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Posts Tagged ‘third party fulfillment’

The Cost Driven Reasons Publishers Outsource…

Over the last couple months I have been discussing the important reasons why publishers, large and small, choose to outsource their warehousing and order fulfillment services. There are a number of benefits that publishers see when they choose a third party vendor such as Ware-Pak to handle their outsourcing. You can read about these benefits in the following blog entries:

  1. Organizationally Driven Reasons
  2. Improvement Driven Reasons
  3. Financially Driven Reasons
  4. Revenue Driven Reasons

I have two topics left to discuss, the first being the Cost Driven Reasons for publishers of any size to outsource their fulfillment to a third party vendor.

When publishers outsource, they experience the ability to reduce costs due to a superior provider’s performance and the provider’s lower cost structure. Typically, a publisher who performs their own warehousing function is paying a premium of 20% to 30% for this service. This does not even take into account the savings that a third party warehouse can achieve by combining the shipping activity of 50 or 100 different publishers in order to reduce overall shipping charges.

Turn Fixed Costs Into Variable Costs
One of the most difficult areas in business is the change fixed costs into variable costs.

For example:

If you own your own warehouse, and orders for the day are down, can your labor costs be reduced? Probably not. You cannot simply tell your employees to go home. They still expect to be paid for 40 hours each week. In this case, what typically happens, is that someone will find some type of make shift work for them to do. The employee stays busy, but the cost per order just increased.

If you reduce inventory levels will your rent go down? No, it is also a fixed cost. Your employees will not manage the inventory as aggressively as they should because there are no real benefits to the organization.

Stay tuned – the final entry of this series will discuss Employee Driven Reasons. The combination of these “Why Outsource” blog entries will be available as a white paper shortly. If you have additional questions, or are interested in receiving this white paper, please feel free to contact me directly. I can be reached at (708) 587-4116 or kshay@ware-pak.com

Publishers: Why Outsource?

In a previous entry you may have read about the organizational reasons that publishers, both large and small, choose to outsource order fulfillment services.

By focusing on what they do best, a publishing house – regardless of its size – can enhance the overall effectiveness of their organization. Allowing an expert, such as Ware-Pak, to handle order fulfillment, the organization can benefit from increased customer service offerings, customer satisfaction and shareholder value.

I mentioned that I would be discussing additional reasons why publishers benefit from outsourcing fulfillment services. In today’s entry I would like to share the improvement-driven reasons for a publisher to outsource warehousing and fulfillment.

Here are the major questions to consider:

  1. As a publisher, how do you improve your operational performance?
  2. Do you have a warehousing industry viewpoint for operational expectations?
  3. Do you regularly send people for warehousing efficiency training?
  4. Is the organization more interested in developing great content or in fulfillment service excellence?

By outsourcing fulfillment services, you can obtain expertise, skills and technologies that your company does not already have. Many publishers do not have the volume of activity to recruit top talent inside the warehouse. When capital budgets are limited, it is often difficult to determine where to spend your technology dollars. You may need to sacrifice the ability to invest in a state of the art warehouse management system.

Within an organization, different divisions often compete for limited resources and management time. This can decrease the amount of time your organization has to dedicate to offering best in class warehousing services. Another challenge publishers may face due to limited resources is whether or not to hire a key executive to manage the warehouse because there is uncertainty of whether or not those salary dollars could have a higher impact on the business if they were allocated differently.

Outsourcing fulfillment services can improve risk management for the company. Part of risk management is diversification. When your warehouse facility is in a different location, you are decreasing your risk for fire and other acts of God. You are also increasing other factors, such as pools for selection of employees and access to the market.

Outsourcing can also help inspire innovative ideas. It can help you find answers to tough questions: Does your organization continually improve its warehousing function? Is your mission to be the best warehousing company available? Do your managers wake up in the middle of the night thinking about how they can improve your warehouse?

A relationship with a superior third party fulfillment service partner will improve your credibility and your image. We all want the ability to do business with successful partners. When you associate yourself with an industry leader, such as Ware-Pak, you are positioning your company as a quality business.

The combination of these “Why Outsource” blog entries will be available as a white paper shortly. If you are interested in receiving this white paper, please feel free to contact me directly. I can be reached at (708) 587-4116 or kshay@ware-pak.com.

Ware-Pak Welcomes Guest Experts to Blog

In an effort to add increased value to clients and industry colleagues, Ware-Pak will, from time-to-time, begin featuring guest bloggers. These guests are experts in their industries – including publishers and other colleagues who have helped Ware-Pak become a leader in third party fulfillment and warehousing services.

I hope you will enjoy what each guest blogger has to offer and that you will find value in their tips and discussions.

Keith Shay, President of Ware-Pak, Inc.

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