3PL Outsourcing: A Solution to the Warehouse Capacity Problem

warehouseFor a small but growing company, the issue of warehouse capacity can easily become a problem. You might think the answer is to buy or rent a bigger warehouse, but the solution is not always that simple. For one thing, complex issues in local real estate markets can become a barrier to the procurement of a warehousing facility. And for another, many small and mid-size companies simply don’t have experience managing the operations of a larger, busy warehouse.

As a result of the above challenges, many growing companies choose to outsource their warehousing to a 3PL (third party logistics provider). Doing so leaves warehouse operations in the hands of experts, while allowing the business’ in-house personnel to focus on their core competencies. Additionally, 3PL warehousing can even end up costing less than handling it in-house.

Warehouse Vacancies Aren’t What They Used To Be

Data from the United States provides a good example of the changing climate in warehouse real estate across the globe. Although warehouse vacancies in the states peaked in 2010, they’ve been declining ever since. Naturally, this has led to an increase in average rent. Warehouse rent in the US is even predicted to increase up to 25% within the next few years, and the situation elsewhere in the world is quite similar. Additionally, there has been a marked decline in the construction of new warehouses in the US, Europe, and Australia. All of which leads to a cold hard conclusion: the current market simply isn’t in your company’s favor. So what can you do when your growing company begins to need more space?

The 3PL Solution

Third-party logistics is the smart choice for many companies in need of warehouse expansion. Logistics is their area of core competence, and a good 3PL company can provide a level of expertise in areas where you’re unlikely to have in-house experts. 3PL companies can also provide a level of flexibility that surpasses what you’d otherwise have access to.

To understand where this flexibility can really come in handy, it may help to use an example. Say you own a company that sells grills and barbeque equipment, and your sales fluctuate seasonally. A good 3PL warehousing provider can adjust storage capacity and services provided based on your seasonal fluctuations. The result is enjoy a scalable logistics infrastructure, one that meets your needs without forcing you to pay for space you aren’t using.

 

The Bottom Line…

The issue of buying or renting warehouse space can be complicated, especially in the current global economic climate. For a growing company in need of more storage space, the best option might be to outsource to a third party logistics company, rather than doing it in-house. Outsourcing removes the burdens of warehousing and order fulfilment, which allows companies to focus their time and resources on what they do best: making or selling products.