The past few years have seen costs rise for companies of all sizes. Shipping, logistics, warehousing and more have become more complicated, requiring business owners to develop creative solutions. How can these leaders navigate the recent supply chain disruptions? One solution is outsourcing warehousing.
First, it’s essential to know the benefits of companies outsourcing their warehousing. These five reasons demonstrate why business owners should let another organization handle their warehouse duties.
1. Reducing Costs
The primary benefit of outsourcing is reducing costs. Business owners can significantly cut overhead by outsourcing their warehousing. Establishing and operating a warehouse can be a significant financial investment small businesses aren’t ready to handle. Research shows warehouse construction has rapidly grown in the last decade, increasing from 15,152 in 2010 to over 20,000 by 2021.
Outsourcing reduces the capital required for investing, and helps companies refrain from paying for training and maintaining equipment. There’s no need to hire and fire employees or upgrade the facilities — the warehouse owner will take care of that for the business.
2. Delegating to Experts
Outsourcing warehousing means business owners delegate to the experts. It may be tough to let go of this aspect, but it can lead to improved results. Warehouse operators hire employees who specialize in this field. They know how to work inventory management systems and optimize the warehouse layout for maximum productivity.
Delegating to another organization leads to a more effective and efficient business model. Warehouse experts relieve the burden of a company’s current employees and allow them to focus on the bigger picture. Now, the business can focus on product development, marketing, customer service or other essential parts of the operation. Companies should lean into their strengths and outsource what might be weaknesses.
3. Taking Advantage of Technology
Technology rapidly evolves in the 21st century. What seems modern now could be outdated in five years. Businesses need to stay on top of their game by outsourcing warehousing. These specialists utilize advanced technology to maintain the best warehousing practices in the industry. The costs can be steep for small businesses, so it’s advantageous to outsource to the experts.
For example, modern warehouses employ robots to perform tasks. These machines have sensors for navigation like self-driving cars and can independently operate inside the warehouse. Warehouses rely on robots to do potentially dangerous jobs, such as handling hazardous material containers or navigating hard-to-reach places.
Robots are terrific assets for a warehouse, but they often require a significant financial investment. Small to medium-sized businesses may be unable to afford robots, so it’s best to let the outsourced experts handle it.
4. Increasing Flexibility
In today’s economic landscape, entrepreneurs need flexibility. Business owners need to scale up or down depending on the season. For example, a company’s busiest season could be the winter holidays, requiring it to increase storage space and operational capacity. Outsourcing allows organizations to adjust their storage needs based on seasonal peaks and lows and reduce costs.
Once the high-demand season is over, business owners can downsize and tailor the outsourcing to their needs. They can’t get this advantage by owning or leasing a warehouse. Owning a warehouse entails a long-term commitment to the facility through high and low-demand seasons, meaning companies may run out of room during the peak seasons.
5. Expanding the Network
In the business world, broadening horizons and spreading the company name as far as possible is essential. Outsourcing warehousing allows brands to do this by expanding their network. There aren’t many limits to where company leaders can outsource their warehousing. Finding opportunities in other countries and continents allows them to grow while saving money on warehousing.
Warehousing in other countries makes it simpler for enterprises to conduct international business. Calculating the shipping rates in Romania, China and South Africa is much easier if a brand has outsourced warehousing to these localities. These facilities will know how to cater to these regions and shorten the supply chain. Supply chains account for 40% of ESG scores, so being conscious of warehouse location is critical.
An expanded network also allows businesses to ship goods faster. Nowadays, consumers expect to receive their purchases quickly — and are willing to pay extra.
What Are the Outsourcing Models?
Outsourcing warehousing can be an excellent strategic move. Before outsourcing, business leaders should know the different models. These examples demonstrate the most popular ways to outsource warehousing.
3PL Model
Among the most widely used methods for outsourcing is the third-party logistics (3PL) model. Businesses employ this strategy when outsourcing warehousing, logistics and supply chain management to a specialized provider. In addition to warehousing, they may handle transportation, freight forwarding, distribution and more.
The 3PL model is effective for business owners because it makes logistics efficient yet cost effective. It also increases supply chain visibility by allowing companies to track their shipments and locate products anytime. Leveraging 3PL models enables businesses to focus on other operational tasks.
Public Warehousing
Another prominent model for outsourcing is using public warehousing. This strategy calls for renting space and services from a public warehouse provider. The warehouse provider often allows numerous entities to use these storage facilities.
Besides warehousing, public warehouse providers often perform services like packing, shipping and inventory management. Using public warehousing is advantageous for businesses seeking flexibility and varying needs for their inventory. They often have tight security, lowering the risk of this method.
Dedicated Warehousing
Some companies already have a warehouse but want to improve the facility’s operations. These businesses may use the dedicated warehousing model. This strategy occurs when companies hire 3PL providers to perform services inside their dedicated warehouse facility. The 3PL provider manages the operations but allows the warehouse owner more control over their supply chain.
The dedicated warehouse strategy is commonplace in the e-commerce world. For example, Amazon uses dedicated warehouses and partners with 3PL providers to manage the facilities. Employing this method has helped Amazon become a shipping giant and household name worldwide.
Increasing Success by Outsourcing Warehousing
Efficiency is the name of the game today. Businesses need to stay sharp by minimizing costs and maximizing productivity wherever possible. Companies often look for departments to outsource, such as human resources, customer service and warehousing.
Delegation may be difficult for some business owners, but it can benefit the brand. Outsourcing warehousing allows organizations to upscale and downscale based on demand and expand their markets. It’s also one less hassle for the executives to worry about.
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