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Keeping Cost Down Through Third-Party Logistics

Posted on Mon, Apr 12, 2010 @ 09:57 AM
Sometimes, owning, manning, and operating a functioning warehouse just isn't economically in the cards. In such cases, many businesses turn to third-party logistics (3PLs) to do their warehousing, storage, and often even transportation. Typically, 3PLs offer a wide variety of warehouse storage and service, depending upon the customer needs.

Transportation is typically an integral part of the 3PL operation. For many businesses, it is simply not cost effective to haul freight. Hauling one's own freight, unless there are massive amounts of it, requires a lot of expenditures and investments that many businesses aren't willing or able to make. Trucks and trailers obviously carry a huge price tag. Then, there probably must be adequate volume being frequently shipped to justify employing drivers. Also, depending upon the weight and size of the trucks and freight to be moved, special licensing can be necessary. Depending upon production speed, onsite warehouse space may then be necessary, in order to amass enough completed product to make shipping worth the cost. Issues of transportation can often be much more cheaply solved using a 3PL.

Often, the cost for storage on one's own property may not be worth it. For many businesses, storage space is limited. Factory space is much more effectively used for production, rather than storage. Some businesses, such as operations that are located in crowded, metropolitan areas, have very little extra space, and therefore storage is basically impossible. For any such business, going with a 3PL for storage and warehousing purposes is fiscally reasonable. Plus, depending upon the type of storage required, having a warehouse that fits the needs of the product can be very expensive. If, for instance, your products need to be stored in a climate controlled facility, owning and maintaining that technology can be much more costly than storing with a 3PL.

If there is a constant flow of product going in or out, full time warehouse employees are just one more expenditure that a business faces with storing onsite. Since 3PLs have massive amounts of freight being stored, and constantly coming and going, having a fully staffed warehouse makes sense. Oftentimes, when businesses do their own storage and transportation, the volume isn't sufficient to justify hiring drivers and warehouse workers. This typically means that employees who specialize in other areas have to take time away from production to fill those temporary positions.

3PLs are the solution to many businesses' warehousing and transportation needs. They can be extremely cost effective when compared to the price of onsite storage and maintenance.

Tags: Third-Party Logistics, Trucking, Warehouse