The answer for when to use a warehouse is… NOW! Just kidding, maybe. Now more than ever, with the current virus causing extreme market fluctuations like we haven’t ever seen before, it may be extremely beneficial to consider if outsourcing to a warehouse is the right move for your business.
Spending has increased:
35-40% for in home fitness products
20-25% for medical supplies
15-20% for in-home entertainment
15-20% for groceries
10-15% for pet supplies
Consideration Number 1: Spending
It always begins with the bottom dollar. Consider your current costs for storage and handling in house. What is the cost of space? The cost of equipment (surveillance system, forklift, management system, etc)? What is the cost to pay the employees? What are the shipping/labeling costs? All of these are valuable questions to answer, but there are other considerations that may be harder to measure. Not only should a business measure cost, but there is also a lot of time spent on warehousing. The opportunities for other ventures the employees could be doing are completely lost due to the time it takes to receive orders, locate, label, and ship packages. All in all money & time should be measured.
Consideration Number 2: Potential Threats
Fires/Natural Disasters — There are several issues that can be avoided by outsourcing. According to the founder of the Supply Chain Risk Management Consortium Greg Schlegel, fires & explosions “happen more than you would think.” He also says “20% of all companies that experience a moderate to severe natural catastrophe in their regions go out of business 15 to 18 months after.. And another 15% go out of business in 2-3 years.” Cyber & Burglar Threats — Cyberthreats are also a big security risk. They don’t happen often, but if they do happen it causes huge issues. On average a cybersecurity breach will cost a company $6-7 million to fix. This is without mentioning the rick of burglary and theft. Demographic Shifts — Demographic shifts can also impact the supply chain risks. Bob Trent, a management professor at Lehigh University says “we’re just not seeing as many young people go into the trucking industry.” From February to April alone, trucking jobs fell by 8% according to Convoy. This makes for unreliable access to different shipping methods. In these cases, it’s nice not to have to worry about how you will ship products.
Product Damage – The best part about outsourcing is that any liability from product damage is now the responsibility of the warehouse. Whether the claim be damage, loss, shortage, or concealed damage or shortage, there are so many ways a business might need to deal with the hassle but it can be avoided.
Consideration Number 3: The Potential of Your Business
Whether you are a small business just starting out, or a multi-million dollar company, something to consider is where your business is going. Storage runs out, the wrong inventory may get shipped, inventory management for products in/out can be a headache. Working with a 3PL gives a new ceiling for growth area. If your business has a vision for growth, the following ways can be of benefit for you:
-Faster order fulfillment
-No relocating warehousing
-Save time/money for other activities
-Benefit of experienced experts
-Flexibility to Expand
At the end of the day, it may be worth doing a cost/benefit analysis for outsourcing your businesses products. If you’re looking for more details, just let us know!