There are two basic ways of warehousing your ecommerce goods.

  1. Own the warehouse, and manage it with in-house staff.   When you own the storage facility, the goods are in your possession, and are as safe as they can be.  However, this will probably be the most expensive way too.  You are responsible for the facility and all of the personnel.  In this case, the product does not leave unless it is paid for by the customer.  Loss of goods once they leave your facility is not your responsibility.
  2. Store the goods in a third-party warehouse.  It is more cost-efficient.  However, the goods are still owned by you.  It is scary to think that you own the goods, and have no control over their security.  How can you make sure they are secure, and you are protected against any loss? 

Managing the Risk in a Third-Party Warehouse

There are a number of ways to protect yourself from loss when you turn the fulfillment process over to a third party:

  • Have a robust insurance policy.  Make sure the policy is well thought out, and has provisions for the kinds of loss that could occur. 
  • Use an inventory software program that monitors your inventory, and check it often.  A good program will have real-time inventory updates, so you can check inventory status on a regular basis, and be assured of accuracy.  It is easier to claim a loss right away, than wait for two weeks after the loss has occurred. 

Insurance

The terms of an insurance policy are customizable.  In reality, there is no such thing as “One size fits all” approach.  If you choose to use or sign a contract that has not been customized for your use, you are doing yourself a disservice.  Don’t ever let anyone tell you that this is the standard contract everyone uses. 

Here are a few basic forms of loss you need to protect yourself from including:

  • Theft and “shrink”.
  • Handling damage.  This is especially important if your product is fragile.
  • Man-made accidents in the warehouse, like a fire or water damage due to pipes breaking.
  • Acts of God, such as a hurricane that damages the entire warehouse.
  • Paperwork errors, such as a double shipment by the logistics company.
  • Returned products.  If your product is returnable, make sure there is a clear procedure laid out for the processing and counting of returned items. 

Covering loss prevention and loss claim procedures is very important to your bottom line.  Doing it right through a detailed and rock-solid contract with the logistics company you hire will make the difference between profitability and loss.

Perry Goldstein
Perry Goldstein

Perry Goldstein is an electronics industry veteran, with over 40 years of experience in manufacturer sales and marketing in both the consumer electronics and Pro A/V spaces. He has managed sales in both B2B and B2C markets.