What Are Outsourced Warehousing Services and How Can They Save Your Company Money?
Warehousing can be difficult to manage at times. Not only are warehouse operations strenuous to oversee, but the rise in warehousing costs tends to be overwhelming. With many moving parts, warehousing is a source for high labor and shipping fees that can easily become difficult to rein in. However, outsourcing your warehousing can take logistics management off your plate while cutting down on avoidable costs. At times, outsourced warehousing services can be limited, but finding the right provider can cover any area of fulfillment that you require.
What are Warehousing Services?
Warehousing encompasses many operations in the fulfillment process. Warehousing involves receiving orders, storing products, locating products in inventory, and preparing a client’s order. Preparation of orders includes the correct packing and documentation, and after each order is assembled, they are shipped from the warehouse to their designated location. Each of these processes can be done electronically or manually, depending on the capabilities of your business. Essentially, the entire fulfillment process takes place within a warehouse, so warehousing can cover each procedure required to manage, prepare, and ship your products.
What is In-House Versus Outsourced Warehousing?
The difference between in-house and outsourced warehousing is the management and location of the fulfillment process. When warehousing in-house, all operations are taking place under your roof. Your business oversees and facilitates all fulfillment operations when warehousing in-house, and each process is completed in a space that belongs to your company.
Outsourced warehousing is performed off-site at a 3PL company in their managed warehouse. Supply chain logistics and management of operations is taken care of by the 3PL company according to your requirements. All the warehousing space, labor, technology, and supplies are managed by the 3PL company itself. While outsourcing involves entrusting your business operations to a third party, you still have a voice when it comes to determining how the warehousing services are managed.
Why do companies outsource warehousing services? There is a plethora of reasons. Most businesses decide to outsource to:
- Improve the quality of warehousing and shipping operations
- Tap into innovations that aren’t possible through in-house operations
- Take the load of management off in-house staff to focus on other key areas
- Capitalize on industry specializations
- Tap into new geographic markets
Usually, one of the top reasons companies outsource warehousing services, however, is to achieve cost savings. Below are the most easily achievable cost savings by using a warehousing service.
How Can Outsourced Warehousing Save You Money?
- Leasing—When outsourcing warehousing, your lease on a warehouse becomes variable. This means that instead of paying based on the passage of time, the warehousing rates vary based on changes in specific needs. Each payment differs in amount according to factors like usage or performance. When warehousing in-house, you could be paying more than necessary with an annual or monthly fee, so having a variable lease can reduce costs significantly. Simply put you pay the same fixed lease cost each month with managing in-house warehousing, whereas you only pay for the warehouse space needed each month using a warehousing service.
- Freight Rates—Warehousing services often have close relationships with national carriers that those warehousing in-house are missing out on. These relationships allow for contract negotiations and better deals on national carrier rates than those you would receive when warehousing in-house. By piggybacking off those deals, your product fees and shipping costs per item can be reduced. Lower rates can increase your profit by giving your business a competitive edge, cost wise, that attracts future customers. Not only are shipping costs reduced, but the probability of potential sales is boosted.
- Efficiency—3PLs are designed to improve all fulfillment operations. After all – managing warehousing is all that they do, so they must be excellent at it to survive. Along with offering supply chain expertise, 3PLs have access to technology that provides real-time, accurate data on inventory and order information. This technology identifies operations that need improvement while ensuring employee accuracy.
Outsourcing warehousing essentially streamlines the supply chain so any unnecessary fees can be identified and eliminated. An increase in efficiency can reduce labor costs for picking and packing while also cutting down on the time and money needed for staff training. The reduction of costs is done by simplifying operations to a level that requires less time and employee training.
An increase in efficiency also boosts customer satisfaction. 3PLs ensure each product has the appropriate packaging and shipping information to avoid unneeded shipping fees and product damage. Having orders received on time and intact boosts customer satisfaction, causing a greater likelihood of future orders.
- Logistics Management—Supply chain logistics can be a difficult task to manage. Warehousing services companies specialize in ensuring that operations are organized and running smoothly which increases efficiency and revenue. By passing on the weight of logistics management, you can focus on growing your company. Increased revenue and sound management allow for expansion, so having a 3PL company to oversee your logistics creates great opportunities for growth.
Outsourcing Warehousing Services Can Save You Time and Money
When warehousing gets overwhelming, outsourcing with a warehousing service can be extremely beneficial. 3PLs reduce leasing, freight, and labor costs while improving efficiency of operations. Streamlining your supply chain is also a great way to increase revenue and promote growth. Overall, warehousing companies offer services that will reduce unnecessary costs and free up time that can be used to expand your company.
