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VMI is a highly orchestrated process that can drastically reduce the inventory carrying costs of a manufacturer, and is one that 3PL providers rely on public warehouses to attain.
The cost benefits of reverse logistics also contribute to the cost efficiencies of public warehouses (Berglund, Laarhoven, Sharman, Wandel, 1999). Reverse logistics is a supply chain process that seeks to capture packaging, recyclable components, and potentially toxic materials in products so they can be safely disposed of (Dowlatshahi, 2010). This is extremely expensive for manufacturers to do on their own, and given the compliance regulations globally surrounding electronic goods in particular, 3PL providers and public warehouse are seeing much interest in this specific service (Dowlatshahi, 2010).
Cost Reduction and Service Bundling: The New Strategy of Public Warehouses
Historically public warehouses have relied on their variable cost business model, located in regions of the world that are distribution hubs, in addition to available space to define aggressive pricing to get manufacturers to lease their space. As price competition has eroded this as a primary strategy, 3PL services providers who own public warehouses have begun to bundle in services to increase sales and profits (Jayaram, Tan, 2010). This has also forced 3PL providers to continually improve their training and not just concentrate on pick, pack and ship skill sets but also concentrate on the use of enterprise...
The ability of manufacturers to off-load the costs of labor hours and insurance has long been an advantage of this strategy (Murphy, Poist, 1992) and now the demands for advanced skill sets dominates the 3PL industry. .
Conclusion
Public warehouses provide market agility and flexibility to manufacturers seeking to gain time-to-market and cost savings throughout their supply chains. Public warehouses are going to expand their level of services delivered to protect their profits and gain customer loyalty over the long-term.
References
Magnus Berglund, Peter van Laarhoven, Graham Sharman, & Sten Wandel. (1999). Third-party logistics: Is there a future? International Journal of Logistics Management, 10(1), 59-70.
Dowlatshahi, S.. (2010). The role of transportation in the design and implementation of reverse logistics systems. International Journal of Production Research, 48(14), 4199.
Jayaram, J., & Tan, K.. (2010). Supply chain integration with third-party logistics providers. International Journal of Production Economics, 125(2), 262.
Jenkins, Michael. (1992). Gaining a Financial Foothold Through Public Warehousing. The Journal of Business Strategy, 13(3), 53.
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