Outsourced warehousing and shipping can help companies alleviate the pain of storage and distribution and reduce overall costs. The theory is simple – warehousing and shipping companies specialize in these services, so they can perform them more efficiently and effectively than most companies can internally. Furthermore, by aggregating the combined services for the sum of all of their customers, third party logistics providers are able to achieve additional cost savings that they can pass on to clients. However, what about add on services, such as shipping or freight forwarding? Many third party logistics companies contract theses services out to another provider, not only adding another layer of communication but also adding another layer of cost to the equation. If you’re interested in achieving the best rates possible and looking at 3PL options, it might be wise to consider the use of a full scale logistics provider that not only has its own warehouse and labor pool, but also operates its own freight services.
Dealing with a shipping issue can be especially painful when using a fulfillment services company that contracts out freight services. Most likely, you’ll speak directly to the fulfillment company about the issue, and they’ll handle the communications with the freight company. Many times, dealing with multiple companies results in additional time wasted due to duplication of communication and correspondence. Furthermore, key information can easily be lost in translation, leading to more frustration. On the other hand, when a logistics management services company also has its own trucking services, all of the communication remains under one roof, and in most cases can be managed with a single point of contact. In addition to streamlined communications, the 3PL also has more control over fixing any issues and bringing proper resolution.
In most cases, warehousing companies mark up the cost of shipping services so that they can make some level of profit. Also, the warehousing company, in most cases, isn’t getting the lowest cost possible for freight services, unless they have significant volume that justifies a sizeable discount. Conversely, when a warehousing company has its own shipping division, it can offer you freight services without an additional layer of markup, helping reduce your overall freight bill.
One of the greatest benefits of utilizing a full service logistics provider is that it tips the scales of negotiating leverage in your favor. When you bring more services into the equation, the 3PL has the potential of winning more business, and will most likely be more willing to entertain the best pricing possible to win your business. Furthermore, with more areas within the business to make a profit margin, the 3PL company doesn’t have to make quite as much margin in each area to survive. And as your volume increases, you can leverage this increase into further potential cost savings, as the 3PL will gain further synergies through an overall increase in volume.This entry was posted on Wednesday, October 2nd, 2013 at 1:58 pm and is filed under Warehousing and Fulfillment Resources.