So you want to start a warehouse … that’s amazing news! Never has it been simpler to roll out a fully tech-enabled warehouse, in such an effective way, in such a short period of time. Simpler doesn’t mean easy, though. If you’re new to warehousing or just starting out with your first warehouse, here are some helpful tips and tricks to consider when building a startup warehousing business.
Understand what you’re setting out to accomplish
Before taking the leap into starting a warehousing business, consider what you’re looking to accomplish. Are you looking to solve a specific pain point? To serve a particular industry? This is your “why,” the most important piece of any business, especially in warehousing.
As an asset-based business, making informed decisions from the ground up will ensure a far more efficient use of capital than just leasing a warehouse and “figuring it out from there.”
Some important points to consider are industries, pain points, verticals, geographic markets, specialty services (e.g., kitting, VAS (Value Added Services), and Amazon FBA prep). Find and follow your North Star(s) to ensure that the decisions you’re making align with the grand vision of a successful warehousing business.
Understand the markets/industries you want to serve
Once you’ve determined your “why,”, the next most important step is “how." How will you generate revenue? Customers of course! Yes, but determining which types of customers to serve is crucial to that plan. Especially in the beginning, choose a singular vertical, industry, geographic market, maybe even customer size. This is important for a few reasons:
- You can’t go out and sell if you don’t know what you’re selling. By deciding how you plan on generating revenue, you can then move into pitching your services to those revenue streams. Without a plan, you’re flying blind and risk slow sales, as well as churned customers.
- Not all warehouses are the same. Some are more optimized for cross-docking, distribution, or final-mile delivery. Without an understanding of the target industry/market you’re looking to serve, you may find yourself with a warehouse that isn’t optimal for your operations, and that’s a tough lease to burn out.
- If you’re a cross-docking operation, you probably don’t need 25 packing terminals at $5,000 a pop. Conversely, if you’re an ecommerce operation, you probably don’t need the automatic stretch wrap machine at $10,000 a pop. Determining the customer base that you want to serve will also help you better budget for equipment. This is especially important in 2022 as machinery and parts are in low supply.
Set a budget
So you’ve got your “why” and you’ve got your target audience. Now you're ready to roll, right?! Nope. I often use the analogy of starting a web agency. To scale up a web agency, that means another computer and maybe another employee; the hard costs are often less of a factor. To scale up a warehouse means more space, more equipment, more people, more insurance, more utilities, and the list goes on.
I can’t say it enough—set a budget! Going over budget isn’t the worst thing in the world, but if you don’t have a budget, you’ll have nothing to compare your spending against and very little means to control your cashflow properly.
Choose your warehouse
Every warehouse in the world is just four walls and a roof. Okay, there are bigger ones and smaller ones. Ones close to the ports and ones centrally located. But they’re still all the same thing pretty much, right?
How many customers do you plan on onboarding right away? That’s great that you want that shiny new 500,000 sq ft warehouse, but will it remain mostly empty for the first year? Or, will it be empty forever since you only do cross-docking and pallets don’t sit for more than an hour?.
Are you a pick/pack operation? That takes a lot of labor. Can the local labor market support your business? Are there active temp agencies around? Sure, it's great that you got that deal in Wyoming for $0.70/sq ft to serve that 20,000 order/month client, but who’s going to do all that picking and packing?
Talk to a realtor, explain what you’re looking to do, and ask them to help put together a portfolio of potential properties. You’d be surprised at how many people tell me that they went on LoopNet and surfed different warehouses for weeks on end. Will every broker be helpful? No, of course not. Most are excellent, though, and most want to see you in the right space.
Choose a WMS
Running a warehouse without a warehouse management system (WMS) is like trying to put on the Ironman suit but you’re not Tony Stark. You’ll look really cool, but you won’t be all that effective.
The good part here is that most WMS platforms worth their salt are pretty modular, meaning that they can be plugged into different types of operations and work equally effectively across the board. That being said, there are some nuances, though. There are some that are better for ambient ecommerce and some that are better for temp-controlled distribution.
Be sure to ask for references or at least examples of warehouses that are similar to yours, that use the same WMS. Above all, take the demo seriously and ask questions! This is the time to vet the WMS, not when it’s Friday at 5PM and you can’t get the WMS to spit out the shipping manifest at the end of the day.
Starting a warehouse business is one of the most challenging, difficult, and arduous business decisions to take on. It is also one of the most rewarding, revenue generating, recession proof businesses out there. Taking the proper steps to ensure your success from the get-go will make for much smoother sailing down the line.
Interested in learning more about how 3PL Warehouse Manager has helped customers get started in warehousing? Book a demo here.
Written by Frazer Kinsley
Frazer Kinsley is the Director of Consulting Services at 3PL Central. Previously, he owned and operated Hook Logistics, an omnichannel 3PL and customer of 3PL Central. Frazer is also the Managing Partner of Kinsley Partners, an investment and consulting firm focused on serving the needs of consumer packaged goods (CPG) brands.