This post is by Avery Walts of SkuVault.
Picture this: you’re a growing ecommerce company that has outgrown the storage capabilities of your basement. You need a big warehouse, but you’re not sure how to even begin or what to do once you have a warehouse.
In this article, I am going to discuss the best practices and basics of running an ecommerce fulfillment warehouse. Along the way, I will detail everything from outlining objectives to designing safety procedures for your employees.
- Start With the Basics
- Practices Within a Warehouse
- Establishing Warehouse Guidelines
- In-House Fulfillment vs. Outsourcing
- Integrations to Consider
- Looking Ahead to the Future
Start With the Basics
For any good plan to work there needs to be groundwork laid first. To create an ecommerce fulfillment warehouse successfully, owners need to plan the amount of storage space needed, a layout for the warehouse, and the objectives for each decision. These objectives could be keeping storage costs low or maximizing warehouse space.
Let’s take a closer look at planning, strategizing, and implementing warehouse storage plans.
Determine the space needed
If you can determine the amount of space needed for all warehouse processes, it will make good use of the total square footage of the building, and not just floor area. Areas of the building include storage (obviously), shipping, sorting, receiving, packing, employee offices, and product locations.
Some other (maybe not so obvious) things to consider are aisle widths, circulation paths, bay heights for shipping trucks, and overhead lighting.
Overall, a warehouse layout needs to minimize costs and maximize efficiency of space without increasing additional resources. It’s important to outline these details, big and small, before implementing a storage strategy.
Planning ahead of time also leaves room to plan for unexpected events, like excess inventory, unrealistic timelines, or a decline or expansion of company growth.
Plan your storage strategy
Even the best-designed warehouse can fall down if products are not stored efficiently. It’s tempting to think that efficient storage means cramming products into every available square inch of space, but it’s not as simple as that.
Picking staff don’t spend most of their time picking products, they spend most of their time walking between locations. If your most popular products are stored the farthest from packing stations, it will take a lot longer to pick each order. Likewise if products that are frequently ordered together are stored at opposite ends of the warehouse.
The product popularity storage strategy groups products into 3 categories:
- A products: your fastest moving SKUs.
- B products: your average-selling SKUs.
- C products: your below-average SKUs.
Categorize each of your SKUs into the categories above, then plan your storage layout accordingly.
For example, you could store A products at the end of aisles, closest to packing stations. When demand is highest, such as during the holiday shopping period, you could even create a separate area right next to the packing stations for the very fastest-moving SKUs. Then store B products in the middle of aisles, and C products on high shelves or a mezzanine level, if you have one.
It’s important to be able to reorganize your storage as demand changes, or you could find that your most accessible locations end up holding average or even slow-selling products. If possible, leave empty space in your A and B areas, to allow room for expansion when sales velocity changes or brand new SKUs are received.
Implement the plan
After all changes have been put into action, make a series of checks to make sure no problems arise. This could be incorrect layout measurements resulting in a shortage of storage space or misplaced or miscalculated inventory.
Practices Within a Warehouse
The layout of your warehouse flow comes into play in the receiving portion of operations. It’s important to optimize the location of the receiving bay so packages can smoothly be transferred to storage.
This is the stage where products are checked for things like damage and quantity that must be correct before moving on to the next steps. Receiving can be performed manually, or automatically with a WMS (warehouse management system). However, when done manually, there is a greater risk for human error which in the end costs your business time and money.
Picking is a pivotal process in a warehouse operations chain. If this step gets messed up, the repercussions carry until the final step of shipping. Small but effective measures should be used to ensure the correct products are picked, like not mixing multiple SKUs in one location and automating picking processes with features like wave picking. On that note, let’s talk about different types of picking and the pros and cons of each.
- Basic order picking. This is the simplest type of order picking, where staff pick one order at a time. It is ideal for paper-based picking, and provides a fast response time for order fulfillment. But it is the least efficient method as the picker has to travel around the warehouse for each item in an order – there is no grouping of items in the same location.
- Wave picking. Wave picking is software-controlled and paperless. The pros include the ability to change picking order based on quantity changes in real-time. It’s also great for multi-items orders and can account for issues that may arise during the pick process that standard paper lists cannot foresee. Wave picking requires a software system to calculate the items to be picked in each wave, and enable mobile devices to be used.
- Zone picking. Zone picking divides SKUs into different zones of a warehouse for pickers to work in those assigned areas. The pros of zone picking include increased speed in the pick process and the ability to create specializations based on the skill level of employees.
Optimize your warehouse space by placing the packing area close to the shipping area. This will help to minimize mistakes before the package is shipped off.
It’s also important to pack products in the correct shipping boxes. Sending customers the wrong product when it could have easily been caught loses your company money instantly. Negative customer satisfaction starts at early points like this, so be sure to optimize your packing procedures and run tests to make sure all employees are trained correctly.
The key to optimizing shipping is to offer a variety of shipping options and get packages out of the warehouse at an efficient pace.
If you’re only offering one shipping method, you could see shopping cart abandonment because customers may prefer a lower price point or quicker speed with a different company. You want to offer customers multiple shipping options so they can choose the fastest way possible to deliver goods.
If a warehouse experiences regularly experiences major mistakes like mis-ships and incorrect inventory counts, it’s probably time to consider an automated way of running operations.
Warehouse management systems reduce human error by replacing certain manual processes with automated processes. This can include wave picking, like I mentioned earlier, quality control features to check packages for accuracy before shipment, or inventory management features to keep an accurate count of all quantities.
The biggest advantage of a warehouse management system is finding the location and count of an inventory item in as few steps as possible. This could be a real game changer if your company is experiencing a loss in sales due to slow performance times, incorrect inventory counts, and the eventual result of these mistakes – poor customer satisfaction.
Establishing Warehouse Guidelines
Think of hiring your warehouse employees like hiring your dream team. You want them to be skilled. You want them to be efficient. And you want them to all have the same goal in mind. This is why it’s absolutely essential to establish warehouse guidelines in safety procedures, working conditions, and fulfillment accuracy before opening up shop.
Although some workers may have previous warehouse experience, each work environment is different from the last. In order to create an orderly and successful warehouse, educate new hires in how your company runs its business.
A working warehouse is a hotbed of injury possibilities. In an ideal world no one would get hurt on the job, but sadly that’s just not reality.
Establish safety procedures for everyone to follow. An easy first step is to make sure aisles and other walkways are always clear of debris and spills, which should be aided by having wide aisles. Have cleaning tools like mops, brooms, and trash cans in multiple areas so staff can clean up after themselves.
Make sure your staff are prepared on what to do and where to go in the event of a fire. They should also be given proper protective equipment in the event of shelving falls or a forklift accident (if your warehouse uses them).
Provide adequate lighting throughout the warehouse. If possible, have the warehouse manager or another dedicated staff member monitor the docks and bays when goods are delivered. One wrong move and someone could be in the blindside of a backward-moving semi truck. Lay out a plan for each worst case scenario and you’ll always be prepared.
A high-volume ecommerce fulfillment warehouse is a fast-paced working environment. It can be physically demanding, especially on people who don’t have previous work experience in a similar field. This is definitely something that varies from person to person, so a way to try and measure physical demand is to look at performance metrics to ensure that safety and fairness is attainable.
To help prevent a possible future staff injury, require that everyone get a physical examination before their first day. This way warehouse managers and owners have a better idea of what they’re working with and what tasks they can ask each employee to perform. If a staff member does have medical disabilities, allow them more frequent breaks and manual labor restrictions such as an exemption from lifting heavy boxes.
Overall, it’s important to brief possible hires on the physical nature of the work. Show them training videos and don’t sugarcoat their responsibilities. If it gets to be too much, and your budget allows, hire more workers to alleviate the burden. In the end you will have happier employees, a faster workflow, and increased sales due to higher customer satisfaction.
Checking inventory for accuracy starts with receiving – as soon as a truck enters the unloading dock. When the first employee gets their hands on a box they must check for accuracy before handing it off to the staging area. If the goods received don’t match the purchase order, for example, any order that includes them will be inaccurate or unfulfillable. It’s very difficult to trace receiving issues much later in the process, such as when orders are being picked.
You can get a headstart on fulfillment accuracy by asking vendors to clearly label shipments and use unique barcodes on each box, so they are not mistaken as the same shipment being received multiple times. Once that is confirmed, check the received items against the original order for accuracy.
Picking, packing, and shipping can easily go awry when done manually. To improve efficiency and accuracy implement a WMS. Since each stage of the process is automated, the risk of human error is greatly decreased.
In-House Fulfillment vs. Outsourcing
There are many things to consider when choosing between an in-house fulfillment method or an outsourced fulfillment method. It depends on a seller’s budget, workflow, and time availability. For ecommerce sellers who choose to outsource fulfillment, there’s a few options to consider including Fulfillment by Amazon and 3PL companies.
For those wishing to fulfill in-house there’s direct-to-consumer, Amazon’s Merchant Fulfillment Network and also Amazon’s Seller Fulfilled Prime. Let’s examine the options.
- Fulfillment by Amazon, or FBA, is when sellers send products from their warehouse to an Amazon fulfillment warehouse to be shipped to customers. FBA is great if you can afford it, but the fees can swallow your business whole if allowed. FBA is also great if you’re just starting out and don’t yet have a warehouse. FBA basically runs on auto-pilot, so you will have more time to manage other things.
- 3PL companies can be great for sellers that need help with their order fulfillment operations, either in whole or part. However, they sometimes have complex or high fees, and may lack options such as customization or specialized handling of fragile products. Their work will probably not be as personal as if you did it yourself, and you may not receive special attention if your company is just one among hundreds of others.
- Direct-to-consumer is simply shipping products to consumers from your own warehouse. Unlike FBA, you won’t incur additional storage costs and you can control your own warehouse operations. You also have free rein to personalize shipping packages and your overall customer service.
- Merchant Fulfillment Network (MFN) for Amazon is shipping products ordered on Amazon directly from your warehouse, in other words it’s direct-to-consumer fulfillment for Amazon orders.
- Seller Fulfilled Prime (SFP) is when companies fulfill from their own warehouse, but ship products with an Amazon Prime badge and Amazon shipping labels. SFP is now open to any eligible ecommerce seller. Sellers with consistent fulfillment capabilities and high performance metrics can sign up for approval. SFP helps sellers win the Buy Box, if they are able to meet the required shipment times.
Integrations to Consider
Shipping software helps ecommerce merchants dispatch their orders. Most software connects to multiple mail carriers, so businesses can offer a range of shipping options to their customers or compare rates to find the most economical service.
Some shipping software is web-based, providing access from anywhere with an internet connection. Essentially, business owners can manage shipments from their homes without needing to visit the warehouse at all. The software generates picklists and prints shipping labels automatically, both of which help prevent human error.
Warehouse management systems
Warehouse management systems (WMS) are highly beneficial to ecommerce merchants running their own fulfillment operations. If you’re experiencing constant order errors, unorganized inventory, or a lack in reports or performance metrics, a WMS is an all-in-one solution.
A WMS automates most warehouse processes, and also integrates with shipping, marketplace, channel management, and accounting systems. Integrations, paired with automation, make for a streamlined, easily accessible system.
If you sell on multiple marketplaces, multichannel management software makes it easy to track product listings across channels. When there’s a change in quantity of a SKU, that is reflected across all channels so there’s not five products listed on Amazon while only four are listed on eBay, for example.
Another benefit of multichannel management systems, besides synchronization, is that they greatly reduce out-of-stocks which can improve search ranking and visibility on the marketplaces.
Looking Ahead to the Future
According to a study conducted by Supply Chain Quarterly published in June 2016, the manufacturer/producer category make up 33 percent of warehouse types expected to become more prevalent in the future. Retailers followed close behind with 24 percent and wholesalers at 20 percent. The results point toward the current wave of new fulfillment warehouses driven by ecommerce and SKU growth.
So what does this all mean? The demand for warehouse growth is booming. That means more employees, more guidelines to set, and more room for mistakes – but also more room for improvement. Business is booming for ecommerce sellers, but rising consumer expectations will continue to put pressure on fulfillment accuracy and the need to reduce human error. So buckle up, people.
This post was by Avery Walts, a Marketing Copywriter for inventory and warehouse management software provider SkuVault. Avery covers the latest updates and happenings in the ecommerce world.
Photo credit: nSeika