Do You Need a Separate E-Commerce Warehouse?

July 12, 2016 by Amware Fulfillment

ecommerce_warehouse.pngWhen E-commerce came on the scene, most retailers and distributors set up separate E-commerce warehouses to handle their online operations. Now, we’re seeing more companies taking an integrated approach that incorporates both activities under one roof, utilizes the same labor pool, and leverages other economies of scale across the firm’s entire operation.

You Can’t Just Ignore It…

“With the growth of omni-channel getting more and more difficult to ignore, these firms want a common inventory pool to draw on and software platforms that can address their entire operations – not just one facet,” writes Commonwealth Supply Chain Advisors’ Ian Hobkirk in Key Distribution Strategies of Top Omni-Channel Retailers. “Inventory split between a retail distribution center and an E-commerce warehouse, for example, creates both redundant inventory and safety stock.”

Plus, stores needing E-commerce inventory (and vice versa) can’t readily access it, particularly when it’s located in multiple brick-and-mortar DCs. “By bringing everything under one roof, companies gain the flexibility they need to be able to move that inventory to the channel that needs it while not being locked into a rigid forecast,” Hobkirk states.

We write about this in our eBook: Mastering Multi-Channel Fulfillment.

Traditional Warehouse, E-commerce Warehouse, or a Little of Both?

Despite these shifts, the question of whether you need a separate warehouse for E-commerce remains a highly individualized decision. In A Segregated Approach to E-Commerce Fulfillment, ARC Advisory Group’s Chris Cunnane says a recent survey shows that 63% of companies are fulfilling E-commerce orders through a traditional distribution center (DC) while 47% use a web-only DC. (NOTE: the reason that the two figures don’t equal 100% is that survey respondents were able to select multiple responses, as different items and categories may be housed in different types of DC’s.)

“Nearly 70% of [companies] are using the same facility for e-commerce fulfillment as well as traditional fulfillment. This means that companies are replenishing stores, fulfilling call center orders, fulfilling store-based delivery orders, and fulfilling E-commerce from one facility,” Cunnane writes. “This central DC gives the company more visibility into inventory control processes and helps to align their separate channels of operation.”

According to the ARC survey, 63% of firms segregate their warehouses, most commonly by using actual, physical separation between the two operations – either a barrier that separates the two or distinct set-up locations for pickers, packers, and shippers. 

E-commerce Pushes the Envelope

With the growth of E-commerce pushing the envelope of traditional warehousing strategies, and with manufacturers fulfilling direct-to-consumer orders via e-commerce channels while also maintaining a traditional order fulfillment process, HighJump Software’s Carl Marin offers these key points to consider when deciding on an E-commerce warehousing strategy (read the full article in Manufacturing Business Technology here):

  • Direct-to-consumer and drop-ship orders. To succeed in e-commerce fulfillment, you’ll need to profitably manage single-line and small multi-line, direct-to-consumer (DTC) and drop-ship orders.
  • Small order sizes. Small-parcel shipping should automatically rate-shop and never add more than a single touch point.
  • Picking, packing, and labeling an entire direct-to-DC order prior to sending your routing request can take up precious floor space and delay shipments to your customers.
  • Order accuracy. Fulfill perfect orders regularly to increase your vendor scorecard.
  • Managing returns. Returns can be annoying, but successful manufacturers and virtual merchants are embracing them because it’s critical to give consumers options.

“The role of the E-commerce warehouse is shifting, and shipping directly to consumers can be a big change for some manufacturers,” Marin writes. “Those that focus on best practices for their facility will be the organizations that increase their loyal customer base efficiently and profitably.”

Amware Logistics acts as a single fulfillment partner for companies that sell through multiple channels.  We handle B2B product distribution as well as high-volume, direct-to-consumer fulfillment for online retailers and direct sellers. To inquire about services at Amware’s multi-client fulfillment centers, please contact us today.

Mastering Multi-Channel Fulfillment  Multiple sales channels should not require redundant inventory, warehouses,  and information systems. Download our free white paper.

Filed Under: eCommerce Fulfillment