The impact of the COVID-19 pandemic and its effects on the logistics industry are still being felt as we enter 2021. One of these effects is an increased demand for warehousing space that will make it harder to find space of your own and will also ensure that you pay more for the space you do find. In this article, we’ll look at some of the ways 3PL warehouse companies can help take the warehousing burden off of you and support your company’s growth in 2021 and beyond.
Tightening of warehouse space availability
The biggest driver of this increased warehouse space demand is eCommerce. When the pandemic hit, eCommerce volumes went through the roof. According to CBRE, year-over-year e-commerce growth surged to 44.5% in Q2 from 14.8% in Q1 of 2020. As the demand for eCommerce products continues to grow, so will the demand for the warehousing space to store product and fulfill online orders.
Another factor driving warehouse demand is concern over inventory. The pandemic has led many companies to reconsider the amount of ‘safety stock’ they have on hand in the event of supply chain disruptions, particularly those involving imported goods. According to CBRE, “many suppliers will increase inventories from 15 days to as high as 60 days.” More on-hand inventory results in more demand for warehousing space.
How 3PL warehouse companies can support your operations
When it comes to warehousing, you have two basic options. You can go it alone and buy or lease your own warehouse space. Or, you can entrust your operation to a 3PL warehouse company. The following are several advantages associated with the latter option.
3PLs offer shared warehousing. If you choose the ‘go it alone’ model, you’re not only on the hook for the cost of the warehouse space, you’re also responsible for the time and costs associated with all equipment, labor and resources associated with that space. With a 3PL shared warehousing model, on the other hand, you simply rent space in a warehouse alongside other companies doing the same.
With shared warehousing, your 3PL can provide more space and allocate more labor and resources to your operations when your volumes are high or when you want to increase inventory, and then reduce space and labor when they’re not necessary. You simply pay for what you need. This a major benefit in 2021 where warehousing space is at a premium – you don’t want to pay for space and labor you’re not using, but you also don’t want to risk needing more space than you currently have. Shared warehousing eliminates these risks as your 3PL flexes its space and resources to support you.
3PLs manage labor challenges on your behalf. In addition to the tightening of available warehouse space, it’s now harder than ever to find qualified warehouse associates. Simply put, there are currently more warehousing jobs than there are people to fill them. As such, logistics companies are battling over the available associates and competing with higher wages and benefits packages.
If warehousing is not your specialty, it may be wise not to enter the fray. By outsourcing warehouse operations to a 3PL, you leave the management of warehouse labor in their court. Fortunately, many 3PLs are experts in this category and have advantages that most other companies don’t. For example, 3PL warehouse companies like Kanban Logistics that have warehouses in close proximity to each other can pull labor from one warehouse to support operations in another when volumes dictate. To learn more about 3PL labor management in the wake of COVID, check out our recent blog article on warehouse staffing challenges.
3PLs own their warehouse management systems (WMS). In addition to space and labor, there is another key resource that comes with a hefty price tag: the warehouse management system (WMS). A WMS is a sophisticated software platform that manages nearly every operation within the warehouse – from inventory management and label generation to tracking of order status and recall capabilities. These systems can cost tens of thousands of dollars – another cost you’ll defer by partnering with a 3PL instead of going it alone.
3PLs offer value-added services. The modern 3PL warehouse is much more than a warehouse. It’s a logistics hub where many key supply chain functions are performed, including omni-channel fulfillment to B2C and retail customers. But there’s even more to it, as many 3PLs can provide additional – or “value-added” – services such as the following.
- Product rework. You can save time and money by working with a 3PL that can perform repackaging or reconfiguration of products within the warehouse.
- Vendor-managed inventory (VMI). With the VMI model, manufacturing suppliers work with 3PLs to store goods that the manufacturer will eventually require. Once the materials are needed, the 3PL performs just in time (JIT) delivery to the manufacturer.
- Cross docking. With cross docking, goods are delivered to a 3PL loading dock for temporary storage or direct transfer to another truck. The time and costs of long-term warehousing are skipped, while distribution can continue with minimal interruption.
- Foreign trade zone (FTZ). Located in or near U.S. ports, some warehouses legally act as foreign trade zones that are under U.S. Customs and Border Protection (CBP) supervision, though considered outside of CBP territory.
If your company isn’t a supply chain expert, it may make sense to partner with someone who is. When you entrust warehouse ops to a 3PL warehouse company, you’re entrusting those operations to a true logistics professional that can make your supply chain leaner and more efficient, while acting as a true partner. With over 1 million square feet of warehouse space in Eastern North Carolina – and ISO certification that proves we walk the walk when it comes to optimizing operations – Kanban Logistics just may be the expert your supply chain needs. To learn more about our services, contact us today.