There’s a time in the life of every small but growing business when homegrown solutions to the challenges of storage and shipping stop working. The extra room in the house is overflowing. The garage is no longer functional. Orders start piling up faster than they can be filled, and the person who should be running the business starts spending half the day trying to play Tetris with boxes.
It’s at this point that things get interesting. Because the obvious step, getting a lease on warehouse space and hiring people to work in it, isn’t always the best move.
The Hidden Cost of Running Your Own Warehouse
Most business owners don’t fully appreciate what’s involved in running a warehouse. It’s not just paying rent on the space and getting your hands on a forklift. There’s liability and property insurance. There are utilities. There are security systems to install. There are shelving units to buy, packing materials, shipping software, and someone has to manage it all.
Then there’s repair and maintenance of equipment, a system to track incoming and outgoing inventory, and the ongoing job of solving problems when things don’t go according to plan.
The financial costs are significant, but the time demands can be overwhelming. Someone has to manage incoming and outgoing shipments. Someone has to organize and put away inventory. Someone has to do periodic inventory counts. Every package has to be packed and shipped. The transport companies have to collect outgoing packages. And when packages get lost, damaged, or misdelivered, there are more problems to solve.
For a business owner who should be spending their time focused on creating better products, improving marketing, and planning growth strategies, running a warehouse can become a major distraction.
Even worse, warehouse space isn’t elastic. You can sign a lease for anything from a year to several years. Whether your business is growing like crazy one month and flat as a pancake the next, you’re paying for that space. February could see half of your warehouse sitting empty, but you’ll still be paying for it.
When Hiring Someone Else Makes More Sense
The alternative that many owners of growing businesses are now considering involves hiring logistics companies that specialize in this area and have already invested in what they need to get the job done.
Professional 3PL logistics services take care of the entire storage and fulfillment process, turning what would be the owner’s biggest headache into a manageable monthly cost.
This changes the approach that businesses take from one of asset ownership to asset access. Instead of spending the money needed to set up and run a warehouse, companies simply pay for services as they use them. If their business grows, they gain access to increased capacity. When it slows down, costs slow down too.
Hiring a logistics company makes sense for businesses that experience seasonal or ad hoc growth patterns. A business that may do 60% of its annual sales volume during the holiday season doesn’t need to pay for year-round storage space that can meet this kind of capacity once a year.
By working with a company that specializes in logistics, firms pay for only what they need when they need it instead of having storage space that meets peak demands only for the once-a-year peak sales period.
An Investment in Technology That Most Companies Can’t Afford
Warehousing isn’t just about putting boxes on shelves. Modern operations use complex technology to make sure nothing gets lost or damaged.
When orders come in, they have to be picked. For small-volume operations, this might involve manual systems similar to sorting through your kid’s LEGO collection. Professional third parties have robotic arms that automate many picking processes.
Then there’s technology that tracks inventory levels and provides real-time statistics about what’s in stock or what might be running low. Warehouse management software ensures accuracy during picking, packing, and transportation.
Many small- and mid-sized businesses also don’t realize how much effort it takes to integrate all their systems. When someone buys a product online from your company website, that order doesn’t just sit there waiting for someone to see it. An automated system picks up the order details, checks what inventory is available, makes sure payment went through, sends out an invoice or receipt, and gets the pick-and-pack process underway.
And then there’s delivery tracking systems. It used to be that your customers had no idea when their packages would arrive. These days, someone buying a cool product from you expects to be able to track it every step of the way as it winds its way across the country.
Creating a comparable warehouse operation takes an investment of thousands of dollars in software alone before you factor in time spent setting it up and getting it running smoothly.
Professional logistics partners have these systems and processes set up already. They use a small fraction of the resources needed to build a decent logistics infrastructure and spread it over several customers.
What this means is that firms that have outgrown their previous ad-hoc approaches to logistics receive enterprise-level services without enterprise-level costs. Tracking numbers go out with orders, deliveries happen on time, orders get shipped faster, and all without interrupting the business owner’s focus on building great products.
See also: Get Ranked: Why Your Business Should Have Professional Link Building.
The Geographical Challenge
Shipping costs vary depending on where you’re located and where your customers are located. In some cases, geography may make it costly for you to ship products that people buy frequently like hotcakes.
Professional logistics companies solve this problem by establishing warehouses in several locations across the country, or even around the world.
The geographic spread of these operations means that businesses can now ship products using second-day delivery services that used to take five days using USPS if they would get delivered at all.
More importantly, if you’re operating in regions where demand is developing but not established yet, this geographic flexibility has another advantage. It no longer takes much time or effort to test those markets for potential demand without disrupting your existing delivery processes.
Instead of investing in getting your own local logistic chains set up, you can tap into an existing one by using a logistics partner who offers these kinds of services all over country.
What Changes When Storage Isn’t Your Problem Anymore
The main change is in what you spend your time doing as an owner of a growing company. Instead of focusing on managing your logistical operation, you can focus on ensuring you create products that are as great as people say they are.
Yes, you’ll still need to devote some time to ensuring that marketing is improving and that customers are being treated well so that they’re raving about your products instead of just saying they are good.
But you won’t have to spend time coordinating shipments or training teams on how to run warehouses.
There’s another advantage in terms of risk management too. This may be less relevant now than it was two years ago when supply chain disruptions became a real headache for small businesses, but disruptions happen still, shipping errors happen still, and we’re still not out of Covid yet.
Therefore, it’s probably best not to keep your fingers crossed when it comes to losing packages as well as damaged packages being returned as well as injuries that occur inside warehouses because people are expected to lift heavy boxes up when they shouldn’t have had any heavy lifting responsibilities in the first place.
Professional 3PL logistics companies carry their own insurance. They have their own teams of trainers onboarding new staff members who need training on how not to injure themselves while ensuring items are packed correctly according to best practices before being shipped off to buyers.
Making The Shift
Many companies don’t make this shift all at once. Initially, they may opt for logistical partners only during peak seasons and retain some oversight over storage operations so they can fill orders during cooler seasons themselves. Gradually though they transition away from this approach entirely as they start seeing better results from vendors who specialize in storage solutions than those who don’t specialize at all.
The crux is recognizing when things like storage/packaging/shipping become more burdensome than they should be so you can focus on growing/reaching out over again instead of getting bogged down trying handle things internally in an ad hoc way with no clear solutions, and afterthoughts just not working anymore because consumer demands have gone through the roof making it nearly impossible for small but growing businesses keep up (even with existing customers).
