Several considerations should be made by businesses that are thinking about outsourcing warehouse operations for the first time. The most crucial thing is making sure that customer service is improved throughout the process rather than degraded.
Optimized Network Design, or more simply, “Where should I place my outsourced warehouse, and how many should I have,” is another crucial factor.
DO I RISK LOSS OF CONTROL?
Fear of losing control if internal staff are not in charge of the warehouse is a significant psychological obstacle that each first-time outsourcer must overcome.
Let’s investigate the “control” problem. When the warehouse is slow and you don’t outsource, your staff will buy their coffee on the house. However, in a cross-utilized third-party logistics (3PL) setting, where workers may be moved to other contracts during lulls in activity, this is not the case.
You have two options with your own warehouse staff in the event of a serious error: yell at them or terminate them.
To make sure that the 3PL pays you if something unusual occurs, you can still yell at and dismiss the 3PL in an outsourced setting, but you also have the option of including gainsharing and penalty terms in your contract. Using your own work, that choice is not accessible.
Most businesses who outsource their warehouse operations discover they have more control than ever.
Where Should I Outsource Warehouse Services?
There are many different types of warehouses, and they all operate differently. Typical warehouse activities include the following:
While there are basic differences between each type of warehouse, most businesses may combine many of these operations in one place rather than running several warehouses across the nation.
Although every business has distinct needs, many choose the “warehouse-within-a-warehouse” function—replenish down the hall rather than across the country—to maintain high customer satisfaction and keep facility expenditures under control.
And keep in mind that contract (single client) storage, which is used by bigger businesses with long-term needs, differs fundamentally from “public” (multi-client) warehousing, which is used by customers with a limited footprint and/or short-term needs.
My Expenses Compared to My Customer’s Happiness
Let me give you two typical instances of the kinds of businesses that are ideal candidates to outsource their warehouse operations for the first time.
Big boxers. These businesses run one or more sizable warehouses or distribution facilities, but they are unaware that they are employing more people than necessary.
To significantly reduce the necessary human count, big box retailers frequently utilize order picking rather than the more effective zone or wave picking algorithms generally used by 3PLs.
These businesses are thrilled to learn that the 3PL will recruit 80 of their finest employees and that they don’t need the 100 that the firm previously employed. These big box retailers benefit from having a skilled and appropriately sized warehouse staff while also drastically reducing costs.
Sprinklers. Every time they acquire a new client, these businesses freely disperse merchandise around the country in tiny, open warehouses. After 20 years, they currently manage 50 warehouses.
Sounds recognizable? Sales have warned corporate management that if they don’t behave in this way, they risk losing consumers. Operations are unaware that consumers may still obtain one- to two-day delivery service with a consolidated, optimized small warehouse footprint thanks to the development of innovative logistics solutions.
Without interfering with client delivery, fifty warehouses may be reduced to five, and expenses can be rationalized.
Will Freight Prices Increase?
In place of pricey public storage, businesses today frequently manage will-call demand with a “hold for pickup” option at the neighbourhood truck terminal. Customers are as content to visit Address A rather than Address B.
Both big boxers and sprinklers can get assistance from outside logistical companies. They make a living doing this.
Many people contemplating outsourcing may ask: “Won’t my freight prices increase if I consolidate my warehousing network since some customers will now be farther distant from a warehouse?” Yes, some prices will go up, but others will go down.
Keep in mind that there are three costs involved: the freight, the warehouses, and the labour necessary to get the goods to your customers.
To provide you with a cheaper overall distribution cost than before you outsourced, third-party logistics companies are trained to combine all three costs rather than only looking at the cost of transportation.
A whole new universe of cost-avoidance options is waiting for businesses stuck in the “we’ve always done it this way” mentality. And your customers will be there right alongside you.