A 3PL warehouse can be a great way to run your business, but if you don’t manage your inventory well, it can be costly. If you are shutting down your warehouse and moving to a 3PL structure, you have to begin thinking about obsolete inventory in a different way. In the old days, you had a fixed overhead and if you had dead stock lying around it wasn’t the end of the world. But with a 3PL warehouse you will have to sell excess inventory and sell obsolete inventory before it becomes a problem. 3PL surplus inventory quickly becomes too inefficient and costly to keep in a public warehouse.
One way to keep your 3PL inventory lean is by getting rid of any merchandise older than 6 months. If you haven’t been able to turn it over in 180 days, you can make the argument it is time to sell excess inventory and make room for new products that will move faster. .3PL surplus inventory is too expensive to hang onto if you aren’t shipping quickly enough, so you may need to liquidate more often than you used to. You can plan to sell obsolete inventory after 6 months by discounting it and offeing it to closeout buyers. Whatever loss you may take on the product will likely offset the cost of additional monthly warehouse costs.
3PL’s have become increasingly popular as more and more companies are shutting down warehouses or moving operations to smaller facilities. Even for operators shutting down companies, there is still often a need for 3PL warehouses because there is surplus inventory leftover that has not been sold. Keep in mind if you are restructuring your warehouse, it is always better to sell obsolete inventory before making any kind of move so you don’t end up taking it with you, only to store dead stock all over again.
3PL warehouses can be most effective to companies who need “flex” space. This type of warehouse agreement allows you to grow and shrink your warehouse space depending on how much you need. As an example, if you are in the process of shutting down your company, as you reduce your inventory you will require less warehouse space. A flex space agreement would allow you to only pay for what you use and this in affect keeps your costs down. Also, if you currently carry a lot of dead stock but have plans to sell excess inventory and sell obsolete inventory, once you ship all this stock you won’t need as much space. Flex warehousing will allow you to increase and decrease space as you need it.
3PL warehouses seem to work well for some companies, while not so much for others. The thing to keep in mind is storing your inventory in a 3PL warehouse can be expensive so you want to keep the inventory thinned out as much as possible.