Budget vs Value: Assessing Efficient Warehouse Services

Today we discuss what a high-value warehouse solution needs to offer and why it’s worth going with someone who values you rather than your money. A first crucial step before you consider any outsourcing is to know your costs.

Often operations leaders knowing what they’re spending total is, but they lack insight into the costs of the various components. True efficiency comes from knowing what the lowest possible cost is for each of the areas of the warehouses and assessing 3PL by this measure.

The True Costs

Breaking this down, it’s key to know the costs for the spaces, labour and equipment separately. Particularly because these are the costs which can dramatically alter. Not only between industries, but also between companies and warehouses.

Many offerings have to accommodate for unique product portfolios, as well the delivery standards for said product. For example, a frozen ice cream product would require more specialized equipment, not only for storing, but for the packing process and delivery service, vs something like a clothing retailer, which would often be much simpler.

Know Your Options

Companies can tackle this by using one of two methods to calculate costs, whether it’s on their own warehousing solutions or in partnership with a 3PL, it works in both circumstances. Parties can use benchmark analysis to assess the warehousing costs which determine their ideal costs for any given warehouse or service component and go off that.

However, this doesn’t accommodate for the differing requirements very well.  A second solution, ‘Cleansheet’ devised by Mckinsey, analyses a warehouse’s costs using a model which determines the true costs per area.

Once operation leaders are armed with the accurate knowledge of their costs, they can begin to target the areas which require the most urgent attention, or when working with a 3PL operation, they can begin to highlight opportunities for improvement in the more limited operation i.e. contracts with 3PL’s tend to be shorter and therefore it’s harder to make infrastructural changes.

Costs of Working with Budget Warehousing

Any budget or smaller 3PL service, which is not open or able to make these kinds of adjustments are something to be wary of and where budget warehousing can start to show its limitations. In particular, if they are unable to work with your changing requirements; the bill and time wasted accounting for the service gaps will soon add up.

Top warehousing solutions will not only be up for this discussion, but they will actively encourage you to work with them to provide the best possible service. From increasing efficiency in your supply chain, improving stock control to maximising their storage capacity for your products and handling of any damaged stock. Value-driven 3PL services are ready to innovate with you.