Despite the growing availability of digital tools designed for warehouse environments, the gap between their formal adoption and embedding into operational practice remains wide and persistent. This gap is most acute in Small and Medium-sized Enterprises (SMEs), where structural constraints limit the organizational capacity to implement and sustain digital change. Existing research on warehouse digitalization has developed without systematic attention to firm size, while SME digitalization research has focused almost exclusively on manufacturing and production contexts. The intersection of warehousing, SMEs, and digitalization therefore remains underexplored. The purpose of this study was to examine the conditions shaping digitalization in warehousing within SME contexts. Two research questions guided the investigation: what barriers to digitalization exist in warehousing within SMEs, and how organizations respond to those barriers.

A qualitative, embedded single-case study was conducted at a Swedish SME distributing wood and wood-based materials across five warehouse sites. Empirical material was generated through document analysis, non-participant observations at three sites representing different levels of digital maturity, and six semi-structured interviews with warehouse operators and managers. Data were analyzed using thematic analysis. The Technology-OrganizationEnvironment (TOE) framework served as the organizing analytical lens.

Fifteen barriers to digitalization were identified across the three TOE dimensions. Technologically, the most significant barriers concerned system misfit, data trust erosion, and the absence of compatible tools at the warehouse floor level. Organizationally, the functional adequacy of the existing manual system emerged as the primary mechanism preventing digital culture from developing, alongside structural overload, person-dependent operations, and implementation cycles that repeatedly encoded existing misfit into incoming systems. Environmentally, both identified barriers originated entirely outside the organization's capacity to address through internal means. All responses identified fell within the organizational dimension: governance decisions at go-live, the channeling of floor-level knowledge into operational decisions, and the redistribution of concentrated task responsibility.

Four contributions to existing understanding follow from the findings. The degree to which a barrier responds to organizational action appears to be structured by the TOE dimension in which it originates, a differentiation the framework does not currently establish. The mechanism through which digital culture fails to develop is identified as the functional adequacy of the manual alternative, rather than resistance to change. Integration readiness is better understood as an ongoing condition requiring active maintenance than as a threshold met once at adoption. Finally, the physical properties of the product and warehouse space define a boundary condition on what digitalization can achieve, a dimension not accounted for in established TOE constructs.