Cross-border trade is a good way to scale a business and expand your market. But testing new markets abroad has challenges that a local supply chain doesn’t. This might mean local warehousing to reduce the time between order and delivery, or import and export red tape.
Small businesses in South Africa that are looking to grow their businesses beyond their current footprint often find themselves in a catch-22: to gain more sales and thus more capital, the business needs to expand, yet expanding might require a large capital investment. So what are they to do when exploring new markets, especially international ones?
“For many SMEs, the biggest challenge in cross-border trade is that international growth often comes before they have the scale to justify investing in warehouse infrastructure,” says Bremer Pauw, CCO DHL Supply Chain Middle East Africa and Managing Director, Africa. “The question is not necessarily whether to own a warehouse but how to get products closer to customers without tying up large amounts of capital.”
This is where shared or third-party warehousing can play an important role. “Rather than investing in facilities, systems and staff upfront, businesses can use existing logistics networks to store inventory closer to key markets and fulfil orders more efficiently. This allows them to test demand, enter new markets and scale gradually while retaining flexibility.”
One example is the DHL Fulfilment Network (DFN), which gives businesses access to warehousing and fulfilment capabilities through a shared network rather than requiring them to build their own infrastructure. “This allows businesses to store inventory closer to their customers, reduce delivery times, simplify cross-border logistics, and scale their operations as demand grows,” he explains. “The broader principle, however, is that SMEs can often expand internationally more effectively by accessing existing logistics ecosystems before making large long-term capital investments.”
Warehousing Challenges SMEs Face When Entering International Markets
According to Pauw, the most common challenges include:
- Limited capital to invest in warehousing infrastructure and technology.
- Managing inventory across multiple countries and sales channels.
- Understanding customs requirements and cross-border compliance.
- Achieving cost-effective delivery solutions at lower shipment volumes.
- Maintaining consistent customer service levels while expanding geographically.
- Managing returns efficiently, particularly for e-commerce orders.
“Many SMEs underestimate how quickly logistics becomes a strategic issue rather than simply an operational one,” he notes. “As businesses expand into new markets, decisions around inventory, fulfilment and customer service can have a direct impact on profitability and growth.”
He explains that by working with a provider that has an established global network, businesses can leverage existing warehouse capacity, transportation infrastructure, customs expertise, and fulfilment technology rather than building these capabilities themselves.
Warehouse Strategies Are About More Than Just Cost
A common misconception is that warehousing is primarily a cost centre. Pauw states that, in reality, where inventory is located can have a significant impact on both profitability and customer experience.
By positioning stock closer to key markets, SMEs can:
- Reduce shipping costs and transit times.
- Improve product availability.
- Lower the risk of stock-outs.
- Deliver a more consistent customer experience.
- Simplify returns management.
This is particularly important as customer expectations continue to rise. DHL’s Online Shopper Trends research consistently shows that delivery speed, convenience and visibility are among the most important factors influencing purchasing decisions for online shoppers. “A well-planned warehousing strategy can therefore become a competitive advantage rather than simply an operational necessity,” Pauw notes.
He explains that there are many elements to evaluate when the conversation of how and where to store stock comes up.
Pauw recommends that business owners should evaluate:
- Where their customers are located.
- Expected sales volumes by market.
- Product characteristics and storage requirements.
- Delivery speed expectations.
- Cross-border regulatory requirements.
- Returns volumes and reverse logistics needs.
- Technology integration requirements with online sales platforms.
- Scalability as the business grows.
“The right warehousing solution should not only meet today’s needs but also support future growth. Working with a logistics partner that offers a flexible and scalable network allows businesses to expand into new markets without repeatedly investing in additional warehouse infrastructure.”
Choosing Third-Party Warehousing Solutions or Doing It Yourself
Deciding to use a third-party warehousing solution rather than managing inventory from their own premises is important for small businesses. “The tipping point usually occurs when logistics activities begin taking time away from sales, customer acquisition, and business growth.”
He lists that a third-party warehousing solution becomes particularly attractive when:
- Orders are increasing rapidly.
- Customers are spread across different regions or countries.
- Delivery times become a competitive differentiator.
- The business requires inventory visibility and fulfilment technology.
- Cross-border compliance becomes more complex.
- Scalability is needed without significant capital expenditure.
“At that point, outsourcing can allow business owners to focus on growth, product development and customer acquisition rather than day-to-day logistics administration.”
What’s of particular importance here is that business owners must understand that there are multiple factors at play when delivering one delivery to a customer – and warehousing that supports this is the end goal. “Getting products to customers efficiently requires every element of the supply chain to work together: Warehousing ensures inventory is available in the right location. Inventory management balances stock levels to avoid both shortages and excess inventory. Transportation moves products between suppliers, warehouses, and customers. Customs and compliance enable smooth cross-border movement while reducing delays and risk. Technology and visibility provide real-time information on inventory, orders, and deliveries. Returns management ensures customers can return products easily, which is particularly important in e-commerce.
“A weakness in any one of these areas can affect delivery performance, even if the others are functioning well. Successful businesses recognise that optimising one part of the supply chain in isolation can create inefficiencies elsewhere. The greatest value comes from ensuring these elements work together as an integrated system.”
Decisions to Get Right Before Cross-Border Trade Happens
Pauw shares that the most important early decisions include:
- Selecting the right logistics partner.
- Designing a scalable fulfilment strategy.
- Choosing warehouse locations aligned to customer demand.
- Implementing systems that can integrate with future growth.
- Understanding customs and cross-border requirements.
Common mistakes include:
- Treating logistics as an afterthought.
- Investing in warehouse infrastructure too early.
- Underestimating inventory planning requirements.
- Expanding into too many markets simultaneously.
- Focusing only on transportation costs rather than total landed cost.
- Neglecting the returns experience.
“The businesses that tend to scale most successfully are those that remain flexible, build logistics capability progressively and recognise that warehousing decisions are closely linked to customer experience, cash flow and long-term growth,” he concludes.
Cross-border trade is a good way to scale a business and expand your market. But testing new markets abroad has challenges that a local supply… Read More
