A man and a woman stand next to each other in an aisle in a warehouse. The man wears a chambray shirt and dark-rimmed glasses and holds a cardboard box. The woman wears a lighter blue chambray shirt and holds an electronic tablet. The man uses one finger to point at something on the tablet's screen.  The metal shelves around the two people are filled with more cardboard boxes.
Whether your company produces its own items or acts as a dropshipper, you can find a warehouse to help meet your fulfillment needs. — Getty Images/gorodenkoff

Many startups and small businesses don’t have the space and workforce required to manage inventory and delivery logistics. For those that do, higher sales volumes can strain existing capabilities. Outsourcing your fulfillment and warehouse services can help your company scale without suffering from growing pains.

E-commerce fulfillment services include a physical distribution center where you can store your products, and the fulfillment company handles the picking, packing, and shipping. Conversely, a dropshipping warehouse stocks goods from one or more third parties (not products made by your business) and manages inventory procurement, packaging, and shipment. Decide which option is best for you and learn what a standard agreement includes. Plus, check out examples of warehouses for fulfillment and dropshipping.

Understand your warehouse and shipping needs

Do you manufacture goods or do you acquire them from external sources—or both? In each case, you need a warehouse that meets your requirements. Fulfillment centers and dropshipping warehouses handle similar tasks, including sending your products directly to customers. However, not all storage and distribution solutions will house items manufactured by your company.

Your options for outsourcing include the following:

  • Dropshipping warehouse: A supplier or manufacturer handles the inventory and shipping processes, including procuring and fulfilling your orders. But they don’t ship items you manufacture.
  • Fulfillment center: Third-party logistics (3PL) or fulfillment centers are flexible but more expensive solutions for optimizing your supply chain. This option is better for companies that create their own product lines and want to outsource logistics.
  • Warehouse rental only: This option is best if you need space but will staff it yourself. You rent a storage room and can bring in a third party for shipping assistance.

[Read more: 5 Smart Inventory Management Processes for Small Business]

Consider your dropshipping or fulfillment center terms

Services vary by vendor, so it’s important to learn what each warehouse solution includes. Prices also differ among warehouse and distribution facilities. Plus, consider any expenses associated with shipping your products to the warehouse. Lastly, it’s crucial to understand the methods used for shipping and returns. In particular, you may use these details when communicating with customers about shipping, returns, or refunds.

When starting a dropshipping business, you’ll have other considerations, such as if you can incorporate dropshipping tools seamlessly into your website. Likewise, you may want 3PL services with food-grade or climate-controlled facilities if you have perishable or high-value items.

While dropshipping has low barriers to entry, there are several things entrepreneurs need to know, including how to pick suitable suppliers.

Compare warehouse solutions by looking at:

  • Costs: Review your line item costs for outsourcing logistics. Shopify reported that “Fulfillment services typically charge by the hour or per unit per pallet.” In addition, you may have one-time or recurring fees for receiving, shipping, or storage. Dropshipping warehouses may charge “fees per order, account setup fees, and membership fees,” according to BlueCart.
  • Location: The closer the warehouse is to customers, the more likely it is to have faster shipping. Fulfillment and dropshipping service providers may have multiple centers in the United States and international regions. Consider solutions that can support your company as it expands into new markets.
  • Shipping and returns: Examine the entire process from your customer’s and company’s perspectives. You should understand the steps customers must take to return an item and your organization’s role in the process.
  • Reliability: Interact with potential providers and do due diligence to ensure their operations are stable and secure. Pay attention to red flags, such as unanswered complaints, financial instability, or cybersecurity issues that halted operations.

Examples of dropshipping warehouses

While dropshipping has low barriers to entry, there are several things entrepreneurs need to know, including how to pick suitable suppliers. For instance, dropshipping services may include supplier databases, allowing you to choose from thousands of manufacturers and products. And some providers offer integrated tools to automate your processes and deliver real-time inventory information.

Investopedia and QuickSprout suggest the following companies:

[Read more: Big Brands’ Inventory Management Partners Share Top Tips to Slay Supply Chain Snarls]

E-commerce fulfillment warehouse examples

Like dropshipping warehouses, fulfillment centers come in all shapes and sizes. Since you’re shipping your products to the center, consider your initial costs and ongoing expenses. Some providers may work better for your business based on the type of products sold and what platforms you use. Fit Small Business recommends Fulfillment by Amazon (FBA) for Amazon sellers, whereas Deliverr works best for “selling on competitive marketplaces.”

Other recommended solutions include:

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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Published November 20, 2022