Driving business growth: outsourcing warehousing, inventory management and fulfillment services
The lifeblood of the Canadian and American economies, perhaps now more than ever, is the ability of small and medium-sized businesses to scale rapidly without huge capital investments. How are businesses that require a loan for things like warehouse space and warehouse staff financed? Have you visited your bank recently to finance a ‘big idea’? So I thought. It really seems like a game of chicken and egg, and often business owners can’t win.
Storage requirements no longer mean huge fixed costs
Good news. The question may not be “Where do I get funding?” but “Do I need financing?” or “Can I get from A to B without capital investment or taking on the risks of higher fixed costs on a multi-year basis?” It is these questions that have led to the emergence of outsourced warehouse distribution, inventory management and customer service solutions – customized for your business.
Let’s face it, micro businesses often start in someone’s garage or basement. Whether it’s selling knitted baby hats on eBay or a hot item you brought in, there comes a time when small businesses grow and need more space. Successful owner-operators often have great product knowledge and marketing flair, but are bogged down in organizing, storing and distributing products. As a business grows, these necessary steps become more than a chore, warehousing and fulfillment take time (and fun) away from doing what business leaders do best.
Contracting: Outsourced warehousing and distribution services
An outsourced warehousing, distribution and fulfillment solution can be just the ticket. By the time a commercial real estate agent can show you 10 warehouse locations for lease, you’ll likely be on your way to an outsourced decision.
Fortunately, it’s incredibly simple — and it can be cost-effective. First, find a warehousing and fulfillment company that you can trust as they will be an integral business partner. Get to know the management plus the people you will be dealing with on a daily basis. Ask all the questions you can think of to make sure it’s the right fit for your growing company. Hear the answers that exactly fit your needs and get them in writing (go beyond the sales pitch). Surprises later will strain the partnership, if not kill it outright.
Second, walk it. Consider hard costs (dollars and cents) and soft costs/benefits. Consider scalability and how an outsourced warehousing and fulfillment partner can help you grow. Compare potential warehousing and fulfillment partners apples to apples. Do they have better courier rates that you can use? Do they have a better inventory management system than your notebook? How can you automate or integrate order fulfillment processing? Get the fine print and understand your costs.
Pay as you grow: Benefit from variable inventory and fulfillment costs
Outsourcing warehousing and fulfillment is especially great for companies that experience seasonality and/or are on a high growth trajectory. Typically, with these arrangements, you pay for the space you use. As your inventory levels vary, so do your costs. The more you execute orders and earn revenue, the more you typically pay for order fulfillment and processing services (order execution cost). When sales slow down, you’re not stuck with high fixed costs. In effect, you have turned traditional fixed costs into variable costs that are in line with sales, which also stabilizes cash flow.
Time to expand your warehousing and fulfillment capabilities?
If you think you can scale supply and generate demand while running out of space and constrained by lead times, the timing may be right for you. Look to outsourced warehousing and fulfillment as a viable strategic option and get serious about smart business growth. Oh, and say goodbye to your banker and having to pay interest to service the debt!
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