The outsourcing of logistics services can be the move that supercharges a company’s operations, replacing headaches related to scale, staffing, and inefficiency, with a more efficient, flexible solution. Arriving at the decision to outsource, however, is not always easy. You need to determine if your operation is ready for such a leap, and then hurdle the barriers – whether real or perceived – your company may have about outsourcing. In this article, we’ll examine characteristics of companies ready to outsource and address the barriers that many prospective outsourcers have.
You’re unable to scale operations. Many companies struggle to manage their lowest and highest volume periods with equal ease. When volumes are high, companies will staff up their warehouse operations – only to let many of those associates go once volumes tick downward again. This staffing dance is expensive and impossible to scale. As warehouse labor management is a core component of a 3PL’s operations, you may choose to outsource to remove labor-related headaches.
You have difficulty keeping up with state requirements. It can be tricky if you’re thinking of expanding operations into another state, as regulations may be different. It can be especially tricky if you are considering expanding operations into California, as CA regulations are often very different (and more stringent) from those in the other 49 states. Instead of adapting to these new requirements yourself, you may choose to hand off operations to a 3PL that already operates in your chosen area.
You’re outgrowing your warehouse capacity. When this happens, you can certainly invest in newer and bigger space. But is running a warehouse a core competency? By partnering with a 3PL that offers shared warehousing, your allotted space can expand and contract to meet your needs, creating a variable cost structure where logistics costs parallel your revenue stream.
Technology investments are required to remain competitive. In this situation, do you make large capital investments in leading WMS and TMS systems, or do you partner with a 3PL that already has this technology in place? Many choose the latter because of the lower cost involved and the elimination of time spent implement tech and getting staff members up to speed.
Your product line is expanding. For many companies, the introduction of new products is a common occurrence. These new products, however, may come with a host of logistics-related challenges that you may not initially anticipate. For products that require a climate-controlled environment, for example, there may be new equipment, requirements and regulations to comply with. Or let’s say that you’re selling hand sanitizer in the wake of COVID-19. Your warehouse may be able to store 10 pallets of it legally, but 1,000 pallets may be an entirely different story in terms of regulations. As such, you may choose to work with a 3PL that has the infrastructure and expertise to handle these products on your behalf.
If your company is facing these – or similar – problems, the time may be right to outsource your logistics operations to a 3PL partner. For some companies, however, this realization never leads to action. For them, the perceived barriers to outsourcing may outweigh the perceived benefits. But are these barriers based largely on misperceptions? Let’s take a look.
Perceived barrier #1: the cost is high. If you’re considering outsourcing logistics services to a 3PL, you’re likely concerned about the price tag. It’s true that in-house operational costs don’t factor in a profit, while 3PL costs do. But the bottom line is that 3PLs should be able to use their experience to support your same volumes in a smaller footprint using fewer people.
3PLs also offer many additional ways to reduce your logistics costs. Here are just a few examples.
Perceived barrier #2: outsourcing will result in service disruption. Many companies have a concern that moving inventory to a 3PL will create a time gap during which their inventory is not available – upsetting ecommerce customers and retail vendors.
The truth is that, for most companies, there is little disruption. It all depends on two factors: picking the right 3PL and both parties doing all the necessary pre-work so that “go-live” happens without a hitch. This pre-work involves a variety of action items, including the following:
From there, you and your 3PL can agree to an inventory transfer date that causes the least amount of disruption to customers (e.g., over a long weekend).
Or, in a perfect world, you can start by transferring excess inventory so that you can fulfill orders for as long as possible from your current location. Then, as you get close to depleting that inventory, your 3PL can transfer the remaining items quickly. This is especially seamless when your 3PL also has a transportation operation in-house to make the moves for you.
With all the pre-work performed, order fulfillment can start quickly after products arrive at the 3PL warehouse.
Perceived barrier #3: the 3PL won’t treat your business like its own. A common concern among prospective outsourcers is that their business won’t be important to their 3PL. Avoiding this situation requires picking the right 3PL provider in the first place. Some of the things to ask yourself during the vetting process include the following:
While no 3PL partnership is ever guaranteed to run smoothly, doing your due diligence before the contract is signed can put the odds heavily in your favor.
If you’re considering outsourcing logistics services on the West Coast, be sure to pay a visit to Weber Logistics. We have 2.4 million square feet of space across 12 California distribution centers. Our facilities are strategically located near some of the world's busiest ports and offer storage solutions for a wide range of industries including chemical, retail, food and beverage, and consumer goods. To learn more about outsourcing logistics operations to a partner that will work with you every step of the way, contact us today.