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In our previous post, we discussed in detail the concept of drop shipping. We understood what it means, how it operates, the challenges and their solutions. If drop shipping was all about not having to maintain a warehouse or real estate at all, what we are about to discuss today is something completely opposite.
In this post, we are about to look at another interesting business model, which is significant to the retail and the Ecommerce industry. It is an integral part of the order fulfilment process and the entire chain of consumerism would crumble if you were to remove this aspect from the process.
Yes, it is the process we call wholesaling and warehousing.
From a layman’s perspective, wholesaling and warehousing are concepts we tend to overlook as consumers don’t generally consider packaging and deliveries once their product reaches their home. But the ballgame is completely different from a business owner's perspective.
People involved in wholesaling and warehousing are the bridges between brands and consumers. The reputation of a brand or marketplace they are associated with depends on their functionality and ethics.
If you come to think of it, a store is just an intermediary that fetches consumers their preferred products. The real and indirect transaction happens between wholesalers/manufacturers and consumers.
Without a proper wholesaling and warehousing system or model in place, businesses wouldn’t be able to make profits or even sustain for that matter.
Being such inevitable aspects of business functioning, let’s take time to understand this business model, how they are different, how they are interdependent, their challenges and some credible solutions.
What Are Wholesaling And Warehousing In Retail and Ecommerce Businesses?
Firstly, both are distinct concepts which we would understand individually. To understand what warehousing is, let’s first get to know wholesaling.
Wholesaling In Retail and Ecommerce
The opposite of retailing is wholesaling. If retailing is all about selling a product to a consumer, wholesaling is the process of selling a product to a middleman, who in-turn sells it to a customer. The middleman invests in setting up a store (online, offline or both), building a brand for it, advertising, recruiting salespersons and more for the smooth operation of the business.
The sole purpose of a wholesaler is to consistently supply products or goods to the intermediary business and ensure the demands of consumers are met at any given point of time.
Moreover, retailing is a Business-to-Consumer concept whereas wholesaling is a Business-to-Business concept.
Warehousing
Warehousing is an aspect of wholesaling that provides real estate for the process of wholesaling to happen. It is the concept of storing products and goods so wholesalers can supply them to different channels, stores and vendors as and when required.
Warehousing is crucial for the fact that it is a centralized unit that ensures
- adequate manufacturing of goods
- appropriate storage of good
- and timely delivery of goods.
It is a way of optimizing inventory and quantity of manufacturing, where businesses can assess and estimate the volume to be manufactured for a particular period in time. A well-maintained warehouse can prove to be cost-effective and productive to manufacturers.
There are different types of warehouses that cater to the distinct needs of private, public and government initiatives.
For our purpose, we will stick to warehousing associated with retail and ecommerce businesses.
Some Industries where Wholesaling And Warehousing Matter
- Automobile – from finished cars and vehicles to spare parts
- Groceries – raw materials and ingredients to instant and ready-to-eat products
- Fashion – apparel and clothing
- Electronic and electrical appliances – finished gadgets to materials like superconductors, chipsets and more
Challenges In Wholesaling And Warehousing
Wholesaling and warehousing are behemoth concepts and the minimum volume we talk about starts from 1000 (depending on industries). When such massive volumes are involved, challenges are bound to be plentiful. From liaisons with vendors and manufacturers to proper inventory management, there are tons of hurdles that hinder the operations of wholesale and warehouse businesses.
Real-world Scenario: A blunder would be when one of your employees jumbles the numbers of two particular products and wrongly notes them down. This could cost you a price as based on the numbers, you end up manufacturing more of a product that you already have in excess.
Offline Tracking Systems – where you don’t have a proper online point-of-sale mechanism in place to take care of your inventory and its associated requirements
Real-world Scenario – you still rely on manual stocktaking of products and maintain ledgers and heavy files to process them.
Redundant Tasks – where you have a dedicated manpower working on purchasing, reordering, invoicing, financing and more similar tasks.
Real-world Scenario – Without an automated system in place, you are limiting the potential of your manpower by indulging them in redundant tasks.
Fraud Orders – where you pack and dispatch high-stake orders only to realize they are fraud or fake orders with no purchasing intention in the first place.
Real-world Scenario – You dispatch an expensive laptop to one of the fake buyers online, who rejects it. Apart from the expenses involved in shipping and getting it back, you also gamble on the quality of the product in transit and its probable chances of getting damaged.
Transactional Processes – with the problems primarily being the currencies involved in transaction, distinguishing between retail and wholesale prices, discounts or price breaks for bulk orders, personalized pricing based on rapport and more
Real-world Scenario – You could incur losses when a payment happens in a foreign currency and gets reduced in terms of value because of the volatile market.
Customer Segmentation – where you find it difficult to segment your buyers according to their frequency of purchases, types of goods purchased and more
Real-world Scenario – You quote the same price for a business that has been doing business with you for years and the one of recent association.
Supply-chain And Logistics – causing delays in deliveries and shipping, poor tracking of shipments, poor coordination between vendors and more
Real-world Scenario – Delays in the packing and dispatching of orders that have special requests in terms of delivery dates, additional payment of exclusive shipping charges and more, resulting in disappointed customers.
How To Fix The Challenges In Wholesaling And Warehousing
Inventory Management – to give you a complete holistic perspective of all the items in your inventory. From their quantities and date or ordering to notes on next batch reordering details to shipment details, get everything in one screen through a proper digital inventory management system in place.
Order and Fulfillment Management – automate the entire process of packing and shipping products to businesses and monitor shipment-in-transit from a dashboard. Get precise estimated date of delivery details and more crucial information regarding order fulfilment.
Relationship Management – replace conventional and generic emails with personalized ones that address specific behavior, requirements and attributes of your customers. From acknowledgement to gratitude messages, send and maintain ideal relationships with vendors and businesses.
Multichannel Orders – streamline online and offline orders in one space and yet distinguish them when it comes to order fulfilment. Segregate orders according to sources, prioritize orders, distinguish prices and do more with multichannel management systems.
Unified POS – A centralized POS is what every wholesale and warehouse business needs to keep track of its comprehensive inventory spanning across boundaries. With a unified POS, you can move products from excess produce regions to the ones in demand and vice versa.
Logistics Management – solve the last piece of puzzle in the supply-chain mechanism by implementing a logistic management system. With this, businesses could track better, pack fragile and hard products accordingly, prefer appropriate shipping techniques and more.
Case Study
FedEx is one of the world’s largest delivery services. FedEx has close to 425,000 employees and serves to over 220 countries. In 2018, FedEx reported a revenue of $65.4bn. It has complex warehousing policies and processes to ensure logistics reach on time regardless of the location in the world.
FedEx believes that a warehouse is crucial for a business’ reputation, flexibility and profitability. Businesses should understand different and complex processes happening across a warehouse to be able to optimize their services and delivery. To facilitate this, FedEx ensure it:
- Offers shared and dedicated warehouse spaces
- Develops or acquires new warehouses
- Implements ways to optimize and manage warehouse staffing
- Design and build distribution centers and more
Future of Warehousing And Wholesaling
Some of the solutions we discussed above are the benchmarks businesses would set in the coming months. Conventional and analog ways of maintaining warehouses will go obsolete and companies would be forced to adopt tech in their operating strategies.
More sensible organizations would understand the importance of what a solid tech infrastructure can do for their businesses and would invest in robotics, artificial intelligence, machine learning, data analytics, industrial automation, internet of things for automatic replenishment of goods and more.
A layer of technology will turn an otherwise redundant technology into a happening space.
The coming years are going to be exciting in this industry and regardless of the market you are operating in, you would be facing the challenges we have seen so far.
The most ideal solution is to go digital with your business and get specific management systems or enterprise applications built for your wholesale and warehouse business. We implement business intelligence tools in your application so you automate most of the complex processes in operations.
Reach out to us to get a solid application built tailored for your business.