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Beginner's Guide to Third Party Warehousing and Fulfillment
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By: David Roberge on October 27th, 2017

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Beginner's Guide to Third Party Warehousing and Fulfillment

The Business of Packaging  |  Supply Chain Services/ Contract Packaging  |  Plant Performance  |  Investment  |  Packaging Psychology  |  Fulfillment  |  Warehousing

As a business owner, you know that making sales is probably the most exciting part of your business. But what happens after the order is placed? Somehow your product needs to end up in your customer's’ hands. If you’ve been manufacturing, distributing and/or selling for a while, you’ve probably thought about storage space, shipping, and fulfillment.

So how does a business owner handle this?

You can either:

  • Sell a product from a drop-shipper who will fulfill orders for you.
  • Fulfill your own orders, either independently or with a team.
  • Work with a third-party who will handle your storage, production and delivery.

Doing your own orders is flexible and cheap.

This works best for businesses that are just starting out or businesses that have unique packaging needs where most third parties don't have the capabilities or technology to reproduce.

If your business is growing quickly and you have the resources, an outsourcing partner can give you a lot of time back to focus on scaling your company and doing what you do best.

This blog will help you ask the right questions and assess your needs before you look for a partner for your business’s fulfillment.

Why Use Third-Party Warehousing & Fulfillment

The obvious benefit to outsourcing is that you don’t have to package or store anything yourself. Here are some more reasons:

Avoid long term leases

Many companies offer flexible pricing so that as you grow or as your industry seasons cycle, they adapt with you. Renting warehouse space usually requires a long-term commitment.

Paying month to month for the amount of space you actually use is much more efficient as your business scales. Why pay for empty space when your industry is off peak?

You don’t have to pay staff

If you are shipping and fulfilling your own orders, you will likely need to hire additional staff or temporary labor to help out as you start getting more orders. Not only is this expensive, managing more people is NOT what you want to be spending your time on.

Let a third-party company worry about trained staff, receiving, and inventory management.

Make better use of your time

  • You didn’t start your company with packing boxes or packaging products in your skill set.
  • Let yourself focus on what you are good at and outsource what you can.
  • Focus on product sourcing, sales, improving your in-house production, or marketing.

You will save money

Yes, doing things yourself is pretty much free, in terms of a long term investment your time is better spent elsewhere. A third-party company operates at a much larger scale than you may be able to, taking advantage of efficiencies only a bigger operation benefits from. They leverage combined shipping volumes that will bring down their costs. Additionally, you have the reliability of a potential fixed-cost partnership that will help you project your costs and remove many of the fluctuating costs that you see when you manage your projects in-house.

When Should You Switch?

When starting out, most businesses will fulfill their own orders and gradually bring on a third-party as needed. But when should you start? There’s a large variety of companies that can fit any sized business, but here are a few signs it might be time to switch:

You see a pattern in uneven or cyclical sales

Many industries are seasonal, so if you see your sales doing better or worse at certain times of year, it doesn’t make sense to commit to staff increases. A third-party will be able to scale back operations as sales slow or a promotion comes to an end. If your business sees ebbs and flows, finding a partner can be a huge help for managing your space and your people.

You’re lacking space or logistics

It makes sense that as you grow, you physically might not be able to handle increased inventory without buying space. When you are struggling to find space to store product or packaging materials, let a third party handle it for you. Companies like Industrial Packaging can manage your project from start to delivery to your end-user.

What Does Fulfillment Look Like?

Once you have your partner company, the entire project can be relatively easy! Your biggest concern at this point is making sure they have enough inventory to keep up with all of your orders. Most of the time, the orders can go directly to the third party, leaving you free to focus on growing your company.

Custom Packaging

Consumers make decisions to purchase not only on how the product provides for their needs, but also on the visual appeal of a packaged product. Finding a third-party that will (or have the ability to) work with your packaging design can be tough, but they do exist.

Companies that will work with you are experienced in dealing with a variety of packages, so they may be able to even help you save money on your packaging materials through their already developed network of material suppliers.

How to Choose the Right One

1. Find a company in your industry

The right fit is the most important part. Your business is different from everyone else’s, and the same goes for 3PL and contract packaging companies.

2. Look for similar existing customers.

Don’t be afraid to ask a lot of questions and figure out how the company has worked with other businesses in your industry. Again many of these companies are very experienced, so a partner that has worked with similar businesses can significantly help you propel your business forward.

What Third-Party Warehousing & Fulfillment with the Right Company Looks Like

Once you’ve found the right company to outsource your production with, there are a few things to look for to make sure you care getting the most out of the relationship.

Supply Chain Management

Your supply chain is the heart of your business. If your supply deliveries are well managed, you can accurately forecast inventory and keep the space you are occupying in the warehouse optimized.

Shipping Efficiency

Sometimes you need to send multiple products or materials to the same location. This is a situation where the whole can be lesser than the sum of the parts. For example, if you consolidate all the small goods into one shipment, the shipping charges could be substantially lowered. Consolidation services should be included!

Conclusion

The most important thing to be sure of is to do your due diligence when searching for a third party to partner with.

Take the time to check them out, talk with them and, if possible, their current customers. Make sure they’re competent, and be certain it’s a good fit for both of you. If you find the right partner, you will be able to focus on growing your business and gain all the time back that you had to spend fulfilling orders, managing labor, space, and fluctuating costs.

So what’s next? Want to know more about working with a third-party packaging company? Reach out to one of our Packaging Professionals!

 Learn More About Outsourcing With Industrial Packaging!

About David Roberge

Part of the outstanding Industrial Packaging team. I'm lucky to hang out with some of the most knowledgeable folks in the packaging industry. I feel even luckier to be able to share our knowledge with you. I love learning about and helping readers grow their brand through unique, flexible package design from the birth of the product idea, through the supply chain and to the launch and placement on the shelf or at the consumer's door.