Looking to Scale Your Business? Look to Contract Logistics
Rapid or planned growth calls for contract logistics in your warehouse operations to execute your ambitions, keep up with demand, and continue climbing toward your goal. Scaling a business is the ultimate challenge, especially when it comes to logistics. Warehousing, distribution, and transportation may look completely different for large brands than they do for small to mid-sized businesses. Even if your current supply chain seems to be running without a hitch, the infrastructure and operations to support, say, $10 million in revenue, almost certainly won’t hold at $100 million in revenue.
When you’re moving a significantly higher volume of product, efficiency, repeatability, and reliability become crucial. Any gaps in operations become more noticeable and delays become more disruptive. Meanwhile, the stakes are literally and figuratively higher than before. You can’t afford to risk your business taking off and then crashing because the logistics weren’t in order.
To scale, many businesses realize it’s time to begin outsourcing supply chain management to a third-party logistics (3PL) provider like ODW Logistics with contract logistics. Aside from simply outsourcing logistics to get orders out the door, savvy business leaders recognize the value of establishing a long-term partnership with a 3PL. Contract logistics come in many different forms—but before we discuss those, let’s start with where and how your product is stored—aka warehousing.
Which Warehousing Is Right for You?
There are several types of warehousing agreements to consider. Each option has its own use cases and benefits.
Many small to mid-sized businesses start with public warehousing. This outsourced option is much more cost-effective than having to lease, operate, and staff an entire warehouse. Public warehousing is usually available on a month-to-month contract, making it ideal for short-term needs involving modest inventory volume. It’s easy to switch from one public warehouse to another if you’re unhappy with the services provided. However, public warehousing isn’t designed to support a business that is scaling as you are allocated a specific amount of space for a set amount of time, with only basic pallet and storage services and marginal opportunities for freight cost savings. If you’re seeing or anticipating a spike in demand, a public warehouse can work in a pinch for overflow—but for continued growth, you’ll need a more tailored solution.
Growing businesses often step up from public warehousing to shared warehousing. For shared warehousing, you’ll likely sign a longer (but still relatively short-term) contract for a year or more, with a combination of transactional and fixed pricing. Shared warehouses typically have more advanced technology and equipment that a 3PL uses to manage multiple clients’ inventory in one facility. That’s why it’s also referred to as multi-client warehousing.
Shared warehousing is great for businesses with peak sales seasons because you’ll get the warehouse space and support you need during busy times without leasing and staffing a facility that won’t be filled during slower times. It can also allow a business to expand into new markets without having to make significant capital investments. Shared warehousing is often a gateway to value-added services that you can pick and choose from the 3PL that operates the facility. We’ll look at what those services might include later in this article. For now, learn more about the advantages of shared warehousing.
If your company is already sizable and you’re poised to take it to the next level, a dedicated warehouse might be a good investment. Your business can own or lease a custom-built facility and have a 3PL operate it, in which case it’s best to engage the 3PL from the start to help you select the best location and logistics for your new warehouse. Or, you can lease an existing warehouse from a 3PL and be the single tenant. Dedicated warehousing is offered in transactional, cost-plus, and customized pricing models.
Dedicated warehousing requires a multi-year commitment. While dedicated warehousing entails a much more complex agreement with various costs, cost structures, and considerations, it can pay dividends in the efficiency gained and long-term partnership forged. As with shared warehousing, you’ll have access to value-added services, but with complete control and the entire facility dedicated to your business at all working hours instead of to multiple clients. Learn more about the difference between dedicated vs. shared warehousing.
Beyond Warehousing With Contract Logistics
Warehousing is just one component of your supply chain. It’s the starting point, with many facets to follow. To successfully scale your business, you’ll also need the rest of your logistics to be fully optimized for growth. That’s where contract logistics can help strengthen your supply chain across the board, including:
Warehousing goes hand in hand with distribution, and many 3PLs’ warehouses today operate as full-service distribution centers. Unless your product needs to be stored for an extended time, a distribution center will likely be the better choice compared to a traditional warehouse. As you’re scaling, it’s safe to assume product will be moving in and out of your warehouse rather quickly, making distribution crucial to maintain flow and avoid backups.
When you partner with a 3PL for warehousing and distribution, you’ll likely get a benefit from the start in the location of their warehouse. A strategic location alone makes distribution more efficient and cost-effective. For example, product warehoused in Columbus, Ohio, reaches 90% of the U.S. within two days of transportation. Columbus is within a 10-hour drive of 46% of the U.S. population including cities such as New York, Philadelphia, Boston, and Chicago.
Whether you’re currently selling online or adding e-commerce as part of your growth plan, fulfilling online orders at scale is a process like no other. In an age where online shoppers expect fast and affordable shipping, e-commerce fulfillment requires next-level speed, efficiency, and scalability, all while maintaining accuracy.
You want to be sure your 3PL can flex and scale to meet your ecommerce fulfillment needs. Ask them specific questions about their experience with your specific needs and problems you have experienced in the past, for example:
- Same day fulfillment
- Spikes in order volumes
- Fulfilled by Amazon (FBA)
- Their experience with ecommerce fulfillment for your specific product category and industry
- Return logistics are also important as returns are inherent to online sales
Not all 3PLs specialize in e-commerce fulfillment. If e-commerce is central to your scaling, be sure to ask any prospective 3PL if they have these capabilities and the ability to grow with you. Learn more about what to look for in an e-commerce fulfillment provider.
Manufacturers have their own unique logistics challenges, often revolving around reducing labor, shortening lead times, and gaining efficiencies in the supply chain. A 3PL offering manufacturing support logistics can help optimize labor and inventory in many ways. For example, Just-in-Time (JIT) delivery synchronizes the delivery of parts with production. Completing assembly work and storing products off-site until they are needed can make a huge difference in the warehouse space and labor required, ultimately reducing costs for the manufacturer.
At ODW, our manufacturing support starts with coordinating inbound delivery through a vendor-managed inventory system. We then perform any unique product identifications, sequencing, and quality assurance at our facility and bring you real-time visibility throughout the entire inventory process before coordinating JIT delivery. Visibility is especially important so you can keep track of parts and the entire production process. We also manage line delivery and final transportation of products. Learn more about our manufacturing support logistics services. Many of our manufacturing clients are global companies with serious scale and robust operations at our facilities.
Scaling only goes so far with manual labor. Given the technology available today, many businesses rely on warehouse automation to support and drive growth. This can include any combination of software, hardware, and machinery. For instance, at one of our Columbus, Ohio, distribution centers, nine “Chuck” mobile robots navigate the aisles helping our employees fulfill orders more efficiently. While a container is fully loaded by an employee, a Chuck robot is waiting nearby to complete the task. Watch. This is just one example that barely scrapes the surface of what’s possible with warehouse automation.
The benefits of warehouse automation are numerous, including efficiency, cost savings, accuracy, customer satisfaction, employee satisfaction, safety, and scalability. However, automation is more of a system than a single solution, meaning no single technology or step in the process can be considered in a vacuum. Furthermore, few businesses can realistically invest in the automated infrastructure that 3PLs invest in to serve their clients. Contract logistics with a 3PL give you the best access to this technology, at the best price, for the best benefits to your business. Read our essential guide to warehouse automation.
There are general principles for scaling a business, but there’s no one-size-fits-all approach. By establishing a long-term relationship and tapping into contract logistics with a 3PL, you’ll be able to explain your needs and know they’ll be met with creative solutions. Even before jumping into contract logistics, supply chain design can help you reimagine your supply chain.
Effective supply chain design entails location selection and a transportation network analysis to set your business up for success. Then, we design an entire distribution center to fuel your growth through efficiency and optimization. Warehouse layout and design, order-to-delivery process, and automated technology can all be customized to get more of your product in and out the door faster, while you focus on running your business rather than managing the logistics.
As part of contract logistics in a shared or dedicated warehousing agreement, your 3PL will likely offer value-added services that you should note and take advantage of. This is yet another way to reduce costs and labor for your business. At ODW, our value-added services include pre-kitting, assembly, sequencing, custom labeling, inserts, mailers, customized gift boxes, and more.
From packaging design solutions to parcel shipping and omnichannel fulfillment, we work to support your growth in every way possible. Learn more about our contract logistics and request a quote today.