Ecommerce order fulfillment is more than just packing and shipping — it’s about precision, speed, and cost efficiency. Businesses that rely on outdated legacy systems often face delays, high labor costs, and manual errors, making it difficult to meet growing customer expectations.

Enter next‑generation warehouse automation software for ecommerce: designed to optimize every step of the fulfillment process. From intelligent order routing to real‑time tracking and automated cartonization, modern shipping software maximizes warehouse efficiency, reduces costs, and ensures seamless operations. By integrating smart automation, businesses can scale effortlessly while delivering faster and more reliable shipping experiences.

In this article, we’ll explore how shipping software enhances warehouse efficiency, minimizes fulfillment challenges, and empowers merchants to stay ahead in a competitive market.

Understanding Fulfillment Challenges

Fulfillment challenges can significantly impact a business’s ability to deliver products efficiently and effectively. Understanding these challenges is crucial to implementing effective solutions.

Manual Processes and Labor Costs

Manual processes can be a significant drain on resources, leading to increased labor costs, reduced productivity, and a higher risk of errors. Tasks such as manual data entry are not only time‑consuming but also prone to mistakes, which can cause delays and escalate costs. This is where automation solutions, like warehouse management systems (WMS), come into play. By automating repetitive tasks, a WMS can streamline operations, reduce the need for manual labor, and minimize errors. This not only cuts down on labor costs but also frees up your team to focus on more strategic activities that drive business growth.

Disconnected Software Programs and Missing Tracking Info

Disconnected software programs can create a fragmented fulfillment process, leading to missing tracking information and making it difficult to monitor and manage inventory levels, shipping, and delivery. This lack of integration can result in inefficiencies and errors that disrupt the entire supply chain. Implementing a seamless integration between software programs, such as a WMS and shipping software, can significantly improve visibility and control over the fulfillment process. With integrated systems, you can ensure that all parts of your operation are synchronized, providing real‑time updates and comprehensive tracking information. This not only enhances operational efficiency but also improves customer satisfaction by ensuring timely and accurate deliveries.

Warehouse Efficiency: Supercharge Productivity for Your Team

We’ve now discussed how shipping software needs features that help you simplify the complex new world of ecommerce. But Sellers are not just focused on simplifying operations inside their businesses. Pressure from the outside continuously bears down on them – whether it’s rivals on online marketplaces, multiple channels to market and sell on, or demanding customers.

Efficient shipping processes play a necessary role in enhancing productivity by automating tasks such as creating labels, tracking packages, and handling returns, ultimately leading to improved customer satisfaction.

And all this is happening amid a competitive labor market, where staffing has become expensive and challenging. It isn’t enough for an ecommerce shipping software to reduce operational complexity. It must do so with minimal human intervention and resources, allowing you to do more with less. Crucially, the software must unlock productivity gains for today’s small teams, enabling them to focus on high‑value work.

In the previous section, you might’ve seen that legacy software has features that can simplify operational complexity. However, those features are often painful and convoluted to implement by a small team of seasonal or part-time workers. We think there are 3 major areas where shipping software must streamline workflows efficiently:

• Does the software have humanless, autonomous automation across shipping workflows, or does it require constant babysitting?

• In a world with increasing basket sizes, can it unlock time savings for warehouse staff by automating packaging selection?
• Is the product easy for seasonal or part‑time workers to use, without specialized training?

In the coming sections, we’ll examine each of these areas, showing how legacy software drains productivity and how next‑generation shipping software reclaims time, boosts efficiency, and drives growth.

Automated Shipping Workflows with Warehouse Management Systems

Legacy Software – Labor Intensive and Painful

The most important tasks in shipping software are routing orders to fulfillment locations and identifying the cheapest shipping label.

Legacy shipping software uses manual, repetitive steps for printing labels. Typically, after logging in, you must:

1. Open an order
2. Fix address issues
3. Identify which warehouse has the SKU in stock
4. Assign a “Ship From” location based on the customer’s address
5. Select packaging
6. Rate‑shop across carriers and services one at a time
7. Pick the cheapest service
8. Print the label
9. Repeat for the next order

Some of these steps can be automated through crude, hard-coded automation rules but those are time-consuming to configure and can still be inaccurate. A rule is needed for almost every single workflow. Here are some reasons why this process is so elaborate and painful:

• Automations in most legacy software require certain criteria to be defined. When orders meeting these criteria (for example, orders for a certain SKU) enter the system, the rule is triggered to execute certain actions (like assigning a certain carrier or service). But what are all these rules defined for? Their ultimate aim is to find the lowest-priced shipping label on every order. These rules simply trigger certain actions to occur, rather than rate shopping for the cheapest label by comparing carriers and services.
• Even the simple steps need a rule. For example, if you’re delivering to a residential address, then only certain services can be used – like FedEx Home Delivery, for example. A rule needs to be written to ensure this mapping is considered by the system. All this makes it enormously difficult to cut down the number of keystrokes and clicks.
• ShipStation’s ‘Auto-routing’ feature (still in Beta in 2025), only factors in which locations have a product and their distance from the customer before assigning orders to a fulfillment center. It still does not support the comparison of real-time shipping rates for each carrier and service to make a full and final, (accurate), decision.

In our estimation, it would take the average human over 5 hours to print labels for 1,000 orders!

And as we all know, a human is not a computer. When doing a repetitive task for such a long period of time, fatigue and the possibility of errors increase dramatically. It’s also worth asking – why should a human be engaged in such repetitive, low-value work all day long?

Next‑Gen Software – Humanless and Seamless

With next-generation shipping software, the difference is like night and day. The system intelligently compares warehouse locations, carriers, shipping services, inventory levels, and shipping supplies to instantly and automatically generate shipping labels for every single order, and integrating seamlessly with inventory management enhances efficiency and accuracy.

Here’s the sequence of steps to accomplish the same goal using Cahoot (after logging in):

1. Verify the address corrections made automatically by the system
2. Prints labels in bulk

The system automates many steps that legacy software doesn’t – it spots potential issues with addresses and makes suggestions to fix them, it only considers warehouses that have inventory available, it selects the smallest packaging that an order can fit into and ship safely, and it rate-shops that package weight and dimension across all carriers, services, and warehouses for the cheapest service.

It’ll take the average human just 15 minutes to print labels for 1,000 orders in Cahoot, and most of that time is waiting for the printer to finish its job. We’ve made a video where you can get a glimpse of how this works, and how we stack up against the popular legacy shipping software ShipStation (if you’d like to see a little more about how Cahoot compares to ShipStation, read our comparison here!) You can sit back and relax, knowing that the optimal selection was made for every single order using technology. You can also free up your time to work on other tasks that add more value to the bottom line. If you’re finding it difficult and expensive to hire more people, you can ensure that the people you do have are focused on the problems that matter the most.

You can see it in action, or read our ShipStation comparison to learn more.

Making Large, Complex Orders Easy to Handle

Legacy Software – Left to Humans and Heuristics

Legacy shipping software is mainly focused on one portion of the fulfillment workflow – printing shipping labels. In a world of rising basket sizes, merchants have complexity in other steps of the shipping process, including shipment packaging selection. Optimizing layout and staff allocation in a distribution center can significantly enhance shipping efficiency and reduce costs.

This is a common problem that customers of legacy software like ShipStation face. For complex orders that might require multiple boxes of various sizes, they are forced to enter the box dimensions manually each and every time based on the SKUs in the order. The customers from their community forum below are requesting a pull-down list of the common boxes they use so they can quickly make the selection rather than manually entering dims.

The customer is also highlighting a more important issue – they can add a set of boxes as a “base” in ShipStation. This feature aims to serve as a default that can be applied to most MLMQ orders. However, unless you’re lucky that most of your MLMQ orders consist of the same unique combination of SKUs, such a feature is pointless.

The list of automation rules that need to be written to map SKU combinations to boxes is dizzyingly long and involves having to figure out all the possible SKU permutations; impossible if your product catalog is any more than a couple dozen SKUs.

As the classic saying goes, customers are great at highlighting problems, but not identifying solutions. We think this is a big pain point that next-generation software already solves.

Next-Gen Software – Powered by Machine Learning for Warehouse Operations

Cahoot’s next-generation shipping software solves both of these problems. We don’t think the solution is a drop-down list, because you’re just replacing keystrokes with clicks. It’s still human effort and time.

Our software remembers the box selection you make the first time and applies it by default the next time regardless of how many SKUs and units of each are in the order. This ensures you’re freed up from repetitive manual entries and clicks.

We don’t believe the solution to picking the optimal box for every MLMQ order is an arbitrary default or crude automation rule. The Cahoot system uses breakthrough cartonization innovation to intelligently evaluate the space utilization for a group of items across all available boxes in stock and calculates the percent fit (% fit), making sure the most optimal box is automatically selected every time.

This frees your team from data entry and guesswork, letting them focus on higher‑value tasks that grow your business.

Optimizing Your Fulfillment Network and Carrier Management

Optimizing your fulfillment network and carrier management is crucial to ensuring efficient and cost-effective shipping operations.

Fulfillment Network and Carrier Performance Metrics

Monitoring fulfillment network and carrier performance metrics is essential for optimizing shipping operations. Key metrics—on‑time delivery rates, shipping costs, and customer satisfaction—provide insights into your fulfillment efficiency. Implementing a WMS offers real‑time visibility, enabling data‑driven decisions to optimize carriers, reduce costs, and improve delivery reliability.

By understanding challenges and optimizing your network and carriers, businesses can boost warehouse efficiency, cut costs, and elevate customer satisfaction through integrated, automated solutions.

Summary: Why Next‑Gen Shipping Software is a Game Changer

Traditional fulfillment systems struggle with modern ecommerce demands—high labor costs, fragmented software, and manual workflows. Next‑generation warehouse automation software transforms operations by automating workflows, optimizing packaging, and integrating sales channels.

Features like real‑time tracking, AI‑powered cartonization, and automated carrier selection let businesses scale without bottlenecks. Investing in the right software drives down costs, increases accuracy, and delivers a seamless fulfillment experience.

Learn more in our Next Generation Shipping Software Guide, Part 4: “Save Money With Ecommerce Shipping Software: Next‑Gen Solutions”.

Frequently Asked Questions

How does warehouse automation software improve ecommerce fulfillment?

Warehouse automation software streamlines fulfillment by automating order routing, label generation, and inventory tracking. This reduces errors, speeds processing, and optimizes carrier selection for faster, more cost-effective deliveries.

What are the key benefits of using shipping software for warehouse efficiency?

Shipping software enhances warehouse efficiency by automating label printing, integrating with multiple carriers, optimizing order packing, and providing real‑time tracking. These features reduce labor costs, minimize delays, and improve fulfillment accuracy.

Can warehouse automation software integrate with existing ecommerce platforms?

Yes. Most next‑generation warehouse automation solutions integrate seamlessly with platforms like Shopify, Amazon, Walmart, and eBay—synchronizing inventory, orders, and shipping updates in real time.

How does automated cartonization help reduce shipping costs?

Automated cartonization uses AI to select the best box size for each order, reducing dimensional weight fees and wasted space. This optimization lowers shipping costs and improves warehouse space utilization.

How do I choose the right warehouse automation software for my business?

Consider integration capabilities, ease of use, automation features, and scalability. Look for solutions supporting multiple carriers, intelligent order routing, and analytics for continuous optimization.

Written By:

Jeremy Stewart

Jeremy Stewart leads customer success at Cahoot, helping merchants achieve high-performance logistics through smart technology and process optimization. With a background in both ecommerce operations and client services, Jeremy ensures that every merchant using Cahoot gets measurable results—whether they’re scaling from one warehouse to many or managing complex returns.

In today’s complex supply chain landscape, terminology can sometimes blur together, leaving business owners and logistics professionals confused about the best solutions for their operations. Two terms that are often used interchangeably, yet serve distinctly different purposes, are fulfillment centers and distribution centers. This article explores their definitions, differences, relationships, and how they fit into the broader supply chain ecosystem alongside traditional warehouses.

What is a Fulfillment Center

A fulfillment center (FC) is a specialized facility primarily focused on B2C (business-to-consumer) operations. These centers receive, process, pack, and ship orders directly to end consumers. The key distinguishing feature of fulfillment centers is their consumer-oriented approach. They are designed to handle individual orders rather than bulk shipments, with workflows optimized for picking single items from inventory, packaging them appropriately for individual consumers, and shipping them through parcel carriers.

A fulfillment warehouse, often managed by third-party logistics providers, operates similarly to a fulfillment center, focusing on efficiently shipping goods, particularly for ecommerce and retail.

The primary goal of a fulfillment center is speed and accuracy in getting products directly into customers’ hands. They typically store inventory for relatively short periods; just long enough to facilitate the order fulfillment process. Modern fulfillment centers often feature advanced automation systems for sorting, picking, and packing to meet the growing demands of ecommerce.

Benefits for Ecommerce Businesses

Fulfillment centers offer a multitude of benefits for ecommerce businesses, making them a necessary component of modern online retail operations. These benefits include:

• Speed and Efficiency in Fulfilling Customer Orders: Fulfillment centers are designed to process individual customer orders quickly and accurately. With advanced automation and streamlined workflows, these centers can pick, pack, and ship orders with remarkable speed, meeting the high expectations of today’s consumers for fast delivery.
• Scalability to Accommodate Fluctuating Order Volumes: Ecommerce businesses often experience varying order volumes due to seasonal trends, promotions, and market fluctuations. Fulfillment centers provide the scalability needed to handle these changes, allowing businesses to ramp up operations during peak periods and scale down during slower times without compromising efficiency.
• Focus on Customer Experience: By outsourcing order fulfillment to specialized centers, ecommerce businesses can focus on their core activities, such as product development, marketing, and customer service. Fulfillment centers also offer value-added services like gift wrapping, personalized notes, and custom packaging, enhancing the overall customer experience and fostering brand loyalty.
• Access to Advanced Technology and Automation: Fulfillment centers leverage cutting-edge technology and automation to optimize the entire order fulfillment process. From robotic picking systems to real-time inventory tracking, these technological advancements enable businesses to stay competitive in the fast-paced ecommerce market.
• Cost Savings through Reduced Shipping Costs and Improved Inventory Management: By strategically locating fulfillment centers near customer population centers, businesses can reduce shipping costs and transit times. Additionally, advanced inventory management systems help minimize stockouts and overstock situations, leading to more efficient use of resources and cost savings.

In summary, fulfillment centers provide ecommerce businesses with the tools and capabilities needed to meet customer demands, streamline operations, and achieve sustainable growth in a competitive market.

What is a Distribution Center

Distribution centers (DC), by contrast, serve primarily as waypoints in the supply chain. Distribution centers serve as essential hubs that receive and store inventory, which is then allocated to fulfillment centers for order processing. They focus on B2B (business-to-business) operations, acting as intermediaries that receive bulk shipments from manufacturers or suppliers and then redistribute these goods to other business locations such as retail stores, smaller regional distribution centers, or sometimes fulfillment centers.

The key function of a distribution center is short-term storage and efficient product flow. Inventory typically moves through a distribution center quickly, usually within days or weeks, as these facilities are designed for high throughput rather than long-term storage. They handle merchandise in larger quantities (pallets or cases rather than individual items) and focus on efficient cross-docking, sorting, and redistribution operations.

In essence, distribution centers act as strategic hubs within the supply chain, ensuring that products are efficiently moved from one point to another. This makes them crucial for businesses involved in wholesale distribution and retail replenishment, as they help maintain a steady flow of inventory to meet market demands. By serving as central points for receiving and storing inventory, distribution centers enable businesses to manage their supply chains more effectively, ensuring that products are available where and when they are needed.

Benefits for Ecommerce Businesses

Distribution centers are equipped with several key features that enable them to manage inventory efficiently and distribute products effectively. These features include:

• Inventory Management and Storage Capabilities: Distribution centers are designed to manage inventory levels meticulously and store products in an organized manner. Advanced inventory management systems are often employed to track stock levels, monitor product movement, and ensure that inventory is readily available for redistribution.
• Order Fulfillment to Various Locations: One of the primary functions of a distribution center is to fulfill orders to various locations, including retail stores, wholesalers, or other fulfillment centers. This involves picking, packing, and shipping products in bulk, ensuring that each destination receives the correct quantities of inventory.
• Cross-Docking and Consolidation Capabilities: Distribution centers often utilize cross-docking and consolidation techniques to minimize handling and storage costs. Cross-docking involves transferring products directly from inbound to outbound transportation with minimal storage time, while consolidation combines smaller shipments into larger ones to optimize transportation efficiency and reduce transit times.
• Partnerships with Shipping Carriers: To ensure timely and cost-effective delivery, distribution centers often establish partnerships with various shipping carriers. These partnerships enable distribution centers to negotiate favorable shipping rates, streamline logistics operations, and ensure that products reach their destinations promptly.

By incorporating these features, distribution centers can effectively manage the flow of inventory, reduce operational costs, and enhance overall supply chain efficiency.

What is a Warehouse

Warehouses represent the traditional model of storage facilities, designed for longer-term inventory storage. Unlike fulfillment and distribution centers that prioritize movement, warehouses are designed for longer-term inventory storage, often holding goods for months or even years. They serve as repositories for raw materials, seasonal inventory, safety stock, or slow-moving products.

Not all warehouses are fulfillment centers or distribution centers. Not all fulfillment centers or distribution centers are warehouses.

The primary function of a warehouse is secure, organized storage rather than rapid processing or shipping. While modern warehouses have evolved to incorporate more sophisticated inventory management systems, their fundamental purpose remains focused on storage capacity and organization rather than rapid throughput.

Fulfillment Centers and Distribution Centers Complement Each Other

Rather than competing entities, fulfillment centers and distribution centers typically operate as complementary components within a sophisticated supply chain network. Many businesses rely on a third party logistics company (3PL) to manage the operations of both fulfillment centers and distribution centers, ensuring efficient movement of goods from manufacturers to consumers. In many large operations, distribution centers feed fulfillment centers, creating a logical flow of goods from manufacturer to consumer.

In this relationship, distribution centers typically receive bulk shipments from manufacturers, then break these large shipments down into smaller quantities that are sent to various fulfillment centers based on regional demand forecasts. The fulfillment centers positioned closer to end consumers handle the final mile of the delivery process.

This collaboration creates a streamlined supply chain that balances efficiency with customer satisfaction. Distribution centers provide the economies of scale needed for cost-effective inventory movement, while fulfillment centers deliver the speed and personalization that today’s consumers demand.

How Warehouses Fit into the FC and DC Ecosystem

Traditional warehouses serve a different but equally important role in the supply chain ecosystem. While fulfillment and distribution centers focus on movement and flow, warehouses provide stability and security through longer-term storage capabilities.

Warehouses often feed both distribution and fulfillment centers with inventory as needed, providing essential warehouse space for excess inventory during low-demand periods. They store excess inventory during low-demand periods, hold seasonal merchandise until the appropriate selling season, maintain safety stock to buffer against supply chain disruptions, and house slow-moving items that aren’t needed in high-velocity centers.

In a well-designed supply chain, warehouses act as the foundation that supports the more dynamic operations of distribution and fulfillment centers. They provide the buffer needed to maintain consistent inventory availability despite fluctuations in demand or supply chain disruptions.

How to Choose the Right Facilities

Selecting the appropriate mix of fulfillment centers, distribution centers, and warehouses depends on several factors specific to your business model and operations.

Using Fulfillment Centers Exclusively

Businesses that rely solely on fulfillment centers gain significant advantages in direct-to-consumer operations. These facilities excel at processing individual customer orders with speed and precision, enabling faster delivery times that meet the growing expectations of today’s consumers. These facilities also provide pack fulfillment services, which include generating pick lists, collecting items, checking orders for accuracy, and packing them for shipping. The specialized handling capabilities of fulfillment centers ensure that each order receives proper attention, from accurate picking to appropriate packaging, enhancing overall customer satisfaction.

Another major benefit of fulfillment centers is their ability to offer value-added services that enhance the customer experience. From gift wrapping and personalized notes to custom packaging and subscription box assembly, these facilities can implement services that create memorable unboxing experiences and strengthen brand loyalty. This consumer-focused approach makes fulfillment centers particularly well-suited for ecommerce operations, where the physical delivery represents a critical touchpoint in the customer journey.

However, relying exclusively on fulfillment centers comes with several drawbacks that businesses must consider. These facilities typically incur higher operational costs per unit handled compared to other supply chain facilities. The labor-intensive nature of individual order processing, combined with the premium locations needed for rapid delivery, contributes to increased expenses that can impact profit margins. Additionally, fulfillment centers are not designed for efficient bulk storage, making them less cost-effective for inventory that isn’t actively moving to consumers.

Businesses using only fulfillment centers may also struggle with limited capacity for long-term inventory holding. These facilities prioritize throughput over storage, making them ill-suited for housing seasonal merchandise, safety stock, or slow-moving items. For nationwide operations, a fulfillment center-only approach often necessitates establishing multiple facilities across different regions to achieve acceptable delivery timeframes, further increasing operational complexity and capital requirements.

Using Distribution Centers Exclusively

Organizations that operate exclusively with distribution centers serve benefit from highly efficient handling of bulk shipments. These facilities excel at receiving, sorting, and redistributing large quantities of merchandise, creating significant economies of scale in inventory movement. Their focus on high-volume handling makes them particularly cost-effective for businesses that primarily serve other businesses rather than individual consumers.

The strategic positioning of distribution centers enables efficient regional distribution networks that can minimize transportation costs while maximizing coverage. By placing these facilities near major transportation hubs or at crossroads between manufacturing sources and market destinations, companies can optimize their outbound logistics operations. This creates better economies of scale for transportation, allowing businesses to negotiate more favorable carrier rates and reduce per-unit shipping costs through consolidated freight movements.

Distribution centers provide an ideal infrastructure for retail store supply chains, efficiently breaking down bulk shipments into store-specific allocations that can be delivered according to retail replenishment schedules. Their ability to process large volumes of merchandise makes them well-suited for operations where goods flow to predetermined business locations rather than individual households.

Despite these advantages, a distribution center-only approach presents significant limitations for many modern businesses. These facilities are not optimized for individual order fulfillment, lacking the specialized processes and systems needed for efficient picking, packing, and shipping of direct-to-consumer orders. Their focus on bulk handling makes them less suitable for the personalized, parcel-based shipping that dominates ecommerce operations.

Businesses relying solely on distribution centers for ecommerce operations often encounter additional handling steps that increase both costs and fulfillment timelines. Without dedicated fulfillment capabilities, companies frequently need to partner with separate fulfillment services or carriers to bridge the gap between their distribution operations and individual consumer deliveries, adding complexity and reducing control over the customer experience.

Using Warehouses Exclusively

Companies that utilize storage facilities as their sole supply chain facility enjoy substantial benefits for long-term storage operations. These facilities offer lower operational costs for inventory that doesn’t require frequent handling, making them cost-effective solutions for businesses with stable product lines or significant safety stock requirements. Their focus on storage rather than processing provides the capacity to house large quantities of inventory efficiently, utilizing vertical space and dense storage solutions.

Warehouses provide ideal environments for maintaining significant safety stock levels to buffer against supply chain disruptions or demand fluctuations. Their long-term storage orientation makes them particularly well-suited for seasonal or slow-moving inventory that would otherwise consume valuable space in more dynamic facilities. Many warehouses can be established in less premium locations away from urban centers, resulting in lower real estate costs and reduced overhead expenses compared to fulfillment or distribution centers.

However, a warehouse-only approach creates substantial challenges for serving today’s consumers effectively. These facilities are not designed for rapid order processing, lacking the workflows and systems needed to efficiently fulfill individual customer orders. Without specialized consumer packaging capabilities, warehouses struggle to provide the presentation quality and unboxing experience that modern shoppers expect from online purchases.

Warehouses are typically positioned farther from end consumers than fulfillment centers, increasing delivery timelines and transportation costs for direct-to-consumer shipments. The storage-focused nature of these facilities often requires more labor to transition goods from storage mode to shipping mode, creating operational inefficiencies when handling ecommerce orders. For businesses serving individual consumers, these limitations can significantly impact customer satisfaction and competitive positioning.

Integrating All Three Facilities

Organizations that successfully integrate fulfillment centers, distribution centers, and warehouses into a cohesive network gain maximum flexibility across all supply chain needs. This comprehensive approach allows businesses to leverage the strengths of each facility type while mitigating their individual limitations. By designating specific functions to the facilities best suited to perform them, companies can optimize each location for its intended purpose, improving overall operational efficiency and cost-effectiveness.

Many businesses rely on a third party logistics company (3PL) to manage the operations of fulfillment centers, distribution centers, and warehouses, ensuring efficient movement of goods across the supply chain.

An integrated approach provides better regional coverage and delivery capabilities, positioning inventory strategically to balance cost efficiency with customer service requirements. By maintaining warehouses for long-term storage, distribution centers for regional replenishment, and fulfillment centers for consumer deliveries, businesses create more robust contingency options during supply chain disruptions. This multi-facility network also offers enhanced scalability for seasonal fluctuations, allowing companies to adjust capacity and capabilities as demand patterns change throughout the year.

While integration offers numerous advantages, it also introduces greater complexity into supply chain operations. Managing inventory effectively across multiple facility types requires sophisticated inventory management systems and careful coordination to prevent stockouts or redundancies. The movement of goods between facilities increases transportation costs compared to simpler supply chain structures, potentially offsetting some of the efficiency gains achieved through specialization.

Integrated networks typically require more sophisticated tracking systems to maintain visibility and control across the extended supply chain. The multi-facility approach also creates greater management overhead, as each facility type demands different operational expertise and oversight. The combined real estate, equipment, and staffing requirements of multiple facility types result in higher total infrastructure costs, although these investments often generate positive returns through improved service capabilities and operational efficiency.

Global vs Domestic Considerations

The global nature of today’s supply chains adds another layer of complexity to facility planning. International operations typically require adjustments to the traditional model:

• Global Distribution Centers often function as import processing centers, handling customs clearance, compliance verification, and international shipment consolidation. These facilities typically require proximity to ports, airports, or border crossings.
• Regional Fulfillment Networks become even more critical in global operations, as fulfillment centers must be strategically positioned to meet delivery expectations across different countries while navigating varying regulations and shipping infrastructures.
• International Warehousing may involve bonded warehouses, free trade zones, or other specialized facilities that help mitigate duties, taxes, or compliance issues associated with international commerce.

Conclusion

Understanding and taking advantage of the distinctions between fulfillment centers, distribution centers, and warehouses helps develop an effective supply chain strategy. Rather than viewing these facilities as interchangeable or competing options, successful businesses recognize them as complementary components of a comprehensive logistics ecosystem.

By strategically implementing the right mix of facilities based on your specific business needs, you can create a supply chain that balances cost efficiency with customer satisfaction. The optimal approach typically involves integrating elements of all three facility types, with their relative importance determined by your business model, customer expectations, and growth strategy. Cahoot can help you find the right mix and help your business grow no matter what.

As ecommerce continues to evolve and consumer expectations for rapid delivery increase, the strategic importance of well-designed fulfillment networks will only grow. Businesses that understand and effectively leverage the unique strengths of each facility type will gain significant competitive advantages in the marketplace.

Frequently Asked Questions

Are Distribution Centers and Fulfillment Centers Warehouses?

Not all distribution centers and fulfillment centers have long-term warehouse space capabilities. Most will support storage, but the storage fees may be much higher than using a dedicated warehouse.

Can a Distribution Center also act as a Fulfillment Center?

Yes, some distribution centers may offer fulfillment services.

What Location Differences are there Between Fulfillment Centers and Distribution Centers?

Fulfillment centers are located near customer population centers, while distribution centers are focused on shipping hubs. These locations have some overlap, but that doesn’t mean that a distribution center makes a good fulfillment center.

Written By:

Indy Pereira

Indy Pereira helps ecommerce brands optimize their shipping and fulfillment with Cahoot’s technology. With a background in both sales and people operations, she bridges customer needs with strategic solutions that drive growth. Indy works closely with merchants every day and brings real-world insight into what makes logistics efficient and scalable.

Warehouse Key Performance Indicators (KPIs) are essential metrics that drive operational excellence in logistics and supply chain management. These quantifiable measurements help warehouse managers track performance, identify inefficiencies, and make data-driven decisions to enhance productivity and profitability.

What Are KPIs and Their Value in Warehouse Management

Key Performance Indicators are specific, measurable values that demonstrate how effectively a company is achieving its business objectives. In warehouse operations, KPIs provide insights into operational efficiency, resource utilization, and overall performance.

The value of warehouse KPIs extends beyond simple measurement. They:

• Establish clear performance standards and expectations
• Identify operational bottlenecks and inefficiencies
• Facilitate data-driven decision making
• Enable continuous improvement processes
• Support budget justification and resource allocation
• Align warehouse operations with broader business goals
• Provide objective criteria for employee performance evaluation

KPIs transform reporting from a reactive to a proactive operation, where performance trends can be analyzed and addressed before they impact the bottom line.

How to Measure Warehouse KPIs

Effective KPI measurement requires a structured approach:

1. Define Clear Objectives: Identify what you want to achieve in your warehouse operation. Objectives should align with overall business goals and be specific, measurable, achievable, relevant, and time-bound (SMART).
2. Select Relevant KPIs: Choose metrics that directly relate to your defined objectives. Too many KPIs can dilute focus, so prioritize those most impactful to your operation.
3. Establish Baselines: Measure current performance to establish a starting point against which future performance can be compared.
4. Set Realistic Targets: Determine achievable performance targets based on historical data, industry benchmarks, and business requirements.
5. Implement Measurement Systems: Deploy appropriate technologies and processes to collect accurate data, whether through warehouse management systems (WMS), barcode scanners, or manual tracking.
6. Analyze Regularly: Review KPI data at consistent intervals to identify trends, anomalies, and improvement opportunities.
7. Take Action: Implement changes based on KPI insights and track the impact of these changes on performance metrics.
8. Refine and Adjust: Periodically reassess KPI relevance and modify your measurement approach as warehouse operations evolve.

Warehouse KPIs by Type

There are many different KPIs that can apply to warehousing. Here are several different types of KPIs, with some specific KPI examples and formulas to calculate them.

Understanding Inventory Management KPIs

Inventory management key performance indicators (KPIs) are critical metrics that provide warehouse and logistics managers with essential insights into the efficiency, accuracy, and financial performance of their inventory operations. These quantitative measurements serve as diagnostic tools that transform raw operational data into actionable intelligence, enabling businesses to optimize stock levels, reduce costs, improve customer satisfaction, and make data-driven strategic decisions. By tracking specific indicators across various stages of inventory management—from receiving and storage to order fulfillment—organizations can identify bottlenecks, minimize waste, and create more responsive and lean supply chain processes.

Inventory Management KPIs

Receiving KPIs

Putaway KPIs

Order Management KPIs

Safety KPIs

Challenges in Using Warehouse KPIs

Implementing key performance indicators (KPIs) in warehouse management can significantly impact operational effectiveness. Data quality emerges as a critical first hurdle, as the accuracy and completeness of performance metrics fundamentally depend on reliable information collection. Inaccurate or incomplete data can lead to misleading KPI values, causing management to make strategic decisions based on flawed insights. For instance, a warehouse might appear to be performing efficiently according to its metrics, when in reality, underlying data collection issues are masking critical operational inefficiencies.

The risk of over-measurement further complicates KPI implementation, creating a potential scenario of information paralysis. When organizations attempt to track an excessive number of metrics, they inadvertently dilute their focus and create unnecessary complexity in performance management. This approach can overwhelm warehouse managers and staff, making it difficult to concentrate on the most critical performance indicators that truly drive operational excellence. The key lies in strategic selection; choosing a focused set of KPIs that provide meaningful insights without causing cognitive overload or distracting from core operational objectives.

Organizational dynamics introduce another layer of complexity in KPI management, particularly through misaligned incentives and potential employee resistance. Performance metrics can sometimes create unintended consequences by encouraging behaviors that might optimize one aspect of performance while undermining another. For example, a KPI emphasizing order processing speed might inadvertently compromise order accuracy, or metrics rewarding individual productivity could potentially discourage collaborative teamwork. Moreover, employees may perceive performance measurement as a threatening surveillance mechanism rather than a tool for continuous improvement, leading to potential resistance and reduced engagement.

The financial and operational investment required for sophisticated KPI implementation presents a significant challenge for many warehouses. Establishing robust measurement systems demands substantial investments in technology infrastructure, data collection tools, and comprehensive staff training programs. These costs can be particularly prohibitive for smaller organizations with limited resources. Additionally, KPIs are not static constructs but dynamic tools that require continuous refinement. Context sensitivity demands periodic reassessment and adjustment of metrics to account for seasonal variations, evolving business strategies, technological advancements, and changing market conditions. Successful KPI implementation thus requires not just initial investment, but ongoing commitment to adaptability, technological integration, and organizational learning.

Tools for Measuring KPIs

Modern warehouse operations utilize various tools to measure and track KPIs:

1. Warehouse Management Systems (WMS): Comprehensive software solutions that manage inventory, track orders, and generate KPI reports.
2. Enterprise Resource Planning (ERP) Systems: Integrate warehouse data with broader business metrics for holistic performance measurement.
3. Business Intelligence (BI) Platforms: Transform raw data into actionable insights through visualization and analytical capabilities.
4. IoT Sensors and RFID: Provide real-time tracking of inventory movement and equipment utilization.
5. Barcode and QR Code Systems: Enable accurate data capture for inventory and order processing.
6. Labor Management Systems (LMS): Track individual and team productivity metrics.
7. Data Dashboards: Present KPI information visually for quick decision-making.

Advanced Strategies and Tips for Using KPIs

Once KPIs are established, there are additional ways to leverage KPIs. First, predictive analytics leverage historical KPI data to forecast future performance trends and proactively address potential issues. Implement systems that provide immediate feedback on critical KPIs, allowing for rapid response to developing issues.

Remember that not all KPIs carry the same weight; ensure KPIs address multiple perspectives: financial, customer, internal processes, and learning/growth and implement tiered KPI structures where high-level metrics cascade down to operational-level indicators, creating alignment across the organization.

Finally, make KPIs collaborative; involve warehouse staff in KPI development to increase buy-in and ensure metrics are practical and relevant. Use friendly competition and recognition to drive KPI improvement among warehouse teams.

KPIs vs. Benchmarks

KPIs and benchmarks serve complementary purposes in warehouse management. KPI’s measure the business performance internally against itself, while benchmarks compare business performance to industry best practices.

Effective warehouse management requires both internal KPIs for operational control and external benchmarks for strategic positioning. While KPIs track progress toward specific operational goals, benchmarks provide context for how your performance compares to industry standards, helping identify competitive advantages or improvement opportunities.

When using benchmarks, consider industry segment, warehouse size, product type, and geographical location to ensure relevant comparisons. Sources for benchmark data include industry associations, consulting firms, and supply chain research organizations.

Conclusion

In conclusion, warehouse KPIs provide the quantitative foundation for data-driven management, operational excellence, and continuous improvement. When properly selected, measured, and analyzed, these metrics transform warehouse operations from cost centers to strategic assets that contribute significantly to organizational success.

Frequently Asked Questions

How do I Track Warehouse KPIs?

Each KPI has their own metric or formula. For example, inventory accuracy is measured by
Number of Errors / Total Inventory x 100%.

What are the Most Important Warehouse KPIs to Track?

There are many KPIs, and just tacking on KPIs doesn’t help. In general, Accuracy and Cost related KPIs are always helpful.

What is the Best Way to Monitor Warehouse KPIs?

Use Warehouse Management Systems (WMS) or Inventory Management Software to automatically track and analyze KPIs.

How Often Should I Review Warehouse KPIs?

KPIs should be reviewed weekly or monthly; KPIs should be used to correct and adjust before problems become major issues.

Written By:

Manish Chowdhary

Manish Chowdhary is the founder and CEO of Cahoot, the most comprehensive post-purchase suite for ecommerce brands. A serial entrepreneur and industry thought leader, Manish has decades of experience building technologies that simplify ecommerce logistics—from order fulfillment to returns. His insights help brands stay ahead of market shifts and operational challenges.

• Fulfillment and operations fixes will play a major role in pulling Pier 1 out of the downward spiral of 11.4% same-store sales declines, said CEO Alastair James on an October earnings call.
• James said “pool distribution,” speeding up fulfillment and consolidating three warehouses into one Columbus, Ohio facility — which happened three months ago — will bring greater speed and efficiency needed to re-engage customers in-store.
• CFO Nancy Walsh named “higher supply chain costs” among the factors putting pressure on gross margins, and the company is evaluating whether tariff hikes could hit margins further.

Pier 1’s “pool distribution,” in which one truck delivers to more than one location, is expected to double store delivery days to twice per week and meant to reduce stockouts and increase the chain’s ability to replenish stores quickly, said the CEO.

James also mentioned the warehouse consolidation as a source of increased efficiency. “The newly configured space which moves us from three buildings down to one is enabling faster processing, improved accuracy, and smarter packaging. We’re now positioned to take the learnings from this transformation and bring this model for the remainder of our supply chain network over time,” said James.

But there is still a serious element of uncertainty behind these strategies to increase efficiency and boost margins since Pier 1 relies so heavily on imports from China. “Approximately 59% of our sales in fiscal 2019 are expected to be generated from goods produced in China. And about half of that will consist of product classes that are subject to the 10% tariff that went into effect last week,” said Walsh.

He added that the retailer is “evaluating” the effects of tariffs in the new year, when they will rise to 25%.

Read the article here.

Offer 1-day and 2-day shipping at ground rates or less.

Recent Blog Posts

Packaging Design That Will Make Fulfillment Easy and Cut Costs

E-commerce Revolution with Strategic Packaging Solutions Like anyone in the e-commerce world, small business owners are always looking for ways to streamline their operations and

USPS Hazmat Shipping Guidelines – How to Ship Fast While Staying Compliant

Hazardous Materials What is a Hazardous Material? What Items Are HAZMAT? Classes of HAZMAT Items What Classes Can Ship on Various USPS Services? What Changes

Protect Your Amazon Listings from Search Suppression, Hijackers, and Stockouts

Amazon is a competitive platform. You need to have a quality product, excellent listing content, and plenty of reviews to catch the attention of busy

Written By:

Indy Pereira

Indy Pereira helps ecommerce brands optimize their shipping and fulfillment with Cahoot’s technology. With a background in both sales and people operations, she bridges customer needs with strategic solutions that drive growth. Indy works closely with merchants every day and brings real-world insight into what makes logistics efficient and scalable.

Trying to find extra warehouse space as a merchant is daunting. According to JLL’s recent Industrial Outlook, the market for industrial rent has never been worse. Vacancies are at a miniscule 4.3%, an all time low, and rents rose a whopping 7.1% in 2021, reaching an all-time high.

And yet, you need room to grow. Higher sales and more products demand bigger inventories, and that’s without mentioning the supply chain crisis that’s forcing merchants to load up on more inventory than usual.

At the same time, many merchants aren’t using all of their own warehouse space. It’s tough to get the perfect size warehouse, so many err on the side of caution and start with more room than they need.

That’s where on demand warehousing comes in – merchants who need space can get the warehouse capacity they need from those who have more than they need.

What is On Demand Warehousing?

On-demand warehousing is the idea that merchants can rent out space in other merchants’ warehouses to help with their storage and fulfillment needs. 

The Wall Street Journal describes it well:

“The idea is to tap into unused space in a crowded U.S. industrial real-estate market where distribution centers near population centers are fetching a growing price premium. Retailers and manufacturers are trying to position goods closer to customers without getting locked into long-term contracts or multiyear leases when rapid changes in buying patterns and trade conditions have made forecasting demand more difficult.”

On-demand warehousing platforms connect merchants to others that can provide warehousing services. A user on one of their platforms will be able to see a variety of warehouse owners that may be able to suit their needs with temporary space. They can then negotiate for warehouse space and services directly from those owners, securing the extra footprint they need.

On-demand warehousing is rising in prominence because it’s becoming more difficult to “go it alone” in the eCommerce era. Before the rise of Amazon Prime, merchants could easily lease space solely around their home base, keeping inventory centralized and easy to manage. Prime, though, has pushed customer expectations for fast delivery ever higher – and those customer expectations extend past Amazon’s marketplace to DTC stores and brick & mortar retailers alike.

To provide fast shipping at an affordable cost, merchants need to strategically deploy inventory in four or more locations across the country. Put it all together, and you see why merchants are looking to expand their footprint across the United States. On demand warehousing offers one way to build a nationwide ecommerce order fulfillment strategy.

Pros and Cons of On Demand Warehousing

On demand warehousing can solve many challenges for merchants, but it comes with its own issues. In this section, we’ll cover what it does well and what it doesn’t address.

Pros of On Demand Warehousing

1. Flexible growth

The retail landscape seems to shift at warp speed – we went from talking about 2-day delivery to same-day delivery in the blink of an eye. The pandemic has only accelerated the pace of change, and while the total retail and eCommerce markets grow rapidly, it’s more difficult than ever to predict their futures. 

Will curbside pickup from big box retailers disrupt Amazon? Will dark stores powering same-day shipping leap over customer demand for 1- and 2-day shipping? What’s just over the horizon?

If you’re buying or leasing your own space and investing heavily into operations, you’re locking yourself into one particular mode of fulfillment for years to come. On demand warehousing’s short contracts and endless options, on the other hand, present an opportunity to shift your approach at the drop of a hat and satisfy the newest customer demands.

2. Enables fast shipping

On demand warehousing is a flexible way for merchants to strategically place their inventory in 4+ US fulfillment centers. Directly owning or leasing space across the country requires a huge investment of time and capital, and it’s simply out of reach for most merchants. 4+ locations, though, are necessary to cover the entire country with 2-day shipping at ground rates. With on demand warehousing, nationwide inventory distribution is feasible even for smaller merchants.

Source: Cahoot analysis of FedEx Ground delivery times

It also helps larger enterprises strategically deploy inventory in regions where they think they’ll experience a demand spike. For instance, when natural disasters unfortunately occur, large retailers will send a massive amount of relevant equipment to on demand warehouses in a nearby area to ensure that they don’t go out of stock on essential goods. It can also help with the holiday rush if a retailer feels that they don’t have enough inventory in a critical part of the country.

3. Low capital requirements

On demand warehousing fits entirely into Operating Expenses. This minimizes the risk of investing in the wrong areas, and it maximizes the capital available to deploy towards other critical parts of the business. 

For instance, you can flexibly rent out more space to try out a new product, and if it doesn’t move, you can quickly get out of the on demand lease. If you had leased out commercial warehouse space yourself, you might be stuck in a 12-month or longer lease, and tied up money that could have gone to a new hire or to expanding the marketing budget to make up for the new product failure.

Cons of On Demand Warehousing

1. Questionable warehousing & fulfillment quality

Fast and accurate fulfillment is hard, and warehouses that weren’t designed with it in mind can’t keep up. When you use an on demand platform to contract with one or more warehouses, you just won’t know the level of quality you’ll receive until your products have been shipped. 

The benefit of enabling affordable fast shipping with a nationwide network will quickly be stripped away by errors in the fulfillment process if you contract with a fulfillment center that can’t keep up with the rigors of same-day shipping. Moreover, as the pressure to work quickly increases, the error rate at many operations skyrockets – just ask the merchants that have been dropping out of the Seller Fulfilled Prime program.

On top of that, you’re unlikely to get good customer support when working with warehouses on demand. Warehouses that sign up for an on demand warehousing platform don’t usually consider customer service a core competency, and you might not even have a reliable way to get someone on the phone to talk out issues.

On demand warehousing gives you tremendous flexibility in choosing who to work with, but it doesn’t come with a central control tower to help make sure things go right. Problem solving and troubleshooting with multiple different facilities will be up to you, and if even just one warehouse isn’t up to par, it’ll eat up a huge amount of your time – and not to mention your profit.

2. Integration complexity

If you just work with one other warehouse through an on demand platform, you’ll have to build a two-way data integration with them to ensure that you have visibility into what’s happening with your products and orders.

Now imagine that you’re doing the same thing with 2 or 3 more warehouses – that’s not a fun tech problem!

No two warehouses’ tech stacks are alike; just about everyone has a different mix of WMS, OMS, IMS, Shipping Software, and more. That means that every additional warehouse you want to add comes with another integration, which adds expense and slows the process down.

This may not be a problem for an enterprise like Walmart, which secured 1.5 million sq ft of temporary space through an on-demand platform, but it can bury a SMB. 

3. Short term solution

The benefits of a short-term contract also come with a downside: just as you aren’t locked into a long-term commitment, neither is the warehouse providing you with space and fulfillment capabilities. If they want to expand their own operations, or if they find a customer that will pay more for you, you can find yourself needing to find a new place for your inventory with only a few weeks’ notice.

Not to mention, your expanding needs will force you back into the on demand marketplace over and over to find new partners. The warehouses that you contract with at first only have so much space and only have certain capabilities, so as you expand, you’ll need to add new warehouses. You’ll find yourself going back to the platform over and over, which incurs significant managerial time costs. And on top of that, you’ll add more and more complexity instead of enjoying economies of scale.

Who Uses On Demand Warehousing?

On demand warehousing is the best fit for sophisticated enterprises that have the resources and capability to manage a high degree of complexity in their operations. They use on demand warehousing to meet specific, short-term goals without deploying capital. In this way, they can take advantage of growth opportunities and find creative solutions for logistics challenges without putting a huge bet on an uncertain or short-term strategy.

Consider our example of Walmart from earlier – they leased out a full 1.5 million extra square feet of space through an on demand portal. They know exactly what their short-term needs are, and importantly, they know exactly how they’ll move on from their short-term on demand solution. 

Ace Hardware presents another interesting example of how on demand warehousing can work well for enterprises. During the 2018 hurricane season, they used on demand warehousing to flexibly stage disaster-relief items near regions that were hardest hit by the natural disasters, ensuring that they could get people the products that they needed to rebuild quickly. Like the Walmart example, Ace used the flexibility offered by on demand warehousing to execute a very specific short-term strategy.

On the other hand, SMBs don’t have the time or capabilities to evaluate, integrate with, and manage short-term warehouse partnerships. If you’re an SMB and want to take advantage of the benefits of on demand warehousing, what can you do?

Cahoot – Your Nationwide Network, Without the Hassle

You want a nationwide footprint to power your growth with affordable fast shipping, but you don’t have the time to manage multiple relationships with on demand warehouses across the country. 

At Cahoot, we handle the hard part for you.

We’ve built a nationwide network of top-quality merchant fulfillment centers already, and we continuously monitor them to ensure a leading >99.95% on-time shipping rate. Your dedicated Cahoot account manager will be your one point of contact, and our software gives you real-time visibility into our fulfillment performance and your inventory. You may have inventory in four of our locations, but from your perspective, you’re just working with one great company.

On top of that, we’ll strategically evaluate your order flow and make recommendations to improve your inventory placement across our network. Need to add a location? You don’t have to go back to an on demand platform again to find yet another partner – we’ll just add one with the click of a button, and you’ll be ready to grow.

Whether you already have a warehouse and want to expand your footprint or are looking for a full-service fulfillment provider, we have the flexibility to handle your specific needs. 

Talk to an expert today and see how our peer-to-peer network will power your profitable growth.

Offer 1-day and 2-day shipping at ground rates or less.

Related Blog Posts

Packaging Design That Will Make Fulfillment Easy and Cut Costs

E-commerce Revolution with Strategic Packaging Solutions Like anyone in the e-commerce world, small business owners are always looking for ways to streamline their operations and

How AI Agents Will Transform Ecommerce Order and Inventory Management Systems

Knowledge workers will either need to learn to harness the power of AI to 10X their output (or the output from the tools at their disposal), or AI agents will take over those jobs at a fraction of the cost.

Preparing for Peak Holiday Season [A Guide for Sellers]

The peak holiday season is the most critical time of the year for e-commerce businesses, characterized by intense order volumes, high consumer expectations, and operational complexities.

Written By:

Indy Pereira

Indy Pereira helps ecommerce brands optimize their shipping and fulfillment with Cahoot’s technology. With a background in both sales and people operations, she bridges customer needs with strategic solutions that drive growth. Indy works closely with merchants every day and brings real-world insight into what makes logistics efficient and scalable.

As ecommerce gains a larger share of the total retail market, the demands on warehouses keep growing. While the underlying principle of what a warehouse is remains the same, the actual processes run within warehouses look far different from what they did even 20 years ago. Warehousing services have evolved from simple storage solutions into integral components of the global supply chain.

Products need to be stored securely and handled properly, and multi-channel ecommerce orders need to be delivered on time, all of which directly impact a merchant’s revenue and profitability. Efficiently handling long-term storage, Business-to-Business (B2B) replenishment, and online direct-to-consumer (DTC) orders is a tall task for any one warehouse, and rising consumer expectations are pushing costs higher. 

What seems like a simple decision – where to store your products before last mile delivery – can get complicated in a hurry. Understanding the breadth of warehousing services, their benefits, and how to choose the right outsourcing partner is crucial to optimizing for success.

What Are Warehousing And Fulfillment Services?

Simply put, warehousing is the term for the storage of inventory before the goods are sold. Warehouses focus on storing inventory inexpensively, securely, and in a way that supports necessary access to the goods. Warehousing can occur at many steps along the supply chain: manufacturers need to store products, warehouses are often needed to help with middle mile distribution, and inventory is stored in a warehouse until it’s shipped to a customer. Within the enormous category of ‘supply chain’, there are many different types of warehouses that may or may not specialize their offerings. But the four primary types of warehouses are:

Public warehouses
These facilities offer short-term and long-term storage solutions for multiple clients, making them a cost-effective option for businesses with fluctuating inventory or order fulfillment needs.

Private warehouses
Owned and operated by a single business, private warehouses provide maximum control but require significant investment.

Bonded warehouses
Used for storing imported goods before customs duties are paid, allowing businesses to manage international shipments efficiently.

Fulfillment warehouses
Specializing in ecommerce and DTC shipping, these warehouses focus on quick and high-volume order fulfillment (often same-day).

Warehouse specializations include things like:

• Temperature-controlled storage for perishable items, pharmaceuticals, and food products.
  
• Sustainable warehousing that supports brand reputation and image by using energy-efficient operations such as microgrid implementation for warehouse energy independence and decarbonization, and eco-friendly packaging such as fully organic mycelium-based materials.
  
• Secure storage for high-value items such as electronics, luxury goods, and jewelry that may require different security measures.
  
• Hazardous materials storage that requires warehouses to comply with safety regulations (e.g., chemicals, flammable goods, lithium-ion batteries).
  
• Food-grade warehouses require certification and stringent hygiene and temperature control standards if they prepare food products.
  
• FDA Food Facility Registration (FFR) for facilities that store and ship food products.

Essential fulfillment services, such as picking, packing, shipping, and storage, are fundamental offerings provided by fulfillment warehouses. Their services are crucial for developing an effective ecommerce fulfillment strategy. These are the warehouses that have seen the most change over the past few decades as they’ve shifted from focusing entirely on B2B orders (pre-ecommerce era) to being able to fulfill a large number of Business-to-Consumers (B2C) orders straight from their shelves. 

How has that shift impacted warehousing & fulfillment services?

Definition And Purpose Of Warehousing Services

Warehousing services refer to the storage and management of goods in a designated facility, playing a critical role in the supply chain. These services provide a central point for receiving, storing, and shipping products, ensuring that goods are managed properly and maintain their quality and availability as the market demands. By acting as a hub in the supply chain, warehousing services help streamline the flow of goods from manufacturers to customers, reducing delays and improving overall efficiency. Warehouse services also include closely related inventory management and logistics functions.

Logistics services (a.k.a inventory management and logistics functions) play a crucial role in warehouse fulfillment operations by offering efficient and cost-effective solutions for attending to the modern merchant’s needs (e.g., inventory preparation such as kitting and barcoding, or FBA forwarding, etc.). Not all warehouses provide these services, but they play a vital role in the success of today’s multi-channel ecommerce sellers. They should not be overlooked when considering whether to partner with a provider.

Not to be confused with distribution centers and distribution services that focus on facilitating the movement of goods between fulfillment centers, businesses also require these services and will need to separately evaluate their operational needs to determine the right mix of ecommerce order fulfillment and bulk storage and distribution services.

Inventory Management And Storage

Much of the floorspace in a warehouse is dedicated to inventory storage, but how inventory is stored has changed dramatically thanks to the shift toward ecommerce order fulfillment. Efficient warehousing is essential for clothing retailers, for example, to manage inventory effectively.

Warehouses focusing on B2B replenishment store their inventory efficiently in large bundles – think of a full pallet of goods or a pallet of goods from which multiple cases can quickly be picked. Relatively little is needed to receive the goods and put them into storage: if orders are pallet-sized, then they might not even need to be unpacked at all.

Contrast that with inventory storage at a warehouse that fulfills ecommerce orders – goods have to be stored in such a way that they can be easily picked in eaches (single unit quantities). When an ecommerce warehouse receives pallets of inventory, they have to unpack the pallet, put away cases of goods, and then open some of the cases so that they can easily access the products inside. The speed with which a warehouse picker can get to the items and pull one or more out of the carton becomes of paramount importance because they have to repeat the process hundreds of times per day.

Thus, the explosion of ecommerce has been accompanied by an explosion in warehouse automation as providers try to make their operations ever more efficient. When storing products, warehouse personnel must be able to pinpoint the exact location of all SKUs quickly, count the number of units on hand, and respond to recalls. Each of those tasks can be made considerably easier with the intelligent use of technology, like barcode scanning. Another [very high-tech] example making waves in 2025 is augmented reality-powered inventory management: implementing AR technology for real-time, hands-free inventory tracking and optimization in warehouse environments. These are very expensive systems, but the ROI on the investment is substantial.

Ecommerce Order Fulfillment

Moving from a handful of large B2B orders every day to thousands of B2C orders per day is a massive shift. Just like the changes to warehouse storage strategy, a change in fulfillment strategy has led to a significant increase in the complexity and cost of warehousing.

Warehouses need to employ more fulfillment personnel and deploy more technology in order to get products from storage into boxes or mailers and affixed with shipping labels as quickly as possible. Amazon Prime’s continual push to cut delivery times shorter means that warehouses can’t wait to fulfill orders; each customer that presses “buy” needs to have their item picked, packed, and handed over to a national carrier that same day.

Amazon SFP support

Speed is the name of the game when it comes to the Amazon Seller Fulfilled Prime (SFP) program. Amazon’s requirements are so intense that barely a half-dozen providers in the entire country have the infrastructure and resources to support it.

Returns Processing

Ecommerce warehouses must be able to process returns as one of its services – those that don’t leave their clients unable to provide a critical service to their customers. Marketplaces again have led the market with super-easy no-fault returns policies, so online merchants of all stripes are under heavy pressure to offer the same on their DTC sites. So, warehouses have to be able to receive returns, assess whether they’re damaged or not, and process them back into available stock whenever possible to minimize loss from returns.

Consolidation

Consolidation involves combining multiple smaller shipments into one larger shipment to reduce transportation costs and improve efficiency. Goods are picked, sorted, and packaged before being transported as one unit, leveraging economies of scale. Common uses include retail restocking and FBA forwarding, where shared truck space minimizes expenses and environmental impact while maintaining delivery reliability.

Deconsolidation

Deconsolidation is the breaking down of large amounts of inventory into smaller batches for efficient regional distribution. Goods are unpacked, sorted, inspected, and repackaged for delivery to separate fulfillment centers. This service prioritizes speed and accuracy, enabling rapid redistribution of inventory for faster and cheaper delivery to customers.

Cross-docking

Cross-docking is a logistics strategy where incoming goods are transferred directly from inbound to outbound transportation with minimal or no storage. Products arrive at a warehouse, are sorted, and immediately reloaded onto outbound vehicles bound for final destinations. This warehouse service prioritizes speed, eliminates warehouse holding time, and is ideal for perishables, time-sensitive retail goods, or high-turnover inventory.

Transloading

Transloading is the transferring of inventory between different transportation modes (e.g., freight container to truck van). Goods are unloaded from one carrier and temporarily stored if needed (usually hours or days, not weeks or longer), and then they are reloaded onto another carrier. Transloading enables cost-effective long-haul shipping.

Benefits Of Using Warehousing Services

Using warehousing services can bring numerous benefits to businesses, including:

• Cost Savings: By leveraging shared storage space and economies of scale, businesses can significantly reduce costs associated with storage, labor, and transportation.
  
• Improved Efficiency: Warehousing services optimize inventory management, reducing the need for frequent transportation and minimizing handling costs. This leads to a more streamlined and efficient supply chain.
  
• Enhanced Customer Satisfaction: Timely delivery of products is crucial for customer satisfaction. Warehousing services ensure that products are stored strategically and shipped promptly according to defined service-level agreements (SLAs), improving customer loyalty and satisfaction.
  
• Scalability: Warehousing services offer the flexibility to scale up or down according to changing market demands. This adaptability is essential for businesses looking to grow or adjust to market fluctuations like peak season demand.

How To Choose The Right Warehouse

Choosing the right warehouse to support your business can be a daunting proposition. There is a huge variety of services provided by warehouses and 3PLs, and it can be difficult to figure out what each company specializes in at first glance.

One crucial factor to consider is the availability of specialized services. These services can include order picking, packing, and specialized handling for unique products like beauty items, perishables, or fragile glass beverages that require custom shipping containers to avoid breakage in transit, which go beyond basic inventory storage and fulfillment.

What are the key criteria that you should keep in mind?

Key Considerations

• Technology: Advanced warehouse management systems (WMS) ensure efficiency, real-time tracking, and visibility of inventory and shipment status.
  
• Scalability: The warehouse should be able to accommodate growth and seasonal demand fluctuations.
  
• Geographic Location: Proximity to major distribution hubs and ports reduces inbound shipping costs, and locations in major metro areas decrease overall shipping costs and delivery times.
  
• Shared vs. Dedicated Warehousing: Shared services are cost-effective and flexible, while dedicated space and resources provide peace of mind and special attention but come at a higher cost.

Sales Channels

Where are you selling now? What’s your growth strategy?

Many online sellers get their start on Amazon and rely on Fulfillment by Amazon (FBA) for their warehousing and fulfillment. It’s only suitable for selling on Amazon, though, so they quickly find that they need an FBA alternative for their non-Amazon sales volume. The same is true of sellers that rely on Walmart Fulfillment Services for their Walmart volume; its warehouses are reserved for its own channel only. If you want to sell direct-to-consumer, or if you want to sell on more channels than just Amazon and Walmart, you can’t solely rely on those warehouse solutions. Today’s marketplace space is very diverse: Target Plus, Nordstrom, Macy’s, Wayfair, and more are thriving.

Stepping outside the big marketplaces, you’ll find that many warehouses and 3PLs specialize in either B2B or B2C orders, not both. Picking a specialist provider can be a strong strategy for sellers who are certain they’ll never want to cross over from retail to online sales or vice versa, but most have ambitions to grow on both channels.

If you’re currently selling both B2B and B2C or have plans to do so, you should know that there are providers that can do both at a high level. Many sellers start out with a warehouse that specializes in the one channel on which they sell (like FBA for an Amazon seller or a single Shopify 3PL for a DTC brand). Then, they add different warehouse and fulfillment companies as they grow to new channels that their existing provider can’t address. 

On the other hand, flexible 3PL networks like Cahoot will scale with you and seamlessly add the warehouse capacity you need for whatever channels you’re adding. Thanks to our peer-to-peer model, we have a dense network of many different types of warehouses – so we can consolidate your fulfillment needs into a single organization and customize our approach to your evolving needs.

It’s not so simple, though – most sellers have fast-movers and slow-movers in their catalog. Their hero SKUs generate an outsized chunk of their profits, but they need the “long tail” to bolster their brand and provide holistic value to customers. These slower movers are most efficiently stored in less expensive areas of the country, and moreover, they’re difficult to distribute around the country because that strategy significantly increases inventory carrying costs. In short, you want an entirely different warehousing strategy for your slow movers from your fast movers.

Some fulfillment networks like FBA specialize in fast movers only; most Amazon sellers have learned this painful lesson from getting hit with restrictive FBA limits that push all but their best sellers out of the service. Many of the tech-enabled 3PLs like Flexport have adopted similar models, and they all have similar markers: they have strict limitations on the inventory they’ll accept (and in particular, they don’t like large items), they charge huge long-term storage fees, and they put punishing surcharges on storage and fulfillment during peak seasons.

You can choose a mixed warehouse strategy in which you use fast-turn-optimized fulfillment centers like FBA for your fast movers and more efficient, low-cost providers for your slow movers. This can work, but it also requires a large amount of managerial time, and you’ll find yourself frustrated when you have too much inventory in one warehouse and too little in another. Alternatively, more innovative networks like Cahoot bring together warehouses that specialize in fast movers, slow movers, B2B orders, and everything in between. That way, you can consolidate your operations with one provider, simplify your life, and enjoy economies of scale.

On top of these considerations, the recent resurgence of volatile supply chain issues adds another wrinkle to your warehousing decision. Many sellers are opting to stock up on as much inventory as they can in advance because they know that “just in time” shipments from overseas will likely not arrive when they are estimated to. This adds another need for super-efficient storage – if you try to keep 6+ months of inventory in a warehouse optimized for B2C fulfillment, you’ll rack up ruinous storage fees. If you’re going to be bringing in more inventory than usual, our advice is to find a long-term storage warehouse in a relatively low-cost area close to your port of entry. There’s no avoiding the fact that you’ll have to pay more to store this inventory than if you brought it in “just in time,” but you can mitigate the cost with this approach. And if you’re stuck with extra inventory and no place to put it unexpectedly (for instance, from reduced FBA inventory limits), then you’ll need on-demand warehousing.

In the same vein, efficient management of raw materials is also crucial in inventory management, especially for industries like automobile manufacturing and food services. Proper storage and distribution of raw materials ensures timely order fulfillment and smooth operations.

Technology Needs And Warehouse Management Systems

Whether you sell online, wholesale, or both, you can’t avoid having a complicated tech stack in the 21st century. Even ten years ago, many warehouses were still operating via Excel spreadsheets – customers would email over the previous day’s orders, and the warehouse would get to work shipping them out. Warehouse operations have changed dramatically, and you need to carefully understand what technologies your warehouse can integrate with.

It starts with sales channels, ecommerce platforms, and order management systems: does your chosen warehouse have a pre-built integration with the services that you use? Does it have an open API and developer support so that you can connect lesser-known channels or custom technology to the warehouse? If you want efficient operations, at a minimum, your warehouse should automatically receive orders from you and then automatically update all of your customer management, inventory management, and ERP software with shipment information. It’s not easy, and many warehouses and 3PLs have struggled to make the digital transition.

On top of that, the technology that your chosen warehouse(s) use to operate day-to-day can have a significant impact on your total costs. Most warehouses and fulfillment centers make the shipping label decision for you because the label has to be printed on location. If they’re relying on an older shipping software, they likely have to pick shipping labels manually. This often leads to you paying more than you need to because they won’t always pick the optimal label. Next-gen shipping software completely removes the human from the process and autonomously identifies and creates the best shipping labels. They will automatically rate shop all of the supported carriers and pick the lowest-cost delivery service that meets your SLA. In this way, your warehouse’s technology substantially impacts your total fulfillment cost.

Warehousing Services Recap

Your needs for warehousing services can vary dramatically based on what and where you’re selling – from the humble long-term storage warehouse to the highly automated fulfillment center. 

Many sellers take a piecemeal approach to warehousing as they grow; they’ll start with a 3PL that meets their initial use case but quickly outgrow it and have to add multiple providers. Keeping up with a broad set of warehouse providers is time-consuming and inefficient, especially when transferring inventory between locations and across software systems. But new warehouse and fulfillment networks are here to address the challenge.

Cahoot’s innovative peer-to-peer network has the flexibility to cover a wide range of use cases, all under one company (and multiple warehouse roofs). 

Cahoot’s fulfillment network is built for the ever-shifting needs of growing ecommerce sellers. We’ll help you delight your customers with a stellar, Amazon-like delivery experience no matter where you sell. We have pre-built integrations with major marketplaces, shopping carts, listing services, carriers, and ecommerce platforms to fuel your multi-channel growth.

We don’t stop there, though. We’ve expanded our dense network to add significant B2B capabilities so that we can efficiently support retail replenishment. 

We can do this while others can’t because our warehouses are operated by merchants just like you with excellent fulfillment operations. There are millions of unique merchants in the US, and chances are that we have a few merchant clients just like you.If you need warehousing services built to help you scale into the future, contact us for a free consultation today.

FAQ

What are warehousing services?

Warehousing is the process of storing goods in a warehouse for the purpose of distribution, sale, or manufacturing. Warehouses are used for storing goods for an extended period of time and are typically equipped with storage areas, shelving, loading docks, conveyors, forklifts, pallet jacks, and other inventory-handling equipment. Businesses can benefit from warehousing in several ways, including more efficiently managing inventory and optimizing the shipment process.

What do warehousing companies do?

Warehousing companies provide facilities to store goods. They do not sell the goods they handle. These businesses take responsibility for storing the goods and keeping them secure. They may also provide a range of services, often referred to as logistics services, related to the distribution of goods.

Is warehousing the same as storage?

Warehousing is typically a temporary holding place for goods, with products moving in and out regularly. Storage can be short-term or long-term, depending on the specific requirements. Warehouses are often large facilities with ample space for storing and maneuvering goods.

Why would a business use warehousing?

Warehousing provides companies with a centralized location to store, manage, and distribute their goods to their end customers. This reduces the complexities involved in inventory monitoring and management and cuts down staffing needs and operation costs.

How much does warehousing cost?

On average, businesses can expect to pay between $5,000 and $25,000 per year for smaller co-warehousing spaces of less than 3,000 square feet and between $50,000 and $500,000 per year for a larger warehouse lease, urban areas commanding the higher end of the range.

How to calculate warehousing cost?

Measure Your Space: Start by measuring the total square footage of your warehouse. This measurement is the foundation for calculating many of your storage costs. Calculate Cost Per Square Foot: Determine the cost per square foot by dividing your total operating costs by the warehouse’s total square footage.

Written By:

Jeremy Stewart

Jeremy Stewart leads customer success at Cahoot, helping merchants achieve high-performance logistics through smart technology and process optimization. With a background in both ecommerce operations and client services, Jeremy ensures that every merchant using Cahoot gets measurable results—whether they’re scaling from one warehouse to many or managing complex returns.