7 Signs It’s Time to Move From Your In-House Warehouse to a Nationwide 3PL
Last updated on September 20th, 2023 at 05:49 pm
Running an eCommerce business demands agility in fulfilling customer orders. Your warehousing solution plays a pivotal role in that process.
While many companies start with internal warehousing, there often comes a point when a more expansive solution, like a third-party logistics provider (3PL), is necessary. Starting with an in-house storage solution can be an excellent decision for budding businesses, as it offers more control, quick access to inventory, and, often, lower initial costs.
However, as your business expands, the challenges multiply. That’s when a nationwide 3PL can provide a much-needed lifeline.
Thanks to globalization, customers can order products from just about anywhere in the world. They also demand faster delivery, diverse product options, and seamless returns. Meeting these high expectations means having a logistical process that spans wider geographies with the utmost efficiency.
Keep reading to learn how to recognize the signs it’s time to move from in-house fulfillment to a nationwide 3PL partner.
3PL providers handle various logistical services like warehousing, transportation, picking and packing, and inventory management. Some, like MyFBAPrep, also offer specialized services to better facilitate the eCommerce process.
A nationwide 3PL enables you to store your products in various strategic locations for quicker and cheaper shipments to a broad customer base.
Signs to Consider a Shift
It’s essential to learn the signs and challenges that indicate a need to reconsider your logistics strategy. These signals can range from operational issues to broader strategic challenges. Recognizing them early can help eCommerce businesses anticipate future hurdles and take proactive measures.
Here are seven signs that your in-house warehousing solution is limiting your growth potential (and moving to a nationwide 3PL could be in your best interest).
1. Scalability Issues
As your business grows, so does your inventory, and you may soon face challenges with expanding internal warehousing alongside it. Your space might run out, or you may run into infrastructural problems. Additionally, handling seasonal demand fluctuations can be a logistical nightmare without proper support.
Business expansion means more products, more variants, and, subsequently, a surge in inventory. With in-house storage, this sudden influx might strain your existing warehousing capacity. In turn, overcrowding in warehouses can lead to mismanagement, potential damage, and a slower order-picking process.
Apart from space, there are other infrastructural concerns: Can your in-house warehouse accommodate advanced shelving systems for better vertical storage? Is there room for integrating automated solutions for faster pick-and-pack processes? Addressing these challenges might require significant reworking and resource investment.
Seasonal Demand Fluctuations
Many eCommerce businesses face demand peaks and troughs tied to holidays, seasons, or promotional events. Catering to these seasonal spikes using internal warehousing can be tricky.
You might find yourself overstocked during off-peak times, occupying precious space and resources, or understocked when the demand surges, leading to missed sales opportunities and dissatisfied customers.
Dynamic Market Trends
Market trends can change rapidly. A product that’s in vogue today might see decreased demand in the near future. This unpredictability requires a flexible warehousing solution that can adapt quickly. With in-house storage though, adapting to these market fluctuations can be cumbersome and slow to respond.
In light of these challenges, it becomes clear that, while an in-house warehousing solution offers control, it can lack the flexibility and scalability needed to keep up with a dynamic eCommerce environment. However, a nationwide 3PL equipped to handle these scalability challenges can provide a valuable edge.
2. Rising Operational Costs
As the old saying goes, “It takes money to make money.” However, as your eCommerce business expands, the operational costs associated with in-house warehousing can escalate beyond expectations. Those expenses can then eat into your margins, stifling growth and competitiveness.
Hidden Maintenance Costs
Routine maintenance costs often go unnoticed until they accumulate into significant expenses. Fixing a leaky roof, repairing damaged racks, addressing equipment wear and tear, and other jobs to maintain your warehouse’s integrity can add up quickly.
Utilities and Overheads
Heating, cooling, and lighting a warehouse space is expensive. As you expand, your energy needs will rise, ballooning utility bills. You also have to contend with other overhead costs like waste management and property taxes, which increase your operational expenditure.
With an increase in inventory value and volume comes a commensurate need for robust security. Investing in surveillance systems, alarms, and possibly even on-site security personnel is essential, but these additional measures represent a continuous cost, both in terms of setup and ongoing operation.
A larger warehouse necessitates more hands on deck to maintain the flow of operations. However, it’s costly to hire more staff, train them, and manage larger teams, both in terms of time and money.
Technology and Systems Upgrades
You may need to invest in more sophisticated inventory management systems or warehouse management software to maintain efficiency in a growing warehouse. These systems often come with setup costs and recurring licensing or subscription fees.
3. Complexity in Inventory Management
Inventory management is at the heart of any eCommerce operation. As the scale and variety of your products expand, ensuring an efficient and error-free inventory system becomes arduous.
Diversified Product Line
A growing product range requires an increased need for meticulous tracking. Different products might have varying storage requirements, shelf lives, or handling instructions. Keeping tabs on each product’s specific needs while ensuring they’re readily available for shipping becomes an intricate dance.
An increase in inventory volume can overcrowd storage spaces. In turn, that can lead to misplaced items, longer pick-and-pack times, and an increased risk of product damage.
Requirement for Advanced Systems
Manual tracking or rudimentary systems can’t cope with complex inventory management needs. So, adopting advanced inventory management systems is non-negotiable. They can track product locations, quantities, expiration dates, and more but also come with implementation challenges and costs.
Today’s eCommerce environment often demands a presence on multiple platforms besides your own website, like Amazon, eBay, or Walmart.
Managing inventory across these channels internally requires synchronization to prevent overselling, underselling, and stock discrepancies. This multi-channel management can be resource intensive and opens the risk to potential errors.
Effective inventory management isn’t only about the present; it’s also about predicting the future. Forecasting demand for each product becomes more complex, especially in a diversified lineup.
Incorrect forecasts can lead to overstocking (and thus higher holding costs) or stockouts (which translates to lost sales).
With expanding inventory, you might also deal with more and diversified suppliers. Coordinating multiple suppliers for restocking, addressing quality issues, or managing lead times further complicates inventory management.
4. Limited Technological Advancements
From inventory management to order processing, tech-driven solutions offer operational efficiency, accuracy, and scalability. But staying on top of these advancements while managing core business operations can be daunting.
The Pace of Technological Change
The tech world is constantly in flux, with new advancements emerging frequently. Keeping up with these changes and integrating them into in-house operations requires continuous attention and investment.
Adopting new technology is only one part of the equation. You also have to deal with integrating it seamlessly with existing systems, ensuring compatibility, training staff, and ironing out initial glitches, which often demand dedicated IT teams.
As your business grows, your technological solutions need to scale with you. However, the tech that suits a small to medium-sized operation might be insufficient on a larger scale, necessitating periodic tech overhauls.
5. Geographical Limitations
With in-house warehousing, you might restrict yourself to local or regional markets. A nationwide 3PL, however, breaks these boundaries by giving you the leverage of a broader, possibly even global reach.
The vast expanse of eCommerce means businesses have opportunities far beyond their immediate vicinity. However, internal warehousing can inadvertently limit your ventures.
An in-house warehouse in a fixed location might serve local customers efficiently. But, when you want to cater to customers across the country or in distant regions, your shipping times and costs can escalate, making you less competitive and profitable.
Customers today expect fast deliveries, and an internal warehouse centered in one location makes it difficult to offer consistent delivery times across various regions. That unreliability can hamper customer satisfaction and loyalty.
Market Penetration Challenges
Breaking into new markets requires not only strong marketing strategies but also logistical preparedness. Without a local warehousing presence in these different locations, promotional events like flash sales or product launches will fall victim to extended delivery times.
6. Inefficient Returns
Returns are inevitable in eCommerce, so handling them efficiently is critical to maintain customer satisfaction. Navigating the challenges of reverse logistics in-house can be cumbersome, while 3PLs have proven systems to streamline return processes.
Managing returns internally means coordinating the receipt of products sent back, inspecting them, updating inventory, and either refurbishing or discarding items. Each step requires dedicated resources and can disrupt regular operations.
When products are returned, you must update your inventory in real time to reflect accurate stock levels. Inefficient returns handling can lead to discrepancies that affect sales and reordering processes.
A complicated or drawn-out return process can frustrate customers, leading to negative reviews and a diminished brand reputation. Given the competitive nature of eCommerce, a smooth return process is imperative for maintaining customer trust.
7. Lack of Expertise
Besides storing and shipping products, warehousing and logistics necessitate well-oiled inventory management, order fulfillment, technology integration, and customer service. As eCommerce operations grow and evolve, this complexity intensifies.
While the basics of warehousing might seem straightforward, the nuances of efficient inventory management, order fulfillment strategies, and tech integrations demand specialized knowledge. That produces a steep learning curve and increases the risks of trial-and-error approaches for in-house operations.
Recruitment and Training
Finding individuals with expertise in warehousing and logistics can be challenging and expensive. Once on board, they need to be trained on your specific business model and operations, which necessitates further investments of time and money.
Specialized staff command higher salaries due to their niche skills. Additionally, the ongoing training to keep them updated on the latest logistical trends and technologies further escalates operational costs.
Without the necessary expertise, even well-intentioned strategies can backfire. Mismanaged inventory, inefficient fulfillment strategies, or poor technology integrations can result in operational hiccups, delayed deliveries, dissatisfied customers, and lost sales.
The Benefits of Moving to a Nationwide 3PL
The decision to shift from in-house warehousing to a nationwide 3PL can upgrade and optimize your entire eCommerce operation in several ways.
Enhanced Supply Chain Efficiency
With a nationwide 3PL, you enjoy centralized control of your supply chain, even if the operations span multiple locations. This ensures consistent and coordinated processes across the board:
- Strategic warehousing: With a 3PL’s warehousing solutions, your products are stored in optimal locations for quick and efficient delivery to your primary customer bases.
- Swift turnaround times: Given their logistical expertise and expansive infrastructure, 3PLs can often guarantee quicker order processing and fulfillment so customers receive their orders promptly.
- Integrated logistics: From inventory management to order fulfillment and returns handling, 3PLs offer a holistic solution, ensuring each aspect of your supply chain is streamlined and efficient.
A nationwide 3PL handles logistics for multiple clients, which allows them to achieve economies of scale and offer competitive pricing structures. Other benefits include:
- Reduced capital expenditure: By contracting with a 3PL, businesses can avoid significant capital investments in warehousing facilities, technology, and equipment.
- Predictable costs: 3PLs usually offer clear and predictable pricing models so businesses can budget and forecast more accurately.
- Minimized risk: Handling logistics internally comes with inherent risks, from operational mishaps to unbalanced investments. 3PLs absorb those risks, providing businesses with a more stable operational cost framework.
Advanced Technology and Expertise:
Nationwide 3PLs employ state-of-the-art technology to optimize inventory management, order processing, and customer communication:
- Continuous upgrades: Due to their dedicated focus on logistics, 3PLs ensure they always leverage the latest technologies, meaning clients benefit from constant tech upgrades without the associated costs or hassle.
- Expert insights: Beyond handling logistics, 3PLs also provide valuable insights based on industry trends, data analytics, and extensive experience. That expertise is instrumental in refining an eCommerce strategy for growth and efficiency.
Companies like MyFBAPrep offer specialized services tailored to the unique needs of different eCommerce businesses. Their customization ensures each solution aligns with a company’s objectives and market dynamics.
Transitioning to a national 3PL is about embracing efficiency, cost-effectiveness, and technological advancement. It’s a strategic pivot that can position your eCommerce venture for sustained growth, a competitive advantage, and heightened customer satisfaction.
Wrapping up — Easily Scale Your Operations With a Nationwide 3PL
As your business evolves, so should your logistics strategy, so it’s crucial to recognize the signs that indicate a need to shift from in-house warehousing to a nationwide 3PL. Whether you face scalability challenges, rising operational costs, or the demands of intricate inventory management, a 3PL partnership offers a highly advantageous solution to a multitude of back-end problems.
If you identify with any of these or related issues, it’s an invitation to pause, evaluate, and consider the transformative potential of a 3PL partnership. Take time to consult with a 3PL expert and set your business on a trajectory for continued growth and success.
Rachel Go is the marketing director of MyFBAPrep, an eCommerce warehouse network for Amazon aggregators, enterprise brands, and top Amazon sellers. Operating a global network of more than 100 warehouses and 85-million-square-feet of operating warehouse space, MyFBAPrep offers a full suite of ecommerce 3PL services including Amazon wholesale and private label, direct-to-consumer (DTC) fulfillment, and B2B retail. Powered by its SaaS technology platform Preptopia™, sellers get access to unified billing, analytics, business intelligence reporting tools and real-time inventory views across multiple warehouses in the network.
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