Why Strategic Warehousing is Essential for Your eCommerce Business
Logistics Industry August 1, 2023
In the dynamic world of ecommerce, businesses are constantly exploring ways to streamline operations, enhance customer satisfaction, and boost profitability. One of the key contributors to achieving these goals is an often overlooked yet crucial aspect – strategic warehousing. So in this blog, we’ll dive into the concept of strategic warehousing, its importance for your ecommerce business, how to implement it effectively, and why partnering with a leading 3pl provider like McKenna can make all the difference.
What is Strategic Warehousing?
At its core, warehousing is the backbone of supply chain management, serving as the central hub for distributing products to the customer. However, the game-changer for progressive businesses has been the shift from a purely storage perspective to a more holistic approach – strategic warehousing.
Warehousing strategies in logistics take into account a range of factors beyond mere storage – from the geographical placement of your warehouse to the technology used for managing operations and the strategy devised for smooth functioning. It involves creating a dynamic warehousing strategy that's tailored to your specific business requirements, enhancing your operational efficiency and, ultimately, the satisfaction of your customers in the process.
Implementing strategic warehousing involves leveraging advanced technology for packing and processing, effective inventory management, optimizing warehouse location, and developing comprehensive warehouse decisions and strategies – but more on that later.
The Importance of Strategic Warehousing for eCommerce Businesses
To compete in the ecommerce space, businesses must move beyond traditional practices and embrace the idea of strategic warehousing. Here's why:
In today's digital era, consumers demand quick delivery, which has innovated new processes (such as cross docking) in logistics to achieve faster timelines. Strategic warehousing, through a calculated distribution strategy and the right warehouse location, enables faster delivery times. When your warehousing operations are optimized and strategically located, the path from warehouse to customer is significantly shortened, ensuring swift order fulfillment.
Beyond contributing to top-line growth, an effective strategic warehousing approach can positively impact your bottom line too. By optimizing the use of space, streamlining processes, and maintaining optimal stock levels, strategic warehousing can reduce costs associated with inventory holding, transportation, and overall warehouse operations.
Improved Inventory Management
Strategic warehousing goes hand in hand with efficient inventory management. Employing comprehensive warehousing strategies can help businesses track and control their stock more effectively, thereby maintaining the right balance of inventory. This balance helps avoid stockouts and overstocking, which can lead to storage costs, spoilage, and potential lost sales.
Flexibility and Scalability
The ecommerce landscape is dynamic, and your warehousing strategy needs to adapt accordingly. Strategic warehousing provides the flexibility and scalability needed to swiftly respond to changing customer demand patterns, market fluctuations, and business growth. With a robust and flexible warehouse strategy, businesses can ensure they are well-positioned to meet these changes head-on.
Reduced Customs Delays Risk
For businesses shipping internationally, customs delays can be a significant bottleneck affecting delivery times and customer satisfaction. Strategic warehousing can mitigate this by establishing warehouses for distribution in key geographical locations, facilitating simpler customs procedures and faster clearance.
Enhanced Customer Experience
Strategic warehousing is intrinsically linked to customer experience. A seamless warehousing strategy ensures prompt delivery, accurate order fulfillment, and efficient returns handling, contributing to an overall enhanced customer experience. By exceeding customer expectations through strategic warehousing, businesses can establish a competitive edge in the ecommerce marketplace.
How to Implement Strategic Warehousing for Your eCommerce Business
Implementing strategic warehousing might seem daunting, but with careful planning, it can lead to transformative results for your business. Here's how you can go about it:
Analyze Your Business
The first step is to conduct an in-depth analysis of your business. Understand your customer demographics, product range, sales patterns, and future growth projections. These insights will guide your strategic warehousing implementation.
You can also ask the team at McKenna to conduct a needs analysis if you’re starting to ship to mass retailers. We’ll see where there are opportunities for improvement and create a tailored logistics solution that supports your growth.
Choose the Right Location
The choice of warehouse location is pivotal in determining delivery times and transportation costs. Prioritize locations that are close to your major customer bases or have easy access to transportation hubs. Analyze different warehousing location strategies to find the most suitable one for your business.
Invest in Technology
The right technology can revolutionize your warehouse operations, providing real-time visibility, accurate inventory tracking, efficient pick & pack fulfillment, and more. Consider investing in a robust Warehouse Management System (WMS) and other technology for packing and processing. Remember, technology is a critical enabler of strategic warehousing.
Partner with a Third-Party Logistics (3PL) Provider
A 3PL provider, like McKenna, can simplify your strategic warehousing implementation process. With their expertise in warehouse management, technology, and fulfillment services, you can enjoy the benefits of strategic warehousing without the operational headaches.
How to Tell If My Warehousing Strategy is Effective for My eCommerce Business
Evaluating the effectiveness of your strategic warehousing approach is a vital part of ensuring that your ecommerce business is operating efficiently and serving customers optimally. It involves a systematic analysis of key performance indicators (KPIs), which serve as measurable values that indicate the performance of various aspects of warehouse operations.
Some of the crucial KPIs to monitor include:
Order Fulfillment Rate: This measures the percentage of orders that your warehouse is able to process and ship within a certain time frame. A high order fulfillment rate is indicative of efficient warehouse operations and robust strategic warehousing.
Order Accuracy: This KPI is a measure of how often orders are correctly processed. High order accuracy results in less time and resources spent correcting mistakes, contributing to customer satisfaction and overall operational efficiency.
Warehouse Utilization Rate: This indicator measures the extent to which your warehouse space is used effectively. Strategic warehousing aims to maximize warehouse utilization, minimizing waste and contributing to cost-efficiency.
Inventory Turnover Ratio: This is the ratio of the cost of sold goods compared to the average inventory during a certain period. A high inventory turnover ratio is a good sign that your inventory management – a key aspect of strategic warehousing – is effective.
Return Rate: This KPI indicates the percentage of products that customers return. A low return rate may suggest that your order accuracy is high and that customers are generally satisfied with their orders.
Regular monitoring and analysis of these KPIs can provide insights into how well your strategic warehousing approach is working. If these metrics are improving over time, it's a good sign that your warehousing strategy is effective. On the other hand, if these metrics are stagnating or declining, it may signal you need to adjust your warehouse strategy or operations.
What Can Affect Warehouse Strategy
Warehouse strategy is not created in a vacuum; it's influenced by many different factors. Recognizing these factors is the first step toward effectively managing them.
Here are some key elements that can affect your warehouse strategy:
Market Trends: Consumer preferences, industry trends, and broader economic conditions can all affect your warehouse strategy. For example, a growing trend toward eco-friendly products may require changes in your packaging and handling processes.
Customer Behaviour: Shifts in customer buying behaviour can impact warehouse operations. For instance, an increase in online shopping could require more efficient pick-and-pack processes, and a rise in demand for personalized products might call for more advanced warehousing solutions.
Technological Advancements: The constant evolution of technology presents opportunities and challenges. Innovations like AI, automation, and IoT (Internet-of-Things) can dramatically improve warehouse efficiency, but they require investment and strategic integration into warehouse operations to work.
Economic Influences: Fluctuations in the economy, such as recessions, can affect consumer purchasing power, which will ultimately impact inventory management strategies since demand may drop. Similarly, changes in fuel prices can influence transportation costs and, consequently, decisions about warehouse location.
Legal and Regulatory Changes: Laws and regulations related to safety standards, labour, trade, and customs can directly affect warehouse operations. Staying compliant requires regular updates to your warehousing strategies and practices.
By keeping a close eye on these factors, you can adapt your warehouse strategy as needed, ensuring it remains aligned with your business objectives and the broader market conditions. This proactive approach can help your ecommerce business maintain operational efficiency, meet customer expectations, and ultimately stay competitive in the ever-evolving marketplace.
Choose McKenna as your eCommerce Business’ Strategic Warehousing Partner
Implementing strategic warehousing can be a challenge, but with a reliable and competitive partner like McKenna, you can turn it into an opportunity. With our comprehensive warehousing and distribution centres in Canada’s market hub – Toronto – you can take your ecommerce business to new heights.
Get in touch and partner with us to ensure your business is primed for success in the competitive ecommerce landscape. With our help, you can stay ahead of the curve and make strategic warehousing a core part of your ecommerce success strategy.