Many growing eCommerce businesses end up investing in their own warehouses to streamline and take full ownership of their operations as they begin to scale up. For larger eCommerce businesses, owning at least one warehouse is often a given.
There’s no question that in-house warehousing brings enormous benefits, from full control and ownership of the process and products to the ability to call the shots around accepting shipments and beyond. But, there are downsides as well.
Warehousing your own goods comes with many costs, from purchasing or leasing the warehouse itself to hiring employees and machinery, managing deliveries and shipments, and the necessity to learn about various rules, regulations, and processes for warehousing prep for various online marketplaces. Then there are there the requirements around delivery times, marketplace compliance, and service level agreement results to manage.
For small to medium-sized eCommerce businesses, holding your own and managing inventory, warehousing, and prep might work just fine. But for eCommerce professionals seeking to expand, identifying a warehousing and prep partner is one of the single most effective ways to change your business for the better.
If you’re an eCommerce entrepreneur, you already know that there’s never been a better time to sell online. As COVID-19 impacted consumers’ ability to shop in-stores, online retailers are grew at breakneck speed and the average shopper learned how to adopt — even embrace — eCommerce.
For eCommerce businesses seeking to scale up and optimize their business, understanding how outsourcing your warehousing and prep can benefit your bottom line and help you grow is important. Here’s how to know the time is right.
9 Signs it’s time to expand to a nationwide warehouse network
1. You’re running out of space
Your existing warehouse has a finite amount of space, no matter how you configure and reconfigure the storage. If you’re beginning to feel cramped, it might be time to consider outsourcing your warehousing and prep as opposed to finding a second or larger warehouse. Why? Bigger spaces (or additional spaces) cost more, require additional staffing, and the expansion is pretty minimal in the grand scheme of your business. By outsourcing your warehousing and prep to a nationwide warehouse network, you gain the benefit of additional space along with a network of multiple locations with a single partner.
On the other end of the spectrum are concerns around seasonality, where certain times of the year may result in higher sales volume and others are quieter. If you’ve purchased a large warehouse, you’ll carry all those costs even when your inventory isn’t filling it completely making it even less cost-effective. A nationwide warehousing partner can help you better manage warehousing costs while eliminating concerns around the ebb and flow of inventory and business so you never have to fret about underutilized space or running out of room again.
2. Your manufacturer doesn’t want to get involved
Many eCommerce sellers we work with have a shared challenge — their manufacturers don’t want to work with Amazon or other marketplace prep requirements, and don’t have time to do things like bundle, label, or polybag individual products.
In this case, you’ll want to partner with a nationwide warehouse and prep network like MyFBAPrep to handle your goods, so that they can be uniformly prepared across various geographic locations before landing on your buyers’ doorsteps or into FBA.
3. Your processes aren’t as efficient as they could be
A common complaint from merchants is that manufacturers are unwilling to get involved beyond the initial manufacturing process, which means they can’t get their items pre-prepped for sale and delivery unless they’re doing it themselves. Depending on the marketplace — Amazon and Walmart, for example, have varying requirements — this can take up large amounts of time as you prep, package, and label goods for fulfilment. And, depending on the manufacturer or supplier, your stock could require more or less prep — making your processes even more difficult to streamline.
If you’re managing prep yourself at your own warehouse, you’re receiving shipments of goods which must then be inventoried, checked, and then manually prepared for fulfilment based on the marketplace(s) you sell on by you or your employees. With varying requirements for different products and marketplaces, this can create an enormous burden — and slows you down.
If you’re currently manually training employees on their tasks, prepping, and assessing/checking your entire inventory for fulfilment readiness, you’re losing time and money that could be spent expanding your business.
With an outsourced approach, you eliminate the time spent bringing your employees onboard, training, and doing the manual preparatory work and can refocus that time on business expansion efforts.
4. You’re growing fast
Is there any better problem to have? (We think not!) While fast growth is the best possible situation for any business, the simple fact is you need a warehousing and preparation solution that can grow with you so that you’re able to expand quickly, not scramble to find a new warehouse and hire and train more staff.
As you grow, so too will your expenses: a larger facility with higher bills, more employees (including recruitment costs), and more stress for you to manage it all.
With a warehousing partner, you can simply send your items to the warehouse network and keep on selling more and more without the worry of managing logistics.
5. You need expert guidance
Even the most experienced eCommerce business owners need support from time to time, especially if you’re switching things up. As you tweak your business, you may choose to expand your sales channels from a singular channel to multi-channel expansion or switch up your selling strategies.
Many eCommerce businesses begin with 1P relationships that allow them to test how various channels will fit with their business model. Once you’ve established that a channel is right for you, it’s time to move up.
If you’re currently in a first-party relationship (1P), you’re not in total control of price or sales as you’re selling to the marketplace and who then goes on to sell to the consumers. While there’s nothing inherently wrong with 1P selling, at the end of the day you have less control of your business and lower margins. But the shift from 1P to 3P isn’t always clear, which is where an outsourcing partner comes in.
3P is a third-party relationship, whereby you are the retailer and sell directly to your buyers on the marketplace. This does two things: First, it puts you in control of our sales and margins and secondly, it removes the dreaded “middle man”.
But (there’s always a but, isn’t there?), becoming a 3P seller isn’t as simple as 1, 2, 3.
The challenge in shifting from 1P to 3P is that most brands and businesses simply don’t know where to begin. An outsourced partner can help you build and follow a strategic plan with a data-driven understanding of 3P marketplace dynamics to set you up for success. Most third party logistics (3PL) partners are already well-versed in the complexities of operational brands and are well-equipped to manage high volumes of single-line orders, sales quantities, and can keep an eye on and manage pricing fluctuations.
6. You need more coverage
As your eCommerce business grows it’s inevitable that the geographic range of sales will grow, too. When you own a single warehouse in one place, it becomes increasingly difficult and costly to serve your customers in other parts of the country. For sellers on the East Coast with buyers on the West Coast, this equals higher shipping costs, longer shipping times, and smaller margins.
By shifting to a national warehouse partner, you’ll not only have inventory located closer to your existing buyers but you’ll have the ability to expand into new markets, attracting new buyers and growing your revenue.
A nationwide solution will cut your delivery times, reduce shipping costs, and diversify your market in a meaningful and low-impact way.
7. You’re spending too much time on inventory & prep
If you’re spending 10% of your time (or more) on inventory and preparation tasks, it’s likely you’re already losing money.
Warehousing, prep, and other logistics tasks are low return on investment (ROI) activities. They’re necessary to execute well, but they don’t increasing your revenue in a meaningful way.
Now, imagine if you could refocus that time into high ROI activities — like refining or refocusing marketing, acquiring new customers with ads, researching and purchasing new SKUs, and optimizing your listings for more visibility.
When you outsource your warehousing and prep activities, you can focus your time and energy on those higher ROI activities to see a tangible difference in your bottom line. Further, when you consider the cost savings you can realize by not needing to lease space, pay bills, and hire employees, you can also funnel those dollars into revenue-generating initiatives.
8. Your current setup can’t handle all of your sales channels
As the number of sales channels you play in grow, it’s likely that managing the nuances and requirements of those channels will become more and more difficult.
For example, if you’re trying to manage prep work for Amazon while also meeting Walmart.com standards or struggling to manage delivery times for your Shopify store, it’s time to outsource.
Finding a full-service solution that can handle warehousing, prep, and logistics for multiple channels will save you time and help you realize a greater ROI through a streamlined process that delivers value to both you and your customers.
9. Your reporting can’t give you the full picture
One of the most critical elements of growing your business is making the right decisions at the right time, but for many growing eCommerce professionals, tracking metrics can be difficult and often falls to the bottom of the list as day-to-day logistics tasks pile up.
Many 3PL and warehousing partners can supplement your existing tech stack and deliver real-time metrics to help you make the best decisions for your business — like understanding what product is selling best or when, your real delivery times, and actual costs to running your business.
How to find the right warehouse and prep partner
You know the time has come to outsource your warehousing, preparation, and logistics management but one big question remains: how do you find the right partner for your business?
There are many factors to consider when it comes to choosing a third-party logistics (3PL) partner. It’s important to find a partner who can help you grow and remain a partner in the long run – the last thing you want is to outgrow your solution and need to go looking for a new one!
Know where your business currently stands and where you’re going
Understanding exactly where your business currently stands and documenting or communicating your goals is critical to finding a partner who can help you achieve them. What channels do you want to expand into? How many SKUs do you currently have versus how many you want to have? Are there new product categories you plan to develop? What about your current vs. forecasted monthly order volume?
Answering these questions can help you set the list of business requirements for choosing your 3PL partner by enabling you to shortlist quickly and avoid wasting time.
Understand and clearly detail your shipping requirements
You already know that the name of the game nowadays is “direct to everywhere” which means you must be strategically selling and expanding on every online channel your customers are buying on. That’s obvious. What’s less obvious is managing the challenge of each channel’s shipping complexities.
To begin, know which channel(s) is most critical to your business and use that to determine your 3PL partner. If the vast majority of your business is Amazon Prime, you know you need fast fulfilment and 2-day shipping as a bare minimum requirement and can start building up from there.
Dig deep on pricing and determine what your margins must be
Don’t go with the cheapest partner just because you see dollar signs. Run your own numbers and communicate with prospective 3PL partners to determine what price works for you and make sure you truly understand what those prices mean. Sneaky, hidden costs can add up quickly and eat into your margins faster than you can say ‘label and bundle’.
There’s a price for everything when you ship through 3PLs — from the number of orders shipped, items picked, pallet storage, packaging and on and on and on. Use your requirements to outline storage and service needs, calculated expected costs, and determine your potential savings (or losses) with each partner.
Consider warehouse locations and network
Finding a nationwide partner who can help you break into new markets is important – and it’s especially important that your partner has a strong network of warehouses from which you can operate your business. As detailed in point number one, remember your goals: if you’re currently selling mostly in the Midwest but have goals to break into the East Coast market, be sure your partner can service that geographical area.
Strategically located warehouses in lower-priced shipping zones will allow you to maximize your shipping efficiency without incurring additional shipping costs when selling into major city markets.
Never forget the data
You need access to data that can help you understand the efficacy and efficiency of your partner against your growth goals. Even when you’re outsourcing to a 3PL partner, you need to have some fundamental warehousing processes set out.
- Master SKUs set up for all products you sell
- UPC codes and barcodes for each product
- Careful tracking of inventory costs of goods sold & profitability reporting
Many — but not all — 3PLs can provide this level of metric tracking. Determine what your comfort level is and identify ways to work with 3PLs to ensure you’re gaining access to the data you need to make the best possible business decisions.
At the end of the day, choosing to outsource your warehousing and prep is not a decision you’ll make lightly. It’s important to choose a partner who understands your business, is reputable and knows the ins and outs of warehousing and the preparation required for a variety of digital marketplaces. By outsourcing warehousing and prep,