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Let’s get into this. This is Jeremy with Easy Logistics Management. Today, we’re diving into warehousing, fulfillment, cross-docking, the benefits, cost savings, and potentially getting the best rates for setting up warehousing and fulfillment or cross-docking services. This is something we’ve done for years with partners, having warehouses nationwide. It’s something that I know quite a bit about.
Obviously, we run a transportation company, too. But I wanted to drill into what some of the primary reasons or benefits that you might want to look into 3PL warehousing and fulfillment or cross-docking, the potential cost savings in my mind from having worked in it for years, and then what everybody wants is really to know how to get the best rates for these services at the end of the day. Let’s get right to it.
Benefits of using a 3PL warehouse for fulfillment and Cross Docking Services
As far as benefits of setting up a third-party warehousing, fulfillment, or cross-docking center, in my mind, number one, you’re trading a fixed cost of owning your own warehouse for a variable cost or per pallet cost of working out of a third-party warehousing and fulfillment center. Especially if you’re seasonal, like a lot of our action sports clients, you’re only paying for that peak season where you have a lot of inventory in the warehouse. Then when you’re replenishing, you’re paying just for what’s left over at the end of the season, which is awesome.
Number two, by trading all that activity that you would normally be doing at your own place, it allows your team to refocus on your core competencies, whether that be more emphasis on sales, new product development to grow, or marketing, just to grow your company instead of packing boxes.
Number three, hopefully you’ll be getting better freight and parcel rates if you leverage the warehouse and fulfillment centers’ aggregate discount for shipping freight for all their clients and UPS or FedEx or USPS, whatever that is. That’s something that definitely garners us more clients because we have deep discounts with freight and parcel and we have warehouses. When you commingle the two, even if maybe our warehousing rates are a little bit more expensive than other places, the combined package usually is a win-win for most of our clients.
Number four, easy software integration. Usually, most companies worth their salt have easy API integration that most e-commerce, ERP, and order management platforms these days can talk to you easily, whether it’s a fixed integration or an open API. That can be a huge benefit.
Number five, “Did you get into the business you’re in to pack boxes and work in a warehouse?” Probably not. I don’t pack boxes per se, but I do run a logistics company. But most people got into the business because they’re excited about the industry, the product and innovation and marketing and sales and things of that nature, but not packing boxes. That’s something you get out of if you outsource to a third-party warehousing and fulfillment or cross-docking company.
Number six, no need for a large headquarters office warehouse complex anymore because… A lot of our clients will keep a small warehouse or a small office, but the lion’s share of it goes through our 3PL warehouse and fulfillment center. That’s a huge benefit and potential cost savings.
Number seven, hopefully, depending on the locations that you choose, it’s closer to your end clients, especially if you’re using a bi-coastal or multi-location 3PL warehouse provider. We have some less expensive options in the center of the country in Kansas City and Texas, but by and large, I feel like most of our clients choose to be close to the port and our warehouses in California and New Jersey, just because it’s closer to the port, and to ship to those clients on either coast is a closer transit time and all that.
The number eight, this ties into that, faster ship times and less expensive if you are using a bi-coastal. It looks like I had a few that got away. We got a number nine, a little add-on. Ideally, if you’re using the correct partner, they’re professional fulfillment centers, the process should be done better, faster, cheaper by outsourcing to a professional that does that all day long.
Then number 10, without a 10, it just sets you up for highly scalable growth. If you’re a company that’s on a big growth curve, you won’t have to be looking for extra warehouse space or purchasing new buildings to accommodate your growth or seasonality, because if you choose the right 3PL warehousing and fulfillment partner, they should have lots of space and be able to scale with you up and down, which is a nice benefit.
Potential Cost Savings from Using a 3PL warehouse and fulfillment partner
As far as cost savings of using these type of 3PL warehousing services, you’re spending less in lease money, because you’re, again, trading your big facility for a variable cost on a per pallet basis or whatever your agreement is to store at your 3PL partner. Number two, less expensive shipping costs, shorter distances to client, hopefully, especially if you’re doing the bike coastal thing. Overall, faster transit times, quicker lead times, a whole variety of cost savings and benefits.
Number three, less overhead across the board if you set it up correctly. Rent for your facility, bypass a lot of electricity, labor costs to staff your own team, and insurance, which a lot of times when we do these proposals, people don’t take all that into account. But I think if you add all that up, especially if you’re seasonal, I can’t help but say that a 3PL warehousing and fulfillment partner would be drastically less than having your own facility, all your own team, and all the insurance and electricity and stuff that goes into that.
Number four, it should be more efficient than your own, probably, because this is what we do all day long or they do all day long. Take that into account. Less drayage costs, especially… The lion’s share of our clients seem to end up in Los Angeles and New Jersey because it’s close to the port. It’s 30 minutes to the warehouse versus if you’re in Colorado or Ohio or wherever, you don’t have to pay to dray your containers to the center of the country only to ship the material back.
Then number seven, a lot of these facilities and for sure, our warehouse management system and freight management and parcel management systems all have API integrations to all the major platforms. You can fully automate a lot of these processes, which will in turn save you time, money, and headache.
How to get the Best Rates From a Potential Warehousing and Fulfillment Partner
Now onto the good stuff, right? How do you get the best rates when looking to get into a third-party warehousing, fulfillment, or cross-docking situation? These are the ones that I came up with. I got six of them. There might be a few more, but this is what came top of mind.
When you’re approaching a 3PL partner, I always tell my clients, you want to show that you’re in growth mode, show some sort of growth trajectory. Companies want to work with companies that are growing. If you’re growing, you want to really showcase that because you’re going to get better pricing, because anybody is going to want to work with somebody that’s in growth mode because they don’t have to have as many clients to be profitable. They could have a handful of clients that are growing really fast and do really well. They’re always going to give you better pricing if you’re growing.
Number two, let them compete for your LTL shipping and parcel shipping dollars. They should have better pricing with their commingle buying power with the LTL providers or parcel shipping providers, FedEx. But to sweeten the deal, always let them bid on your outbound shipping or inbound shipping, too, because there’s more billables, they get to make some more money, better control. There’s a whole host of benefits.
Number three, if you can, especially if you’re outsourcing your manufacturing and it’s overseas and the labor is a little bit less expensive, try and have your manufacturer prepackage your products for optimal warehousing and fulfillment if you’re going to go into a 3PL environment.
We consult a lot on that, just so that there’s less picking and packing and touching, because the more touching, picking, and packing that goes on at the warehouse level, the more it costs per unit. The less it’s touched, the more it can just come in and go out pre-boxed and ready to go, the less expensive it’s going to be. Obviously, you can’t get around all of that, but if you can think ahead, you’ll probably save money.
Number four, be open to optimizing your process for the warehouses’ optimal process. A lot of times our clients will come into our warehouses and they have a process that they use. But then they come in and they see how we do things and they actually learn a lot about how to do it better at their own facility if they ever take it back or if they do part of it there.
By coming into a professionally-managed warehousing and fulfillment center… Amazon could probably teach us a few things about everything, so can our warehouses. And then you’re not working with a giant company. You actually can call us on the phone and we’ll pick up and talk to you and get out there and do it.
Another thing to think about, get multiple bids. I mean, I guess that goes without saying, but usually get about three bids. We compete for a lot of our business, so it makes sense.
Number six, work with warehouses that have better shipping rates also. That ties in to some of this other stuff, but this can sweeten the deal for you as well. Like I said, lots of times, maybe our warehousing rates aren’t the most aggressive, but if you combine our deep discounts on shipping and our fair pricing on warehousing, it’s a win-win across the board per unit. Those are my six recommendations if you want to get better rates, and I know most people do.
If you’re looking at outsourcing or you need overflow storage or if you need seasonal help with fulfillment or overflow, these are things that we grapple with every day and have been doing for years and years and years. We would be happy to look at your current process, show you what it would cost for us to do it, and drill into anything you want.
We have warehouse and fulfillment centers that can also provide cross-docking services pretty much within a 1-2 day transit time of anywhere. The majority of our facilities now are in California, around Los Angeles; Edison, New Jersey; Carrollton, Texas, which is near Dallas; Utah; and Kansas City, Missouri. We have others that we can tap into, but those are the primary ones that we’re using right now. I think that’s a pretty good spread as far as time to market and not spending an arm and a leg having to dray the containers everywhere.
I can be reached at 866-854-5341 extension 3, or Jeremy at Easy Logistics Management. Make it a great week. As always, we’d be honored to work with you. Have fun out there this week. We’ll talk to you soon, hopefully. Bye.