3 Ideal Scenarios for an eCommerce Warehouse-in-a-Warehouse
Worldwide eCommerce sales are predicted to eclipse £3 trillion and account for more than 16% of total retail sales in 2020, according to the latest reports.
According to Statista Research, eCommerce revenue in the UK will reach £65.9 billion in 2020, with revenues expected to show an annual growth rate of 4.6%, resulting in a market volume of £78.9 billion by 2024.
The market's largest segment is Fashion with a market volume of £19.6 billion in 2020.
In this climate, many businesses are looking to invest in developing the logistics capabilities needed to handle the continued surge in online ordering and cost-effectively manage consumers’ elevated expectations.
What is a warehouse-in-a-warehouse?
Essentially, a warehouse-in-a-warehouse strategy involves dedicating an area of your existing warehouse for the functions and processes needed for online fulfilment. Most legacy systems and warehouses cannot provide the following capabilities:
- picking eCommerce orders efficiently and accurately
- packing to the right carton/parcel
- seamlessly managing parcels to carriers.
All while being integrated with existing systems for inventory, order management, accounting and online storefronts.
How do I know if this strategy is right for my business?
If you are looking to take advantage of an expanding eCommerce market in an atmosphere of high consumer expectations and increasing costs, ask yourself these three questions:
- Does my existing WMS support online picking and parcel shipping?
- Is my carrier-provided or 3rd party multi-carrier shipping solution simple and easy to use?
- Do I have significant time and budget to deploy a heavy and complex solution for an eCommerce experiment?
If you answered “no” to any of those questions, a warehouse-in-a-warehouse strategy could be your best option to enable eCommerce fulfilment whilst providing the ability to scale to Enterprise as your business grows.
Let’s look more closely at the three most common, best-fit scenarios, for warehouse-in-a-warehouse.
Scenario #1: Brick-and-mortar retailer looking to add online and mobile order fulfilment
Traditional retailer warehouses and distribution centres are used to handling pallets and large orders and not the smaller individual, mixed orders more common with eCommerce. Orders need to be packed into the appropriate size containers to reduce packaging waste and avoid additional shipping fees. When it comes to shipping, you may be more used to dealing with transportation providers and pallet networks, rather than multiple parcel couriers. Furthermore, you may be constrained to a single parcel carrier.
With a warehouse-in-a-warehouse , staff will be able to pick and fulfil multiple order simultaneously for maximum efficiency with each order containing a detailed packing list and carton selection. What's more, multiple carriers will be available, with the fastest and/or most cost-effective shipping services automatically selected depending upon customer or business preference.
Scenario #2: Manufacturer or distributor looking to better support eCommerce and retail customers
Like retailer warehouses, manufacturers and distributors are generally geared towards shipping pallets and part/full load orders to distribution centres/consolidators who then move orders and stock to individual stores or smaller warehouses.
Today, many manufacturers and distributors are increasingly being asked to handle individual store drop ship orders and to supply direct to stores and/or end customers. Moreover, there is often a requirement to provide replacement parts and warranty services direct to consumer. To support their eCommerce and retail customers, manufacturers and distributors need to be able to ship directly to their customer’s stores and their customer’s customers.
A warehouse-in-a-warehouse strategy can power direct-to-consumer or direct-to-store drop-shipping. This allows end customers to 'extend' their inventory to the manufacturer or distributor, virtually eliminating stock outages.
Manufacturers and distributors who provide greater shipping flexibility can significantly enhance competitiveness, as major retailers are more likely to carry your range and provide additional shelf space to those who can most effectively service their first party distribution centres, stores and end customers.
Scenario #3: 3PL provider expanding eCommerce fulfilment capabilities
We all know eCommerce customers check shipping status multiple times throughout the fulfilment process. This is driving a greater demand for supply chain visibility. In addition, 3PLs need to be able to properly invoice for smaller order fulfilments, something they are often not well set up to do.
By employing a warehouse-in-a-warehouse strategy, 3PLs can better service existing customers and attract new ones. This has the added benefit of maximising asset utilisation throughout the year.
More importantly, with the right system in place, you will have the ability to track and invoice for all elements of work performed, eliminating revenue 'leakage' common to providers new to offering small order fulfilment or value added services.
If any of these scenarios sound familiar, a warehouse-in-a-warehouse strategy can help you overcome the significant adjustments to warehouse operations needed to take advantage of an expanding market. Properly executed, you can ensure that all orders are picked accurately, meet promised service levels associated with the orders, minimise labour costs and reduce shipping costs through smart carrier and service selection.
Getting into the eCommerce game doesn’t have to require months-long upheaval of your existing warehouse and processes. With Microlistics you can set up a warehouse-in-a-warehouse in just 30 days.
Want to learn more?
Contact our experienced team today.