What’s The Deal With Outsourced Warehousing?

Written by Chloe Harwood

Entrepreneurs are always looking for the “next big thing” to invest their time, energy, and money in. There is no denying that the Internet has helped paved the way for many new profitable business niches, ranging from digital agencies through to virtual assistants! Savvy startups know they have to keep their costs down to maximize their profit potential.

When you start a business that sells physical products, you need somewhere to keep your stock. While it’s possible to go for the drop shipping way of doing things, some entrepreneurs prefer to have total control over their order and dispatch processes. With that in mind, it makes sense for them to keep their operations in-house and maintain a warehouse with plenty of stock available for consumers and retailers to buy.

Of course, the only downside to that approach is that leasing an office building with a large warehouse can cost an absolute fortune to a cash-strapped startup! So, what’s the alternative? Store your products in a shed at the end of your garden? Convert a room in your house into a stockroom? Let’s face it; neither of those ideas is particularly attractive or practical for various reasons!

One solution that gets hailed as the answer to many startup (and even established) business’ prayers is to opt for outsourced warehousing. If you’re still looking for the next big investment idea, you’ve just found it! Outsourcing logistics services to other businesses is fast proving to be a lucrative concept. So, what’s the demand for such an offering, and how easy is it to invest in the idea of outsourced warehousing? Keep reading to find out more!

The business case for outsourced warehousing

Analysts have predicted that, by 2019, the storage and warehousing market will grow by an astonishing 8.52%! They put down the increased demand to the need for outsourced warehouse storage and services.

The reason for such high market growth is because companies, sole traders, and other organizations need cost-effective fulfillment services. Many enterprises cannot afford to lease a warehouse building, employee plenty of operatives, and manage it within a tight budget.

Outsourced warehousing is attractive to that group of people in the business community because it represents excellent value for money. Compared to the cost of having their own warehouse, outsourcing that aspect of their business offers them a huge cost saving.

So, aside from the financial aspect, why do businesses use outsourced warehouse facilities and services? Here are some of the prime reasons:

  • They operate home-based businesses;
  • They need purpose-built facilities to store and dispatch perishable goods;
  • They want to run a lean operation and outsource as much as possible.

People from all walks of life use outsourced warehousing. From individuals that sell on eBay to international corporations, there is a broad customer base.

Identifying demand in your area

Now that you know there is a market for outsourced warehousing and the reasons why individuals and businesses use them, you might be asking yourself whether the investment is worth it for you. Well, if you’re located near several commercial and industrial businesses, the chances are high that some of them will use your services.

Don’t forget that many of your customers will probably never meet you; it’s likely you’ll get a lot of clients online that don’t need to discuss or inspect your facilities. If you provide enough information on your website about your outsourced warehousing, that will be compelling enough for them to pay you to store and send products out to their customers.

As with any new business idea, it makes sense to do plenty of market research first. The last thing you want to do is set up an outsourced warehouse only to find the market in your town or region is overly saturated! It pays to find out where people are most likely to use you.

Choosing the right premises

As you can imagine, it’s important that you’ve got large enough premises to allow you to work with a plethora of clients. You’ll need to have separate and secure holding areas for each customer’s stock, and a dedicated dispatch area complete with a loading bay for delivery trucks.

Believe it or not, the hardest part of setting up an outsourced warehousing business isn’t getting the customers or fitting it out with galvanized pallet racks, conveyors, and computer systems. It’s more to do with locating a suitable storage facility! In many cases, providers decide to have their facilities purpose-built rather than selecting an already-built center.

Designing and building a warehouse can often be cost-effective to startups, as strange as that might sound!

Aside from the type of building you buy, lease, or build, it pays to have premises that are accessible to most major road networks. Don’t forget that most of your “visitors” will be semi-trucks, and so it can be a bad idea if your location is hard to find or isn’t central to your region.

Pricing up the machinery and equipment you will need

Apart from storing products for your clients, you will also need machinery and materials to help you package them up and send them out to their customers. As mentioned earlier, things like pallet racks and conveyors are a couple of examples your outsourced warehouse will need. But, there are other considerations to make as well.

For instance, you need to have a purpose-built office (perhaps on a mezzanine floor) to house your admin staff. The office will also serve as an area for your warehouse team to congregate during each shift, and it provides everyone with a place to relax during break times.

Other things you will need for your outsourced warehouse include:

  • Forklift trucks;
  • Pallets;
  • Cardboard boxes and packaging tape;
  • Box filling material (i.e. loose fill or bubble wrap);
  • Office furniture;
  • Fire and safety equipment such as extinguishers and alarm systems;
  • Vending machines for your employees.

As you can see, there is quite a lot to consider (and buy). Still, the fruits of your labor will be the fact that you’ll have a profitable business and one that is always in demand.

So, when will you make the move to set up an outsourced warehouse in your area?

About the author

Chloe Harwood