Warehousing: What It Is, Why It Matters, and How To Do It

Today, there are more than 20,000 third-party logistics (3PL) companies in the U.S. competing to manage warehousing and logistical services for a growing number of businesses across all industries.

In 2023 alone, the market for the 3PL industry is expected to reach more than $2 billion, growing nearly 8% from 2022. To keep up with demand, an increasing number of companies are now offering 3PL services, making it ever-more challenging for existing 3PLs to win and retain customers.

So, how can you set yourself apart from the competition? That competitive edge may lie in:

• How well you understand the changing warehousing industry
• How effectively you can communicate to your customers:
  • What warehousing is and is not
  • What effective and efficient warehouse management looks like
  • How an experienced 3PL can simplify even the most complex supply chains
  • And, the role fulfillment centers play in ensuring operational resilience, even as companies scale or change

First, What is Warehousing?

Warehousing, or warehouse management, is a crucial piece of the modern supply chain puzzle. It’s a process to receive, store, manage, and track inventory.

In commerce and manufacturing, the terms warehousing and distributing are often interchanged, but they are not exactly the same. Distribution is within a distribution center where companies also store goods, but also handle order fulfillment, packaging, and shipping to customers.

Warehousing processes, sometimes referred to as logistics management, take place within a warehouse facility designed to store inventory or serve as a staging area—whether that’s a company’s actual products, or all of the raw materials needed to create those products, or both.

Without warehouse management, your customers may never see the big picture of just how successful—and efficient—they can be. This is a perfect opportunity for 3PLs to step up and help eliminate common customer warehouse pains.

Why is Warehousing Important for Ecommerce?

Warehousing is important for ecommerce brands because it’s the foundation of how companies transport, store, and manage materials and goods. In fact, ecommerce is one of the key drivers of 3PL industry growth.

In a recent Extensiv survey, the 2022 Third-Party Logistics Warehouse Benchmark Report, retail, bulk goods, and dry storage were among the top three industries served last year.

If your customers are ecommerce brands, you can help them realize a range of benefits that come from optimizing warehouse operations. For example:

Ensuring accurate inventory levels

Whether it’s raw materials to create a product, supplies to keep warehousing operations running, or actual goods and products, warehousing can ensure your customers always have insight into accurate inventory levels. With effective inventory management, you can help your customers know in advance when materials are running low so they have plenty of time to restock. Not only will timely reorders potentially save your customers money (no added fees for rushed shipping or product expediting), it can create a buffer to address any supply chain issues that may unexpectedly pop up.

Fewer stockouts

A key driver of operational resilience will be directly connected to customer and staff satisfaction. And, nothing can more quickly and irreparably damage an ecommerce brand than not having a product available when and where customers want it. That has a trickle down effect that may influence other buyers’ decisions, but it’s also frustrating for your customers’ staff. Effective warehousing can ensure your customers keep their consumers and staff happy by decreasing the frequency of—and possibly eliminating—stockouts.

Dedicated storage

Not only can your warehouse management processes ensure your clients always have the goods they need on-time, but as a 3PL, you can make sure that inventory is always easy to find and access, for example, by offering dedicated storage for stock-keeping units (SKUs). With dedicated storage facilities, your warehouse staff will always know exactly where products are stored and will have a system to ensure they restock in the same locations. This can speed up processing times because your staff will always know where to find materials when your customers expect a shipment.

Costs savings

When your 3PL effectively manages warehouse operations, you can help your customers save time and money. How? Efficient and automated warehousing is a key to optimizing your customers’ supply chains. One report found that 93% of 3PL respondents said use of 3PL services contributed to overall logistics cost reductions, which in turn contributed to improved customer service. In addition to that, warehouse rentals and leasing fees can quickly surpass what many businesses can afford, which is challenging to estimate with retail market fluctuations. Or they’re stuck using storage space that’s too small to meet their needs. As a 3PL, you will likely manage multiple companies’ inventories within a single facility, greatly reducing facilities costs—which you can include as part of your services package pricing.

Why is Warehousing Important for 3PLs?

Effective warehousing is important because it can give your 3PL an advantage in an increasingly competitive logistics management industry. By demonstrating the benefits of working directly with your company for inventory management, you can help your customers be more efficient and evolve along with a changing economy.

Here are some ways you can talk to your customers about why warehousing with a 3PL is a better alternative than trying to manage warehouse logistics on their own:

Flexibility and scalability

Warehousing enables more flexibility and scalability for your customers in a range of ways. This isn’t just about being able to store more or larger materials. Warehousing can also help your customers serve more consumers and offer opportunities to expand into other industries. For example, by using 3PL services, your customers will have access to a larger network of warehouses and transportation options they might not have otherwise been able to access if they managed warehouse operations on their own. In many cases, this may include access to your warehouse network if you run multi-warehouse operations and have facilities in specific geographical areas to decrease delivery times and reduce related costs.

Technology without the expense

The core operations of a warehouse can be one of the most challenging and cost-prohibitive parts of business for customers who attempt to manage warehousing and distribution centers on their own. To effectively receive, track, store, ship, and reorder inventory, your customers need access to the latest technologies. These technologies use automation to simplify incredibly sensitive logistical operations. Many companies just don’t have the knowledge to purchase a warehouse management system (WMS) or the financial resources to implement up-to-date technologies to streamline warehouse management. As a 3PL that specializes in warehouse operations, you can ensure your customers’ inventories are handled by industry recognized technologies with automated logistics, everything from barcode scanners to in-house robots and even artificial intelligence tools. These technologies can improve inventory management without expanding staffing requirements and with fewer opportunities for human error.

Specialized and secure storage options

Your customers may have a range of storage needs—everything from cold storage and refrigeration to bulk storage and storage for hazardous materials. Without a 3PL, many small businesses would not have access to these types of facilities. Your customers might not even realize how many warehouse types you can help them access. For example, there are both public and private warehouses. A private warehouse manages its own inventory and is usually for a single business, whereas a public warehouse such as those 3PLs use, handles inventory for multiple businesses within the same facility. Some other examples of specialized warehouse storage options include:

• Temperature controlled facilities
• “Smart” or automated warehouses
• Cross-dock warehouses for inbound and outbound transportation transfers
• Cooperative warehouses (for example a warehouse owned by an agricultural co-op)
• Consolidated warehouses (accepts smaller supply shipments and packages them with others before sending out to your customers)

Common Warehouse Processes

To attract and retain customers over your competitors, it will be important to clearly explain your warehousing processes, but not with a lot of technical jargon. Your customers will be focused on their individual business goals and objectives. That means you’ll need to talk to them about these processes in a way that unifies what you can do for them with what they want to achieve. Here is a high-level overview that can help you simplify many of the complex operations in a warehouse:

Receiving raw materials or products

Ensuring correct inventory arrives, that there is no damage, and that the correct volume/amount was delivered to the warehouse space and will have availability when your customers need it.

Storage facilities

Efficiently inventorying all materials, storing them in the proper environment (for example, temperature-controlled or hazmat facilities), tracking quantities for restocking, and labeling goods to ensure they’re accessible and trackable.

Selection and movement

When a 3PL customer needs supply chain management or to aggregate products, warehousing will ensure the appropriate product type and quantities are packaged for shipping to the customer’s location of choice and on-time.

Warehouse inventory management

Management of all processes related to inventory (raw goods, supplies, and finished products) sourcing, receiving, storing, and shipping to your end users.

An Extensiv Solution for Warehousing

Warehousing is complicated and can be tedious. Even the most experienced 3PLs can benefit from the automation and insight of an omnichannel warehouse solution. And, the more efficiently and effectively your 3PL can manage warehousing, the more customers you can serve using fewer people and resources.

For example, Extensiv 3PL Warehouse Manager can help you stay focused on customer attraction and retention by eliminating many of the manual, repetitive processes your staff may handle today using paper manifests or complicated spreadsheets. 3PL Warehouse Manager seamlessly integrates with systems your customers already use, and with its cloud-based visibility, you’ll have real-time comprehensive insight into your customers’ warehouse management needs so you won’t be caught off-guard by overlooking blind spots in the logistics process.

And, because you’re likely serving customers from a range of industries with many different needs, you’ll want a solution that can help you simultaneously manage many types of orders and workflows so your services can scale right alongside your customer needs.

Extensiv 3PL Warehouse Manager will also help your teams reduce pick time—and ensure they’re selecting the right materials at the right time at the correct volume—with fewer errors and increased efficiencies.

More than 1,500 3PLs have already discovered the power of Extensiv’s warehouse management system built by 3PLs for 3PLs, and they’re using it to their advantage to expand services and meet customers’ changing needs. If you’re ready to scale your 3PL business, now is the time to see how Extensiv 3PL Warehouse Manager can help you win more customers and improve customer service with less lift and reduced expense. Schedule a demo today!