Many start-up firms and entrepreneurs invest in relatively small-scale warehousing operations or handle their logistics internally to reduce costs. However, there could come a time when outsourcing your warehousing operations becomes an attractive option.
Whether due to increased complexity, rapid growth or reducing risk, using a third-party logistics (3PL) company can reduce costs by eliminating the need to invest in new technology, labour, warehouse space, safety measures and transportation.
Utilising the expertise of professionals can boost efficiency and improve performance, which can produce longer-term effectiveness relating to customer satisfaction, expansion and revenue.
CEOs, CFOs and COOs, should regularly evaluate their supply chain and identify whether there is scope to outsource logistics and bring value to the business.
While you might be keen to develop an internal warehousing operation, mastering the growing complexity of logistics can be a challenge, especially while striving to maintain optimal performance in other business areas.
If you lack the resources, time or expertise to invest in internal logistics, why not outsource your warehousing operations?
What is Warehousing?
Warehousing refers to storing physical products or raw goods in a large building for sale or distribution.
Various businesses use warehouses to temporarily store their products before shipping them to other locations such as customer residences or a depot. Many eCommerce retailers also use warehouses to store goods they’ve purchased in bulk, reducing delivery miles and improving deliverability efficiency.
The demand for warehousing increased significantly following the COVID-19 outbreak, with the pandemic-fuelled eCommerce boom leading to a 614% increase in warehouse occupancy. According to recent projections, the global warehousing market will hit $326BN by 2024 due to the growing appetite for online shopping and shifts in consumer demand.
The eCommerce boom has also been linked to the 3PL boom. Logistics companies increased their occupancy by more than 42% in 2021 and now account for 20% of all warehousing space in Britain.
Unsurprisingly, the fastest-growing sector is online retailers, with ASOS, Etsy, Shopify and Ocado registering strong growth.
Although warehouse capacity for high street retailers did decrease in 2021, many have limited space to hold inventory in-store and utilise warehousing to keep up with demand, especially during high volume shopping periods such as the festive holiday.
Importance of Warehousing in Logistics
Warehousing is an essential part of the supply chain. When done effectively, it can improve your firm’s order fulfilment, protect against processing issues and increase labour productivity, leading to greater customer satisfaction.
Whether you own a B2B or B2C company, storing goods in bulk can help improve company margins by allowing executives to negotiate lower prices for large orders with suppliers.
Even if you own a small business, keeping inventory available amid fluctuating demand will ensure goods stay in stock and mitigate against the bullwhip effect.
The bullwhip effect can be costly to all organisations involved in the supply chain, resulting in:
- Reduced lead time
- Poor customer experience
- Lost revenue
- Missed production schedules
Order fulfilment companies seemingly face new challenges every day, with one of the most prominent issues now being improving delivery times.
As consumers have become accustomed to same and next-day delivery, outsourcing warehousing and letting specialists handle your order fulfilment requirements could save you money and boost your productivity.
Benefits of Outsourcing Warehousing
Still unconvinced? Here are eight reasons you should consider outsourcing your warehouse operations:
#1 Reduce Overhead Costs
Outsourcing warehousing means you’re only required to pay for the space you need instead of building/renting and running an entire warehouse yourself.
Unless you have a large inventory and need to constantly use an entire warehouse, outsourcing the job is a far more practical option. An external warehousing company is also more likely to have access to related facilities and materials, meaning you’ll also save on packaging and other servicing costs.
Besides the obvious “pay for what you use” benefit, you also won’t need to fork out employee salaries and utility costs.
#2 Better Use of Space
If you’re storing stock on your company premises or in your home, this could become an inconvenience as your business grows and you run out of floor or shelf space.
Utilising a warehouse would be a more cost-effective option. Also, as these facilities are designed to store goods, this significantly reduces the risk of damage and any potential implications with your insurance policy.
#3 Easy Scalability
Outsourcing your warehouse operations can significantly boost productivity and customer fulfilment by giving the back-office tasks of stock management, invoicing and delivery to specialists.
Most modern warehouses are equipped with advanced technology such as automation to streamline operations, reduce error and react swiftly to changes in the market.
Outsourcing warehouse operations makes supply operations more easily scalable due to increased flexibility, which is key to minimising loss and disruption, as recent years have proven.
#4 Improves Shipping and Delivery Speed
Benefit from quicker shipping and delivery times by outsourcing your warehousing. However, it’s best to choose the geographical location of the warehouse strategically to eliminate delays.
For example, those that ship by sea should find a port-centric service to keep delivery times as short as possible and keep customers happy.
If you deliver UK-wide, using multiple warehouses could pave the way for business expansion and increase your return-on-investment (ROI) by allowing you to serve customers all over the country quickly.
Whatever you decide, it’s essential to outsource a warehouse with good transport connections to ensure you can deliver goods timely.
#5 Increased Security
Outsourcing warehousing significantly reduces the risk of damage and lays the responsibility of the warehouse operations with the third-party company.
To maintain the credibility of their business, warehouse companies will prioritise security as those with a reputation for poor security will be the first to go out of business.
#6 Value-Added Services
Some warehouse providers offer additional services such as packaging materials, inventory management, reverse logistics and kitting, which means combining multiple products into a single package.
Working with 3PLs can give you the tools needed to operate in compliance with applicable laws and regulations while keeping costs low to ensure you remain competitive in the ever-evolving marketplace.
#7 Increased Flexibility
The flexibility that outsourcing warehousing offers reduces labour costs and eradicates concerns about providing specialist training to staff or managing employee levels during peak and non-peak performance periods.
Using an outsourced warehouse will allow you to hone your budget and dedicate more time and resources to other vital areas of your business, thus improving the quality of your service.
#8 Specialised Solutions
Warehouse companies are better equipped to handle large order volumes and special handling requirements such as heavy, fragile or hazardous goods as staff have received specialised training.
They can also react swiftly to changes in the marketplace and customer activity, which reduces disruption and losses while increasing peace of mind.
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