The Outsourced Warehouse Management Alternative To 3PL & Staffing Agencies
by Ken Neal
November 2, 2023
Warehouse management is at a crossroads. Until recently, there have usually been two options: businesses could manage their warehouses in-house, or they could turn over the management of warehouse operations — and often the warehouse itself — to a third-party logistics (3PL) company. Although each option has advantages and challenges, many organizations are finding that neither offers them what they’re looking for: a warehouse that not only operates efficiently and cost-effectively today but is flexible enough to grow with the business and respond quickly as market conditions change.
For these organizations, a new option can help them find the sweet spot between the all-or-nothing options: partnering with an outsourcing services provider that can deliver customized, integrated warehouse management. In this new model, a logistics partner works on the organization’s site, contributing warehouse resources and expertise as needed — and only as needed — to the company’s own warehouse and supply chain operations. In this article, we explore these three approaches to help you make an informed decision and find your own warehouse management sweet spot.
In the past, most businesses managed their own warehouses. Today, companies that self-manage their warehouses are responsible for every aspect of their operations — and they have complete control. This gives them an iron grip on every facet of their warehouse operations. From inventory management and control to staff management, every decision is made in-house, ensuring seamless alignment with the company's overarching objectives and company culture. These companies can pivot swiftly in response to market changes, and they can tailor their processes to specific requirements without external constraints.
But in-house management is expensive — and status quo isn’t a strategy for growth. Establishing and maintaining a self-managed warehouse demands a substantial upfront investment in infrastructure, technology and personnel. And self-managed warehouses incur continuous expenses, including staffing costs, maintenance of equipment and periodic technological updates. Without significant investment in warehouse expertise, this can limit a company’s competitive advantage and divert resources away from its core competency.
Some organizations have outsourced to third parties to address the challenges of in-house warehouse management. 3PL companies specialize in providing comprehensive logistics solutions, including warehousing, transportation and distribution. They bring professionals who are well-versed in logistics, which allows their customers to streamline operations and leverage industry best practices. With a 3PL provider, companies can potentially reduce real estate costs while sharing resources and benefitting from economies of scale. 3PL Outsourcing also allows businesses to refocus their attention away from the warehouse and toward core activities, potentially leading to improved products, services and customer experiences.
But 3PL outsourcing means losing control of some aspects of warehouse operations. There’s no guarantee, for example, that a 3PL company’s processes will align perfectly with the customer’s vision. 3PL providers often have a fixed model, and they may require customers to adapt to that model. Companies that need a customized solution may experience delays, incur additional fees or be faced with upcharges on equipment and technology. And because 3PL arrangements are standardized to serve multiple customers, flexibility to accommodate unique requirements or changes may be limited.
Today, organizations have an alternative to the all-or-nothing choice. Customized, integrated warehouse management strikes a balance between the two extremes. In this approach, a company works on-site with an expert management partner, who contributes resources and expertise to the company’s warehouse operations. The partner fills in gaps where needed but otherwise leaves decision-making control with the customer. Because each relationship is customized, the resulting strategy allows the customer to maximize their existing investments in real estate, systems/technology, equipment, and processes. This approach also can enhance efficiency, cost containment and the ability to adapt to changing market conditions.
Beyond being able to retain the control they want, companies can leverage the partner's resources to enjoy cost-effective solutions without bearing the full burden of operational expenses, freeing up capital for other strategic initiatives. Additionally, the partner takes on some of the operational risks, ensuring continuity even during disruptions. This risk-sharing arrangement can be particularly beneficial in unpredictable warehousing environments.
However, these partnerships must be grounded in communication and collaboration to prevent inefficiencies, misunderstandings and conflict. Companies must establish comprehensive contracts to define responsibilities, terms and expectations between the two parties.
Today’s warehouse management decision-makers face some tough challenges. Often, they’re struggling to just keep enough labor on the floor. The thought of gaining process improvements, increasing productivity and improving accuracy may seem like a distant dream.
But with a customized, integrated warehouse management solution, that dream is within reach — cost-effectively and without relinquishing control. Making a business case for integrated warehouse management is easy when you consider the benefits:
- You offload the headaches of labor management and the fulfillment of your service level agreements (SLAs) to the partner, who assumes the risk.
- You capitalize on the flexibility of the solution to grow and adapt to a constantly changing business climate.
- Your partner brings a foundation of industry-tested best practices to help you do more with less, driving productivity, safety and accuracy.
- They offer guaranteed operational maturity models to build the strength and productivity of your warehouse operations and ensure success into the future.
- You focus on your customers and on higher value supply chain needs.
- You may lower your distribution center operating costs by leveraging process efficiencies.
- You gain access to new technologies and systems, as well as expertise around regulations and compliance.
Ask yourself this: if you had the right foundation in your warehouse, how much more effective could your core business be? At Canon, we believe there is a better way to run the modern warehouse — one that is minimally disruptive, tactically sound and proven in use cases throughout manufacturing, automotive, healthcare, life sciences and more.
In fact, when a global company sought to address its changing distribution environment and improve its processes, the company turned to Canon for help optimizing its technology and workflows. Canon enhanced the company’s existing warehouse management system and established “mini warehouses” closer to the production line for better inventory control. We also implemented a workforce optimization program, which helped the company reduce production turn times and increase operational fluidity. With this approach, the company increased inventory accuracy from 83% to 99.8% and saved approximately $1 million annually.
The world isn’t going to slow down. Eventually, your warehouse is going to need to pivot. Be ready with a customized, integrated warehouse management solution so you can make the shift and move forward on a path of continuous improvement.
Get started now with an on-site assessment. Contact us at https://cbps.canon.com/contact-us.