Key Takeaways
- Using a third-party logistics (3PL) provider helps manufacturers expand their storage capacity without purchasing land, building facilities, buying equipment, or hiring staff.
- Using a 3PL provider helps manufacturers lower their fixed costs, and helps them increase their order and inventory visibility and fulfillment speed.
- A 3PL warehouse GTA solution allows Ontario businesses to access major Canadian routes and networks and provides faster orders across Canada.
- Using a provider that combines warehousing and distribution services helps reduce order fulfillment and product handling costs.
- Using flexible warehousing distribution services helps manufacturers quickly respond to changes in demand without the need to expand their warehouse.
The Storage Challenge for Ontario Manufacturers
Warehouse space comes with a high price. Building a dedicated warehouse requires a large capital investment and the purchase of staff and equipment. According to Statistics Canada, Ontario accounts for more than 40% of Canada’s manufacturing GDP, making efficient inventory storage and distribution critical for maintaining supply chain performance.
Many manufacturers in Ontario find that business growth exceeds their available storage capacity. Seasonal demand grows. New products are introduced. Even the increase in production can quickly fill available warehouse space.
The growth of manufacturing business no longer requires the building of a warehouse. Third-party logistics providers offer scalable storage and fulfillment services that help businesses grow without the need to build their own warehouses.
Why Building a Warehouse is Not Always the Best Investment
Recent data from the Canada Mortgage and Housing Corporation show that vacancy rates for warehouses and industrial spaces in major markets across Canada are at or near historical lows. This has created even more competition for storage space and increased the cost of occupancy for businesses that need more warehouse space.
The perception of greater control over the fulfillment process is the main reason manufacturers assume they need to build a warehouse. In reality, the ownership of a warehouse means greater challenges in the day-to-day operations and greater financial risk.
Warehouse projects require significant time and resources before delivering value. Land must be purchased. Permits need to be acquired. Construction, equipment purchases, and staff hiring must all be completed before the warehouse becomes operational.
During that period, stock continues to pile up.
Estimates indicate warehouse building costs have increased significantly in the last few years because of a shortage of labor, the cost of materials, and the escalating cost of commercial real estate. This means warehouse space is more of a financial commitment than it used to be.
For many growing manufacturers, the opportunity cost of capital tied up in a warehouse is better spent on producing more, getting more equipment, and reinvesting in the business as it grows.
How Warehousing Services Address the Capacity Issues
Warehousing services address capacity challenges by providing immediate access to professionally managed storage facilities while eliminating the costs of ownership.
Rather than buying or leasing more space, manufacturers pay for the space and services used.
This approach helps businesses to:
- Economically store excess inventory
- Scale storage space as required
- Maintain better organization of inventory
- Lower the cost of doing business
- Allow internal teams to focus on manufacturing operations
RGX Group has seen customers go from overcrowded facilities to well organized inventory in a matter of weeks rather than months while waiting for an expansion of warehouse facilities to be completed.
The result is greater operational efficiency and more space available for production.
Advantages of Having Warehousing and Distribution Together
Warehousing and distribution services fit well together.
When storage of inventory is in the same building as fulfillment, it is much easier and quicker for a product to go from being stored to being delivered to a customer.
Manufacturers enjoy the following:
Speed of Service
Inventory is already in a building that is ready to fulfill orders. No time is wasted transferring inventory, so orders can be completed and delivered much quicker.
Lower Transportation Costs
Lower handling costs and transportation expenses arise from fewer inventory transfers.
Better Inventory Visibility
Real-time tracking of inventory through advanced warehouse management systems aids manufacturers in optimizing their purchasing and production decisions.
Improved Customer Service
Fulfillment that is faster translates to shorter delivery times and improved customer satisfaction.
The combination of these distribution and warehousing services yields a supply chain that is nearly impossible to achieve through the use of multiple vendors.
Why a 3PL Warehouse GTA Location Matters
When it comes to the efficient use of inventory, the importance of location cannot be overstated.
A strategically located 3PL warehouse GTA facility facility positions inventory close to Ontario’s largest consumer markets and major transportation corridors.
The advantage for manufacturers is:
- The ability to serve all of Ontario quicker
- Shorter transportation distances
- Faster shipments
- Lower freight costs
- Better access to the region’s major highways and carrier routes
Products that are warehoused in the Greater Toronto Area can be easily distributed to all of Southern Ontario and even to the rest of Canada.
For manufacturers that supply retail, eCommerce, wholesale and industrial customers, being close to the transportation infrastructure can dramatically improve their ability to deliver.
Using a Real-World Framework to Evaluate Storage Options
Before expanding their warehouses, manufacturers should examine the following three elements:
1. Current Storage Utilization
Operational efficiency often declines when warehouse utilization exceeds 85% for extended periods.
2. Forecasted Inventory Growth
What are the expected inventory levels over the next 12-24 months? If the expected growth is temporary, building a warehouse may not be justified.
3. Capital Allocation Priorities
Would investing the capital in warehouse construction be better than using the capital on other options like production equipment, personnel, product innovation and fulfillment, or improving sales?
Often, outsourced warehouse services help manufacturers address their needs without making significant investments.
Choosing the Right Warehouse Storage Partner
Logistics providers do not all offer the same capabilities.
Manufacturers can benefit from working with providers that have the following:
- Flexible storage capacity
- Systems and tools for managing inventory
- Support for order fulfillment
- Services for distribution
- Safe facilities
- Strategic placement in the GTA
- Skilled warehouse staff
The objective is not just finding a space to store products.
The objective is to provide a supply chain solution that meets the needs of a growing business.
Conclusion
Manufacturers in Ontario no longer need to construct their own warehouse to accommodate growing inventory needs. Modern warehousing services provide flexible, cost-effective storage solutions without the large capital investment required to build and operate a warehouse.
Warehousing and distribution services provide the business the ability to grow and redesign its services without the need for an investment in a warehouse. For businesses that want to manage their inventory more effectively and lower costs while improving the speed of fulfillment services, a strategically located 3PL warehouse in the GTA provides many services to address their needs.
FAQs
What are warehousing services?
Warehousing services are businesses that provide secured storage for inventory along with management and fulfillment services. They allow other businesses to store their inventory without purchasing and operating their own warehouse.
How does a 3PL warehouse GTA help manufacturers?
A 3PL warehouse GTA offers manufacturers flexible fulfillment and storage solutions. This helps manufacturers improve their distribution while lowering their logistics costs.
Is outsourcing warehouse storage cheaper than constructing a warehouse?
For many manufacturers, the answer is yes. Outsourcing warehouse storage eliminates the expense of purchasing land, building a warehouse, buying equipment, and hiring staff while granting instant access to storage.
What distinguishes warehousing from distribution?
Warehousing is the process of safely and efficiently storing inventory. Distribution is the process of getting products out of storage and to customers or retail and other destinations through fulfillment and transportation.
Are warehouse storage services able to adjust to seasonal increases in demand?
Yes. Warehouse storage services generally provide flexible capacity that allows manufacturers to increase or decrease the size of their storage space over the year as their storage needs fluctuate.
