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Supply chain management has become more popular within the last decade. More companies are choosing to forego having their own warehouses and hiring logistical companies that not only handle their supply chain management functions, but they also store and ship the products to their client’s customers.
This saves the company money not only in warehousing costs but also shipping. They no longer need to have storage facilities or operate a fleet of trucks–they can put that in the hands of the company they hire to handle their supply chain management functions.
Is it really cost beneficial to pay some else to handle your supply chain management functions? If you look at it from a practical view, it may seem at first to be a frivolous expense until you add in all of the additional costs that are involved with having your own warehousing facilities.
Even if you own your own plant, you still have to pay for people to ship the products, operate the warehouse, store the material until shipping, and of course the trucks to ship the products. All of that can cost money, especially when you also add the cost of salaries, insurance, benefits, and overtime as necessary. When you can push that onto a fulfillment company who can handle all of the supply chain management, you can actually save a great deal of money.
How can supply chain management save money when you still need somewhere to produce your products? While this is very true, it also means the company will not need as large a facility if they are not handling their own supply chain management functions. It is also important to understand that the supply chain management company will also handle billing and collection of payments, so there is a limited need for accounting personnel. They may still need people to handle payroll and make payments to vendors if they have not contracted that service with the supply chain management company, but there will be little need for accounts receivable services.
How many functions the fulfillment services company does for each client is an individual one. While some companies may only want the storage and shipping services, other companies may want a bigger package up to and including the pick up of finished goods and storage in a warehouse until they are ready for shipment. The logistical handling of these storage and shipping functions is becoming more attractive as companies strive to cut costs in both payroll and overhead.