How to estimate the real cost – or savings- of outsourced warehousing
More small to medium sized enterprises are switching to outsourced warehousing and fulfillment providers every year, but how can you tell if 
it is worth making the switch? Like any business decision, you make a case for a change by comparing costs and benefits.
The difficulty comes when smaller businesses fail to include many hidden costs of doing their own warehousing and fulfillment, or fail to consider some of the services now offered by service providers. Some of the key factors follow, but you know that every business is different, and every situation is unique. Make sure you think out everything that might change when outsourcing any of your functions, and make sure to talk with potential providers in depth – they might be able to do a lot more for you than you think.
- Use a wide net when considering what in house costs can be eliminated by outsourcing. You might be able to lease or rent a smaller office or site. You’ll eliminate salaries, but also benefits, insurance, electric power and heating/cooling costs, and materials.
- Look for hidden costs, like shipping consumables, depreciation of machinery, software purchases and maintenance, even ink for the postage meter. These costs can amount to thousands of pounds a year, but you might not even be tracking them as part of the process.
- You’ll be off the hook for the management time and support services, especially customer service and disputes, which you would normally dedicate to the process. Include the value of applying more of your own time to your core business functions.
- Consult with any potential providers in detail. They can give you an excellent estimate of what will change based on their experience with similar clients.
- Remember to include the benefits of paying the provider on monthly invoice basis rather than paying expenses as they arise.
- Give outsourcing another look after calculating these factors, and the whole outlook may change.