eCommerce Warehouse: A Comprehensive Guide

Gone are the leisurely warehouse work days when staff members could have a laugh, play basketball and relax. Today, due to the urgency of eCommerce, the hustle and bustle of an eCommerce warehouse resemble the organized chaos at a busy stock exchange, only without fancy suits and watches.

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Ecommerce warehouses are highly efficient organizations working behind the curtains to enable us to buy things on our phone and get it within a few hours. But it isn’t as simple when choosing or building a warehouse for your online business. And that’s why we’re here to help.

Article Roadmap

• What Is Ecommerce Warehousing?
• Types of Warehouses
• How To Choose the Right Ecommerce Warehouse
• Third-Party Warehousing
• Trends and Best Practices
• How To Pick the Best WMS
• Next Steps

What Is Ecommerce Warehousing?

Ecommerce warehousing is the process of effectively storing and managing your inventory before sales on online channels. It’s part of the larger eCommerce fulfillment process and involves tracking products’ arrival time, storage location, shelf period and the number of units at any given time.

Although it sounds similar to traditional warehousing, here are the key differences between the two:

Traditional Warehouse	Ecommerce Warehouse
These warehouses ship products to retailers.	Ecommerce warehouses are retailers themselves, so they ship to end customers directly.
Ship products in bulk.	Ship individual items, which requires more granular attention to knitting, assembly and fulfillment.
Store and manage similar types of products.	Handle a mix of both slow and fast-moving SKUs.
Ship to fixed routes weekly or monthly.	Ship to multiple channels daily. Demand lightning-fast picking and packing processes.
The warehouse can be at any location.	The warehouse must be close to the target market to meet customers’ expectations for fast deliveries.

Features

Here are the best eCommerce warehouse features to improve your fulfillment process, reduce costs and improve customer satisfaction:

• Proximity to target markets to reduce shipping times and costs.
• Capacity and scalability to adapt to changing demand and inventory needs.
• Technology and automation for faster and more accurate order processing.
• Security and safety measures to protect inventory and ensure the safety of warehouse staff.
• Efficient inventory management to track stock levels, minimize stockouts and ensure that the right products are available and ready to ship.

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Types

Businesses might require different types of warehouses based on their product storage requirements and target market location. Some of the common types of eCommerce warehouses are:

• Leased: You can privately own a warehouse as a strategic move to improve your brand’s presence in a particular area.
• Bonded: These warehouses store imported goods before a customs inspection and tax or duty payment. These duty-free storage options allow cross-border businesses to store goods safely before receiving payments.
• Public and Government: Public warehouses are government facilities managed by private entities, offering affordable rates. Government warehouses are owned and managed by the state or the Federal government. They are great options for storing valuable items that demand robust security measures.
• Consolidated: These warehouses collect and combine products from different businesses to ship them to a common location. They typically accept small inventories as they share the storage and shipping between multiple suppliers.
• Cooperative: Wineries, farmers and other cooperative organizations can use a common warehouse to store similar types of goods. This helps distribute the cost and reduce the burden on individual members.

How To Choose the Right Ecommerce Warehouse

Ecommerce warehousing isn’t rocket science, but it does require careful planning; otherwise, things can go bad very fast. Most people jump into an establishment only to regret it later. The key is to determine what you’re looking for before starting your search for the perfect warehouse.

You must analyze business requirements to define the best warehouse suited for your operations. Start by preparing a checklist and ask yourself a few critical questions to identify your needs and find the right solution. Here’s a breakdown of the process:

Step 1: Determine Product Requirements

Looking for a warehouse is like searching for a home for your products. The first step is determining what kind of housing or storage your products need. Will simple pallet racks and storage shelves suffice? Or would you need mezzanine floors to store and organize different SKU categories?

If you’re looking to store food or perishable items, there are many guidelines to follow. FDA prescribes maintaining a minimum 50°F temperature while storing consumables. And HACCP manual mandates having two-meter-high walls, waterproof-resistant floors and a disinfected area for food storage.

Step 2: Identify Suitable Locations

The warehouse location will determine your supply chain’s efficiency and speed of fulfillment processes. It’s an important decision and can have ripple effects throughout your business’s lifespan. Ask yourself these questions to get an idea of the ideal location:

• Where are my target markets? Consumer expectations around delivery time are at an all-time high. You need to be close to them to deliver your products within a few days or even hours.
• Where are my suppliers from? Close vicinity to your suppliers can result in lower transportation and carrying costs.
• How do I move goods? Warehouses located near transport hubs like ports and truck stations can help you lower drayage costs and allow you to move larger quantities.
• What’s my future plan? If you plan to add more SKUs, look for a space that can grow with you.

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Step 3: Calculate Warehousing Space

You can start by estimating the number of cartons and pallets you’ll store at a given time. Then multiply that number by the measurements of your pallets to get the total storage area you need. Factor in the number of shelves you expect to get your total space requirement in cubic feet.

Total storage space requirement = no. of cartons x measurements of boxes x no. of shelves

If you’re building your warehouse, you must consider space for these processes along with the total storage space:

• Receiving and unloading
• Quality check
• Pallet breakdown area
• Forward staging
• Value-added services
• Deadstock area

Step 4: Identify Essential Equipment

Depending on your products and their volume, you must choose warehouse equipment that optimizes the flow of goods and improves visibility in warehouse processes. Here are the essential types of equipment you’d need in your warehouse:

• Storage equipment like shelves, racks, bins and drawers.
• Transport equipment and unit loading and positioning tools.
• Machines to assemble, pack and label orders before shipping.

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Step 5: Set Time Limits for Fulfillment Cycles

Consider your audience and business positioning in the market to determine how fast you need to promise delivery to customers. And then set time limits for picking, packing and delivery.

But don’t standardize time limits for every product across seasons. An electronic drum kit needs more packaging time than a t-shirt. On top of that, rushing warehouse workers during off-seasons isn’t the best idea.

Step 6: Define KPIs

KPIs are like yardsticks to judge a warehouse’s performance. They help improve planning, identify bottlenecks and gauge customer satisfaction. But all warehouse KPIs aren’t the same, and which will work for your business depends on your unique situation.

Here are some common metrics that are useful for every business:

• Shrinkage: This ratio tracks the difference between tracked and actual inventory to determine if it went missing due to theft, damage, decomposition or other reasons.
• Inventory turnover: You can track the rate at which you’re selling your inventory. Compare the number of sales to your average inventory over a time period.
• Receiving cycle time: Measure the time taken to process and shelf an incoming product batch. You can get it by dividing the total time taken by the number of products.
• Picking accuracy: This tells you how accurately the warehouse staff picked and processed customer orders. It’s a ratio of returned orders due to wrong picking to the total number of orders, and you should aim at a score close to 1.
• Backorders: This is a percentage of your returned orders. A poor score means you need to go back to the shop and work on your supply chain planning and inventory management.
• Cost per order: One of the most important metrics, this helps you track the warehousing cost for each order fulfillment so that you can adjust your pricing accordingly.

Step 7: Conclude Your Search

Now you’ve got a blueprint of what you want from an eCommerce warehouse. Gather an internal committee of your business’s stakeholders and decision-makers to decide the next course of action.

Enterprises can consider leasing vacant units in strategic locations to set up branded warehouses that can offer in-depth personalization in their processes. SMBs can either use personal properties or third-party services for their warehousing.

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Third-Party Warehousing

You can do warehousing in-house by leasing a facility or stacking your house and basement with products. And that’s okay. Many great businesses started from a living room or a garage. But they soon realized that eCommerce is not just selling locally but reaching people from anywhere with your brand. The world is your audience. But offering speedy fulfillment across the globe is tricky when handling your own warehouses.

Third-party logistics providers (3PL) or eCommerce fulfillment companies are great options to tap into this potential. They offer warehouses in strategic locations with trained workforces that ensure on-time deliveries to target markets across the world.

Primary Benefits

Here’s how outsourcing eCommerce warehousing can benefit you and your business:

• Improve product distribution: Get your product to customers when and where they need them. You can distribute inventory to multiple warehouses to ensure you make the most of seasonal trends and buyer habits in different locations.
• Ship faster: Leverage highly-trained warehouse staff to pick, assemble, pack and ship your products faster.
• Reduce stress: You don’t need to worry about lost inventory, wrong shipping, stockouts or other issues, as the vendor takes charge of the entire storing, picking and packing process.
• Save time: No more rushing through piles of paper or playing storage Tetris. Focus on growing your business and let the vendor handle every warehousing duty.

Trends and Best Practices

Did you know that we live in the era of the fourth industrial revolution? With the fusion of AI, robotics, IoT, web3 and quantum computing, we’re witnessing a blurring of boundaries between the physical and digital worlds.

Ecommerce warehouses are ground zero for launching and testing such innovations as consumers’ expectations around efficiency and shopping experiences continue to skyrocket. Here are some of the key warehousing trends that can help you keep up with this vibrant and ever-changing industry:

AI and Automation

AI has come a long way — from being John Connor’s assailant in Terminator movies to the friendly neighborhood Alexa, helping us play music on Spotify. But that’s just the beginning.

Using AI in eCommerce warehousing not only helps you optimize processes but also analyze trends to adjust your supply chain. It keeps your warehouses running smoothly as demand fluctuations throughout the year become a part of our reality. Here’s how it helps:

• Planning and forecasting: You can use demand forecasting and predictive analytics to analyze historical data and adjust your inventory accordingly. AI paints a picture of what’s most likely to happen and helps avoid setbacks or pitfalls.
• Automation: You can define rules to automate inventory management and replenishment based on season and warehouse space. Streamline the picking process by analyzing the shortest route per product location, size and equipment availability. With such flexible automated operations, you can stay more nimble and pivot easily in the face of adversity.
• Shipping: AI shortens fulfillment times drastically by automating order routing, transportation management, invoicing, assigning cost-effective shipping carriers and printing labels based on custom rules.

Robotics

Did you know a UK-based grocery chain called Ocado uses robots to overcome labor shortages and enable faster and cheaper deliveries? Robotics is no longer restricted to large conglomerates like Amazon and Walgreens.

Due to its wide applications, there’s an increased adoption across industries. The global industrial robotics market is expected to jump from $18.2 billion in 2022 to $151.4 billion by 2031 at a 27.2% CAGR.

Here are some unique types of robots you can consider deploying at your warehouse:

• ASRS: Automated storage and retrieval systems (ASRS) modify a warehouse’s floor plan and infrastructure to install portable shelves that can move along a track per custom rules.
• AGV: Automated guided vehicles (AGV) are goods transportation units like forklifts that can drive autonomously around premises. It can help facilitate a lights-out warehouse automation environment where AGVs will use lasers, liDARs, sensors and route optimization algorithms to perform each task on their own.
• AMR: Autonomous mobile robots (AMR) come in various designs, and you can train them to perform tasks like picking, assembling and packing orders. AMRs can replace traditional conveyor belts as they don’t require infrastructure modifications. You can use them as a flexible plug-and-play solution in any type and size of a warehouse.
• Drones: They use structure from motion algorithms, HD videos and machine learning to hover independently inside warehouses without GPS. You can use drones to scan barcodes, tag RFID codes, count cycles, pick products and perform aerial inventory inspections.
• Cobots: You can’t deploy traditional AMRs with a human workforce, as they can injure people or cause accidents. That’s where cobots come in. These are collaborative robots fitted with sensors that allow them to “feel” and activate safety measures when they sense anomalies or human presence.

Warehouse Management Software

Warehouse management software (WMS) is a comprehensive solution that lets you manage every aspect of your warehouses from a centralized location. You can use barcodes, RFID tags, IoT and other data collection systems to keep track of your inventory.

The software lets you automate routine administrative tasks like routing, transportation management, assigning tasks, inventory alerts, procurement, sourcing and invoicing. You can also connect WMS with ERP, inventory management modules, shipping receiving software and other supply chain tools to gain granular visibility across your supply and value chain.

Some of the main benefits of using WMS are:

• Improved inventory accuracy and visibility
• Increased efficiency and productivity
• Better order accuracy and faster order processing
• Reduced labor costs and errors
• Optimized warehouse space and resources
• Real-time data and analytics for informed decision-making
• Enhanced customer satisfaction and loyalty

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How To Pick the Best WMS

If you’re looking for a warehouse management solution, it’s important to understand that there’s a diverse market with different types of solutions — from free WMS to robust all-in-one platforms that improve efficiency from start to finish.

The best warehouse management software isn’t necessarily the same for every business, and what works for others may not be ideal for you. To find the perfect platform, you should start by gathering your business’s executives, department heads and directors to discuss and prioritize WMS features crucial for your workflows.

We recommend preparing a checklist for every feature and requirement your business has from the new platform. You can consider using our free WMS requirement template to kickstart your journey.

Once it’s ready, you can start contacting vendors to see how well they can meet your requirements. To streamline your search, we’ve prepared a list of the best warehouse management solutions available. Our analysts dive into the market to compare top products against each other and identify the best solutions. Here are our top picks:

Oracle Warehouse Management

Oracle warehouse management is a cloud-based solution that caters to organizations of all sizes. It allows you to organize, optimize and streamline warehouse operations to boost productivity, improve accuracy and reduce inventory costs. It offers a highly configurable environment, allowing easy implementations.

One of the standout features is the fulfillment module that allows you to move large volumes of products across warehouses with ease. You can manage manufacturing, distribution and service industries from a unified dashboard. Some of its other capabilities include:

• Workforce management
• Warehouse intelligence
• Receiving and putaway workflows
• Outbound allocation
• 3PL integrations
• Cross-docking

Dynamics 365 SCM

Dynamics 365 is a complete SCM solution powered by Microsoft. It stands out because of its robust warehouse and fulfillment management capabilities that improve visibility throughout the chain and offer more control.

You can use the native AI to improve demand forecasting and optimize inventory allocations across locations. It helps you continuously plan and implement changes in real time with smooth collaboration between teams that help avoid stockouts or other awkward situations. Its other features include:

• Supply Chain Management
• ERP
• Order fulfillment and shipping
• Picking and packing planning dashboards
• Workforce Management
• Robotics integrations
• Business Analytics

Logiwa

Logiwa is a warehouse and fulfillment management solution that can handle multiple business models, including D2C, 3PL and B2B eCommerce. It helps you automate inbound logistics using customizable putaway algorithms that reduce walking distance and save time.

You can use pre-built automation to design custom picking and packing workflows with rules for single and multi-item orders, cross-docking, expiry dates and more. It also offers mobile apps for staff and managers, allowing you to track and optimize movements throughout your facility. Here are its other features:

• Shipping
• Order management
• Analytics
• Third-party integrations

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Next Steps

Ecommerce warehouses are well-oiled machines that require proper management and organization to meet customer demands. But doing it manually with pen, paper and phone calls can be messy in the age of two-day or same-day deliveries.

That’s why eCommerce warehouse management solutions are crucial for simplifying processes, improving visibility and optimizing fulfillment cycles. If you’re ready to take the next step, use our free comparison report to analyze the top products side-by-side based on features, pricing and other benchmarks.

What challenges have you faced while managing your warehouse? Have you tried any WMS before? Share your thoughts below!