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If your company is considering looking into a company to provide supply chain management, it is important to first understand how your company can benefit from third party supply chain management.
If you are currently paying people to work in a warehouse and maintain and operate a fleet of trucks to ship products, you want to evaluate the cost of outsourcing those functions before you make a final decision.
Does that mean you should not consider outsourcing those functions? The key point is to ascertain you are making the decision that is financially feasible for your company.
In most cases you will save money if you outsource your warehouse and shipping functions to a supply chain management company, but you want to determine what the cost savings will be on paper before you make any decisions.
Won’t you be putting people out of work if you outsource warehouse functions? This is perhaps something you hesitate to do, but you need to look at the cost savings to your company and how the decision will affect its profits. The other thing you want to review is which functions you want to outsource. Do you just need storage space for overstock or are you looking for someone to also bill your customers and accept payments as well?
All of these considerations will affect how much you will need to pay for fulfillment outsourcing and how much of a cost savings it will incur. The more functions you outsource to the supply chain management team, the higher the cost will be there. At the same time if you will be able to eliminate the lease on a warehouse, a fleet of trucks and the accompanying employees, you will cover those costs immediately.
What about retail chains that don’t have to worry about production? How can outsourcing supply chain management be beneficial to them? One thing retail outlets can do is contract with a supply chain management company to store their excess inventory. This will save the cost of having to rent a warehouse or having only minimal stock on hand because they lack the storage space.
Retail chains that receive orders from a central warehouse location are perfect candidates for supply chain management–they do not usually have local warehouses and are therefore forced to overstock their sales floors due to lack of space. This is especially problematic during the beginning of a season when they may have to wait to put products on the sales floor.