Growth is essential to any business’s success, and having the right logistics operation plays a key part in achieving that goal. But when it comes to selecting the best method of keeping inventory for small businesses, they often have two options. Those options are third-party warehousing or dropshipping. Understanding all aspects of both models should be paramount when making any decision. That in large part, because leveraging one over another can make or break profitability.
In this article, we will be exploring the advantages and disadvantages of both methods so that you can assess their suitability for efficiently managing your company’s inventory.
What is Dropshipping and How Does it Work?
Dropshipping is an incredibly popular e-commerce business model in which a business does not maintain any inventory or take responsibility for the direct shipping of items to customers. Instead, these businesses partner with dropshipping suppliers who store, package, and ship items directly to the customer on their behalf. To get started with dropshipping, you first need to find reliable dropshipping suppliers and add products from them to your store. The dropship supplier will then be responsible for packaging and delivering products directly to your customers.
The Benefits of Dropshipping
Through dropshipping, entrepreneurs can vastly expand their product range and enter new markets with minimal startup cost implications. Companies also no longer have to worry about stocking items that may not sell. That is because dropshipping merchants are billed when an item is ordered. In turn, that eliminates the traditional risk associated with inventory-based businesses. Those benefits make dropshipping an attractive option for many budding e-commerce entrepreneurs who want to jump-start their business quickly, but notably, quality can be lacking on many fronts.
What is a 3PL Warehouse and How Do They Operate?
A 3PL warehouse, also known as a third-party logistics company, is a company that provides warehousing space along with other distribution and logistics services. They are powerhouses for operating supply chains and are already fully equipped with the staff and tools necessary for running a successful warehouse and logistics operations. How a 3PL works is by managing all warehousing and logistics matters for a business that isn’t its own, including inventory tracking, distribution, warehousing, order fulfillment, and much more. Local third-party logistics companies provide a wonderful alternative to renting and owning your own warehousing space.
The Benefits of 3PL Warehouses and Keeping Inventory
Third-Party Logistics (3PL) warehouses offer a multitude of benefits to ensure your inventory is managed efficiently, cost-effectively, and in compliance with regulatory standards. First, 3PLs limit the need and cost for warehousing spaces, giving you more flexibility to invest in other areas such as marketing or additional business investments. Additionally, a 3PL’s knowledgeable staff can handle order fulfillment quickly and accurately – from stocking to shipping and tracking, leaving you free to concentrate on higher value-added tasks that further promote the success of your business. Also, by keeping accurate inventory records using a 3PL provider, you can gain valuable insights that will give you the opportunity to optimize stock levels based on customer demand. Ultimately, a 3PL warehouse offers clear benefits of greater productivity and profitability.
Want to Work with a Local 3PL? Choose Overflo!
Overflo is a 3PL that provides the Mid-Atlantic Area with premier logistics and warehousing services. We work with small businesses to Fortune 500 companies and can grow with you as you scale your business.
For more information and a free rate quote on our services, contact us today!