More and more product oriented enterprises are making the shift from using their own warehousing facilities and instead using a third party warehousing and distribution partner to handle all aspects of their product-side logistics. Recent advances in the industry are bringing this kind of dedicated, professional warehouse storage service within the reach of smaller and smaller businesses, and allowing them to participate in ways once reserved for the big players alone.
The big question is “would a warehousing partner make or cost me money?”
All to many are put off by fulfilment and storage fees, and failing to compare these to the real costs of in-house warehousing and distribution.
So, how do we compare apples to oranges? In pounds, just like we always have. The first thing you need to do is develop a realistic picture of the costs of your logistics department. Getting all these scattered costs together can be a nightmare, it’s true, but the harder it is to get a clear picture, the more it is probably costing you already.
Specifically, see if you can get good data on the following costs, and see if you don’t get a bit of ‘sticker shock’ from these results too.
- The benefits, salaries, insurance, HR costs, and other expenses relating to your Warehousing and Distribution staff
- The cost of managing these people, and of supporting the managers
- The lease, rent, or building costs of your warehousing facility, including any insurance
- Your materials costs, especially packing materials, etc…
- Your equipment cost, especially the costs for support and maintenance, not just devaluations and leasing. Remember especially to include your logistics department’s IT needs, scanners, scales, etc…
- Your customer service based expenses, including customer support, especially the salary, benefits, insurance and other expenses of your CS staff
- The expenses of your inventory management and other software systems
Most estimates overlook management support expanses and equipment purchases, but I imagine there were a few things on that list that you missed out. If you don’t put a detailed logistics expense list together, you can’t really judge the value of a third party provider.
Another easy mistake is leaving out the value of the benefits that a Warehousing & Distribution partner can bring to the table. Keep in mind that third party warehouse space is very flexible. You can use more without building, and then use less without paying for the empty space. Your senior management will also have more time for growing your end of the business when they have all of the logistics headaches taken away.
So keep these things in mind before making your decision. Make that expense calculation for your in-house warehouse storage department, too. Even if you don’t switch over, it can help you spot troubles you never knew you had