Use this guide to understand warehousing services, prioritize service level agreements, and choose the right warehouse partner for your business.
Use this guide to understand warehousing services, prioritize service level agreements, and choose the right warehouse partner for your business.
What is Warehousing?
Types of Warehousing Services
Warehousing Service Level Agreements
Warehousing for Amazon Fulfillment
Understanding Warehouse Management Systems (WMS)
Criteria for Choosing a Warehouse Solution
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Warehousing may seem like a simple concept at first glance, but as the home to your most valuable asset (your inventory) and a pivotal player in your supply chain, warehousing is actually a key function of your brand. The term “warehousing” refers to the facility where your inventory is stored, as well as the systems and protocols that warehouse staff employ to ensure proper storage, processing, and monitoring of inventory levels.
Choosing a warehouse is a decision that should be weighed carefully, considering your current product and business needs, as well as your future growth plans. If your business is looking for a warehouse partner for outsourced order fulfillment, this guide will serve as a resource for understanding warehousing services, SLA’s, warehouse management systems, and more.
Traditionally speaking, the term warehouse refers only to the building where items are stored. By this definition, a warehouse would only provide inventory storage. A fulfillment center (FC) or 3PL provides comprehensive storage, fulfillment, and shipping services. For the purpose of this guide, we’ll refer to a warehouse as a full-service storage and fulfillment center.
Many full-service warehouses have found that partnering with a 3PL network simplifies their operations, allowing them to focus on their areas of expertise rather than managing vendor relationships or trying to sell space on their shelves. Tony Donaldson, a logistics specialist with Regis Corporation, found that partnering with a 3PL network enabled his team to focus on picking, packing, and warehouse management.
The first step in warehousing and fulfillment is getting your inventory from your supplier to your warehouse partner. A qualified warehouse partner will have a thorough onboarding process to simplify your first order inbound. The quicker inventory is inbounded and stocked, the quicker you can start selling and shipping, turning your inventory into revenue.
The process typically begins with an Advance Shipment Notice (ASN) that details the SKUs and quantities the warehouse can expect in an incoming shipment from the supplier. The ASN is usually sent as an electronic data interchange (EDI) through the warehouse’s warehouse management system (WMS) as soon as the inventory is shipped. This gives the warehouse time to ensure adequate space is available for the incoming inventory and to schedule the appropriate staff to receive and store it. Once the shipment arrives, the ASN is reconciled with the shipment to ensure accurate inventory count, and the items are stocked according to product requirements.
A qualified warehouse partner will prioritize dock to stock time, or the time it takes to receive and store inventory so it’s ready for shipment. A dock to stock time of 48 hours or less ensures more accurate inventory counts and quicker turnaround times so your inventory is immediately able to be sold. If any of your products are perishable, or if your business follows strict LIFO or FIFO protocols for inventory valuation, it’s important to find a warehouse partner that can support those functions both with labor and with their inventory tracking or warehouse management system.
Not all storage is created equal, and if your products require temperature control, humidity control, cold chain, or serialization it’s important to fully vet potential warehouses, scheduling an in-person tour if possible. Another solution to ensure a warehouse is qualified is to partner with a 3PL network that will have already inspected the warehouse and negotiated SLA’s, and will regularly monitor KPI’s to hold the warehouse accountable.
The manner in which products are stored is important to the productivity of the warehouse. Fast-moving SKUs should be easy to access, and products should be stored in a way that reduces the number of steps taken by pickers as they move through the warehouse. According to WMS Fulfillment Strategy Manager, Anita Patel, a well-slotted warehouse is an efficient warehouse with fewer mis-picks and better on-time fulfillment rates.
Read more about warehouse slotting here.
Picking and packing refers to the process of pulling inventory from the shelves and packing it into boxes once an order has been received. A tech-enabled warehouse will have a WMS system with double-verification for pickers to ensure against mis-picks. This saves you both time fielding customer complaints and saves on re-stocking or writing off returned items.
Shipping services should be provided by a reputable carrier, especially considering Amazon’s announcement that carrier names must be added to orders and all tracking information will be verified by Amazon. Carrier pickups should be scheduled on a daily basis, and the best warehouses will have all orders received before the daily cutoff time ready for pickup on the same day.
Proper warehouse packout procedures are vital to ensuring the safety of your products in transit. Items that arrive to customers damaged can result in negative reviews, costly returns, and loss of inventory. Ultimately, your brand equity is at stake when it comes to proper packout procedures. 75% of consumers report that they are likely or very likely to tell friends and family about receiving a damaged item, and 23% are likely or very likely to share their experience on social media.
Hydrogen water brand, HyVida, saw first-hand the effect that damaged shipments can have on Amazon reviews in particular. While Fulfillment by Amazon (FBA) packed and shipped their Prime orders, HyVida’s customers complained that an average 1 to 4 cans arrived damaged in every shipment. Actually, the brand’s only negative Amazon reviews were related to damages, while reviews related solely to product averaged 4.9 stars. HyVida switched to a new fulfillment provider that created a custom packout solution for them, completely eliminating their damage complaints and garnering them positive reviews on Amazon from customers that noticed the change.
Service Level Agreements (SLA’s) should be a major consideration when choosing a warehousing partner. The key SLA’s to prioritize should be fulfillment accuracy, dock-to-stock time, on-time fulfillment, and cycle count accuracy. Finding a warehouse that offers competitive SLA’s in all of these areas will ensure not only an exceptional customer experience but will help you keep inventory moving rather than eating up margins with storage costs.
It’s often difficult for small to mid-sized merchants to negotiate for top-tier SLA’s. Large warehouses often focus their efforts on keeping high volume merchants happy and SMB’s may feel lost in the shuffle, if they can get their inventory into a top-tier warehouse at all. That’s why many SMB’s turn to on-demand warehousing partners, who aggregate the Average Daily Volume (ADV) of multiple merchants when negotiating rates. This way, merchants of any size can compete with high-volume sellers for space in top-tier warehouses with competitive SLA’s.
Retailers today have a new set of challenges as customer expectations for delivery and in-store pickup options are continually shaped by ecommerce. Motorcycle helmet brand, LS2, discovered that they were missing out on brick and mortar sales because their retail warehousing network was unable to support 1 to 2-day delivery. By optimizing their warehousing strategy they were able to meet customer expectations for in-store delivery, putting them on the path to become the fastest growing brand in America.
Retail warehousing also requires flexibility in transit modes. Small retailers may purchase wholesale items online at wholesale marketplaces like Faire. These small retailers will likely be purchasing pallets or small parcels, especially as they test out your product in their stores. If you’re able to secure a retail distribution partner, you’ll need the flexibility to ship LTL or full truck load, depending on the store and forecasted demand.
Most businesses today, however, do not rely on retail as their single sales channel but take an omnichannel approach. A fully integrated and flexible warehousing solution will have the capability to meet both your retail warehousing and ecommerce warehousing needs through a single network and platform.
Warehousing is clearly much more than just storing your inventory. Strategic warehousing is actually the key to meeting your customers’ expectation for delivery for both ecommerce and brick and mortar customers. The “Amazon Effect” and general ecommerce trends have made 1 to 2-day delivery the new customer expectation for fast shipping. And expectations for SMB’s is actually even greater. In a 2020 consumer survey, 37% of respondents indicated that they expect faster shipping when making a purchase from a small business.
Offering nationwide, 2-day shipping may feel out of reach for many SMB’s, but this is where strategic warehousing can be a competitive edge. The most effective way to affordably achieve 2-day shipping is by distributing inventory across multiple locations closest to your largest pockets of demand. By establishing a nationwide warehouse network, you will be able to reach your most profitable customers with 2-day ground shipping. This helps you meet customer expectations without relying on expensive solutions like next-day air, and ultimately lowers your overall cost to serve by eliminating long-zone shipments.
Cowarehousing is one way for small to mid-sized merchants to secure space at top-tier warehouses and 3PL’s. Also called on-demand warehousing, cowarehousing is an asset-light solution that allows merchants to scale up or down based on their demand. It is a flexible alternative to traditional models that usually require a guaranteed average daily volume (ADV), locking merchants into storage and labor rates in a long-term contract.
A cowarehousing agreement is usually brokered through a 4PL that will aggregate the inventory and order volume of several merchants when negotiating for rates and SLAs. There are several advantages to cowarehousing, including:
Amazon has become a necessary component of any multichannel ecommerce business. The sheer amount of exposure and marketing tools provided by Amazon make it a great first step for businesses launching their marketplace sales channels. Amazon’s fulfillment expectations are not only some of the most stringent among online marketplaces, but are also constantly evolving as they try to stay ahead of, and ultimately shape, consumer expectations.
There are three main Amazon fulfillment options for third-party sellers: Fulfillment by Amazon (FBA), Fulfillment by Merchant (FBM), and Seller Fulfilled Prime (SFP). FBA is often the go-to warehousing and fulfillment solution for retail arbitrage and Amazon-only sellers, but multichannel sellers and ecommerce merchants will likely want more control over their inventory and more visibility into warehouse operations and KPI’s.
Sellers who choose to fulfill through FBM or SFP will want to find a warehouse partner that can help them build the right strategy based on their product size and inventory availability. High-volume, standard-sized sellers may be able to support a nationwide 2-day delivery footprint to qualify for standard SFP. Sellers of oversized products qualify for regional SFP and may choose to build a targeted network to reach their most profitable geographies with Prime service levels.
A Warehouse Management System (WMS) is the software that connects your warehouse to your sales channels. It should automate as many processes of your warehousing and fulfillment as possible through direct shopping cart integrations, marketplace integrations (like Amazon and Walmart+), and EDI connectors. Today’s merchants need a digital warehousing solution to keep pace with digital sales channels.
Consumer shopping patterns have unarguably changed. Shoppers are buying more online, and often shop multiple channels before making a final purchase. In response, merchants have had to take a multichannel approach to sales and need a Warehouse Management System that can fully integrate with all of their sales channels and offers a flexible, automated solution to multichannel fulfillment.
When searching for the right Warehouse Management System for your business, prioritize systems that automate processes like order management, warehouse locations, delivery tracking, and inventory management. These automations create a low-touch fulfillment workflow that allows your team to focus on your core competencies rather than managing fulfillment and inventory statuses. The most robust WMS will also be capable of managing multiple transit modes from LTL to small parcel.
The best Warehouse Management Systems will offer both direct integrations and an open API. A digital warehousing system should fit in seamlessly with your current tech stack and operations rather than forcing you to reconstruct your internal systems to work within the confines of the WMS. Depending on your current tech stack, you should be able to either access the WMS through its native dashboard or have it running in the background, accessed through your ecommerce platform or ERP.
Once implemented, the WMS will be command central for your supply chain. You will manage inbound shipments, check inventory statuses across sales channels, check fulfillment statuses, and access tracking information all through your WMS.
eCommerce sellers especially need flexibility in a digital warehousing solution. The technological expectations of ecommerce shoppers is high, for both their online shopping experience and order fulfillment. 93% of consumers check the tracking number of their deliveries, with 29% checking the status at least once per day. Over half of consumers expect tracking information to be up to date within a matter of hours.
A digital warehouse will automatically send order status updates to consumers and include tracking information through a reliable carrier. This will cut back on the number of customer support interactions your team has to process and give customers a sense of security with your brand.
When searching for the right warehouse for your business, it’s important to vet potential partners according to the right criteria. Prioritize the following criteria will ensure that you find a long-term partner to support your business goals.
Ware2Go’s warehousing solution combines a nationwide, distributed warehouse network with best-in-class fulfillment technology, including an integrated WMS to support multichannel sales and any transit mode. To learn more about how Ware2Go can help your business find the perfect warehouse solution, reach out to one of our fulfillment experts.
Warehousing is a necessary step in the supply chain to ensure inventory is prepped and ready to pack and ship when orders come in. Some manufacturers offer drop-shipping services, but shipping from a single manufacturing facility increases time in transit and raises final mile delivery costs.
Lean warehousing is a process of warehouse management that strives to use the fewest resources necessary without sacrificing efficiency or accuracy.
The warehousing process begins with inbounding. The merchant sends an ASN (Advance Shipment Notice) with full shipment details. Once received, the warehouse staff reconciles the shipment’s contents with the ASN and stores the inventory according to agreed-upon SOP’s.
Warehouses function to receive and store inventory; pick, pack, and ship orders; send tracking information; and maintain accurate inventory counts.
The main function of a warehouse is to store inventory according to product needs (cold storage, humidity control, big and bulky, etc.) and keep accurate inventory counts to reduce the chance inventory shrinkage or obsolescence.
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