WHen’S THE RIGHT TIME TO MANAGE YOUR OWN FACILITY?
Are you thinking about operating your own warehouse? If you’re new to exporting that’s probably not the best idea. But keep that thought in mind for future reference and circle back once you’ve grown.
Warehousing, at its most basic level, involves leasing a certain amount of square footage. But especially when it comes to exporting, it can mean so much more than that. If you’re new to exporting, for instance, do you know whether your products require special packaging or labeling? Do they need export or import licenses? Are they properly classified on import and export documentation? Are they adequately insured?
These days, warehousing companies are very much logistics companies, and these are some of the issues they can help you tackle.
“Exporters really need to make sure their products are packed correctly to arrive in good condition,” says Greg Boring, vice president of Kenco Group Inc. “They also need to be labeled and documented properly so they arrive on time and in the right place.”
Many U.S. companies run their own warehouses and distribution centers, but that might not be the best idea for newbies, suggests Rick Lee, chief operating officer at SEKO Logistics. “It’s a legitimate issue to consider in your development as an organization,” he says. “For a company new to the game, it makes good sense to look at the issue two to five years down the road.”
If you need to get up and running quickly, engaging a third-party logistics (3PL) provider can help make things go faster. The rule of thumb, according to Lee, is that you need 18 months of lead time to get a warehouse in working shape, if you’re going it alone. “A 3PL strategy can compress that timeline,” he adds.
A 3PL strategy can also save you from having to invest in your own facility and staff it from scratch. “Then, as your export business grows and you learn more about the various complexities of transporting goods overseas, you can decide what skills and resources you want to outsource, and what makes sense to bring in-house,” says Bill Fraine, executive vice president and chief operating officer of XPO Logistics Supply Chain.
Engaging a 3PL also provides companies the flexibility to scale up and scale down based on their current needs, notes Lee.
What’s the first step toward occupying warehouse space? If you don’t have the in-house expertise, you’ll need to engage a consultant, such as a 3PL, to advise you. It’s also a good idea to talk to your freight forwarder.
“Many forwarders provide one-stop shops and run warehouses themselves,” says Boring. “They provide product pick-ups for delivery to their facilities and provide the documentation, booking and insurance required to get products from the dock in the United States to the destination location.”
“A 3PL can secure warehouse space on your behalf, and assign a team that will manage the warehousing and export processes for you,” says Fraine.
When going through the search process, it’s important to provide the warehousing companies with accurate information about the services that you’ll need. That’s where consultants can play an important advisory roll.
“Without accurate information, it’s difficult for the warehousing company to supply a proper quote,” says Boring. “Consultants can get a flavor for the best providers and sites to visit. This is critical for both sides and it all depends on what you’re trying to accomplish and what kind of operation the warehousing provider is running. Those meetings are a great opportunity to ask about their current customers and their commitment to invest in innovation.”
It’s also a good idea to ask about whether the company is looking to be acquired. There’s been a serious level of consolidation in the industry in recent years, and you want to make sure the company you engage is the same company you’re dealing with down the road. Shippers should examine four or five companies before settling on a service provider, Lee advises.
Innovative service providers offer both warehousing and export transportation management, notes Fraine. “Even the most experienced export shippers can benefit from forging this kind of relationship,” he says. Multi-faceted 3PLs “have a broad suite of capabilities to support exporters” and “can draw on established relationships with carriers, customs brokers and other service providers to design and implement solutions that best fit the exporter’s objectives.”
Warehousing providers can also bring innovative technology solutions to bear for the benefit of their customers. “An outsourcing provider can add a lot of value to a company’s ERP processes,” says Lee, “including demand planning and forecasting that some companies don’t run in their own enterprise systems.”
It’s also important to observe and understand warehousing industry trends when planning for your future needs. Not too long ago, warehousing space was plentiful and inexpensive. That’s no longer the case. The e-commerce boom has seen retailers absorb a great deal of the excess space and developers are now building in response to demand rather than speculation. That has led to a tightening in the supply of warehousing space, a trend that will be important to follow as your business grows.
“There was a significant amount of absorption of existing warehousing space in 2016,” says Boring. “It’s been the greatest velocity we’ve seen in decades. Vacancy rates are falling.”
That means that shippers may find it difficult to find the warehousing space they need where they need it. While it probably doesn’t make sense for new exporters, you may have to consider building warehousing space for yourself or having it built for you somewhere down the road. That, says Boring, can be a 24-month process—much longer than if you’re just looking at available space.
If current industry trends continue, that’s an issue your company may have to face a few short years from now. And if you do decide to build out warehousing space, you then have to confront the next question: Do you run it yourself or to do you have a 3PL do it for you?
WHAT NEW LOGISTICS TECHNOLOGY ARE YOU HOPING BECOMES AN AFFORDABLE EVERYDAY REALITY IN 15 YEARS?
20% | Drone delivery
40% | Self-driving trucks
16.8% | Hyperloop
36.8% | Industrial 3D printing
LEARN FROM THE PROS…
WHAT ARE THE MOST OVERLOOKED FACTORS WHEN CHOOSING A PORT?
“Congestion, labor issues and access to rail.” – Allan J. Miner, President, CT Logistics
HOW CAN A SHIPPER IDENTIFY WHETHER ITS 3PL HAS THE PROPER THOUGHT LEADERSHIP TO MODERNIZE ITSELF IN REAL TIME?
“Identify a 3PL whose leadership has already embraced technological advancements such as cloud-based applications that focus on end-to-end supply chain visibility and speed to market. 3PLs should ensure applications are scalable to seamlessly support growing and changing business needs.”
– Derek J. Leathers, President and CEO, Werner Enterprises
HOW WILL AMERICA NEED TO UPDATE ITS INFRASTRUCTURE TO REMAIN COMPETITIVE IN THE NEXT 15 YEARS?
“Better rail system from port. Freeway lanes specific for trucks.” – Scott Weiss, VP of Business Development, Port Logistics Group
The Warehouse of the Future: An Interactive Infographic