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The realities of a virtual warehouse solution

May 10, 2024
11 min read
Ioana Neamt

Ioana Neamt

Contributing Writer

There is no shortage of recommendations and guides about how to gain a competitive advantage and maintain it, how and why to optimize your inventory management, streamline your operations, reach your customers faster, and much more. 

Everything is important when building a business in today’s highly dynamic economic environment, and you might sometimes feel that you simply can’t have enough hands, heads, and eyes to keep it all in check. 

Luckily, however, technology also advances at a highly dynamic pace and there are plenty of modern approaches to choose from when you need to tackle everything at once. Implementing virtual warehousing software is one of the best ways to ensure that there are enough hands, heads, and eyes to manage your inventory and stay on top of any issues that inevitably arise. 

What is a virtual warehouse?

Virtual warehousing is a solution businesses use to track their stock in real time across multiple locations. It allows you to leverage technology to streamline your storage tracking and operations, even if (or especially if) you have more than one storage location. With virtual warehousing, you can essentially put together a digital copy of your real-life storage facilities and all the key information about the inventory you have stored in them.

Key advantages of virtual warehousing

Although not a physical location, the virtual warehouse offers distinctive advantages in terms of inventory and warehouse management, and more.

1. Analytics and insights in real time

This software solution allows you to automatically track key metrics such as inventory levels, inventory health, storage costs, and more. With key real-time data always available on hand, you can save the time and effort of making the calculations required by regular warehousing management, easily monitor multiple physical storage locations, and optimize your stocks and logistics as needed.

2. Complete view of inventory

Another advantage of virtual warehousing is that it offers you a holistic view across your storage locations and is not limited to one specific warehouse. Regardless of its physical location, any item or batch of inventory can be easily tracked, which puts you in a position to make better decisions regarding things like fulfillment strategies, stock allocation, and forecasting needs for additional stock in certain locations.

3. Optimized storage

Monitoring everything digitally from one source gives you and your team superior visibility over all segments of inventory in real-time, which allows you to react quickly to maintain high efficiency across your warehouse operations and always keep your stock optimized. For instance, when your data shows that you have particularly high turnover for a particular item in one location, you can optimize your storage there to allow more room for additional stock of it. What’s more, you can see in the virtual warehouse how you might be able to reconfigure the storage layout in that location, so that it is easier for workers to pick units of the item that is in high demand.

4. Convenient scalability

Virtual warehousing is also an asset for you when your business is growing. Easily scalable, this software solution allows you to add more warehouses to the digital copy of your physical network without having to change your inventory management system.

5. Reduced overhead costs

Using a virtual warehouse solution essentially means you won’t need to have a central warehouse. This, in turn, spares you of some storage costs, as you can trim your warehouse network down to key locations that meet your geographically dispersed customer base strategically.

6. Improved customer satisfaction

By distributing your inventory strategically to where it is needed most and/or soonest, you can efficiently fulfill orders from the closest warehouse. This can reduce your shipping times and costs, and lead to more satisfied customers.

User leaving a rating for a product or a service using a smartphone

Common challenges of virtual warehousing

While a virtual warehouse is a powerful tool that can help with many inventory management issues, it is not a guaranteed one-size-fits-all solution. Here are some of the most common challenges you should consider:

Technology investment and integration

To implement a virtual warehouse system, you’ll need to invest in software that, ideally, integrates with your current systems.

Warehouse network management

The quality of your virtual warehousing depends on the performance of your physical storage locations in terms of consistent service standards in security measures, efficient operations, and transparent communication.

Limited visibility into warehouse operations

You will probably have less direct control of the everyday operations in each physical storage space. You’ll need to establish and communicate clear performance expectations and protocols to ensure an efficient process throughout your storage network.

Robots moving around boxes in a warehouse between shelves stacked with inventory

Best practices for implementing virtual warehousing software

By understanding the challenges and implementing best practices, you can leverage the advantages of virtual warehousing and create an efficient inventory management system for your business.

1. Define your needs

Understanding your objectives will help you choose the best approach for your business. Identify what business goals you intend to reach with the help of virtual warehousing. Do you need to improve fulfillment speed? Reduce storage costs? Reach new markets?

2. Audit your inventory

In order to determine the optimal distribution of your inventory across storage locations, you should have a clear and complete record of aspects like product types, storage needs, and sales activity throughout your network.

3. Choose the virtual warehousing software (VWS) that is best for you

You will most likely be looking at VWS options that can easily integrate with the systems you currently use. It should also include features and capabilities that meet your specific needs, such as scalability, ease of use, reporting, and budget.

4. Warehouse partner selection and management

Your inventory might be distributed across storage locations that are not operated directly by you. It is essential that the warehouse network partners you select are reliable and experienced, and that they offer secure facilities, an efficient fulfillment process, and strong communication channels. Maintaining a reliable and trustworthy relationship with your partners will go a long way.

5. Standardized practices

The clear communication protocols that you develop with your partners should include standards and procedures for inventory updates, order fulfillment, handling discrepancies, and resolving any unavoidable issues. Product labeling, storage procedures, and quality control measures should be consistently up to standard across your network.

6. Ongoing monitoring and improvement

Establish metrics and indicators that you need to track and keep tabs on your virtual warehouse performance. This way, you will be well positioned to calibrate and refine your strategies through gradual and timely improvements whenever needed.

Production planning KPI booklet open on a desk

Unlocking the potential of virtual warehousing with Katana

If you’re looking for a reliable partner in your inventory management journey, Katana might just have everything you need. The cloud-based inventory and order management platform has been successfully helping enterprises in retail, distribution, wholesale, ecommerce, and manufacturing to stay on top of their business.

Katana software can be the one-stop-shop that meets your inventory and order management needs. Features include:

  • Multilocation inventory management
  • Purchase order management
  • Inventory planning
  • Seamless integration with the best and most popular platforms and business tools
  • Tracking and monitoring
  • Analytics and insights for forecasts and improvements

Reach out for a demo to see Katana in action and understand how it can add value to your business.

Virtual warehouse FAQs

What is virtual inventory?

Think of virtual inventory as a master list of all your products and all their locations. Whether it’s in a warehouse, in a shop, or anywhere else in the supply chain, you can identify it and make sure that you fulfill your orders most efficiently from the closest available location.

How does a virtual warehouse work?

A virtual warehouse works like a control center that allows you to see information about all your inventory, in all your storage locations. With this digital copy of your collective inventory, you can plan, forecast, find ways to optimize storage, and reconfigure layouts as needed so that you can fulfill orders faster and save costs.

What is the best virtual warehousing software?

The best choice for you depends on the needs you need to address or the issues you need to solve with it. Katana is one of the most popular cloud-based inventory management systems and offers essential features such as real-time tracking and visibility, easy integrations, and reporting capabilities.

Ioana Neamt

Ioana Neamt

Contributing Writer
With more than 10 years of copywriting experience, Ioana has a fondness for longform writing, investigative journalism, cats, and Victorian-style mansions.

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