Manage Costs in a Third Party Warehouse
Study from Supply Today finds a fresh approach to a growing business can save costs with third party warehousing and logistics providers.
This study focused on a fast moving consumer goods importer that had been experiencing major volume growth with its third party warehousing provider and was receiving cost impacts above expectations.
The company was not alone. A successful business importing goods from overseas and selling into the sports market nationally was experiencing cost increases with their third party warehouse provider. This was due to the increases in volumes and storage space required to support the business growth, however to obtain the best possible cost at time of purchase larger quantities were required. Service levels were very good from the service provider and the relationship with the warehouse was very good.
The real life situation with growth and outsourcing had both sides of the relationship working hard at the same time, making for difficult emotive conversations, said John Hogg, Managing Director of Supply Today. But there was a problem needing to be solved and issues work through.
In the case study, Supply Today detailed problems as reported by the client:
Pallet spaces had increased from 300 to 1000.
Picking costs had increased by 12%.
Transport costs had increase by 14%.
However, the third party warehouse was providing increased services, space and effort to meet the new demands.
Over a few weeks period, Supply Today reviewed and reconciled all data with the warehouse provider as to what was driving the costs. An analysis revealed that most of the costs arose from poor packaging and the unusual shape of the items. For instance, the warehouse found it was only possible to store 8 units on a pallet within the warehouse in a standard rack.