The reasons for outsourcing warehousing functions and operations to a third party expert specialist are many and varied. They include the obvious ‘hard’ justifications such as the reduced need for capital investment in your warehouse, the lower cost of sharing compared to owning and the reduced need for specially trained warehouse staff.
They also extend to less tangible or quantifiable benefits such as the value of flexibility that outsourcing brings. In this article we offer you ten powerful reasons why outsourcing your warehouse operations to a specialist, expert 3rd Party Logistics (3PL) operator makes good business sense.
- More time to focus on your core business
Regardless of whether you design and manufacture flooring products yourself or import them from other manufacturers, your core business is flooring products and not warehousing.
The case for outsourcing ‘non-core’ business operations is strong, especially if those operations are not direct revenue earners. Instead, when properly viewed as overheads, those operations are likely to be soaking up cash and diverting management time and expertise that could be put to much better use on your core business.
- No warehouse Health & Safety compliance issues
Running and managing a warehouse can be particularly complex because of the Health & Safety requirements involved. Regular specialist training and certifications for staff in some areas of warehouse operations are mandatory and subject to strict enforcement.
Health & Safety, while entirely justified, can be cumbersome and even overwhelming. For those reasons, it may be best to outsource your warehousing function to a specialist.
- Better service
Specialist 3PL providers, whose revenues depend on the provision of quality services, are more likely to be true experts. Their service levels can also be backed up by appropriate contractual terms.
These service level agreements are enforceable, not just in a legal sense, but also because your service provider will work hard to retain your business and its own reputation. It is in their interest to do an excellent job for you.
- Ideal distribution location
You are most likely currently paying for your product to be picked up by your transport provider and transported to their cross docking facility. It’s not only the cost and the double handling involved, there is also a delay in the delivery of your product to your end customer. Speed to market is vital these days and your 3PL provider will have the appropriate transport network available at their warehouse.
- Reduced capital investment
Whether you own your own warehouse or rent the space from a third party, the costs are high compared to outsourcing.
If it’s a simple matter of ownership vs outsourcing where costs and cash flow are the only factors, outsourcing is usually the answer. You can free up capital by switching from an in-house to outsourced model, or avoid the upfront cost completely if you are choosing between investment in your own warehouse or outsourcing to an experienced 3PL provider.
- No ancillary equipment purchases
As well as avoiding capital investment in warehouse infrastructure, you’ll also save on the associated costs of equipping your warehouse with everything from pallet racking to safety barriers, mezzanine floors and forklift trucks.
The costs of maintaining and servicing this equipment on a regular basis is also significant and it’s worth considering outsourcing on this basis alone.
- Flexibility: No long term lease or wasted space
A key benefit of outsourced warehousing is the flexibility it offers your business. You no longer need to worry about long term property leases nor the cost of empty racking during the year to ensure you have space available for the peak season. You will also have an incentive to keep stock levels low, as you will only be paying for what you use, rather than the fixed cost of your own warehouse.
- Shared costs: Benefits of a shared resource
A shared resource is likely to be a cheaper resource – because your 3PL provider is spreading their overheads across multiple clients.
The quality of your operation is not compromised because your 3PL provider knows that his business also depends on your business being efficient and successful.
- Reduced requirement for HR operations
Management of warehouse staff can be difficult and time consuming, particularly if operations carry on round the clock or your workforce is unionised. As well as outsourcing your warehouse operations you are also outsourcing a big part of HR management, including training, payroll, sick pay, holiday pay and performance management.
- Because there are specialists to do it for you
The old business principles hold true: if a 3PL provider can do it more efficiently than you, it’s worth investigating the outsourcing route.
If none of the other reasons for outsourcing your warehouse persuades you, start here. Simply analyse what your warehousing operations currently cost and then compare against the cost of a specialist 3PL provider.
For more information or to discuss your warehousing and distribution requirements, contact David Knagge on firstname.lastname@example.org or call us on 1300 796 208.