Companies have two options when it comes to getting their products to customers, to do it themselves or outsource to a Contract Packing company.
Running your own warehouse operation is attractive, especially in the start-up phase of a business, when keeping costs down is key. But there will come a time in any business’ success to look at improving the pick and pack operation and to look at the benefits versus the costs of keeping this operation in-house.
Understanding all of your costs
When it comes to working out the real costs of your in-house warehousing and order processing, there are a number of costs that are often hidden or overlooked. These costs need to be taken into account in order to get an accurate picture of how much your operation is really costing your business.
- Buying a warehouse requires a large initial investment and the money needed for both a payment on the property and the cost of equipment may better suit being spent elsewhere. Taxes, insurance and maintenance bills are likely to increase from year to year. As a result, leasing may initially appear more appealing. However, commercial leases are generally subject to annual rent increases, as well as increased costs whenever the lease is renewed. You have much less control over the decisions of the property owner and may be subject to rate increases or relocation if a renewal is not an option. And obviously, if and when your business finds itself expanding faster than projected, it’s going to be far more difficult to modify the current facility to meet your needs and may require a costly relocation instead.
- Storage/ warehouse space may be taking up valuable floor space that could be given over to production, or you could be paying to lease space to store product prior to dispatch.
- Running an efficient order fulfilment operation requires specialist machinery, such as forklift trucks and warehouse storage systems, this is expensive to buy or hire as well as to maintain and update.
- The amount and type of packaging will depend on the nature of the product being shipped but at the very least will likely include boxes, tape, void fill and labels, plus labelling equipment.
- There is a multitude of costs associated with your workforce, including recruitment, initial and ongoing training, salary and benefits, holiday and sick pay, and management.
- Administration costs include order processing and shipping, plus the all-important inventory management.
- Manufactured goods ready and waiting to go out to customers are valuable and premises holding a lot of stock need a higher level of round-the-clock security.
How to control your costs
Working with an expert and experienced Contract Packing company removes potentially all of these costs from your business and offers many other benefits besides.
To find out more about our third-party logistics and outsourced order fulfilment, please contact sarah.johnson@cannonpacking.co.uk
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