Best Ecommerce Warehousing Strategies for 2024

Running your own ecommerce business can be difficult, especially if all the order fulfillment is done in-house with a limited team. That’s why businesses utilize ecommerce warehousing strategies. Ecommerce warehouses play a pivotal role in order fulfillment, which involves picking, packing, and shipping customer orders. These warehouses can manage inventory, track the arrival of goods, stock duration, and available quantity at any time.

But not all warehousing strategies are created equal. Depending on the nature and scale of your business, different warehousing strategies might be more suitable for your needs. This article will examine the different types of warehousing strategies to help you determine which one is best suited to optimizing your ecommerce company’s fulfillment strategy. 

What is Ecommerce Warehousing? 

Ecommerce warehouses serve as storage locations for your products before they are sold through your online store. Third Party Logistics (3PL) providers, wholesalers, distributors, and manufacturers use these warehouses to store and manage inventory. Ecommerce warehouses are also used for fulfillment services, which include picking, packing, and shipping goods to the end customer. 

Types of Ecommerce Warehousing Strategies

A business can utilize many different types of ecommerce warehousing strategies, each with its own advantages. Choosing the best warehousing strategy for your online business depends on cost, space needs, and what kind of ecommerce fulfillment services and shipping processes your business requires. Below is a list of the advantages, disadvantages, and considerations for the most common types of warehousing strategies.

Using Your Home As A Warehouse

A founder’s garage, basement, or spare bedroom doubling as a warehouse has birthed countless ecommerce businesses. This in-home “warehouse” is where an ecommerce business uses an employee or founder’s personal residence to store, pick, pack, and ship orders. It’s common for a new ecommerce business to use a home warehouse setup when the company is just starting out. It’s cheap (if not free!), convenient, and in the early stages of a business, when orders are few and far between, often the default starting option.

These warehouses can become impractical as your business grows and you can no longer keep up with order fulfillment or storage needs.

Advantages: 

• Low costs: Costs associated with home warehouses are rent, mortgage, or utility fees connected to the home – there are no extra storage fees.
• Oversight into your fulfillment: Fulfilling orders from home allows complete insight into and control over inventory, packaging, and shipping. You will always know what is going on in every aspect of your fulfillment process.

Disadvantages:

• Size limitations: The size of your home warehouse determines the size of your fulfillment operations. As your order volume grows, finding the space needed to fulfill orders from home can become challenging. 
• Lifestyle disruptions: Mixing business operations with your home environment can blur the line between work and personal life. This can lead to burnout and stress, and the activities related to fulfillment might affect the lives of others sharing your space.
• Time commitment: Picking, packing, and shipping each order by hand takes up more time the more your business grows. This can take away from the time needed to focus on business growth activities, limiting your company’s ability to scale.
• Risk of errors: With employees packaging orders from home, there is an increased risk of fulfillment errors occurring. A standardized fulfillment process is essential if you use a home warehouse setup to reduce unnoticed mistakes. 

Is This Warehouse Right For You?

Home warehouses might be right for your business if:

• You have a small business, or you’re just starting out.
• Your products and packaging are highly customized.
• Your business does not utilize a manufacturer and produces all your products in-house.
• Your home warehouse has enough space to accommodate expected order volume increases.

Leasing and Running Your Own Warehouse

When you lease and operate your own warehouse, you rent a space to store inventory and pack and ship all your orders. Leasing a warehouse space helps companies access storage facilities on a contractual basis from companies who own the property. This means your business is responsible for hiring a fulfillment team and configuring the warehouse. Companies often hire temporary employees, employ warehouse managers, or integrate their own Warehouse Management System (WMS) into the warehouse space.

Advantages

• Flexibility: This warehouse provides your business with an open storage space that you can customize to fit your inventory needs. 
• Increased inventory capacity: Renting a warehouse allows you to expand your storage space to meet growing demand and order volumes.

Disadvantages

• Price Increases: When renewing your contract, landlords can increase your rent which can lead to higher overhead expenses for your business.
• Requires warehouse management expertise: If you lease a warehouse, you become responsible for hiring your own staff. You are also responsible for implementing a warehouse management system and establishing warehouse operation processes.
• Over-extending your business: Moving from in-house fulfillment to leasing a warehouse requires careful consideration of your current order volume. You’ll need to rent a space that’s large enough to handle your existing needs but also with enough extra room to accommodate future growth. This approach may lead to leasing a larger warehouse with higher costs that might be underutilized at the start.

Is This Warehouse Right For You?

Leased warehouses might be suitable for your business if:

• You manufacture products at the same location as the warehouse.
• You don’t expect your order volumes to change dramatically over time.
• You have custom packaging and shipping requirements.
• You want to personally run your fulfillment operations long-term.

Outsourcing Warehousing and Fulfillment to a 3PL

Third-party service providers, like 3PLs, are companies that run fulfillment centers and warehouses. With this strategy, a 3PL receives your inventory and manages storage, picking, packing, and other order fulfillment services. They also typically process thousands of orders daily and integrate seamlessly with your ecommerce platform to fulfill orders in real time. They handle all the behind-the-scenes logistics to ensure your products arrive in your customer’s hands quickly and efficiently. 

Ecommerce fulfillment warehouses and 3PLs are long-term fulfillment solutions. They can scale to meet your business’s growing inventory storage, order fulfillment, and shipping needs. These 3PLs often offer inventory management software that provides real-time updates and visibility into your orders and stock levels. Outsourcing your fulfillment to a 3PL allows you to spend more time growing your business and less time worrying about fulfillment.

3PLs are a turn-key fulfillment solution that can manage your fulfillment-related operations and costs. Many 3PLs build long-lasting relationships with shipping carriers, allowing them to negotiate discounted shipping prices. This ensures that their clients receive the best shipping rates available. 3PLs can also help you optimize your logistics operations to reduce unnecessary costs. 

Advantages

• Decreased fulfillment and delivery times: Many 3PLs have cultivated strong relationships with shipping carriers. Clients can use these relationships to ensure efficient delivery times and lower shipping costs. 
• Reduced operational expenses: Since 3PLs operate out of fulfillment centers on such a large scale, they can often offer reduced operational expenses. This can include rent, utilities, dunnage, and courier fees.
• Long-term fulfillment solution: Businesses often partner with 3PLs for years, allowing them to build lasting relationships with their fulfillment experts. These partnerships also provide businesses convenience as they do not need to switch warehouse providers and frequently shuffle around their inventory. 
• Industry expertise: Partnering with a 3PL allows you access to industry experts and dedicated account management. Relying on their fulfillment expertise can allow you to focus on growing your business.
• Seamless Integration: 3PLs and their fulfillment centers typically come equipped with built-in technological integration capabilities. This makes it easy to start fulfilling orders through Shopify and other ecommerce platforms immediately.

Disadvantages

• Minimum order requirement: Some 3PLs require a minimum monthly order volume to partner with a business. A business might have to search for a 3PL that will work with their specific order volume. 
• Product requirements: If you are shipping very large, heavy, or dangerous, it may be challenging to find a suitable 3PL due to specialized storage and handling requirements.

Is This Warehouse Right For You?

Fulfillment Centers might be right for your business if:

• Your business needs to spend more time scaling and less on order fulfillment.
• Your business wants access to industry relationships to obtain competitive shipping rates and costs.
• You’re looking for a reliable partner with industry expertise.
• You expect your order volume to grow beyond what you can fulfill in-house.
• Your business is looking for a long-term fulfillment partner.
• You’re looking to access better rates with carriers and save on shipping costs.

On-Demand Warehousing Solutions

On-demand warehousing is a solution where businesses can rent space in shared warehouses that accommodate multiple tenants. Unlike partnering with a 3PL, this type of ecommerce warehousing is more transactional and short-term, without added support.

These warehouses operate on a pay-as-you-go model. Companies can scale up or down their storage capacity, depending on availability, paying only for the space and services they utilize.

However, on-demand warehousing can run the risk of inaccurate order fulfillment if you contract the warehouse to fulfill orders for your business. Many on-demand warehouses can have varying levels of safety procedures, carrier relationships, and differing picking and packing processes. Additionally, sharing space with other businesses can mean less control over the specific conditions and handling of your inventory. 

Advantages

• Short-term solution: This is effective if your business requires temporary warehouse space to store goods and fulfill orders. 
• Flexible arrangement: On-demand warehousing allows businesses to scale their storage and distribution needs according to demand fluctuations.
• Lower fixed operational costs: On-demand warehouses reduce the need for long-term lease agreements and maintenance costs. Businesses only pay for the storage space they require, reducing fixed costs.

Disadvantages

• Integration Challenges: If you contract the on-demand warehouse to fulfill orders for you, then integrating the warehouse with your existing ecommerce platforms, systems, and workflows can present challenges. Businesses need to establish seamless data exchange and integration. If they do not, data syncing problems can arise between your business’s ecommerce platform and the warehouse.
• Risk of fulfillment errors: Companies who arrange for on-demand warehouses to fulfill their orders and manage their storage and distribution activities risk potential service interruptions and quality variations.
• Lack of control: Given that multiple clients may utilize the same space, achieving full control over inventory management might not be possible. This is especially so if the warehouse is fulfilling orders for your business. 
• Poor customer service: These warehouses usually employ offsite customer service representatives who might not be aware of the requirements of your business’s products and operations. Consequently, addressing ticketed issues becomes challenging due to extended wait times and the absence of real-time visibility into operations.
• Lack of Expertise: If you haven’t arranged for your on-demand warehouse to fulfill your orders, then you will be responsible for managing your own fulfillment operations. This means hiring and managing your own staff and building a warehouse management system – all activities that take away from your time to focus on your business.

Is This Warehouse Right For You?

On-Demand Warehouses might be right for your business if:

• Your company experiences extreme seasonal fluctuations in demand and requires flexibility to scale up storage capacity quickly.
• Your business plans to expand its reach and needs a temporary solution to position your inventory closer to your target market.
• Your business is testing a new product and is still determining future demand and storage requirements.

Should You Do Fulfillment In-House or Outsource?

As your business grows, managing increased order volumes, expanding inventory, and meeting customer demands can become challenging. A 3PL provider that operates a fulfillment center, such as Shipfusion, is already equipped with the infrastructure, resources, and expertise to accommodate your business with turnkey fulfillment solutions.

Shipfusion handles all aspects of order fulfillment for your ecommerce business. It scales operations seamlessly to ensure accurate fulfillment during peak seasons. Shipfusion also has dedicated in-house and on-site Account Managers that work with each client to learn the ins and outs of their business.  

Outsourcing your fulfillment to Shipfusion means taking back the time you need to focus on growing your ecommerce business. If you want to learn more about how Shipfusion’s customizable fulfillment solutions can help streamline operations for your business, contact one of our fulfillment experts today.