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Self Managed Warehousing Vs. Outsourcing to 3PL Service Provider

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Published Date:
April 19, 2023
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Warehousing has always been the backbone of any logistics strategy thereby giving leverage to forecast and plan your distribution strategy. Warehousing has always been the least priority area in terms of investment and technology adoption. However there has been a major shift in this outlook due to the customer expectation set high by e-commerce companies whereby vouching for 1 day and 2-day delivery experience. Now warehousing is the priority area to enhance customer satisfaction.

3PL is a service that allows you to outsource your warehousing operation and distribution thereby enabling you to focus on your business. As per a recent study by Armstrong and associates 86% of all fortune 500 companies use 3PL service to manage their warehousing operations and these companies focus on their core competencies

Most of the businesses have the dilemma of whether to manage the warehouse by an in-house team or outsource the same to a 3PL company who are specialized in providing good service and improving the overall efficiency of warehousing options.

In-House or self managed warehousing: -

Control When you manage your warehouse the inventory is in your control from space allocation to the storage methodology, the entire operation works as per your guidelines.

Customization: You can do customization in operations and packaging as per your requirement and try to work on extended time as per your operational requirements.

Outsourced Warehousing to a 3PL service provider:-

Scale: 3PL service provider generally operates a multi-client facility and depending on the size of the facility each client has the option of scalability thereby giving them the flexibility to use extra space in case of seasonal demand or new product launch.

Operating Cost: The self-managed warehouse needs to be maintained with requisite manpower to complete the task and maintain resources like computers, CCTV cameras, material handling equipment, training manpower, investing in software like wms, shipping, etc. In the case of outsourcing warehousing to a 3PL service provider, he takes care of all these requirements and maintains the highest level of operational efficiency.

Flexibility: 3PL operation is flexible in terms of the duration of the service and multi-location facility. Most of the 3PL service providers have multi-location operations thereby providing flexibility to clients to store their inventory near to their market thereby facilitating 1–2 days delivery and giving great customer experience.

Affordability: The cost factor of 3PL outsourcing needs to be compared with your inhouse or self-managed warehousing. This should account for all cost factors and services along with certain uncertainty in business.

Business Focus: When you outsource your warehousing to a 3PL service provider you can purely focus on your business expansion and marketing thereby concentrating on your business goals.

ItemSelf Managed Facility3PL Managed Facility
Space utilizationYou need to pay for total space leased even though your utilization is lessYou have the flexibility to give minimum commitment or pay peruse and the same can be increased to cater to seasonal requirements
Multi-LocationYou need to maintain the infrastructure at multiple locations thereby blocking your capital and managing the operation.A single 3PL service provider can give a multi-location service with a single contract governing the entire operation
ManpowerYou need to maintain fixed manpower to cater to daily operations. The fixed cost can be a major factor in profitability.The manpower usage can be optimized and you pay based on order or specific requirement thereby reducing your fixed cost and making it a variable cost.
Capital ExpenditureYou need to maintain an office, computer, CCTV, MHE, softwareThe entire infrastructure is maintained by service providers
Digital InfrastructureIt’s very cumbersome to maintain the digital infrastructure which deals with software migration and training thereby increasing the cost.3PL service provider invests in new technology to increase process efficiency and takes care of staff training and other requirements.

We would, therefore, recommend to give a try and select a 3 PL provider with good presence in your city of interest and good track record.

The current e-commerce market has further fueled the growth in logistics in terms of time and speed of operation. The e-commerce fulfillment is another challenging area where warehousing plays a very important role along with order fulfillment. The startups and established businesses need to do benefit analysis along with their decision-making capabilities to recognize the value proposition. Just to add a point in the scenario of corona pandemic the entire operation is stopped however you need to cater to your fixed cost in case of outsourcing you end up paying variable cost amounting to 3PL rental of space and little on overheads thereby hedging your risk in this time of uncertainty.

Still have some query? Get in touch with Godamwale.

Godamwale is a pioneer in providing 3PL service with pan India presence in 30+ cities. Godamwale works as your partner to plan and optimize your warehousing operations thereby helping you to reduce your cost and increase productivity. Godamwale works as your partner to study and optimize your supply chain needs.

Bonus: We have developed a google sheet to work on your cost-benefit analysis for migrating a self-managed facility to a 3PL facility. You can just download the sheet by clicking the link below and making a copy of the same and do the comparison of your warehousing and inventory management expenses and compare the same against the quote you receive from a 3PL vendor.

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