An Overview of Retail Warehousing - ChicagoShipper

While retail locations may struggle to remain open in the aftermath of pandemic, retail warehousing is more important than ever. 

As a result of the pandemic’s increase in online retail sales and demand for contactless home delivery, retailers are in need of storage space to efficiently store inventory and fulfill orders. 

They’ve had to get creative, with some renting a warehouse, others partnering with a 3PL, and some even converting obsolete retail space into dark stores (micro fulfillment and/or distribution centers that aren’t open to the public). 

Retail warehousing, no matter how you secure it, is an absolutely critical aspect of modern business — especially as the ecommerce industry continues to grow at an alarming rate. Retail warehousing can turn online retail into a competitive advantage for your company and position it for success in the digital marketplace with the right strategy, operations, and investment. 

This article will discuss what retail warehousing is, why it is important for retailers, how to incorporate retail warehousing into your supply chain management, retail warehousing best practices, and what to expect for in a retail warehouse. 

Retail Warehousing Definition 

The storage of a retailer’s goods and/or the fulfillment of online orders within a warehouse space is referred to as retail warehousing. 

Retail warehousing is a critical step in the retail supply chain because it directly affects the quality and efficiency of all subsequent supply chain activities. As example, if a retailer’s warehouse storage process is disorganized, it is difficult to keep track of what items are available, and fulfillment slows; however, if warehouse storage is tidy and optimized, pickers can quickly pick and pack orders without worrying about stockouts. 

Depending on the size of the company, warehousing can be done from one’s own home or store, in a rented or built-out warehouse space, or through a 3PL. Given the size of most retailers, renting a warehouse or partnering with a third-party logistics provider (third-party logistics provider) is usually the most viable and cost-effective option. 

How Retail Warehousing Works? 

Retail warehouses play an important role in the retail supply chain by housing a variety of important operations and activities. Here are just a few of the logistical functions that retail warehouses are in charge of. 

  • It stores inventory. 

When a retail warehouse receives inventory ordered from a manufacturer during procurement, it must be organized and stored. 

Unloading each pallet of inventory, sorting it by type and SKY, performing inventory counts to ensure that the amount of inventory ordered matches what was delivered, and establishing new inventory levels are all part of this process. After that, the inventory is moved inside the retail warehouse for storage. 

Storage of inventory should never be haphazard or random. Rather, a retail warehouse should be organized so that popular SKUs are closer to the ground for easy access by pickers and that each SKU has its own specific location, with different types of inventory separated from one another. Production inventory must be stored separately from finished goods that are ready to be picked. 

Labeling each SKU with a unique barcode also aids in keeping retail warehouse storage organized. When a picker selects a unit and scans its barcode, the inventory level for that SKU is automatically updated on whatever inventory management software the retail warehouse employs. 

  • Customers’ orders are filled. 

Retail warehouses are frequently used as fulfillment centers, which means that they not only store inventory before it is sold, but also serve as a location where orders are picked, packed, and prepared for shipping after a customer makes a purchase. 

Order fulfillment is a multifaceted process. It starts with order processing and confirmation, in which the details of an order are communicated to a retail warehouse (usually electronically or through an e-commerce platform). 

The order is then passed to a picker in that warehouse, who picks it, packages it, and places it aside for shipping. This order is then delivered to the end customer’s door by last-mile shipping companies such as UPS, USPS, or FedEx. 

With so many moving parts in e-commerce fulfillment, maintaining order accuracy while also driving speed and efficiency can be difficult. To accomplish this, various technologies, such as your e-commerce platform, inventory management systems (IMS), and warehouse management systems (WMS), must all work seamlessly together to confirm orders and track inventory. Order inaccuracies, supply chain breakdowns, and delivery delays may jeopardize the customer experience if this is not done. 

  • Orders are fulfilled for retail stores. 

Retail warehouses, as opposed to DTC or small business warehouses, have the added capability of fulfilling and shipping orders to retail locations rather than to the 

DTC brands bypass wholesalers and retailers by shipping finished goods directly from their warehouses to customers. Retailers, on the other hand, can ship orders to both consumers and retail locations for pick-up. 

Alternatively, the retail warehouse can select a particular inventory and ship it to another retail center for replenishment or redistributing. This will ensure sufficient inventory in the physical store in an emergency. 

Common Warehousing Issues Confront 

To grow your business through online commerce, you need a retail warehouse, but as your business grows, inventory management becomes more complex and the challenges faced by the retail warehouse increase. 

Here are just a few of the retail warehouse challenges retailers face as their business grows. 

  • Higher Order Volume

As your retail business expands and order volume rises, you’ll require a retail warehouse and order fulfillment strategy that can handle the influx of orders. 

If the volume of orders grows and you don’t have the staff, storage space, or warehousing process to process those orders accurately and on time, you will not be able to meet your customers’ expectations. 

This discourages customers from making repeat purchases or results in costly returns that must be processed, both of which reduce revenue. 

A retailer should ideally take the time before a major growth period to prepare their supply chain, ensuring that they have the floorspace, storage space, and optimized processes to support an influx of orders. 

In cases of unexpected, rapid, or sudden growth, partnering with a 3PL may be beneficial. The right 3PL will have the capacity, resources, and expertise to handle high order volumes that individual retailers may not be able to handle. 

  • Management of Inventory 

Higher order volumes result in products flying off warehouse shelves at a faster rate, so growing retailers must be extremely careful to manage their inventory as they scale, and track inventory levels religiously to ensure that they are always in a position to meet customer demand. 

Many retail warehouses use inventory management software to automate inventory management (or IMS). These systems provide real-time inventory levels and automatically update inventory counts to reflect orders within minutes or even seconds. 

As an added benefit to their customers, some tech-savvy 3PLs use IMSs with additional automations to assist with reordering and inventory tracking. 

  • Bad Technology 

Outdated or incompatible technology is not useful in a retail warehouse; in fact, it can actually hinder rather than promote efficiency. 

While it may be slightly better than manually performing warehousing operations and inventory tracking, poor technology with connectivity issues, complicated controls, or limited capabilities is not equipped to handle increasingly large quantities of orders. 

Retailers require modern and intuitive technological tools to help them scale operations effectively for a truly optimized retail warehouse. 

Retailers should consider investing in the best hardware and software (such as barcode scanners and labels, robotics, and warehouse automations) (including a WMS and IMS). While it may be more expensive in the beginning, the long-term benefits of a smoother supply chain far outweigh the initial investment. 

3PLs are experts in digital warehousing best practices, and some even provide cutting-edge technology platforms to help you manage inventory, optimize warehouse operations, and track critical data. 

  • Insufficient Knowledge 

Warehouse storage can be overwhelming for beginners during periods of normal demand. If you’re a small retailer, you probably don’t know the inside or outside of the warehousing industry like any other expert. 

Without prior warehousing experience, retailers overpay for substandard solutions, waste time and money on avoidable mistakes, and inefficiently plan logistics and other aspects of the business’s future. There is a risk of doing so. 

This is where 3PL’s experience and industry knowledge can give retailers a competitive advantage. Appropriate 3PL introduces proven technology to streamline the process of operating retail warehouses using carefully developed SOPs and improve supply chain efficiency, seasonal blockages and international shipping protocols (imports, etc.) Serves as a retailer resource to address challenges such as. Customs, Taxes, Customs) and Last One Mile Logistics. 

Solutions for Warehousing for Growing Brands 

There are a variety of warehousing solutions available to retailers looking to prepare their businesses for the aforementioned challenges. Here are three strategies that retailers can use to manage retail warehousing, increase efficiency, and support the growth of their business. 

  • 3PLs 

3PLs aren’t just for small, direct-to-consumer brands. In reality, larger retailers stand to benefit greatly from partnering with an experienced, tech-savvy 3PL. 

Outsourcing to a 3PL provides large retailers with the resources they need to efficiently scale their retail warehousing operations without requiring them to invest in real estate or capital. 

For example, for some retailers, it may be economical to store inventory in one place, but distributing inventory across multiple warehouses is cost-effective for geographically separated customer groups. You can reach it on a highway. 

Rather than renting or buying multiple warehouses, partnering with 3PL, which already has a network of warehouses and fulfillment centers nationwide (preferably in densely populated urban areas), is the best way to do this. It’s an easy way. 

This is just one type of optimization that logistics professionals can offer. A good 3PL can evaluate a retailer’s warehouse, identify areas for optimization, and implement operational improvements that minimize warehouse costs. 

3PL also optimizes for time. Outsourcing receipt, warehousing, handling, and shipping to 3PL saves retailers the time it takes to plan, coordinate, and execute logistics. This gives retailers time to focus on other important business functions without sacrificing quality. 

  • Using Warehouse Management Software 

Warehouse management systems streamline the warehouse process, minimize order processing errors, track data to analyze warehouse productivity, and automate various aspects of the warehouse to save time and money. 

While the introduction of WMS does not replace the practical and professional know-how of logistics service providers, independent retailers who want to manage their own retail warehouse can monitor and optimize their day-to-day warehousing operations. You need to consider the implementation. Where they can. 

  • Logistics Assistance 

For retailers who want to keep everything in-house, logistics consulting services can help optimize their retail warehouses for cost and efficiency. However, these services can be very expensive. Therefore, only large and well-established retailers can offer long-term solutions.