All companies who produce a good must deal with warehousing in some capacity. Exploring your options for warehousing is extremely important, as it impacts the present and future state of your organization.
There are many factors that go into the true cost of warehousing. A great way to minimize these impacts is to partner with a third-party logistics provider (3PL). Capital, labor, seasonality, liability, scalability, and strategic offerings are all factors that can be addressed efficiently by a 3PL partner.
1. Capital Requirements
Minimal, if any, upfront capital is required when outsourcing. 3PL’s already have the land, facilities, and technologies in place. This carries an added benefit of a minimal wait time for ramp-up.
Impact to You: A company who is looking to limit their capital expenditures and deploy cash elsewhere may benefit tremendously.
2. Labor Requirements
Hiring, retention, and schedule management are all required for the facility. Management and associates are needed for staffing. 3PL’s already have tenured, proven employees to handle this.
Impact to You: Employee turnover in the warehousing sector is about twice that of the national average1. Warehousing jobs have a very high correlation to other industries such as restaurants and construction. Due to this high competition, some warehouses place free college tuition, sign-on bonuses, and even incentives such as raffle giveaways as part of their compensation plans. Despite this, they are still struggling to keep positions filled and turnover low2.
3. Seasonality
The ebb and flow of inventory can have a high standard deviation through your cyclical year. 3PL’s, like Wavepoint who owns 13 state-of-art warehouses, can maximize inventory through predictive analysis3,Warehouse Management Systems (WMS), and Stock Keeping Unit (SKU) optimizations.
Impact to You: Seasonality can be impactful on inventory, sales, and pricing. Managing inventory is hard enough, let alone managing the space that it is stored within. Losing out on potential sales and market share capture because of a lack of space can be a huge cost to the business.
4. Liability
The legal liability attached to operating your own warehouse is enormous. Large umbrella policies and high General Liability limits are required. Outsourcing to a 3PL will eliminate a lot of the legal exposure.
Impact on You: Warehouse legal liability is a complicated animal4. The best way to shift the risk away from your organization is to outsource to a 3PL. Legal battles that result from your own warehousing can impact your company finances and resources.
5. Scalability
A 3PL can provide access to geographic scalability. The two largest considerations for business’ as they grow their geographic market share are distribution and inventory management. 3PL’s provide quick-to-scale distribution and warehousing.
Impact to You: As your company grows its’ market share, geographic expansion is imminent. If you are a west coast operation with new customers on the east coast, you need to quickly manufacture and distribute your product in a new area. Advantageous production, inventory and distribution points assist your operation in meeting this demand in a timely fashion.
6. Strategic Offerings
A 3PL can turn your warehouse into a competitive advantage. This partnership can allow you to focus on your core competencies. This will free up labor, capital, and bandwidth.
Impact to You: Collaborating with a 3PL for your warehouse needs can create new offerings for your customers. They will feel the impact of quicker replenishment cycles and higher on-time delivery percentages. Your core competencies can now experience the full attention of your workforce.
Conclusion: The total cost of ownership for warehousing can be highly impactful to your organization. Financial, operational, and opportunity costs are all factored into the operation. The most strategic way to eliminate liabilities and create a competitive advantage is to partner with a 3PL provider like Wavepoint.
Wavepoint 3PL offers customized supply chain solutions through our 17 state-of-the-art, food grade warehouses. We adapt and provide unique solutions to meet the specific needs of your organization. By leveraging our technology, you can achieve faster throughput and improved lead times whether you are looking for intra-facility, intra-state, or cross-country transport optimization strategies for last mile deliveries, Wavepoint delivers.
By: Alec Porco
References
- US Bureau of Labor Statistics. BLS.Gov.
- Mary Hanbury. Retailer struggle to hire warehouse workers ahead of the holidays, with brutal hours and poor working conditions taking their toll. 2021. BusinessInsider.com.
- 8 Ways to Better Manage Seasonal Inventory. 2018. Clearspider.net.
- Alex Rosas and Noah Klein. Unpacking Warehouse Legal Liability. 2020. AMWINS.com.