When considering if outsourced logistics is the right move for your company, there are many advantages and disadvantages you will want to think about before coming to a decision.
Outsourcing your warehousing can be smart for businesses to improve their efficiency and organization processes. Still, some common factors may impact your decision to outsource your company’s logistics. Read on to learn some of the main positives and perceived negatives of outsourced warehousing.
Outsourced Logistics Cons
For companies who worry that outsourcing their warehousing is not the right decision, they typically cite one of the following reasons.
Control
Many businesses who forego outsourced warehousing cite having less control as the main reason for handling their warehousing needs themselves. They equate having their own warehouse as being able to manage their own processes more efficiently. And entering into a successful contract warehousing agreement requires trust. But that trust your business places in your 3PL (third-party logistics) company often provides better results than going at it alone.
Needs
Businesses with particular requirements may not feel they can find a 3PL partner that will appropriately meet their warehousing needs. Searching for and vetting every and any possible warehouse does take time if you are unfamiliar with the industry or do not even know precisely what it is you want in your warehousing provider, which can make this reason seem legitimate.
Outsourced Logistics Pros
While there are some concerns you may have about outsourced logistic operations, the pros often far outweigh the cons of partnering with a 3PL company.
Ease of Scaling
As your company enters new markets, introduces new products, or the seasons change, inventory levels and transportation needs will naturally follow suit. It may not be possible to accurately predict the amount of warehouse space or level of distribution services that you will need, but with outsourcing, it is easy to scale your distribution model as needs change. Outsourcing distribution helps to mitigate increased costs and gives you the ability to better manage inventory levels.
Amalgamation of Shipments
When working with a 3PL, your entire inventory warehousing and transportation needs are combined under one roof. Multiple shipments to different locations can be accomplished in a more time-efficient manner, rather than sending sporadic shipments. There are also economic benefits in that some 3PL providers are able to offer deep discounts by going through several transportation providers.
Experience and Expertise
For many business owners and managers, the supply chain is not their first area of expertise, which can make the process much more challenging. A 3PL provider, on the other hand, will have in-depth industry knowledge as well as a proven process. Taking advantage of the experience and expertise a 3PL offers can make the difference between serving the customer and losing the customer.
Access to Solutions
For smaller businesses, a lack of funding makes it impossible to invest in technological solutions, creating a serious barrier to entry. A 3PL provider that offers warehouse and transportation management systems—incorporating radio frequency identification and other inventory tracking methods—will help to meet customer demands without the investment. This type of access gives companies a competitive edge no matter the marketplace.
Low Capital Expenditures
Acquiring warehousing space and infrastructure for distribution requires a large capital investment. Companies that choose this route risk tying up their cash flows, which can create financial instability. In order to grow and expand, further investments are always necessary. When the facilities and transportation are owned and operated by a third party, these risks are eliminated allowing for expansion without laying out capital upfront.
Strategic Storage
Storage spaces also allow manufacturers to stock and store excess goods for a lower cost than a manufacturer could store them themselves. This reduces the risk that you will be out of a good when a customer needs it, improving customer satisfaction. In addition, goods can be stored to maximize profits even with fluctuating supply and demand — inventory is held until prices are more favorable for your company.
Good for Business Growth
Whether you have just opened your business, are looking to grow, or are branching out into geographic expansion, a 3PL partner is a great way to help achieve your business goals. It ends up saving you money by allowing you to expand and grow your business without having to hire additional employees, purchase insurance to cover liability issues, and speculate about how much storage you’ll need.
Trust CWI for Your Outsourced Logistics Services
The bottom line, for companies that require warehousing and distribution services, is that outsourcing to a 3PL like CWI Logistics makes good sense.
The ability to manage inventory, combine shipments, rely on experience, and keep more capital on hand will give your business the upper hand in continuing to satisfy your customers, well into the future.
Need a hand with your warehousing and distribution? Give CWI a call today!