What is Warehousing?
A warehouse is an industrial building that stores or houses goods for a particular use. Manufacturers, distributors, import/exporters, and anyone working with large scale volume of products along the supply chain uses a warehouse. While a storage warehouse will keep products for long periods of time, a distribution center might use a warehouse to sort products for shipping out to customers, keeping them for days or weeks only.
Often a 3PL will use a warehouse as an integral part of their ecommerce fulfillment. Through a complex web of systems, the 3PL will organize products in an efficient way throughout the warehouse to be able to quickly pick and pack products when they are ordered online. The 3PL also facilitates receiving products to the warehouse coming from the manufacturer, and also working with shipping carriers to pick the products up to move to end-customers or retailers. Any good warehouse also has a robust system of operations, from an IT warehouse management system, to human operators who help pack products.
Is a Warehouse the Same as a Fulfillment Center?
Not exactly. Both house products, but the function of a warehouse versus a fulfillment center (also called a distribution center) is very different.
When something is described as a warehouse, that often implies a storage warehouse. This is where products are kept for longer periods of time, months and years. This is really the only function of a warehouse, storage.
A fulfillment center, on the other hand, is a more active warehouse that may allocate portions for longer term storage, but also have sections for picking, packing, kitting and assembly, labeling, sorting, and specialized product areas that may have refrigeration, or other controlled environments for products that require a special environment.
The main function of a fulfillment center is to provide dedicated space to ecommerce companies for receiving and processing goods, then sorting and shipping them to end-customers who have purchased the products online. A fulfillment center can be owned and used by one single company, or operated by a 3PL or 4PL to process products from many different companies.
If you’re an ecommerce brand new to the world of fulfillment and logistics, you may need this primer on warehouse terms, acronyms, and concepts.
How Does Warehousing Fit into Ecommerce Fulfillment
Inventory Management
All of the items within a warehouse need to be organized and in a way to calculate the exact number of SKUs at any given time.
Balancing the flow of products and component parts from the manufacturer to the end-customer is a very difficult operational aspect of managing product business. At the heart of it is inventory management, or keeping the right amount of SKUs in a distribution center to be able to fulfill orders within a day, but not having too many that the distribution center becomes a storage warehouse with an overflow of products. This requires correct forecasting for order volume, clear communication with the manufacturer and freight forwarder to receive products regularly, and a great inventory management tool to see real-time data on how many items are in the stock. This is all in an effort to avoid stockouts and customers getting delayed shipments due to backordering.
If you plan to store inventory in multiple warehouses, be sure you understand the resources, planning, and tools it requires to have a successful distributed inventory strategy.
A great warehouse will have systems to accurately see the inventory count at any given time. While manual order counting is still done in some warehouses, modern technology is improving each year to be able to scan and count components in shorter and shorter amounts of time.
Order Picking
When an end-customer places an order online, that order is flagged to the distribution center so that it gets picked from the warehouse shelves. Picking is one of the most labor-intensive aspects of the supply chain. Within a huge warehouse of multiple SKUs for many different companies, it’s a big endeavor to get to the right item quickly. Modern fulfillment center warehouses have very robust systems to ensure they pick accurately and efficiently. There are many types of picking methods: single order picking, batch picking, zone picking, and many more.
Kitting & Assembly
Once an order is picked, it will move to a station within the distribution center to get packed into a shipping container. Then the order is accompanied by additional materials or items before getting packaged, labeled, and shipped.
Some basic 3PLs only offer picking and packing. This means single items and orders get picked and put directly into a parcel, labeled and shipped. A 3PL with value added services and customizable fulfillment solutions will take extra steps to ensure their clients can give end-customers the exact experience they aspire to.
Assembly is the act of collecting multiple components and assembling them into one item. For consumer electronics products, this sometimes means assembling a few component parts together before packing them, or even updating software to the latest version. Kitting, on the other hand, refers to adding multiple items to the same order. For CPG brands, this may mean ensuring multiple flavors of a product, or accessories to a product (camera lens, strap, and tripod) all go into the same order.
To accurately perform kitting and assembly, the distribution center warehouse requires modern IT infrastructure to ensure the right items and components get into the correct packages.
Shipping & Receiving
Once an order has all of the correct materials, components, and parts assembled, it gets boxed up and labeled for shipping.
All fulfillment center warehouses have carrier pickups multiple times per day. The type of carrier service will depend on the amount of products being picked up and where they are going next. The warehouse needs to have docks and stations set up for various volumes of goods. If multiple pallets of goods are going to a retailer, for example, the dock needs to accommodate a large freight carrier truck. For direct to consumer (DTC) pickups, smaller box trucks and carrier vans need to be accommodated to fulfill a smaller amount of product pickup.
The same goes for receiving at the distribution center warehouse. There needs to be adequate space for unloading pallets of products in order to get them on warehouse shelves.
All in all the role of the warehouse in shipping and receiving is to optimize a smooth transition from all activity at each of the loading docks. A warehouse should employ an updated system for booking times at each dock, otherwise there will inevitably be a log-jam of trucks and carriers vying for time, having to wait, and getting frustrated.
Returns Management
Many smaller companies leave returns management (RMA) as an afterthought, but it’s a large component of any ecommerce business. A warehouse needs to be able to facilitate a simple process to receive any item that is returned, no matter the reason.
Some warehouses and 3PLs add extra steps for their clients, refurbishment of returned products, disposal of returned items, and even real-time tracking for end-customers to ensure their returns get back to the warehouse.
Warehouse Operations & Management System
A great warehouse is like a well-oiled machine, all the labor, systems, orders, products, and third-party partners can flow through and get what they need done without colliding or missing a beat. All functions that the warehouse is responsible for must seamlessly interact with one another. This is considered the operations of the warehouse, the ultimate goal usually of operations is to ensure the customer’s orders are fulfilled accurately, and on time.
A warehouse management system (WMS) is a software or IT connected network that will help operations run smoothly by automating all functions that happen within the warehouse. Their primary purpose is to increase order throughout and reduce errors from the moment an order comes in to the moment it ships out. Other improvements a WMS can have within a warehouse include: reducing total time for fulfillment, increasing accuracy of inventory management and picking, improved customer service through traceability, greater space utilization throughout the warehouse, increased warehouse productivity, and reduced labor cost.
Important Warehouse Technology For Efficient Operations
Automation
Your warehouse should have automated and integrated IT systems that connect the orders customers are placing, to all other workflows in the warehouse: picking, packing, kitting, labeling, and shipping. Any misstep there could lead to delayed or undelivered goods which means disgruntled customers. There are many platforms that help integrate the many applications needed for an order to move through these steps in the warehouse accurately, efficiently, and quickly.
Conveyor technology is becoming widely used in many warehouses of all kinds. By placing conveyors in between stations it allows human operators to stay in one place and perform their tasks more efficiently. They aren’t burned by stacking and moving products around a warehouse. Plus during the COVID pandemic it allows human operators to maintain a safe distance from each other, to stay healthy.
Robotics
Many warehouses have begun implementing robotic picking arms, and other cobots (robots that can safely interact with human operators). While implementing a robotics system used to be a very expensive endeavor, the cost (financial and labor) have been reduced significantly in the past few years. There are now cheaper solutions that are also more noble to fit the needs of the warehouse. Now when a robotics solution is introduced, it can be modular and fit into the systems of the warehouse, rather than assuming the warehouse functions will have to mold to the new addition.
Plus the benefits of using robots in a warehouse have increased as the technology has become more usable. Robots work efficiently for longer hours and everyday, increasing throughout and labor when human operators cannot work. Robots are more accurate more often by eliminating human error. In many warehouses they have taken over the extremely rote tasks that would fatigue or strain human operators.
At DCL Logistics, we can help you with fulfillment and shipping. We have many services that enable trendsetting brands to scale their business. If you’re looking for 3PL support, we’d love to hear from you!
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