When should you insource your warehouse?
What factors should you consider if you want to run your warehouse yourself rather than outsourcing? And what are the advantages of insourcing your warehouse? We have asked Steffen Larvoll from Lager & Industrisystemer (Warehouse & Industrial Systems) these questions here.
If you run an online shop or other business where you have a warehouse, you probably know the dilemma whether you should in- or outsource the warehouse. Both can be an advantage, but it is vital that you pre-calculate the costs and include your business strategy and future, before you decide whether to in- or outsource your warehouse.
Calculate the costs of running your own warehouse. This includes start-up costs, for example premises, equipment, trucks, packaging, WMS and EDI systems and staffing. In addition, maintenance and daily operation of the warehouse, such as wages, power consumption, repairs, software licenses and unpredictable costs have to be included as well. Compare the costs with the price of a 3PL player.
The costs of insourcing may seem heavy at startup, but in return you have full control over them, and you are able to reduce costs through warehouse and process optimization. 3PL players have a fixed price, which you cannot control. If you just can do it marginally cheaper than a 3PL player, this is of great importance in the long term.
Read more: 7 tips on how to optimize your warehouse.
When you outsource your warehouse, you also outsource warehousing and logistics competencies instead of building them yourself. That way you write off the possibility to affect how you work with logistics and delivery as a competitive factor. If you have good logistics at the warehouse, favorable carrier agreements and also have a desire to actively use logistics as your competitive advantage, you need to decide if you want to compromise on this strategy when you are considering the possibility of outsourcing your warehouse to a 3PL actor.
Read more: how online shop Get Inspired through an insourced warehouse provides their customers faster delivery.
Insourcing of the warehouse is practical if you want the possibility to go to the warehouse and check inventory, process orders, adjust orders or change deliveries. This makes your delivery more flexible, which may increase customer satisfaction. By insourcing the warehouse, you can also offer your customer that he can pick up his order at the warehouse. In that way the customer gets more delivery options and is able to save shipping costs. An insourced warehouse can also be beneficial, if your product range is constantly changing, because then you do not have to coordinate the changes with an external 3PL player.
Steffen Larvoll points at the e-commerce industry, as an industry where insourcing can be advantageous. E-commerce is volatile with rapidly changing trends and rigorous demands from online consumers on flexible delivery. E-tailers must be dynamic and adaptable, and here insourcing of the warehouse can be particularly beneficial, Steffen Larvoll concludes.
If the above considerations and benefits match your business and strategy, then insourcing of the warehouse may be a possible solution for you. If not, read the next time when we discover the benefits of outsourcing the warehouse to a 3PL player.
Read more: When should you outsource your warehouse?
- It is usually medium-sized companies that choose to outsource the warehouse.
- Lager & Industrisystemer is a Norwegian logistics provider that helps organizations with competitive logistics solutions in the warehouse
- Lager & Industrisystemer is part of the Nordic network for the German logistics company SSI Schäfer.