In a Bad Economy – Outsource!!!!! You Get What You Pay For

By August 13, 2009 Distribution, Fulfillment

Many of TAGG’s clients are first-timers, meaning their decision to use a third party logistics (3PL) company was the first time they decided to outsource fulfillment and distribution.  We hear all kinds of reasons why a client decides to outsource – they don’t have iStock_000004142069XSmall[1]the right technology to manage inventory; they don’t have the right equipment or personnel to operate a warehouse; or they don’t want to invest in the infrastructure to set up a proper supply chain.  We also hear clients tell us that warehousing and distribution is not an area of strength and serves as a distraction from core competencies that lead to growth.  We love that reason and couldn’t agree more!

With the difficult economy, more and more of the outsourcing decisions have centered on decreasing overhead.  At its simplest, outsourcing to a 3PL is trading fixed costs for variable costs.  If your sales have decreased, you may have warehouse square footage, forklifts and personnel that are underutilized.  These costs are fixed overhead that you have to pay for if you use them or not.  When you outsource fulfillment, you only pay for what you use.  You pay for how much you receive from suppliers, you pay for the actual space you use and you pay for each order that goes out.  Think of it, if volumes are down, your bill goes down, if volumes are up your bill goes up.  You don’t have to worry about how you lease to much space when sales are down and you don’t have to worry about getting more space when sales are up.

This flexibility exists only in an outsourced situation.  You pay for what you get and you get what you pay for!  Focus on growing your business, let us worry about the warehouse.