Now, if you only have a handful of SKUs, storage fees will likely be less expensive than if you have 1,000 SKUs. If you have 1,000 SKUs but you only sell 1,500 orders each month, some companies may not be able to work with you. You’ll need to be sure to check on that before you work with anyone.
This is just how fulfillment companies work — they don’t exist as standalone warehousing solutions — they aim to turn inventory over quickly by fulfilling orders as soon as they are placed. There’s a big advantage to this, it means you restock inventory often enough to keep up with demand. This way, you’re not caught paying high storage costs.
If you’re not selling a lot yet but have a large amount of SKUs and inventory, warehousing as a standalone solution will be a much more cost-effective option than an all-encompassing fulfillment service that has separate fees for receiving inventory, shipping orders, and of course, warehousing and storage.
Warehousing fees will vary from one company to the next, from per-SKU or per-unit storage to a fixed fee for each bin, shelf, or pallet used.
2. The Type Of Products You Sell
The exact warehousing solution you ultimately choose will depend on what you’re selling. If your products are sensitive to specific conditions, such as perishable foods or a product that needs to be froze, you’ll need a warehouse that has refrigeration or has climate controlled storage.
3. Warehouse Locations
The optimal location for a warehouse will depend on your needs. If your goal is to store a lot of product in bulk over a long period of time, you can pay less by finding a rural location or a facility near a transportation hub. If your goal is get orders delivered to customers as quickly as possible, you’ll want a fulfillment warehouse near your customers’ shipping destinations.
Warehouses in urban areas or big cities can deliver your orders to large populations very quickly. This helps meet customer expectations such as expedited shipping by reducing the distance traveled and time in transit. If your customers don’t all reside in one geographic area, a more centrally located warehouse can help reach more regions more efficiently as opposed to just one coast.
4. Seasonality For Your Business
If you’re in a business that has seasonal flux in supply and demand, managing warehousing logistics can prove to be complicated. If your sales fluctuate seasonally or month-over-month, leasing a dedicated space or warehouse for your business may become costly during the low seasons or lead to a shortage of space when you get a new batch of inventory or during peak season and the holidays. Hiring a company like Thill Inc. can help you avoid both.
5. Warehouse Management Technology
Whether you plan to manage your own warehouse or outsource logistics to a third-party, technology is a critical piece of warehouse management and operations. Fulfillment software automates the order fulfillment process while bringing together orders, shipments, inventory levels, fulfillment centers, and customers in one place.
By connecting your sales channels, the same technology can automatically send orders to the warehouse for associates on the floor to begin picking. Each step of the process is recorded and tracking information is sent back to the customer.
6. Number Of Warehouses Being Used
As your businesses grows, logistics will become more complex and require expansions. To optimize your supply chain and minimize fulfillment costs, you’ll need to select the most favorable locations in terms of size and geography.
Making sure you have enough space for not only current needs but also future growth will help prevent you from outgrowing the warehouse immediately. You should also pay attention to sales trends over time to monitor where orders are shipped to. If you are shipping to zones that are far away from your warehouse, you will pay more in shipping costs and have a longer time in transit.
Having warehouses in multiple regions near your customers can help you offer 2-day shipping and reduce abandoned carts. Thill has fulfillment centers in Reno, Dallas, Georgia, and Wisconsin, which allows ecommerce businesses to distribute their inventory and take advantage of our extensive geographic footprint.
If you use multiple fulfillment warehouses, you’ll need full visibility into real-time stock levels across each location to make informed decisions and ensure each order is routed to and shipped from the warehouse that’s closest to the shipping destination. Here at Thill, we have the technology and software to give you real-time updates.
7. Value-Added Services
If you’re in need of additional valued-added services outside of traditional warehousing, pick, pack, and ship functions, be sure to find a company that can handle your unique requirements such as kitting, cross-docking, B2B orders, refrigeration services, and whatever else your business may need.
As you can see, warehousing can be complex and have a lot of moving pieces.
If you’re serious about learning how warehousing can help your company grow and thrive, it makes sense to speak with a company that has been delivering great results for the past 50+ years.
We’d love to answer any questions you have about warehousing logistics. Give us a call today at 1-920-967-9201 and speak with one of our warehousing experts.