Why Warehousing & Distribution is So Important for eCommerce Merchants and Manufacturing Parts Providers

The efficient Warehousing (storage of commodities) and Distribution (moving commodities through the supply chain) is critical to the success of any business, but particularly for eCommerce retailers and manufacturers.

The development of an effective warehousing strategy tailored to particular market needs, is of primary importance and a requisite for optimum and consistent distribution performance. It is imperative that a clear analysis may be performed so that operations are carried out at maximum efficiency. This helps to minimize  supply chain costs while ensuring the highest quality of service. Warehousing & Distribution, taken as an inter-related entity, is essential for a unified presentation of the complete Supply Chain.

What is Distribution and Warehousing? Is There a Difference?

Industry norms define distribution as: “The activities associated with the movement of material, usually finished goods or service parts, from the manufacturer to the customer. These activities encompass the functions of transportation, warehousing, inventory control, material handling, order administration, site and location analysis, industrial packaging, data processing, and the communications network necessary for effective management.”

The simple definition of “warehouse” is a large storage building that holds materials, components, or finished products before being delivered to other stages in the chain or directly to customers. The better definition is more complete and entails a well-planned space that provides efficient receiving, logical storage, practical handling and, in due course, rapid distribution capabilities. Warehouse activities address the goods themselves: receiving goods, offloading goods, forklifting goods, stacking goods, protecting goods and more. The coordination of all the movement activities is what warehousing entails.

That covers distribution and warehousing.

But What is Considered a Distribution Center?

A distribution center is defined as: “a building, structure or group of units used to store goods and merchandise that are to be delivered to various places on an as-needed basis.”  Distribution on the other hand, is a process: efficiently making goods available for consumption by business users and supply chain segments en route to final consumers.

Here are two quick ways to distinguish a warehouse from a DC (Distribution Center)?

1. A warehouse usually stores products for longer periods of time than a distribution center. Since the distribution center is one of the last steps in the supply chain on the way to the customer, the turnover of goods in a distribution center is much faster than in a warehouse.
2. A distribution center is where order fulfillment is carried out. Because of this, distribution centers are generally located closer to the end-user than a warehouse. 

As Long as We’re Counting –

What are the 4 Types of Warehouses and Distribution Centers?

1. eCommerce Warehouses and DCs – These centers store and fulfill online orders for ecommerce merchants and resellers.
2. Retail Warehouses and DCs – These facilities store inventory and distribute goods to stores and customers.
3. Manufacturing Warehouses and DCs – These centers store and distribute raw goods, components, and finished goods for manufacturers.
4. 3PL Warehouses and DCs – 3PLs (Third Party Logistics) Warehouses and Distribution Centers are outsourced facilities that any business can use to store and distribute goods to end-users.

While those are the basic types of warehouses and DCs, there are actually more categories of warehouses than the four distribution warehouse types as just listed. They are:

Private Warehouse – A private warehouse is owned by a manufacturer, retailer, wholesaler or distributor and is used solely to store goods for that owner.

Public Warehouse or On-Demand Warehouse – Small or mid-sized companies can lease or rent space from a public facility. These warehouses can charge by the pallet or square foot.

Cold Storage or Climate-Controlled Warehouse – All sorts of temperature-sensitive goods are stored in these facilities: medicines, produce, frozen foods, cosmetics, etc.

Cross-Dock Warehouse – These specialty warehouses use highly trained staff and advanced technologies to sort through large inventories, transferring goods from inbound trucks to outbound carriers. Cross-dock warehouses allow carriers to drop off products and often bypass the storage process. This can reduce shipping times and lower storage costs.

Hazardous Materials (HAZMAT) Warehouse – Because of the nature of the materials stored at these facilities, the safety and security standards at HAZMAT warehouses are extremely high. The materials may include: explosives, weapons, chemicals, gases, radioactive materials.

Customs Warehouses or Bonded Warehouses – These facilities are usually located near borders, ports or airports, and deal with the storage of imported goods that often require duty payments.

Government Warehouse – The contents of these warehouses are chiefly goods that belong to national governments, although they can rent to institutions such as schools, or even to private businesses.

Cooperative Warehouse – Farm or winery coop members store goods at these locations which are owned by the coop. Non-members can rent space, but at higher rates than members.

Consolidated Warehouse – These warehouses receive small shipments and group them into larger units which are then sent out to buyers in the same regions.

Automated or “Smart” Warehouse – These facilities try to reduce or eliminate the need for human workers through the use of Automated Storage and Retrieval Systems (AR/RS). Unmanned equipment and low-emission automated tools handle the storage and retrieval of goods.

Distribution Warehouse or Distribution Center – As previously mentioned, these warehouses are for short-term storage only, as the fulfillment services performed there keep goods moving to the end-user.

What are the 5 Essential Warehouse Management Processes?

Since we’ve covered the types of distribution centers and types of warehousing, we should look more closely at warehousing and distribution center operations and the function of Warehouse Management Systems (WMS).  WMS systems automate and integrate the 5 functions of a smooth-running warehouse.

1. Receiving and Storage – As freight is unloaded from trucks at warehouse receiving docks, warehouse management systems must scan the barcodes and enter in to inventory the quantities of each shipment. Then the shipment is placed in a storage location where it is re-scanned.
2. Inventory Tracking – This process monitors stock levels at the warehouse, indicating the quantities of Stock Keeping Units (SKUs) the exact location of SKUs and whether or not they are in transit.
3. Picking and Packing – The WMS will generate pick lists and packing lists that pickers use to retrieve products within the warehouse. The item is given to a packer who packages and labels it for shipping.
4. Shipping – Once the shipping carrier has picked up the package, the WMS can send ecommerce order tracking information to the seller so that customers can track their orders.
5. Reporting – This process of a WMS can provide the data necessary for accurate inventory forecasting and other management needs. Order fulfillment accuracy reports, orders shipped on time, reports of total orders fulfilled by the hour; these are distribution warehouse examples of inventory and operational reports that can be generated by a WMS.

What is TAPA and How Does It Work?

Cargo theft is becoming increasingly common worldwide. In an effort to prevent or minimize transport crime, a forum of over 1,200 law enforcement agencies, global manufacturers, freight carriers, logistics providers and other industry professionals have united to set security standards that will create an international, cost-efficient and secure supply chain. This forum is known as Transported Asset Protection Association or TAPA.

TAPA organizes training courses and offers certifications in three different areas of transportation security:

• TAPA FSR – Facility Security Requirements
• TAPA TSR – Trucking Security Requirements
• TAPA PSR – Parking Security Requirements

The certifications are upgraded every three years and include the use of certain electronic locks, alarm systems, tracking and tracing devices, as well as intermodal transport containers.

A TAPA certified warehouse means that it is compliant with TAPA guidelines and utilizes:

• CCTV, smart lighting and physical barriers
• Fortified walls, roofs and doors
• Advanced alarm systems
• Security training for personnel
• High-end access control systems

A TAPA certified facility guarantees maximum security for the high-value goods stored within it.

What is the Importance of Demand Planning in Supply Chain Management or Warehouse Management?

Demand planning is a supply chain management process that enables a company to project future demand and successfully customize company output — be it products or services — according to those projections.

Demand planning seeks to achieve and maintain an effectively lean supply equilibrium, one in which warehouse and DC inventories contain just as many products as demand dictates, but no more. Finding that perfect balance that exists between sufficiency and surplus can prove especially tricky.

Effective demand planning typically requires the use of demand forecasting techniques to accurately predict demand trends, and carries added benefits, such as heightened company efficiency and increased customer satisfaction.

Demand planning is the linchpin of an effective supply chain, serving two essential functions — which makes it doubly important to business.

First, there always exists the fundamental drive to protect the sale and ensure that expected revenues are generated. But retailers can’t sell what they don’t have in stock. And it doesn’t take long for today’s consumers to develop a lasting impression of a company, and whether it can meet demand. Demand planning works to see that businesses have exactly the right amount of inventory at the right place to avoid stock-outs and remain prepared for that next sale.

But protecting sales isn’t enough anymore. Sales forecast accuracy is also about running businesses more efficiently. Demand planning and forecasting assists with efficiency, by helping manage warehouse space smarter. Why should companies invest in more physical space than they need? Demand planning can help businesses avoid the perils of overstocking — such as increased inventory carrying costs and financial situations that require the use of product discounts or other temporary measures to alleviate overstocking by selling inventory as quickly as possible.

What Are 4 Crucial Elements of Demand Planning?

Product portfolio management

Effective demand management requires a comprehensive understanding of products and their respective lifecycles. Product portfolio management offers this, detailing a product’s complete lifecycle, from its origins until its eventual phase-out. And since many product lines are interdependent, product portfolio management shows you how shifting demand can affect “neighboring” products.

Statistical forecasting

Working from the traditional concept that past history is usually the best predictor of future performance, statistical forecasting uses complex algorithms to analyze historical data and develop supply chain forecasts. The mathematics of statistical forecasting methods is advanced, and the exacting process demands accurate data (including from outliers, exclusions or assumptions).

Demand sensing

Demand sensing uses a combination of new sources of data, such as weather, infectious disease trends, government data and more, with historical trend data and applied AI to detect disruptions and demand influences in near real-time.

Trade promotion management

Survival in the retail jungle depends on sparking the interest of potential customers. Trade promotions and other marketing strategies use special events (such as discount prices or in-store giveaways) to spike consumer demand. Trade promotion management works to ensure that such opportunities are properly executed and deliver all expected benefits.

What is the Importance of Material Planning?

Digital ecommerce retailers and manufacturers can simplify and support operations for branded products with clear and timely views of inventory levels while streamlining fulfillment with their 3PL service provider.  Cloud-based, resources may offer savings and speed for currently in-house activities. Material planning and forecasting will maximize the performance of workers and use warehouse space more effectively.

For a business to function and prosper, accurate warehouse performance is critical. 3PLs can ensure that all information and pertinent data is collected promptly and with precision. These advantages include shorter cycle times for in-flow and out-flow, greater inventory accuracy, better storage space utilization, improved structuring of material storage, and more adaptability in warehouse operations.

What is Inventory Management?

Inventory management is a systematic approach to sourcing, storing, and selling inventory. With proper inventory management a company maintains the right stock in the correct volumes, in the right locations, at the right time, and at the best cost.

As a part of the supply chain, inventory management also supports the control and overseeing of purchasing, storing goods, maintaining quantity of inventory, and the optimization of order fulfillment.

Objectives of Inventory Management

Inventory control techniques –

• Maintaining an uninterrupted flow of raw materials and finished goods to ensure uninterrupted production and timely customer deliveries.
• Removing excessive or un-needed inventory.
• Keeping a check on costs of purchased materials to reduce production costs and total business expenses.
• Reducing losses due to wastage, damage or spoilage.
• Optimizing inventory levels to meet the needs of the sales process.
• Protecting the high quality of stocked goods to maintain favorable prices.
• Avoiding double ordering of the same stock inventory.
• Providing necessary statistics for future inventory control and planning.
• Establishing and maintaining clear inventory management policy.

What are the 5 Benefits of Inventory Management?

Keeping  Healthy Relationships with Suppliers

Good communication is key. Suppliers that have early notices of changes respond  better to shifting needs. Preventable shortages can be avoided to help maintain stock levels.

Never Running Out of a Stock Item

Par levels can be set for each item in inventory. The par level is the minimum quantity of a needed item to have available to meet customer demand, plus a cushion. The establishment of timely reordering practices is fundamental to this process.

Controlling Risks with Management and Problem Solving

Anticipating issues and forming contingency plans for possible situations is easier with inventory management. The preparation of responses that avoid further troubles ensures that actions are more streamlined if they are ever required.

Staying Informed with Accurate Regular Audits

Regular audits ensure all numbers match up and operations are functioning as they should. Comparing product quantities shown in records with the number of products physically counted and confirmed is key. If those numbers differ, the problem can be quickly identified and corrected.

Selecting Shipping Options to Match Demand

Efficient inventory management allows for the adaptation of shipping types to meet the range of styles most advantageous to both receivers and shippers. Bulk, pallet, truck, container, dropship, and other choices become more easily met with an efficient system.

Isn’t It Time You Got Your Products to Market Faster?

Now you can with ModusLink, the premier omnichannel 3PL company with worldwide logistics solutions.

 Let ModusLink partner with you to tame the intricacies of supply chain management that are a vital part of international ecommerce.

With ModusLink as your trusted end to end ecommerce solutions provider, you won’t need to know any of the warehousing terminology or distribution services in order to improve your profit margins. We will help you to deliver a world class CX (Customer Experience) anywhere you want to sell.

Contact ModusLink today for a private consultation with one of our knowledgeable agents.