Once your business has grown to a certain size you’ll need somewhere to store goods, a staging hub from which to distribute these goods to retailers or the end consumer.
Your own warehouse of course is ideal but do you have the capital to invest in one? Even if you did have the capital, would it not be better invested in some other part of your business? Buying a large enough warehouse can unnecessarily tie up working capital.
There are third party warehouse and distribution services which can be outsourced to provide storage and transportation services. Here are some reasons why you might want to outsource warehousing.
- Flexible pricing. You can usually lease warehousing on flexible terms more appropriate to the growth of your business. If your business has slow sales periods, you might prefer to rent month by month and just pay for the storage space you actually need when you need it, increasing storage area during more favorable sales periods, and saving yourself money.
- You won’t need to employ more staff. Your third party logistics (3PL) provider will already have the trained professional staff to receive and ship goods, fulfil orders, manage and inspect inventory. This saves on your labor costs, usually a major overhead.
- Outsourcing the warehousing management allows you to concentrate on the core aspects of your business, the parts you excel at and motivated you to first start the business. You won’t become distracted by logistics solutions and packing crates, so your core business will likely grow faster as a result.
- Working with a 3PL saves you money by taking advantage of their greater buyer’s leverage with transportation, warehousing and labor costs. As they’re working on a larger scale with multiple clients, they can combine their total shipping volumes to obtain better rates.
- You might need to use a custom warehouse, a facility where goods are stored for up to five years without payment of custom duty. After this period the goods can either be re-exported without duty, or imported for consumption with all appropriate duties paid. Custom warehouses can be either state or privately run; in the case of the latter, a customs bond is required to be paid to the government.
If you’re too busy to handle your company’s growth, or your sales are uneven throughout the year, it’s probably time to consider outsourcing your warehousing management.