The ecommerce landscape of today is a highly competitive sphere with manifold players targeting every possible niche. With a global economic downturn due to the pandemic, the ecommerce space has stepped into the spotlight, with some fundamental changes from adjusting to the supply chain disruptions, new customer acquisition and retention blueprints, and greater spending on amplifying their reach.
In this changed landscape, efficient warehouse management is more important than ever. As an ecommerce business selling from distribution centers, warehouses or fulfillment centers, it is directly linked to the success of your business.
Neglecting warehouse management can lead to poor staff performance, low profit margins, inefficient fulfillment, high operating costs and mismanaged inventory. It can also damage your customer relationships and affect the number of returning customers.
What makes e-commerce warehousing different?
Ecommerce warehousing faces a distinct set of challenges that require strategic solutions. These challenges encompass various aspects of warehousing operations, from order fulfillment to technology integration and security:
- Order Fulfillment Efficiency
The cornerstone of successful ecommerce lies in efficient order fulfillment. Customers expect swift, accurate, and on-time deliveries, necessitating streamlined processes within the warehouse. Balancing speed with accuracy while managing order spikes during peak seasons demands sophisticated logistics planning and execution.
- Inventory Management Complexity
Ecommerce warehouses handle a vast array of products, each with unique storage and handling requirements. Proper organization and efficient space utilization are crucial to prevent damage, reduce picking errors, and optimize inventory turnover. This complexity increases as warehouses strive to accommodate a wide range of product sizes and characteristics.
- Fluctuating Order Volumes
Ecommerce experiences fluctuating order volumes due to factors like promotions, holidays, and market trends. Warehouses must scale their operations rapidly to meet demand surges, while avoiding overcommitment during slower periods. Flexibility in staffing and storage solutions is essential to maintain efficiency and cost-effectiveness.
- Reverse Logistics Management
The rise of online shopping has also led to an increase in returns and exchanges. Efficiently processing returned items, determining their condition, and deciding whether they can be resold involves complex reverse logistics management. This process can strain resources and impact overall warehouse productivity.
- Technology Integration and Automation
While technology and automation offer promising solutions to streamline operations, their integration presents challenges. Adopting and maintaining inventory management systems, robotics, and automated picking solutions require significant initial investments, training, and continuous updates. Ensuring seamless compatibility between various systems is crucial for optimizing warehouse processes.
- Data Security and Privacy
Ecommerce warehousing involves the storage of sensitive customer data, including personal information and financial details. Protecting this data from cyber threats and ensuring compliance with privacy regulations is paramount. Implementing robust cybersecurity measures and maintaining compliance safeguards is a constant challenge.
- Last-Mile Delivery Challenges
The final leg of the ecommerce journey, last-mile delivery, presents unique challenges. Efficient routing, managing diverse delivery options, and handling customer expectations for timely and convenient deliveries require careful coordination and optimization.
Assessing your Ecommerce Fulfillment Operations
The specifics of your fulfillment business determine the factors to consider in the purchase decision of a WMS. Using certain metrics, you need to outline the state of current operations and the desired state of operations. The following questions can make things clearer:
- Do you have a single warehouse or multiple locations?
- Are there plans for expansion in the near future?
- What clients do you cater to?
- What products do the clients sell?
- What sales channels do you use?
- Who are the manufacturers/suppliers your clients buy from?
- What are the expected order volumes?
- What is the average number of line items and units per order?
- How complex are the packing, labeling and shipping processes?
Another important consideration is the current workflows of inbound, outbound and storage processes in the warehouse. Potential bottlenecks can be identified through this exercise, and standard operating procedure can be established. In order to reach this conclusion, you must ask yourself the following questions:
- What is the current receiving process and how are quality checks conducted?
- How is the putaway of pellets, boxes and units achieved and what are the movement patterns?
- How is the putaway location decided?
- How are lot numbers and bin numbers tracked to comply with FIFO/FEFO?
- Is there a real-time view of each product’s placement and the SKUs?
- What are the standard picking, packing, sorting and shipping processes?
Evaluate the distinct needs and prerequisites of your clients that you must consider within your procedures and workflows. This might encompass a range of factors, including specialized handling and supplementary services.
- Are there any specific demands from the clients concerning the treatment of their merchandise?
- Should the client’s products be placed in particular environments, like refrigerated or dry storage, or ambient storage, etc.?
- Do you provide your clients with value-added services like packaging, grouping, assembly, inspection, etc.?
- What type of reporting commitment have you made to each client? This includes up-to-the-minute/periodic reporting for inventory, orders, returns, operational efficiency, and warehouse accuracy metrics.
- What SLAs (Service Level Agreements) have been assured to the client? These could involve one-day/two-day order fulfillment, and so forth.
From the preceding exercise, you’ve gained a comprehensive grasp of your clientele, their expectations from your fulfillment enterprise, and the necessary strategies for setting up and executing fulfillment operations that align with these expectations.
Establishing Goals for the Warehouse Management System (WMS)
This stage is pivotal in the selection, deployment, and customization of the appropriate WMS to suit your distinct prerequisites.
These objectives often stem from the prior two exercises—pain point identification and business environment analysis. Ideally, the WMS should alleviate the pain points and facilitate the execution of unique fulfillment operations tailored to your specific business.
These objectives can encompass both qualitative and quantitative aspects and should clearly articulate the ultimate outcomes your fulfillment enterprise aims to attain. They need to be quantifiable and should be communicated to potential providers during the WMS assessment phase.
Meanwhile, it is equally crucial to distinctly define the metrics that the WMS is intended to influence and how these metrics impact the overall vitality and performance of the company.
Several common metrics that fulfillment enterprises aim to enhance through a contemporary WMS implementation include:
- Warehouse throughput
- Order fulfillment rate
- Daily/weekly/monthly order processing volumes
- Order lead time
- Reduction in labor costs
- Net profit margins per fulfilled order
What do you need to look for in a WMS for e-commerce?
The following WMS features are particularly suited to e-commerce businesses:
Integration with ecommerce marketplace
A warehouse management system offers the capabilities to integrate with the ecommerce store and update product catalogs, dispatch information, order status tracking, and stock levels. API integrations allows orders from the ecommerce store to show up directly in the WMS application.
Control Incoming Goods
With a mobile application that displays which supplier or production line is about to deliver, and in what quantity, staff can stay informed and verify the quantity and quality of the product. Initiating the warehousing process or sending back the product can be done as quickly as possible.
Ecommerce orders can come in from any location around the world. The application must be able to support a variety of units and foreign currencies. Shipping documentation for exporting is a complicated matter and the WMS must be able to handle that too.
As an ecommerce business that is continually growing, choosing a WMS that can grow with your business is incredibly important. The platform must be able to handle multiple warehouses, with modules for a variety of operational scenarios. It must be able to scale up or down based on demand fluctuations and accommodate changes in warehouse layout, processes, and product lines.
Handling returns can be complex. An ecommerce WMS streamlines the process by identifying the best disposition for returned items, whether restocking, repackaging, or disposing. Losses can be minimized and the return-to-stock cycle is sped up.
Cross-Docking and Transloading
An ecommerce WMS facilitates seamless cross-docking and transloading operations by coordinating the movement of goods directly from inbound to outbound trucks. The objectives of cross-docking can be pursued in a more streamlined manner like reducing handling and storage time, and speeding up the distribution process.
In order to actually be useful, efficiencies need to be observable and quantifiable. An effective module will showcase not only a graphical overview of the primary metrics and key performance indicators (KPIs), but also offer a base level capacity to define the metrics you want, and also input or derive values necessary for accurately populating the data.
Smart Put Away Techniques
The ability to establish regulations for storage allocation, taking into account factors like popularity in terms of picking frequency, seasonal demand, storage unit attributes, dimensions, and volume is essential. There are instances when it is crucial to maintain a significant distance between items with distinct attributes, like food items, to mitigate the potential for allergen cross-contamination.
Ecommerce WMS Best Practices
As your business grows, there are a number of challenges in regards to ecommerce warehousing that you may encounter:
- Your first storage space may become too small to match demand
- Safety stock might exceed needs, and you may need an overflow location specifically to store it
- Warehouse leasing or purchasing land
- Investment in fulfillment infrastructure like shipping supplies, conveyors, forklifts, technology, certifications and staff
- Need for multichannel inventory management due to new sales channels
- Need for secondary fulfillment centers to reduce shipping costs and transit times
- Scaling international fulfillment capabilities
To ensure that these challenges are tackled in a meticulous manner, and to maximize business efficiency and customer experience, some best practices must be followed:
Test multiple picking systems to find the perfect fit
There are a wide variety of picking methods that ecommerce businesses can choose from. Advanced tools suited to ecommerce warehousing can auto-generate picking lists based on the ordered items’ proximity to one another, and enable batch picking to reduce the walking paths and time it takes to pick an order. Make a decision if this might be the best picking system, or if other systems can offer improvements.
Set minimum points for inventory
One of the biggest inventory management challenges is finding the right balance. When it’s too much, profits can be harmed and cause high inventory carrying costs, while not enough can affect customer retention numbers with out-of-stock notices in case demand spikes.
Thus a smart precaution in inventory management is setting inventory minimums – a good WMS will let businesses set reorder points, so they can receive a notification once a product reaches a specific threshold.
Distribute the inventory
Using the strategy of distributing inventory across multiple warehouses, shipping costs can be reduced. When an order is placed, it can be prepared and dispatched automatically from the distribution center closest to the customer. This translates to faster, more cost-efficient delivery, improving the customer experience.
Utilize the WMS features
An ecommerce WMS is a software specialized for ecommerce warehousing. Each feature is essential to smooth functioning of the ecommerce warehouse.
- Providing real-time insight into your inventory and product availability
- Managing and monitoring eCommerce supply chain operations, from the manufacturer to the distribution center
- Forecasting inventory to determine when your stock might run out
- Streamlining the eCommerce fulfillment process and make your operations more efficient
- Integrating your eCommerce store (and other tools)
- Optimizing inventory management to determine stock availability in real-time, forecast inventory more easily, and set reorder points in advance before a shortage can occur.
Return on Investment
Setting up an ecommerce WMS is an expensive affair. In order to justify the purchase of a WMS, you will need to know your figures inside out and calculate cost vs benefit for a return on investment study. Choosing the right WMS is also vital. The wrong WMS will cost your business rather than save money.
Conclusion: Flexibility and efficiency are key in an eCommerce WMS
Ecommerce warehousing can be tricky with a lot of variables. Your business needs an efficient ecommerce warehouse to improve profits and scale for the future.
When researching warehousing options for your ecommerce business, consider that you’ll need supply chain experts on hand who can manage fulfillment and provide a great customer experience.
You can find out more about Warehouse Management systems here.