Warehousing And The Benefits Of Warehousing

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Warehousing is an integral part of logistics providing the buffer between the production and consumption rate of flow (Jr., 2014, p. 173). Owning a warehouse is a costly capital investment as well as adding the on-going expenses of maintenance and staffing and being inflexible to changing environment. To avoid the capital investment and to increase the flexibility, a firm may look for different warehousing options such as contract warehousing known as 3rd Party Logistics (3PL) providers. 3PL may be favorable to some organizations as it reduces the negative effects of owning the warehouse while highlighting the benefits of public warehouse (Jr., 2014, p. 177). Such company as Ford reaped a great benefit through its collaboration with 3PL as its 3PL provider was able to bring 15% reduction in its inventory by streamlining its logistics network and purchasing practice (Blanchard, 2015). If hiring 3PL will answer all logistics issues, it would be no-brainer to all …show more content…

3PL comes with industry best practice in all logistical functions including shipping. Because they specialize in logistics, they are the experts in logistics who are focused in logistics as their core-competency (Jr., 2014, p. 177). Because they are the experts in storing and moving the inventory, having a single source of logistical partner can often bring cost savings. Mike Wagner, while working for UPS, offered his customer what he felt a great rate only to find out that his client’s 3PL offered better rate than what could offer as a sales person of freight company (Right on Target, 2016). Such is the power of 3PL. Because they specialize in moving inventory, they have purchasing synergies in procuring a cheaper transportation. Rather than dealing with multiple partners and losing the focus of the own core competency, by hiring a right 3PL provider, a firm can focus on its own core competency and leave the logistics to the professionals who deal with it every

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