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Recognizing the benefits that outsourcing inventory management can bring is necessary to meet the expectations of the modern customer. Using an Inventory Management System (IMS) is essential in these technologically advanced times when customers expect their goods in days. This is a balancing act with close ties to overall warehouse operations. It’s important to point out the benefits of outsourcing inventory management in such cases.
Outsourcing inventory management is a strategic business decision that offers numerous benefits.
With improved inventory management, warehouse operations are more efficient and result in cost savings.
Explore these benefits further to understand why outsourcing could be the right decision for your business.
Table of Contents
Outsourcing inventory management refers to the practice of contracting with a third-party logistics service provider (3PL) to manage and control warehouse functions.
A 3PL can manage multiple warehouse operations. Much of the time, it’s really up to the business itself to decide how hands on or hands off they want to be in their inventory and shipping management.
The two mostly commonly outsourced warehouse operations are:
The two are closely related, but with some slight differences.
When a business outsources inventory management, a 3PL can use specialized skills, technology, and systems to streamline operations. It’s possible to use it to manage tracking of the number and type of goods in a warehouse. Depending on the available technology and service, this can even be done in your own warehouse.
In order management, the goal is to track a customer’s order through its entire lifecycle. From the moment an order is placed to the day it’s delivered to the final destination.
This includes processes such as:
If necessary, it may also include return logistics if the customer ends up needing or wanting to return the purchase.
As with inventory management, these processes can be outsourced to a 3PL or similar entity.
Inventory management is a critical aspect of any business, particularly those that deal with physical goods. Since it’s also a major part of business operations, not to mention customer service, it deserves plenty of attention.
Outsourcing to a 3PL is one way of making sure that these important functions are handled by professionals. For new business owners, it’s a great way to get a specialized service right from that start. Too many have had to learn the hard way that logistics is a business in and off itself.
On that note, we’ll review five reasons you should be outsourcing your warehousing operations to experienced providers.
There are only so many hours in a day for business owners to overlook every minute detail of their operations. Truthfully, it can probably even be overwhelming at times.
But what if you could hand a part of your business over to a partner who would do an amazing job while charging a fair price that allows you to still reach your own financial goals? Or just give you more time to think about big picture items like strategy, making processes more efficient or expanding your operations?
Employing a trusted company like Fulfillment and Distribution to take on the day-to-day managing of your inventory and order management can help accomplish this. You’re dealing with a company that knows what they’re doing and won’t be a constant source of anxiety for you. A true win-win.
Running a warehouse or fulfillment center is a big financial commitment. If you don’t have your own storage or warehousing space, you don’t have to worry about the upkeep.
Remember, it’s more than just paying rent on space. You need to have the right equipment and people who can handle them. These would be employees solely focused on handling warehouse responsibilities.
| Annual Salary | $30,000 |
| Healthcare Benefits* | $14,500 |
| Hiring Costs | $2,000 |
| Onboarding Costs | $2,000 |
| Total Annual Budget Needs: | $48,500 |
Source: Kaiser Family Foundation
Depending on your area and the way you run your business, any of the above costs can go up or down. Let’s assume you can bring down the annual budget needs to $45,000 annually per worker. With five floor workers, you’re looking at $225,000 per year. As people stay on, you have to account for raises, paid holidays, and sick leave.
Chances are you’ll also need to hire some kind of warehouse manager, which will cost you significantly more than a mid-level floor worker. If you’re looking for ways to reduce costs, this is not the way to go. Outsourcing all warehouse operations, including the actual physical storage allows for you to use at least a portion of those funds for other business needs.
You will not have to worry about moving all of your product to an entirely different warehouse setup, possibly in a worse location situation (more on that later). Also, you’ll be able to pay a logistics company a flat rate each month and will have more flexibility than if you had to enter a lease to rent your own warehouse.
Furthermore, you don’t have to worry about employing additional workers, setting up benefits and carrying additional insurance, often the largest expenses a business incurs. If you work with a prepared and stable company like Fulfillment and Distribution, you’ll get accurate timelines on freight movement and inventory status. We will never overpromise or under deliver, any aspect of our operations.
In a perfect world, you want your items warehoused as close to their final destination as possible. The rising Ecommerce market has changed that somewhat. Alternatively, you might need multiple warehouse solutions strategically located throughout the country.
A reputable, well-run logistics company has already thought of this and will very likely have warehouse space in major areas of commerce and also in other handpicked locations based on both current and projected demand.
This can be both a time and money savings for you: your business doesn’t have to spend a bunch of time scouting out desirable locations. Money-wise, you’re not making a sizable investment in buying or leasing your own warehouse.
It makes no sense for a smaller business to make that kind of investment at all. Even for a bigger business, maintaining an entire warehouse or system of warehouses can be a huge headache.
One of the major benefits of outsourcing inventory management, is benefiting from the technology. An inventory management system (IMS) has the ability to instantly show you what your stock looks like at a given moment.
For a small business — or any business really — the upfront cost alone of implementing its own IMS can be prohibitive. Also, inventory controls are absolutely needed. Outsourcing to a 3PL that already employs an IMS is a great way to get real-time data on inventory levels.
An IMS will give you the ability to learn more about your business:
All of these make sure you’re not out of an item when customers are submitting orders for them. So allowing a company like Fulfillment and Distribution to manage this important part of your supply chain can really pay dividends.
The last thing a business wants is to have a heap of products, a bunch of eager customers — and then not being able to meet that demand. That is literally unrealized profits flying out the door for one reason or another.
On the other hand, a stellar logistics company can mitigate this issue for you by taking over your order management at the very least. Even if you don’t want all the amazing benefits of outsourcing warehousing operations entirely, having order management outsourced means you can keep your current operation. Most of the big lifting there is done through technology, which can be run remotely.
Fulfillment and Distribution can really ramp up your ability to meet demand because we can manage not just your inventory but really much of the supply chain management on your behalf. If it’s in our warehouse and being managed well, we can also pack it, put it on a truck and haul it to its point of sale or just fulfill online orders.
Before making your final decision, there are some important points to keep in mind. After all, you are basically giving up direct control of a major part of your business.
Some key things to examine ahead of time include:
Choosing the right provider for outsourcing inventory management, or warehouse operations entirely, is a decision that will have a long-lasting impact on your business operations. It’s the most visible part of your business to customers, so keeping them satisfied is key.
Take your time, do your homework, and ensure that your chosen provider meets your specific requirements. Remember, at Fulfillment and Distribution, we have decades of experience and are always looking for ways to expand what we can provide you.
Once you’re prepared to take the plunge and start outsourcing inventory management, contact the experts at Fulfillment and Distribution to handle all of your needs in that arena. We offer warehousing and systems to manage the supply chain of your products.
Gain access to:
This way, your focus can be deployed where it matters — on the making and marketing of your products.
R+L Global Logistics can handle the housing, warehousing management, and even fulfillment and distribution of the products once orders are received. With our decades of experience in this area, you’re truly in good hands with us.
Once you’re ready to begin outsourcing warehouse operations, contact Fulfillment and Distribution today for a risk-free quote or by calling us at (866)989-3082.
