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fulfillment inventory

Hidden costs of inventory in house warehousing of fulfillment products

One of the benefits of using a fulfillment company is to warehouse and manage your inventory.  Fulfillment and warehousing have a lot of hidden costs and pain points when done in house, especially for start-up companies.  Even though there are costs associated with using a fulfillment company you will ultimately be able to save money and grow your business.  Below are some of the hidden costs in warehousing and storing your own product which can help you weigh the cost benefits of using a fulfillment company.

Space Requirements: Whether you are renting warehouse space or storing your materials in your office or home the cost and inconvenience of storing products is high.  A typical pallet is 48" x 40" or about 3.65 square feet, but you will need to get enough warehouse spacing to organize and access your products.  Space requirements are often close to double the size of your inventory as you will need to access and move materials easily as well as have enough space to accommodate large shipments.  Product packaging like boxes and packing materials also take up considerable space and should be accounted for.

Additional Equipment: Warehousing products also requires investments in equipment like warehouse racking, forklifts, pallet jacks, labels, etc

Security: Ensuring your products are stored securely is important to protect your inventory from being damaged or stolen.  Security measures should be put in place to ensure inventory is stored securely and if necessary in a climate controlled environment.

Warehouse and Inventory Management: In order to fulfill items quickly and have accurate inventory counts you will need to invest in inventory management software and ensure your warehouse manager is correctly receiving and deducting shipped items from inventory. 

Insurance: You will need to insure your warehouse and products to ensure that you are covered should anything occur

Utilities: Your rental costs will not include utilities.  These are surprisingly high even for small operations, and can be astronomical for climate controlled warehouses.

Employees: The cost of employing a warehouse manager will add up, as there are additional expenses to their salary and you will also need to invest significant time in training.  Additional expenses like holiday pay, insurance, workers comp, overtime, recruiting, to name a few add up quickly and should be taken into account when determining if you want to hire your own warehouse and fulfillment staff.

Time: Nothing is as valuable as your time.  Even if you do not account for your time as an expense the opportunities lost by warehousing, managing, or fulfilling your own product can significantly effect the growth of your business.  Managing a warehouse you will need to have someone on site at all times to receive inventory and send out shipments.  It is also very time consuming moving, receiving, sending, and managing a warehouse, which is valuable time you can invest in growing your business.

Managing your own warehouse can provide additional control and comfort but there are many hidden costs that you will need to take into account when evaluating your options.  Often times using a fulfillment center will reduce your warehousing costs and help improve your efficiency with proven systems and processes.