If you run an e-commerce or retail business, you have to store your products somewhere. In the beginning, newly-founded online stores use their office space (or even basement or garage) to store products. Although this solution is straightforward and cheap, it won’t be useful for a long time. Sooner or later, you’ll have to find a warehouse for your goods. And this is where you have two options. You can rent your own warehouse, or you can decide to outsource storing products to a fulfillment company. What are the pros and cons of both these solutions?
New stores usually decide to store their products in their own rented warehouses. From many perspectives, that’s a reasonable choice.
However, we’ve come up with some useful information in this article, that will help you understand the difference between in house storage and third party storage services and which one suits you best.
Running your own warehouse
It always looks pretty much the same: You decide to start a trading/e-commerce company, and you rent a warehouse to store products. This approach entails many benefits. For starters, with your own warehouse, you can easily keep everything under control. Depending on your budget, you can find a warehouse that fully meets your needs and expectations. It can be located near your office or home and have all the features you need, e.g., sufficient storage and parking space and additional appliances to load, organize, and pack parcels. Inside, you can organize products and packing stations precisely the way you want.
However, there is also the other side of the coin. Running your own warehouse is time-consuming and difficult if you’ve never done that before. You need at least basic logistics knowledge to establish everything in an effective way. The more products you have, the more tricky it gets to track them. More sooner than later, you will need an advanced ERP or WMS system that will help you monitor everything that happens in the warehouse. Additionally, you’ll need to hire at least two warehouse workers. But keep in mind that busy periods, like peak season and holidays, may call for extra workforce, that you most likely wouldn’t usually need during the year. When you take a look at the big picture, it can turn out that running a warehouse is not that cheap, and it’s a full-time job, meaning you won’t have enough time left to grow sales.
Thankfully, it doesn’t have to look that way. You can go for outsourcing and start cooperation with a 3PL (third-party logistics) company that runs a fulfillment center.
Fulfillment for your store
Fulfillment is a service that’s based on outsourcing all the logistics processes. This means that the logistics center you work with deals with:
- Storing products
- Picking and packing orders
- Sending parcels to customers
- Receiving returns and complaints
And they do all that on your behalf! As a result, you don’t need a separate warehouse (and neither warehouse workers) – the fulfillment center will provide you with their storage space (which usually is top-notch, too). In fact, all you have to do is inform your vendors and distributors about the new location of your warehouse. The rest is in the hands of the fulfillment center.
Furthermore, some fulfillment centers provide cross-border shipping for their clients. Working with such a company entails many benefits:
- You get quick and instant access to foreign markets
- Your store can use preferred local carriers with attractive shipping fees
- You can make the most of your partner’s know-how concerning the given market, meaning your company can easily win this new target audience and easily grow sales.
Fulfillment centers give you access to their warehouse management system so that you can quickly check what’s going on with your orders. And because logistics centers are experienced in storing and shipping large volumes of products, they have all the procedures and processes already perfected. Moreover, thanks to shipping thousands of parcels every month from one place, fulfillment centers have far more attractive courier fees, so that you save money on every shipment.
Indeed, with a decent fulfillment center, your online store can ship more orders than ever before, even during sudden sales growths like Black Friday or Christmas.
Are there any downsides to this solution? You have to be aware that from now on, all the logistics processes in your store are only as good as your 3PL partner. When working with a fulfillment center, you stop shipping parcels in-house, the whole process is now in the hands of your logistics partner. That’s why it’s so important to select your future fulfillment center carefully. Do some research, compare available offers, and make an informed decision on your warehousing model.