Warehousing is an important component for any retail business to store products until they are ready to be shipped to customers. Managing warehouses well is a core responsibility for businesses to fulfill orders efficiently and add value to their company.
Companies can possibly operate private warehouses that they own and are operated by their employees. Another option is for companies to outsource the warehousing process to a third-party warehousing provider.
Third-party warehousing meaning
A third party warehouse is one owned by a service provider that companies can partner with. The third-party warehousing provider will fulfill the warehousing processes such as receiving, picking, packing and shipping.
Companies will be able to outsource the process of handling inventory and managing resources for a storage building. This frees up resources for the retail company to work on other areas of the business.
What is third party distribution?
Distribution services handle the delivery of products to customers through various service providers. Retailers can hire third-party companies to handle the fulfillment of product delivery, tracking items and processing returns.
What is the role of a third-party logistics provider?
There are a number of value-added services that a third-party logistics provider is able to offer a retail business. These companies aim to work alongside businesses to give customers the best service experience.
Warehousing and distribution
A third-party logistics provider usually handles both the warehousing and distribution on behalf of a retail company. The ability to hire a company to handle the entire fulfilment process has allowed companies to operate efficiently in various markets around the world.
Fulfill orders at a lower cost
Companies often choose to work with a logistics provider because they are experts in their field. Third-party companies lower the overhead costs incurred while also increasing the volume of orders fulfilled. They are also able to handle unexpected increases in volume during seasonal sales.
Often a company would choose to work with a service provider when the company is still in the growing stages because handling everything in-house is costly.
Third-party providers are more likely to have invested in technology that would give your business an advantage.
Handle the little details
By hiring the right logistics provider, the retailer can sit back while the little details are handled. Logistics providers will choose the best freight provider, track parcels and handle product returns. Logistics providers often optimise the delivery systems to provide quick and efficient delivery.
A good logistics provider will also offer reports on timings for product distribution and sales analytics. Retailers still maintain ownership over products and continue making decisions while leaving the day to day processes to the logistics provider.
The advantages of third-party warehousing and distribution companies
Hiring a third-party warehousing company gives you quite a few advantages aside from just freeing up resources. The different services provided could benefit your companies in these ways:
- Access to experienced experts in the field of order fulfillment.
- Encouraging business growth and expansion into new markets.
- Increasing the flexibility and scalability of your business.
- More efficient warehouse management and distribution operations.
- Better customer service experience and satisfaction.
By working with a partner, your company can combine resources on both ends to specialize in terms of service and build a competitive business in the industry.
Common misconceptions about warehousing and distribution companies
Warehouses only store items
The main role of a 3PL warehouse is to store items till they are ready for sale but that is not the only service provided. In fact, when you speak to a third-party provider, there are many other services they could offer you including market analysis, cross-docking facilities and eCommerce fulfilment centres.
It is cheaper in-house
Some companies choose to keep warehousing and distributions in-house because they assume that third party providers are expensive.
Often, the upfront costs might seem like an investment but it actually lowers overhead costs over time. Smaller retailers also get access to better technology they would otherwise not be able to afford.
The resources used to keep warehousing and distribution low can instead be used for profit-generating activities. Companies tend to recognize the waste of managing warehousing in-house but feel reluctant because of the perceived high prices of logistics partners.
Hidden fees and charges
Often, companies are also concerned that there may be hidden fees and charges at logistics companies. Check transparency of the charges before choosing a company to work with. Trustworthy companies will make all charges clear prior to agreements so you only pay for services that you’re using.
A third party warehousing and distribution partner aims to add benefit to your company by providing excellent service to you and your customers. Finding the right logistics provider will give you the peace of mind to know you are entrusting your business in safe hands.
The article is a part of our comprehensive series on “Warehouse Management Systems”