The growth of a company can be exciting as it will have more customers and generate more profits, leading to higher revenue for the company. However, this growth will mean processing more transactions in the supply chain, which can be more work. 3PLs can be incredibly important for businesses success, and it is crucial to know when your business needs to partner with one.
Whenever businesses experience growth, they should be able to manage this success. This means they will have to focus on the infrastructure supporting the expansion, which some enterprises find challenging. Regarding logistics companies, this can entail hiring more employees, adding more inventory and streamlining order fulfilment. Though businesses might know what is required of them, they might fail to realise that they cannot manage their logistics independently. We will focus on some signs indicating that you need to consider outsourcing logistics.
1. Higher costs
It is common for businesses to suddenly experience an unexpected surge in sales growth or seasonal volume swings. This growth might be exciting for the company; however, your logistics network may begin to struggle to keep up with the sudden rising demands. When you start to see an increase in costs, this indicates that you should consider outsourcing logistics to a 3PL.
In most instances, whenever businesses begin to see rapid business growth, they might struggle to realise the impact that an increase in order demands will have on their existing distribution network and supply chain. This may lead to desperate attempts to ensure that the business can run smoothly and may cause them to rush into hiring new warehousing staff, procuring more warehouse space and purchasing specialised equipment. Instead, these hasty decisions will increase costs, which will negatively impact the company’s bottom line.
Using a 3PL provider will benefit the business as you can outsource your warehousing activities and utilise their standardised and flexible systems to expand capacity and meet your growing company’s needs. 3PLs also assist with growing your business’ logistics solution in a scalable manner.
2. A rise in customer complaints
Another indicator that you are failing to handle your warehousing internally is an increase in customer complaints. When companies see an increase in sales volume, it will likely lead to customer dissatisfaction. Whenever the number of customer orders exceeds the company’s ability to meet them, it will lead to mistakes and accidents. To resolve this issue, businesses must consider whether they can fulfil the increased product orders. This can either occur internally, when the company hires new staff, acquires more storage or purchases more equipment, or by outsourcing warehousing and shipping operations to a 3PL provider.
Using a 3PL service provider will give the business access to their experienced and trained warehousing staff. 3PL providers also enable you to effectively improve operation efficiency and order status visibility.
3. Poor inventory management
If the cost of carrying inventory in your warehouse surpasses the costs you pay for the space, you might need to consider enlisting the help of a 3PL provider. In most instances, poor inventory visibility will contribute to companies having more safety stock. The more safety stock you have, the more likely you will run into warehouse capacity, which will increase expenses. When outsourcing inventory management to a 3PL provider, ensure that you tap into their warehouse management software and industry best practices. The WMS enables you to track orders, collect payments, monitor inventory stocks and gain feedback from customers.
These service providers also have the tools to predict order demands which will help optimise inventory levels. You can also utilise its existing distribution network to position your inventory close to suppliers and your target market, reducing transportation costs.
4. Overwhelmed staff
As your company expands into new markets or offers new products, you will realise that your staff will find it challenging to match the business’s growth pace. Staff may feel overwhelmed for numerous reasons, such as increasing product demands, which might make it challenging to process orders on time. Searching for new staff, interviewing the potential candidates and then having to train the new employees while you are already in a busy period can be difficult. The management department may already be overwhelmed trying to focus on ensuring operations are running smoothly instead of worrying about warehouse staffing. By outsourcing your warehousing operations to a 3PL provider, you will always have the appropriate staff levels to meet demand.
5. Business growth
A business looking to expand to new markets or offer new products to their customers might find it challenging to transition as it might be difficult to execute. Whether you are looking to expand your current storage space to enhance inventory capacity or you want to relocate to a new production facility to gain market reach, you will need to be mindful of certain factors. For example, if you aim to target a new market, you first need to grow your existing distribution network and establish a supply chain. This will include hiring new staff, identifying transportation hubs, and assigning additional tasks to the current team.
With the assistance of a 3PL provider, you can smoothly transition from where you are to where you want to be. You can also tap into the order fulfilment provider’s inventory management and delivery network expertise to scale your business.
Conclusion
Choosing to outsource your operations to a 3PL provider means that you will have to conduct some research first. Through analysis, you can identify your business’s pain points and choose a provider who will meet expectations.