by Will Schneider
A great number of product based businesses consider outsourcing with a third party warehousing company as a viable option for handling the warehousing and distribution of their product. But once they begin researching these third party providers, they oftentimes get hit with “sticker shock” in terms of storage and fulfillment fees. They often think to themselves, “Is it cost effective to outsource?” Or better yet, “Will cost savings be realized by outsourcing warehousing and fulfillment?” These are extremely important questions that need to be analyzed from a detailed financial perspective in order to gain appropriate insights to make the best decision.
One of the most difficult aspects of any in house versus outsourcing financial analysis calculations is the gathering of ALL “in house” costs. If any of these costs are left out of the equation, you’ll surely not be able to gain the proper perspective in your decision. What kinds of costs need to be included?
Some of the most commonly overlooked areas are equipment purchases and adequate measures of management support related to the fulfillment process. Without a thorough analysis, you’ll potentially be left thinking that outsourcing isn’t the best option when in fact using a third party warehousing solution would be the best way to go.
In addition to forgetting to include certain in house costs, another common mistake is not accounting for other added benefits of outsourcing your third party warehousing. Some of these “intangibles” can really provide significant savings. They include:
Properly accounting for all costs and benefits will help you make the best decision regarding the use of third party warehousing. Don’t be short sighted when looking at the pricing proposals from fulfillment companies. Take into account all costs and you’ll set your business up for the greatest success possible.This entry was posted on Wednesday, December 12th, 2012 at 10:15 am and is filed under Warehousing and Fulfillment Resources.