If you’re opening a business, reliable inventory management is an essential skillset you’ll need. From purchasing to warehousing, inventory is necessary at every step of production, packaging, and distribution. However, you don’t necessarily have to become an inventory expert. You can simply hire people to manage your inventory for you. For small and medium-sized business owners, outsourcing inventory to a third-party company is a smart move. Why? Well, the obvious answer is efficiency. As a business owner, you have many things to worry about. It’s simply more efficient to delegate inventory, which is very tedious and lengthy, to a professional.
So, is third-party inventory management worth it? It may reduce costs, but to what extent? Let’s find out.
How Does Third-Party Inventory Management Work?
First, it’s essential to understand how third-party inventory management is different from first-hand management.
Production
Inventory is essential in every stage of business operation. Businesses need to track all of their raw materials before, during, and after the manufacturing process. For those who outsource inventory management, another company will take charge of this process, ensuring that stock (raw materials/products) is controlled. Inventory management companies specialize in stock management, so they will ensure there is enough stock in place to fulfill orders.
If any raw materials are falling short, the third party logistics company will order more. Moreover, they’ll ensure stock is kept in good condition. Such measures are essential, especially in the production stage. Otherwise, serious quality control issues may arise, so the use of 3PL companies can not only help with inventory management but reduce spoilage, shrinkage to reduce loss and keep costs down.
Distribution and Shipping
When it comes to the post-production stage, the inventory team will ensure products are safely packed and stored. It is the 3PL company’s job to ensure there is enough storage space. Once products are ready for shipping, they’ll make sure all the outbound trucks are loaded with the proper amount of stock and sent out for distribution. Further, the 3PL will also aid with final product quality reviews and keep things moving quickly, especially when combining with other deliveries in cross docking, to ensure prompt shipping times.
If you don’t know, cross docking is when products aren’t stored for long periods. Rather, they’re sent to the distributor almost immediately after production.
Reports
Finally, a third-party inventory company will also create inventory reports for you. They’ll detail whether there were cases of over or understocking. Moreover, an analysis of inefficiencies in the production process such as manpower wastage and warehousing issues is also their responsibility. These reports will help your business in making future operational decisions.
How Does Third-Party Inventory Management Reduce Costs?
Now that you have a solid grasp of what a third-party inventory team can do. 3PL firms make things with your inventory run more efficiently. But, how does all this reduce costs? Well, it does so in the following ways:
Improves Order Fulfillment
When stock is running smoothly, the manufacturing and distributing process will also run smoothly. Therefore, businesses who use 3PL in manufacturing are more able to utilize just in time for order distribution. Order fulfillment delays can increase costs in shipping, warehousing, and labor. Moreover, customers may ask for a refund when orders aren’t shipped efficiently, so the use of a third party vendor that manages everything smoothly can significantly reduce planned and unforeseen costs.
Requires Fewer Resources
One of the best parts about outsourcing inventory is that there are less strain on a company’s resources. Businesses don’t have to place manpower on such a lengthy process and can focus their efforts on what they do best. By hiring a third-party, these businesses are freeing up management resources and administrative costs.
Hiring the 3PL also alleviates the need to oversee day-to-day operations, devise business and marketing strategies, and manage budgets for warehouse and delivery staff. Shifting the operational and managerial responsibilities frees up both time and money resources for businesses who can then shift their focus to other parts of their business.
Saves Warehousing Costs
Another essential cost reduction factor is warehousing. Most inventory management teams have proper storage facilities for their clients. If not, they’ll have professional know-how of different storage facilities. Therefore, they’ll make sure their clients are not wasting any money on extra storage. Moreover, the third-party will also prevent businesses from using their production area as storage. This measure will help improve efficiency.
Conclusion
To conclude, hiring third-party inventory services is a sound investment. Mastin and Cain hopes after reading this article, that businesses will not only see the value in hiring a 3PL company to help with your warehousing and inventory needs, but further they will contact us to have a serious conversation about how we can help with your specific needs moving forward.
