Managing Growth: The Pros And Cons Of Outsourced Warehousing

Growth is an exciting and challenging part of business ownership. For businesses that deal with inventory, there often comes a point where it makes sense to outsource warehousing. Choosing to outsource any aspect of your business can be a scary and overwhelming decision. If you're like most business owners, you have a hard time giving up control. However, there are many benefits that can come from hiring an expert to handle your warehousing. Here are some of the pros and cons to help you decide if now is the right time to outsource.

Pros

1. You won't have to deal with space issues any longer. One of the biggest difficulties businesses face when doing their own warehousing is managing warehouse space. There will be times when you have more than enough, and times when you are bursting at the seams. On the one hand, you're paying for space you aren't using and your employees are left with nothing to do. On the other hand, you're trying to find places to put inventory while maintaining some semblance of order. Neither scenario works very well. Outsourcing your warehousing eliminates these problems--the space issues are left up to the experts, and you only pay for the space you need.

2. Your warehousing efficiency will improve. Warehousing companies have mastered the art of managing inventory storage and distribution, and most companies also handle returns and restocking for you. Because they handle such a large volume of inventory, they know the best possible processes for getting your inventory to your customers quickly and at the lowest possible cost to you. 

3. You'll have access to your inventory through state-of-the-art software programs. Warehousing companies understand how difficult it is for you to give up control of your inventory, so they provide you with a way to monitor it from the comfort of your own office. Their software programs enable you to have as much control as possible without actually doing the work yourself. If you need to make changes or address problems, you can do so with just a few clicks of the mouse.

4. Your insurance costs will decrease. Because of the hazards associated with working in a warehouse, your insurance costs will decrease when you no longer have warehouse employees. The savings could be significant enough to justify outsourcing this aspect of your business.

5. You'll reach your customers faster at greater distances. Many warehousing companies operate on a national or even global scale, with contacts all over the world. If you're starting to expand into national or international markets, outsourcing your warehousing can help get your inventory to your customers faster, improving customer retention and acquisition.

6. You'll free up valuable time to focus on other areas. It's difficult to give up control, but outsourcing your warehousing will give you time to focus on the things that you do best, like assessing customer needs, creating a culture for your employees, and marketing your business for future growth.

Cons

1. You won't be able to send customers out the door with your products. If your business sold products directly to customers on-site, you'll no longer have the freedom to send customers out the door with their purchase. This can be a drawback, since many customers like to walk out of the store or warehouse with something. However, choosing a warehousing company that is close to you and/or your customers will ensure that products get delivered in a timely manner.

2. You may have additional travel expenses. Even if your warehousing company seems to be handling things well, it's a good idea to travel to them on occasion to verify that your inventory is being handled in a way you see fit. This means extra travel days and expenses for you.

3. You won't be able to handle problems as quickly. When you manage your own inventory, you can deal with problems immediately. When you outsource, you'll have to go through the proper channels with your warehousing company, and this can take anywhere from hours to days.

4. Your warehousing costs may increase. Be sure to do a careful cost evaluation before outsourcing. In most cases your costs will increase initially, but the savings (in both time and money) may outweigh the cost in the long run. For some companies, the cost will simply be too much, and it will be best to wait until additional growth has occurred.

Now that you understand the benefits and drawbacks of outsourcing your warehousing, you are better prepared to make a decision about your own inventory. Take a good look at your warehousing processes and speak with several warehousing companies for estimates. Choosing to outsource can be difficult, but it may be one of the best things you can do to help manage your company's growth.

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