A virtual warehouses is a digital solution that stores and manages the inventory. These also allow the businesses to holistically monitor and control the warehouses from one seat.
Virtual warehouses can be used by businesses across industries to streamline their operations, especially inventory management. However, for these to work successfully, businesses should focus on some factors that can impact their performance.
Factors to Consider Before Opting for a Virtual Warehouse
Here are the factors that businesses should consider before introducing a virtual warehouse to their setup:
Current Warehousing Infrastructure
The first factor to consider is the current infrastructure of the warehouse. This brings out any issues and inefficiencies in the current system.
These are the problems that have to be solved. Making informed choices about which areas of the warehouse require the most attention will help in setting up an effective virtual warehouse system.
Required ECommerce Platforms and Tools
The next factor is choosing a virtual warehouse that can integrate easily with the company’s tech stack. This is crucial because to automatically update the data and perform other functions, the warehousing solution needs to be connected to the business’s e-commerce platform.
This is the reason why the compatibility of the virtual warehouse with the e-commerce platforms and tools is essential.
Team Trainings
Working in a physical warehouse and operating a virtual warehouse are two distinct operations. If a business is shifting completely or integrating a virtual wing of the warehouse, staff training is important.
This is how companies can sync the warehouse operations with the rest. Alongside this, teams should also be given updated training as the virtual warehouse goes through technological changes.
Performance Monitoring
Virtual warehousing is a relatively new phenomenon. This is why it is absolutely crucial for businesses to monitor their performance regularly.
For example, one aspect of monitoring is if any of the metrics like sales, profit, customer service, lead time, etc. have shown any improvement. This will mean that the virtual warehouse is working for the business.
Logistics Partner
Another factor that businesses can consider for the successful working of the virtual warehouse is bringing in a logistics partner. This can be similar to the 3PL warehouses, only this time, it will be virtual.
These logistics partners can make the operations flexible, timely, and accurate.
Once these factors are taken care of, a virtual warehouse can be of great advantage for businesses.
Benefits of a Virtual Warehouse for Businesses
The following are the major benefits of a virtual warehouse:
Increased Inventory Visibility
As opposed to traditional warehouses, virtual warehouses are managed from one source.
This means that the inventory can be monitored even using a single screen.
In traditional warehouses, some products may be ignored due to their positioning. However, in virtual warehouses, all the inventory is visible and accessible to the operators.
Automation in Operations
One of the major advantages of using a virtual warehouse is automated inventory management. This includes inventory replenishment, customer services, order processing, sending inventory alerts, etc.
Doing these operations manually can involve certain risks. For example, in a physical warehouse, if a product is placed somewhere behind or in the corner, staff may not notice it. Due to this, the company may reorder this product even though it is available at the warehouse.
In a virtual warehouse, due to data monitoring, the software will only send a stockout alert when the product reaches a critical threshold.
Reduction in Cost
By optimizing space utilization using virtual warehouses, property rent, energy bills, insurance, and related taxes for extra physical spaces can be avoided.
Another benefit of using existing spaces is that companies can diversify their product range as much as they want, without worrying about getting extra space for them.
Real-time Inventory Data
Data is essential for businesses to know about the current inventory situation. Based on this data, companies take measures for the future.
With a virtual warehouse, businesses can monitor inventory in real-time. This way, companies can take immediate steps to avoid any crisis situation.
Integrated Sales Channels
Managing omnichannel sales is a major benefit of a virtual warehouse in the e-commerce business. This can be made possible by using a warehousing solution that can be integrated with multiple channels.
This way, the business can deliver its products from the nearest location quickly using a single unified warehousing solution.
Despite these benefits, virtual warehouses can create some challenges in inventory management.
Challenges in Inventory Management Using a Virtual Warehouse
Businesses may face the following challenges by using a virtual warehouse:
Data Security can be Compromised
As the warehouse is in a virtual capacity, it relies on digital systems and data. Technical glitches can cause data leaks, breaches, and thefts.
This security compromise on inventory data can be detrimental to any business. For this, robust data security measures need to be ensured. These should either come built-in with the warehouse or the company should get it separately.
Costly to Set Up
Virtual warehouses, although cheaper than the traditional ones, can still be costly to set up. As discussed in the point above, security measures have to be tight.
So, if a business has to purchase security software, this can be an additional expense. On the other hand, a virtual warehouse solution that comes with a security program can be expensive.
Requires Different Supporting Programs
A virtual warehouse isn’t just a space that holds the business inventory but a combination of several systems working in sync. These systems may include ERP (Enterprise Resource Planning) system, sales management, purchase order and invoice management, inventory management, etc.
Setting up these systems and then gaining the required knowledge about these can be an issue.
Integrating Multiple Warehouses
For businesses that have multiple warehouses, integrating them can also be a challenge. For example, businesses may set up different warehouses for different regions or sales channels.
Tracking the inventory movement and strategizing exclusively can be difficult.
Conclusion
A virtual warehouse can be beneficial for businesses to make their operations more efficient by increasing control and monitoring. For this, companies should ensure that they invest in a comprehensive virtual solution that covers the majority of warehouse management aspects.
