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Retail Warehousing: Cost Benefits of Warehousing for Retail Businesses

forklift in warehouse

Retail warehouses work as a one-stop station that optimizes operations, from stock management to product distribution. Retail warehouses serve as an extension of your service to help you meet customer demands. With their crucial role in supply chain efficiency, businesses have long considered retail warehouses a necessity.

While warehouses aim to scale business processes, there may be predicaments along the way. Shifting to retail warehouses can lead to an increase in order volume, affecting your overall operations, especially if you have inadequate stock and limited staff. Other issues may stem from poor technology or even a lack of expertise on the side of the third-party provider. Before you take on the next step of your business, it’s important that you fully understand the ins and outs of warehousing.

Advantages of Warehousing

From streamlining complex processes to ensuring proper storage, warehouses offer a sweeping list of benefits that help businesses. Here are a few reasons why retailers opt for outsourced warehousing:

  • Bigger storage space: Storage is one of the challenges experienced by retail businesses. The limited space on their site restricts business operations and growth. This is where warehouses come into action. Warehouses offer a solution to insufficient storage, providing enough space to keep a bigger inventory and various types of commodities under one roof.
  • Better stock management: Besides inventory accuracy, retail businesses need proper stock management for customer satisfaction and increased profit. Big warehouses streamline key processes through automated technologies, managing your inventory smoothly and resulting in seamless and more secure stock tracking. Better inventory tracking also impacts the overall efficiency of operations.
  • Efficient distribution and logistics: Apart from storage and stock management, retail warehouses regulate the transportation of raw materials and end products. They are capable of fulfilling and transporting orders to various locations, including the customer’s address. As such, warehouses contribute to the smooth operations of the supply chain.
  • Meeting customer demand: The centralization of inventory, seamless fulfillment of orders and efficient shipping of products allow businesses to satisfy customers. When you meet customer expectations, there is a higher chance of achieving business goals and growing your company.

Cost Benefits of Warehousing for Medium-Sized Retail Businesses

Optimizing medium-sized retail businesses is easier with warehousing services. Here’s how warehousing impacts the financial aspect of the business:

  • Optimized storage space leads to cost savings. Removing large storage sections from your site creates a more conducive space for other business activities. That is why many companies opt for warehouses to maximize the storage space on their site for more relevant allocations. Storing stock in warehouses also means fewer expenses since you won’t have to build additional storage areas from scratch. You will only be paying storage fees and other costs to the warehouse, which requires less upfront capital.
  • Streamlined operations lead to reduced labor costs. Warehouses offer more than just product storage. Third-party logistics (3PL) is a more advanced retail warehousing solution that optimizes retail processes to improve the overall supply chain management. Trusted 3PL providers like Crown LSP Group come with an established network of distribution and fulfillment centers to streamline operations and reduce labor costs.
  • Bulk storage leads to reduced cost of goods. Medium-sized businesses with a more extensive influx of orders benefit from warehousing. Retail warehouses allow you to buy and store products in large quantities, which is advantageous for retailers. Bulk storage gives retailers better negotiation opportunities with suppliers. With better deals and reduced costs of goods, customers can enjoy increased product savings.
  • Enhanced customer service leads to stronger customer retention. All three benefits above empower you to deliver better customer service. When you fulfill the demands of your customers, it translates to better customer retention and increased profits.

Warehousing Vs. In-house Storage Cost Analysis

Whether you’re running an in-house storage space or hiring warehousing services, you will still incur costs, but to what extent? It’s crucial to compare the costs between the two in detail. Go through the pros and cons of each solution to help you make an informed decision.

In-house storage space

One of the main advantages of in-house storage is self-storage, which allows you to manage your stocks exclusively. It also means no rental costs. However, when your business starts to grow, it will come to a point where the cons will overshadow the pros. You will need more space to cater to your growing inventory to meet the demands of your customers. With no warehousing services to help you with order fulfillment, you take all the responsibility, from sorting orders to shipping packages.

Here are some other pros of in-house storage space:

  • Direct management of inventory
  • Complete control of storage design
  • No rental costs

There are also some cons of in-house storage space, namely:

  • Expensive storage expansion
  • Possible problem with space utilization

Warehousing services

The retail warehousing benefits are far-reaching, helping you streamline operations and satisfy customers. Most warehouses are situated near transportation hubs, improving the shipment of goods from suppliers to customers. Since you will not be taking care of the inventory, storage or distribution, hiring a warehouse service will enable you to prioritize more substantial operations within your company. All the repetitive tasks go to the third-party provider. More than that, you will save resources on costly storage expansions and additional labor costs.

Consider the pros of third-party warehousing:

  • Bigger storage capacity
  • Streamlined operations
  • Better inventory management
  • Efficient product distribution

The only con of partnering with a third-party warehousing company is paying rental expenses. However, these expenses are insignificant compared to the cost of maintaining your own warehouse and expanding your operations.

How to Select a Warehousing Service

When choosing a warehouse service, there are several factors to consider, including:

  • Location: The location of the warehouse plays a crucial role in streamlining operations. Pick a warehouse that is strategically located to save on transportation costs. The warehouse should be close to manufacturers and suppliers to reduce costs, time and effort. It’s also pivotal to consider the distance of the warehouse from your customers.
  • Technology: Technology matters. More than just picking a strategic location, technology influences the overall success of warehouse services. Consider a trusted retail warehouse equipped with modern technologies, such as barcode scanners, digital labels and WMS solutions. Warehouse automation is another key element that helps in inventory management and warehouse operations.
  • Scalability: The ability of the warehouse service to cater to your needs is as important as the location and technology they offer. Warehouses need to understand the unique needs of every business. They should be flexible to accommodate the differences in operational requirements and customers’ demands. When picking a warehouse, make sure you discuss what you want to achieve to avoid issues in the long run.
  • Value-added service: While warehouses generally focus on storage and inventory management, some established providers offer value-added services. For example, E-commerce fulfillment is highly beneficial to medium-sized businesses. This service allows you to shift the challenging operations of e-commerce to the experts, from managing inventory to fulfilling orders and handling returns.
  • Cost: The cost of warehousing takes on a series of factors, including the location, size, storage facility, labor and security. Technology and the cost of insurance also contribute to the overall pricing. Choose a third-party company that fits your budget.

Set Up Retail Warehouse With Crown LSP Group

For retail businesses, warehousing is truly a strategic business decision that improves operational efficiency and fulfills customer needs. You can count on us if you’re looking for a reliable warehouse partner. Crown LSP Group is your trusted 3PL provider that offers more than just warehousing services and inventory management. We handle logistics, transportation and even order fulfillment to simplify the entire process. Our extensive list of services gives you the opportunity to focus on more relevant business operations. Contact us today for all your warehousing needs and more.