As the eCommerce space is experiencing a paradigm shift, the warehousing options are evolving too. Smart warehousing is the culmination of efforts to make warehousing more efficient and productive. Now, this can be achieved using interconnected automated technology in your own warehouse or outsourcing the operations to 3PLs and 4PLs.
In the following infographic, we have outlined the major trends and statistics around smart warehousing in 2021. Check it out.
Are you looking for an omnichannel inventory management solution with integrated B2B order management for your eCommerce business? Drop us a line at [email protected] or directly sign up for a demo here.
The increase of commerce at digital storefronts has led to a number of experiments on the supply chain front. Some of these experiments have been extremely successful, and the others have come across as a necessity. In a recent development, micro fulfillment has emerged as one of the most appreciated innovations to streamline eCommerce operations across the entire supply chain. The concept has completely transformed the logistics sector while also upgrading the customer experience. According to LogisticsIQ’s recent market study, the micro fulfillment market will have a cumulative opportunity worth of around $10B by 2026. If you are running an eCommerce business or just curious about what’s in, here’s something new (relatively) and informative for you to read.
The Concept Behind Microwarehousing
In a world where everything is available at the click of a button, consumers prefer faster delivery over free shipping. They are already familiar with the concept of receiving “food” within an hour after ordering online, and the foundation of micro fulfillment works on the same principle. The concept simply aims at being closer to customers to offer faster deliveries. Companies like Pickrr, WareIQ, Ohi, Vanderlande ,etc. already offer one-day delivery and logistic automation with their warehousing network distribution across urban population centers. It wouldn’t be a surprise that we will be able to receive deliveries within a matter of hours, just like food. It seems far-fetched, but at least that’s where we are headed to.
Micro-fulfilment or warehousing in eCommerce refers to the concept of running small-scale warehouse facilities at accessible locations that are closer to the end consumers. While some of these micro warehousing companies can either have their own dedicated storage buildings, others might lease out spaces at corporate complexes as per their operation scale. The introduction of micro-warehouses is making instant delivery services more seamless and affordable. Furthermore, the concept is a breather for fulfillment congestion in the urban areas. The premise behind micro fulfillment is quite straightforward- Optimize the efficiency and speed of online order fulfillment while taking the load off of the retailers storing and managing their inventory on their own.
The idea of micro fulfillment establishes a hub-and-spoke like distribution model for the companies where the regional Delivery Centers (DC) act as hubs and Micro Fulfillment Centers (MFCs) work as spokes placed within the proximity to urban population centers. Adopting the micro fulfillment strategy not only shortens the last-mile distance but also gives an option for in-store pickup fulfillment model.
eCommerce Trends Behind the Rise of Micro Warehousing
- eCommerce growth: As more and more consumers are migrating to online platforms to buy everything online from household items, groceries, accessories, etc, eCommerce sellers need to support direct-to-consumer delivery as well as fulfillment. Micro warehousing takes care of both the operations leaving a minimal scope of logistic related operations to the business owner.
- Reducing warehouse space: Brands operating online usually have limited available storage space, so it becomes utterly important for sellers to have high-density options for effective in-store fulfillment strategies, hence, micro fulfillment.
- Rising delivery expectations: As per the latest statistics by invespcro, over 56% of consumers in the age range of 18 to 35 expect same-day delivery. The increasing Service Level Agreements (SLAs) are regulating the need for an upgrade to the last-mile or last-hour delivery methods and fulfillment strategies. The conventional manual fulfillment processes are already giving retailers a tough time, so they also need an improvement in their strategies.
- Expanding Product Portfolio: The cut-throat competition among the brands with the unlimited expansion of product varieties largely affects fulfillment complexities and even the established e-commerce players struggle with them. However, fulfillment automation has proven to be a very effective tool to address these situations, and especially for the grocers that have the added disadvantages of managing foods that are either dry, refrigerated or frozen.
- Urbanization: Nearly half of the world’s population live in urban areas and these figures will increase exponentially in the coming years. Placing micro fulfilment facilities and fulfillment centers within the urban-population proximity remarkably improves the later parts of supply chain management.
- Workforce Limitation: Nearly one-third of distribution and fulfillment operations usually experience high turnover rates. These high numbers along with shortages of qualified staff call for a major digital transformation and a momentum change for automated fulfillment processes.
- Essentials Going Online: The aftermath of a widespread pandemic has pushed a lot of leading grocery and essentials brands to an unfamiliar territory of online retail. This doesn’t come as a surprise, as most of them are not adequately equipped to meet the online fulfillment demand. Grocers, in particular, incur heavy losses without automation in place, and they also experience major customer loss. The need for a cost-effective and optimized home delivery fulfillment model that meets customer expectations is the immediate sustainable option.
- Replenishment Issues: The fulfillment burden on online sellers for rising customer demands can also often lead to inadequacies in the replenishment process, which, in turn, result in several stocking issues like out-of-stock situations; the inability to fulfill online orders; and, of course, irritated customers. Micro warehousing in eCommerce largely solves these issues and allows ample time for replenishment.
- Quick and Sustainable Implementation: The ability to be on your feet in this forever changing market with dynamic customer demands has become a major differentiating factor for online sellers. A variety of supply chain disruptions can pose unexpected challenges in online demand, and this is why sellers need a quick, scalable, and a sustainable micro fulfillment solution that can be easily implemented to meet unpredictable fulfillment demands for different regions. A quick and scalable solution like this one also helps with efficient handling of expiring products, which often becomes troublesome in larger, company-owned warehouses.
How does Micro Warehousing Help eCommerce Businesses?
Optimize your Supply chain
With the pandemic-catalyzed delays and constant eCommerce disruption by retail giants like Amazon and Walmart, online sellers can use several techniques to overcome supply chain kinks. Warehouse management and fulfillment to the end consumer is one of the most painful areas for eCommerce sellers, and it directly affects their customer retention and brand reputation. In these challenging scenarios, micro fulfillment facilities come to the rescue.
Compete with the Giants
Like we mentioned before, retail giants have already been disrupting the supply chain, it is hard for small eCommerce sellers to stay in the game. Micro warehousing in eCommerce allows them to keep up with the competition, especially when the competition for selling similar products is so cutthroat. Having said that, not all brands can benefit completely from this option because of the nature of their products and additional requirements, but it most certainly offers the luxury of competing with big brands. Since consumers have been favoring Amazon and Walmart because of same- and next-day deliveries, micro warehousing remains one of the best options for smaller companies to gain some traction and build stronger customer relationships.
Enhancing Customer experience and building trust
The value of a product or a brand increases multiple folds if the delivery expectations are met. Micro warehousing companies offer you just that. Same-day or next-day deliveries count for a major share of the customer experience. Also, the reduced distance between the product and the consumer ensures that it reaches them in its best state without having to go through multiple transits. Additionally, a properly organized fulfillment structure also gives room to personalize deliveries as per customer requests.
Reduction in Shipping Costs
One of the biggest perks of migrating to a micro fulfillment center is the considerable drop in shipping costs. Managing end-customer deliveries on your own with limited resources and logistics network constraints can increase the operational costs and impact efficiency. The saved capital from the external fulfillment and warehousing options can be used to further accelerate business growth.
The Future of eCommerce with Microwarehousing
Source: investable universe
Services offered by Amazon Prime and Walmart nearly made it impossible for smaller brands to compete but the introduction of micro fulfillment companies is already changing the dynamics and democratizing the eCommerce ecosystem. This will ensure that everyone gets a relatively similar ground play and the upcoming eCommerce brands have a safety net for efficiency and flexibility to their customers.
The short distance run to reach the end consumer in the localized region aka the “last-mile delivery” is known to be one of the biggest pain paints for eCommerce sellers. But owing to the exponential rise of micro fulfillment, last-mile pain points are slowly becoming a thing of the past.
Here are some of the most fast-growing micro warehousing companies that are revolutionizing the logistics industry:
- TakeOff Technologies: This brand offers grocery fulfillment solutions, lowering last mile and assembly costs with their automation technology.
- Fabric is yet another brand that claims on-demand fast fulfillment for grocery, eCommerce accessories, along with B2B stock replenishment.
- WareIQ promises Amazon-like next day delivery for eCommerce companies in India. The company empowers brands to run their eCommerce businesses with fulfillment centers near the end customers and tools to maintain control over inventory, orders, and shipments on a unified platform.
- Ohi, is another emerging logistics- tech startup offering an “Amazon Prime Now” experience with same day delivery and superior service levels.
- Shopify Fulfillment allows you to select items for fulfillment from the admin panel and ship via their full-service distribution network.
- Shipbob, a tech-powered 3PL fulfils orders for DTC eCommerce brands. The brand is an end-to-end fulfillment provider that helps improve delivery time, costs, and overall customer experience.
There are a lot of other such companies making their way to the mainstream logistics industry with their instant service models. With rising eCommerce brands and their operating areas, limited resources to maintain inventories, and unpredictable customer demands, micro warehousing is one of the most sustainable options that is rapidly making its way through the entire digital commerce ecosystem. The concept is relatively new and unfamiliar to a lot of online retailers but promising, nonetheless. We say that “Micro warehousing is the future of Retail”.
Do you agree with our assumption? What are your thoughts on the subject? Let us know in the comments section below.
Whether you are managing a single warehouse or multiple storage spaces at the same time, it is important that you implement an adequate warehouse management system (WMS) to ensure smooth eCommerce operations.
If you are still wondering whether you should go for one, here’s an infographic listing out the top 10 benefits of a WMS for your online business. Check it out.
Table Of Content
- Warehousing Benefits
- Key to Managing and Improving Warehouse Operations
- Best Practices for Efficient Warehouse Management
- Warehouse Management System: When to Use? Benefits
- Managing Multiple Warehouses: Things to consider before opting for it
- Managing Multiple Warehouses
The process of storing inventory or items that are to be distributed to the customers is what we refer to as warehousing. Warehouses can be of different sizes and types based on the requirements of a business. A small-scale business that has just started out can be operated from the owner’s house, a storing unit, basement, or a garage while the larger ones usually rent out a separate area that is specifically meant for storing the inventory.
Warehouse management is one of the most important aspects of eCommerce fulfillment. It is crucial for any eCommerce business to get this part right as it makes or breaks a brand. In general, warehouse management in eCommerce dictates day-to-day warehouse operations that include the following:
- Managing inventory and all the equipment efficiently so as to ensure the safety of all goods.
- Demand forecasting
- Maintaining relationships with courier companies for timely delivery of items to end customers
- Scaling warehouse operations with business growth
- Tracking daily inbound and outbound shipments
- Training warehouse staff members to increase productivity and efficiency
Warehouse management directly impacts customer satisfaction. While brands keep looking for new and improved ways to boost customer satisfaction, the basics are lost in the process. The ground rules always remain that “if a customer is unable to purchase the required stock or finds the order process difficult, they will shift to a different supplier. And, that’s why you need to have an effective warehouse management system.
Like mentioned above, different types of businesses use different warehousing methods. Small or medium sized businesses either outsource to 3PL or 4PL companies or maintain a single warehouse/storing facility. A larger business, on the other hand, could be running multiple warehouses simultaneously. Regardless, warehousing has its advantages and it should be handled efficiently and effectively to ensure smooth functioning of your business. Let’s take a look at some of the major warehousing benefits and the key to managing and improving warehouse operations.
Customers expect fast delivery and brands compete with one another to deliver just that. For a sizable business, when choosing where to store your inventory, it is recommended to consider distributing it to multiple warehouses across locations. This keeps the inventory closer to end customers, thereby, reducing the time and expenses on the delivery. For small businesses, 3PL and 4PL can be engaged to ensure faster delivery to the end customers.
Better Inventory Management
eCommerce warehousing can improve the accuracy of inventory tracking and prevent items from any sort of damage. With the right warehouse management system in place, this can help you track inventory turnover rates and proactively reorder inventory.
Time is money and it holds true for eCommerce business in the most literal sense. Without a proper storing space and a system, it will take forever to go through the pile of items that you can better utilize in scaling your business growth.
As your eCommerce business proliferates, you have to make sure that your warehouse is managed efficiently. The day to day warehouse management operations ensure that inventory is received, stored, picked, packed, shipped, and replenished in the most efficient way possible. When warehouse operations are efficient, your business could significantly cut on the operational costs and keep customers satisfied. But, when improperly managed, there is a delay in your orders, workers will not be as productive as possible, and your company loses money and reliability. So, how can you, as a retailer, make sure that your warehouse operations run smoothly?
The Key to Managing and Improving Warehouse Operations
A strategic warehouse plan should include diagrams such as floor plans and documentation of resources such as space, labor, and equipment and how each warehouse function utilizes what portion of each of these assets. It is quite essential when you want to maximize the use of each component. According to Princeton’s Annual University Press Statistics, these are some of the crucial steps you need to take to develop an efficient master plan:
- Define the function you want or need to accomplish
- Determine how the function will be accomplished.
- Determine the equipment needed to accomplish the function.
- Define the function’s space requirements.
- Estimate the function’s support needs and include changes within your workflow
Even though you have a functioning warehouse management operation in place, there is always room for improvement. Warehouse operations managers can improve warehouse performance by monitoring key performance indicators (KPIs) such as:
- Receiving efficiency
- Picking accuracy
- Carrying costs
- Inventory turnover
- Rate of return
- Backorder rate
- Order lead time
These KPIs will help you gain an optimal performance rate. Supply chain technology and analytics should be used to forecast the demand rate. Having an excellent supply chain visibility is key to eCommerce operations. During eCommerce events like seasonal sales, there should be adequate inventory and suppliers on call due to the spike in demand. You can monitor trends, of course, and prevent yourself from ordering excess inventory but there is always a possibility of storing items above the threshold. It helps in mitigating potential risks in your warehouse and doesn’t affect your eCommerce rankings or business performance.
Best Practices for Efficient Warehouse Management
There is no concrete set of checklists for you to manage your warehouse, however, there are some tried and tested practices that come in handy in streamlining warehouse operations.
- Audit your warehouse operations: One of the tools in managing warehouse operations is conducting an operational audit. Auditing your warehouse every year helps you in updating stock and accounting for all products gone missing. Evaluate whether changes need to be made to make it run more effectively. This also helps you in gauging your supply chain performance.
- Implement cross-docking and labeling: Cross-docking is the practice of unloading materials from an incoming vehicle and immediately loading the same items directly onto the outbound vehicles with minimal warehousing interval in between. It helps in reducing the TAT and increases profits and is of course, time-saving. Mostly, the companies in the pharmaceutical sector use cross-docking to save time and distribute their perishable products to the end consumer. Walmart is also known to implement cross-docking for a lot of their items.
- Labeling also helps in having a fast-moving warehouse. SKU numbers, clear labels, or barcodes can help in the easy identification of your products.
- Implement safe measures in your warehouse: A safe warehouse means implementing regular training and awareness courses. The staff that knows how to use equipment safely and adequately typically keep warehouses running more efficiently and better managed. Safety protocols must be followed sincerely, and danger zones must be marked and noted by the staff.
- Increase staff productivity: Managing a warehouse needs a productive team to make sure orders are not delayed. A warehouse manager can make sure the staff is adequately taken care of and efficiently conducting themselves. Loyalty programs, incentives, and other morale-boosting programs can be set up so that they do not feel burdened. The workers should also be educated and trained correctly to maximize productivity. A lot of brands conduct seminars and workshops for their employees to ensure that their staff is well-trained and informed about the operations.
- Maximize your space: As we said earlier, having proper documentation of your floor plan and warehouse space helps you take care of more inventory. The warehouse should be organized in such a way that the operation flow from receiving to packing is done smoothly. Making use of vertical space and bin locations also helps in maximizing your warehouse space and easy to navigate.
- Track the right metrics: Tracking the right KPIs makes all the difference. It helps you gauge your vendor performance, delivery accuracy, customer satisfaction, and much more. Using data to analyze these metrics are also important. Having a thorough understanding of these numbers is also crucial for the growth of your eCommerce business.
- Invest in a Warehouse Management System: WMS systems are meant to automate and implement tracking in a day to day activities of a warehouse. Locating a particular item within the warehouse can be challenging for a large warehouse with multiple staff members. WMS solves that pain. It is much more beyond that. WMS is capable of monitoring product quantities, cycle counting, picking, packing, shipping, and managing multiple locations. Although a time-consuming process, automating your warehouse operations is super beneficial.
Warehouse Management System: When to use? Benefits
Deploying a warehouse management system allows your company to optimize warehouse operations, cut on any labor expenses, keeping a check on the inventory levels, and maintaining its accuracy. Automating your warehouse operations is important but one should be careful about when and how to go about it.
For a larger warehouse with multiple staff members, one of the major challenges is to locate a particular item. With a WMS, this becomes a matter of seconds. Furthermore, a WMS is capable of monitoring product quantities, cycle counting, picking, packing, shipping, and managing multiple locations.
Here’s a checklist for when you need a warehouse management system for your organization:
- You have a large warehouse or multiple warehouses
- You fail to dispatch orders within specified SLA
- It’s challenging to track your shipments and returns
- You find it extremely time-consuming to search for a product in the warehouse
- You process more than 50 orders a day
- There is more than one team member doing the pick and pack job
Benefits of a Warehouse Management System (WMS)
The WMS system integrates the workers, task handling types of equipment, storage tracker onto a platform called WMS. It majorly prevents manual errors by working on system directed operations of receiving, putaway, picking, and shipping. Let’s look at some of the major benefits of a WMS.
- Complete Inventory tracking
Systematic tracking of inward, outward, and the overall movement of the stock within the warehouse ensures avoid inventory shrinkage. Additionally, item-level barcoding enables the complete history of a particular item. This is particularly helpful when a product is RTO and gets re-shipped.
- Optimizing Space utilization in the warehouse
By handling your inventory in the right manner, you can effectively minimize the situations of overstocking and under-stocking of products. Simply put, it enables accurate slotting, stocking, and order pulling.
- Detailed Quality Control at the Time of Receiving
The system facilitates a detailed QC process at the time of receiving to ensure that the right item gets inwarded into saleable inventory. The remaining items get tracked as rejected and can be later returned to the vendors. This majorly saves costs in the case of miss-shipments by the vendors and further your customer service efforts.
- Increased productivity
The team members know the exact location of the product’s shelf and this reduces the time and risk of stretching the period. The staff gets to pick more orders in less time, increasing efficiency in the order fulfillment process.
- Accurate Inventory planning
Get insight into the most popular items during a specific time period. This will help you decide which products to invest in at that point in time.
- Checking on received products
Keep a record of received products and ordered products handy with GRN report in order to avoid paying extra to the supplier. It ensures all the delivered items are recorded correctly.
- Elevate customer satisfaction
Ensures prompt and accurate product delivery which helps in the reduction of customer complaints and increases timely delivery.
- Enhanced Security
A WMS helps you keep accurate records of inventory, providing you with user-specified logins so that managers can ensure the staff is not slipping extra products on delivery.
- Product-Friendly Model
A WMS should support different distribution methods including FIFO that allows warehouse operators to implement this method when they need to ensure that the expiring and perishable items are picked first.
- Visibility into important metrics
WMS captures various data points that come in handy when running critical reports like Inventory aging, restock calculations, SLA deviations in fulfillment, etc.
Managing Multiple Warehouses: Things to consider before opting for it
We just discussed how you should implement a WMS if you own multiple warehouses. While a WMS helps, handling several warehouses at the same time can be quite challenging. You often question if you should shift all of your attention to the business growth or worry about making space at your in-house storing unit to store more products? You can always consider giving away your warehousing department to a third-party or if you have the team and resources, get on with it on your own. Nonetheless, you should evaluate all your options. For multiple warehouses management, you can opt from any of the following options:
Third-Party and Four-Party Logistics (3PL and 4PL)
These order fulfillment centers are handled by logistics companies who manage end to end business right from stocking to packaging, shipping, etc. These are effective if you don’t want the pain of running your warehouses.
A 3PL company is on the forefront of carriers arrangement and warehousing. They deal directly with the service providers. A 4PL on the other hand, arranges the same services for their clients but instead of direct handling, they engage 3PL companies and other service providers who use their network of carriers and warehousing providers.
Source: Warehouse Anywhere
Company-owned fulfillment warehouses
These distribution centers are owned and maintained by the respective organizations and the order fulfillment centers are operated by channels (e.g., Fulfilment by Amazon, Flipkart Advantage)
These fulfillment warehouses are owned and handled by the channels that store and sell these products. They work in the SOR (Sell or return) model. Here, the channels own the warehouses and manage everything on their own. The sellers have to pay for the warehousing fees, logistics charges, pick pack fees, and commission on sales.
All of these have their own sets of advantages and disadvantages. You can go through them in detail here.
However, there are a few major things that you should check before opting for multiple warehouses or distribution points.
- Operating costs for opening additional warehouses
- The number of SKUs
- Monthly order volume
- ROI on additional expenses
If these aspects are sorted, you are off to a good start. Now, let’s move on to how you handle multiple warehouses after these are up and running.
Managing Multiple Warehouses
Multiple warehouses give you the benefit of time and utility that can’t be easily achieved with a single warehouse. The deliveries to customers get faster, transportation costs are reduced and it provides the business easy accessibility to raw materials and storage.
However, these come with a plethora of operational challenges that might affect the productivity and efficiency of your eCommerce business. Automating WMS with advanced features to assign, redirect, restock inventories on a real-time basis is the most optimal solution. Here is what you look for in a WMS while you have or hope to manage multiple warehouses:
- Cloud-based system
For multiple locations, a WMS that is cloud-based allows you to monitor your inventory from anywhere on a real-time basis.
- Option to set stock level and re-order alerts:
To achieve the optimum level of inventory management, it is important to identify the maximum level, minimum level, average level and reorder level for each SKU per warehouse. This helps in minimizing the cost of overstocking and out-of-stock situations where you lose out on sales.
- Inventory Forecasting tool:
The inventory forecasting tool is fairly vital to understand the pattern of stock movement. It is not necessary to maintain each SKU in every warehouse owned. have backup plans for each aspect of inventory management.
- Make Warehouse wise inventory record:
While keeping records of the available inventory, it is always advised to keep the record warehouse wise so that any overbooking can be redirected to the available warehouse for a successful order fulfillment.
- Automate Warehouse Management
Automation of each warehouse includes cycle count, serialization of stocks, quality check, put away option, shelving, barcode scanning, PO generation, gate pass, and a lot more.
- Identify Stock Demand segregated Geographically
Multiple geographic locations will have different demands, choices. The Omnichannel solution must have an excellent data analytics tool to provide a report on the demand pattern on the basis of warehouse location and season of sale.
- Have multiple supplier management for high demand products
For fast-moving items are items, there is always a concern of shortage that might go unnoticed. Therefore, it’s always safe to have multiple suppliers who can constantly fulfill high-selling items in the stock.
- Audited stocklist Report:
The inventory Count feature in a WMS is used to avoid unexpected stock shortages. All these reports on the dashboard must reflect data that will help you understand your inventory status on a regular basis across the warehouses.
A lean and efficient warehouse keeps your eCommerce business running efficiently and does not hinder your supply chain. Each action should support the organization’s goals while being aimed at increasing productivity and safety, optimizing space, reducing costs, and top-notch customer service. A perfect mixture of automation and manual labor can make managing your warehouse a piece of cake.
EasyEcom’s centralized inventory management solution comes with an advanced state of the art WMS platform which has built-in provisions to handle bulk orders and accounts reconciliation tracking for all your warehouses. Our WMS Solution seamlessly integrates with all the major sales channels. You can sign for a free demo here.
Are you looking for an omnichannel inventory management solution with integrated B2B order management for your eCommerce business? Drop us a line at [email protected] or directly sign up for a demo here.
Managing tens and hundreds of inventory without an organised system in place or methodical analysis tools, especially in e-commerce businesses, can turn out to be a time-consuming process, often resulting in increasing inventory levels with a shortage of fast-selling, profitable items. Without optimizing inventory, organizations run the risk of overpaying but underperforming.