A warehouse is an, often large, facility which is used to store goods which are either finished or are used for assembly of the final product. Well, even though this definition works for most 3rd party distribution and warehousing facilities, several businesses still have second thoughts about handing their products over to them. The reason, endless rumors are giving birth to misconceptions about lack of safety in a third party warehouse.
Businesses which abstain from using the services of 3rd party warehouse are missing out on great opportunities of growth and expansion, for those who do not know how, in this article, we will try to debunk some common myths about using third-party warehousing services.
1. The use of warehousing services is limited to storage
Warehousing services do offer the storage of goods as their primary function. However, that is not all there is to them. Yes, you will be surprised to discover that a 3rd party warehouse offers an array of services that make them nothing less than e-commerce fulfillment centers. You can ship your products to the warehouse, and they will take care of kitting, packaging, branding shipping, cross-docking, reverse logistics, and many more tasks for you.
So, warehouses are not mere storage facilities, but they can also look after all your inspection, packaging, consolidation, transformation, fixing, and other requirements. These comprehensive services make them worth every penny you spend.
2. Third-party distribution and warehousing come with insurance by default
Individuals and businesses are often under the disbelief that if warehouses are taking the responsibility of storage and distribution, they will also insure your finished goods. But this is not how it works.
The third-party logistics providers take out insurance for their staff, facilities, and equipment. They are not liable to insure products from the manufacturers. In such cases, the businesses can either mention their third party warehouse as a ride in their insurance or request the warehouses explicitly to cover the products under the warehouse insurance. If businesses want to use the latter option, they are billed accordingly.
So, whenever you are entering into a warehousing contract, agree upon insurance-related matters before finalizing it.
3. Third-Party Warehouses Cost way more than business owned warehouses
Often businesses, mostly small scale, believe that outsourcing their warehousing responsibilities to third party warehouses will only increase the cost of production. However, it is a misconception that warehousing facilities charge a bomb. On the contrary, considering the comprehensive services they offer, they charge a bare minimum.
Many companies believe that they will save costs by dedicating their own space to store and save a ton of money. But, at the end of the day, it is a waste of valuable and expensive floor space which can be used to expand operations in the longer run. Plus, then the companies will have to hire additional staff to take care of the warehouses, adding to their annual expenses.
Other companies, to save the cost of third party logistics, try to rent out warehouse spaces. These spaces are not only substandard in terms of climate control, sanitization, and other services; the rent per square foot can be pretty expensive too. Not to forget, hiring employees, even if they are warehouse workers, involves benefits, salaries, and insurance.
Another reason why third party logistics are more affordable is that they have trained professionals taking care of your inventory, shipments, and warehousing duties. If you hire employees for that, you will have to train them which involve additional costs.
So, you can either put in all the work for basic warehousing or let the experts handle the job for reasonable costs.
4. Third-Party Logistics Have Hidden Charges
If you are wondering that since 3PLs offer so many services apart from warehousing, they must charge separately for all of them. This is certainly not the case. Warehousing charges charged by 3PLs are pretty straightforward with all services mentioned in the contract. For additional services, they have all the rights to charge extra, but it is up to you which services you would like.
5. Third-Party Warehousing is Only For Long Term
Many small businesses which work on order basis refrain from outsourcing warehousing because they think that it is a long-term commitment. You will be surprised to discover that warehousing works on a transactional basis as well. So, you can avail the services when you have a consignment ready, but there is time in shipping it to the retailers or customers. Such conditions work well for seasonal and short-term businesses.
In the end, warehousing and distribution can be tricky businesses if taken up by the company itself. Not only it diverts the employees from performing core activities, but it can also cost a fortune to allocate space and hire personnel. Hence, third party warehousing is the way to go!