From start-up and infrastructure costs to employee and benefit costs 3PL’s are a great way to reduce a company’s need to spend. When the storage and distribution work is done by an outside source, there is only one cost, the 3PL’s monthly bill. This greatly reduces the amount of money going out to different buckets each period.
Spending based on usage
Using a 3PL eliminates the need to spend time and money investing in warehouse space. The cost to rent a warehouse is climbing steadily each month and the demand for space is increasing as well. So, unless you own the warehouse space, you can easily see where problems can come up. Even if you do own space, there can be issues as well. You can run into having too much space, which leaves you spread too thin in your warehouse (and wastes money), or you can get into a building and quickly run out of space. This is never a problem when using a 3PL due to the option to flex the space used each month. There is also a similar effect with the employees that it takes to smoothly handle storage and distribution. There are people to handle organization, skilled workers driving forklifts, somebody to handle packaging, and another person to manage all of that. Murphy COO Paul Welna puts it very simply, saying “If you have your own space and equipment, you pay for that, no matter if it’s being used or not. If you have your own employees you pay them for every hour of every day. But, if you are using a 3PL, you only pay for what you use and ask for. If it’s a slow day you aren’t paying Murphy anything, except for the space that your product is in.”
Murphy’s CFO Tom Griep says that switching storage and distribution options to a 3PL helps companies save money in both the short term and in the long term. He says “A change in business strategy normally triples the amount of work a company has in the short term. A 3PL helps to alleviate that work by allowing you to focus on what you do best while we handle everything else.” This allows a company to grow rapidly or even shrink inventory levels during specific seasons or make any necessary changes without worrying about personnel within the supply chain. Bringing business to a 3PL is also an easier process than one would think. Seamless IT systems integration, convenient real estate options and the right equipment make moving product out of current situations to an offsite warehouse an easy and rewarding experience for most businesses. It simply lets a company change, without drastically changing their overhead costs.
A couple of our largest clients are all manufacturers within the same industry. They know that we are shipping product to the same vendors every day. Although these clients also know that they are direct competitors, they enjoy shipping discounts and consolidate truckloads every day when shipping to wholesalers. There are also partnerships between manufacturers and wholesalers that take place in our warehouse. The product can come in from multiple sources and be consolidated when the order is placed allowing us to lower the number of touches an item has on it before it reaches its final destination. We can even offer discounts at the final stage of the supply chain. Because of the sheer volume that a 3PL ships, there are discounts applied with courier and single item shipments, lowering the cost to ship direct to consumers.
Programs in Place
Gaining industry certifications and implementing best business practices into a supply chain can be a large task for a company, especially if they do not have much experience with audit processes or do not know which certifications they will need. A 3PL will already have essential programs that every company needs in place before you come in the door. Our owned Murphy Warehouses are all ISO 9001, ISO 14001 and food grade certified, which allows us to handle products of all kinds. Murphy also is a large player in sustainable supply chain solutions. We have LEED and Energy Star certified buildings and transportation solutions which fit well with any business practices that may be of need. Those programs are not just handed to a 3PL because of the nature of our business. We go through comprehensive audits each year at our campuses to achieve this status. This means your product will be safe, and handled correctly no matter what it is. We can even customize security measures based on the client’s needs and value of the product.
Thanks for reading, be sure to check back every week to learn more about our growing industry and company! Next week we will recap all of our main benefits of using a 3PL, and wrap up this series!