Tips for Selecting an Outsourced Warehousing and Distribution Partner Based on Location

Many growing small businesses seek out third party warehousing and distribution partners. It makes sense to do so because unless your core business is warehousing, you should probably look at leaving this task to the experts (much like you might outsource bookkeeping or marketing). But how do you make the best decision from a location perspective.

The best way to make the right decision is to make both operational and customer-centric considerations.

Should the Warehouse be Close to Our Office?

Not necessarily. If the job of the warehouse is to receive inventory, store it and ship it for order fulfillment, then consider why office staff should ever really need to visit the warehouse. Of course, you will require visits for auditing and maintaining a relationship with the vendor and those handling your products, but these should be infrequent (otherwise you may have partnered with the wrong outsourced warehouse.) The truth is, 99% of administrative directive can happen remotely and remote communication is highly efficient.

Does the warehouse have to be close to highways and airports?

It depends on where your product is going. Being close (or just off) of major highways is always advantageous for getting your shipments on the road quickly. If you’re never or infrequently ship by air then there is no need to be close to an airport. If you are, this may be an important consideration if economic value can be realized.

Should I seek out prime urban location or does it matter?

Ask yourself why this matters. For example, do you really want to pay for warehousing in an expensive downtown Toronto or New York City area where you know operating costs will be high? Often, the most efficient warehouse spaces have great proximity to highways but are away from urban centres and in same-day courier industrial areas. Depends on volume and frequency of freight coming in and out, sometimes the increased costs of real estate can even outweigh their potential benefits.

We fulfill orders by courier and often ship direct to customers. How does that affect our decision?

This is important as couriers operate using zones across the country (Canada and the US). If a larger percentage of your orders go to one particular zone then it may make sense to locate within that zone. Often, sales of products are tied to where the population is. If 70% of your sales are made in Southern Ontario, Canada for example (or likewise in the Northeast United States) thenΒ fast courier deliverΒ there may be huge aggregate savings that can be achieved over time by locating in specific locations within these high value zones. Of course, you’re not going to locate your third party warehouse in Florida just because they have the lowest warehousing rates since you’ll be incurring higher incremental costs for shipping the highest percentage of orders to the New York or Toronto area, in this example.

Regardless of the location, if you are going to outsource warehousing and fulfillment services to a third party, there are two additional key considerations.

  1. Like the people. If you’re comfortable you’re dealing with a trusted partner who has a genuine interest in your business then they’re serious about your success – and theirs.
  2. Look for Value Added Services. This is broad and the services you need may be unique. Some partners may actually allow you to leverage their volume earned discounts with couriers. Also, many operate their own transportation brokerage which means they can source the best deals for freight forwarding.

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