Today, the most important expectation of demand is "speed". Within supply chains, warehouses are the places where a decrease in inventory velocity is observed, directly impacting logistics costs and customer demand expectations. Although warehousing expenses account for an average of 20% of logistics costs, warehousing decisions are a crucial decision area for companies because warehouses act as a unifying-regulating element at the center of supply chains and directly affect other major logistics costs such as transportation,  inventory, and order management, which are the other logistics components.

Although warehouses are generally seen as cost centers, they are also areas that provide place-time utility for expected or unexpected customer demands and where value-added services (packaging, labeling, etc.) are offered.

Benefits provided by 3PL

By outsourcing warehousing and product-related value-added services to a third party (3PL) under a logistics service agreement for a certain period, companies generally aim to reduce logistics costs, ensure budget discipline, avoid fixed costs and prevent investment in fixed assets, benefit from the 3PL's scale and culture,  increase service quality, use resources efficiently, reach customers in a wider geographical scope,  and integrate warehousing, distribution, and value-added services.

However, outsourcing warehousing services to 3PL companies that invest in expert teams, equipment, information technology, and facilities, and that develop flexible warehousing strategies to quickly adapt to market and customer demand expectations, is not a process in which proposals are collected and then decisions are made quickly.

Noteworthy points

Selecting the most suitable warehouse operator requires a system approach perspective where many criteria are evaluated together, far beyond dropping warehousing expenses, due to the high interaction of the warehouse with suppliers, customers, and other supply chain members.

For this, first of all, the desired service level, targets, and criteria appropriate for these targets must be determined. The selection of the most suitable warehouse operator can be analytically determined through modelling techniques such as AHP and mixed-integer programming methods. If the decision-making company does not have the right workforce resources for this, support can be obtained from supply chain management consultancy firms that provide these services.

In the process of transferring warehousing services to 3PL companies, including 3PL companies that carry out R&D activities and have the flexibility suitable for space, location, and service demand changes that may occur in future periods, rather than just the needs of that specific period, can give companies a broader perspective at least during the initial meeting phase.

In order for warehousing service fees and contract clauses to be accurate, fair, and complete, it is essential that there are no gray areas. For this reason, it is important for the company to provide all data fully and accurately to the Logistics Service Provider (3PL)  during the tender process. In particular, unwritten and employee-dependent operational processes must be clearly specified. Otherwise, a long-term warehousing service contract can bring unexpected financial and operational risks.

The company must correctly define and determine key performance indicators and include their applicability and development in the contract. Involving finance, planning, legal, sales-marketing, and senior management in the bidding phase, in addition to the supply chain or logistics manager, is crucial to prevent the contract from falling through at the last minute. Conducting detailed tests regarding IT processes is vital to ensure that operational flow is not disrupted.

For companies inclined to outsource this service, what should not be forgotten is that service standards and continuous improvement must be guaranteed together with the 3PL through routine meetings and audits. For this, a business partnership philosophy should be adopted by both parties rather than a classic customer-supplier relationship. For this, the correct logistics or supply chain management department needs to be structured, employed, and invested in within the company itself.

Conclusion

In summary, in this period where inventories are becoming increasingly dynamic and customer service expectations are rising, evaluating the outsourcing of warehousing and value-added services, which are outside the core activities for companies, to expert 3PL companies will create great benefits, even if only for the analysis of the current situation.

If the warehousing needs do not require a long-term contracted service, flexible supply chain management tools such as seasonal, calendar-based, or other short-term warehousing services can be utilized.

Thanks to short-term warehousing platforms, it is possible to find opportunities to work with different 3PL companies.

Park Palet (www.parkpalet.com)  is Turkey's first online B2B warehouse platform that unites companies looking for warehouse space in the short term with warehousing companies that have excess capacity. In this way, companies can;

• Instead of fixed rent and operating costs, pay based on the scale and storage duration of the product.

• Rent the needed warehouse space for the required amount of time for seasonal or sudden inventory increases.

• When demands require, work with the warehouse operator that offers the lowest cost and/or the most suitable specifications in the required region.

• Instantly start working with numerous professional warehouse operators under the Standard Park Palet Contract.

• Achieve a reduction in overall logistics costs by using warehouses close to consumption or production.

• Develop a dynamic logistics strategy by creating numerous distribution points at different locations.