Managing Warehouse Overflow with Third-Party Warehousing  

In July of 2022, retailers were sitting on $548.8 billion of inventory, a 21.6% increase from the prior year. With an influx of inventory due to economic conditions, suppliers have found it hard to accurately predict the supply and demand of many products, leading to warehouse overflow.  

Let’s face it, storing unpurchased goods is expensive. Overhead costs start to add up fast, and with less product moving out the door you now have a restraint on your cash flow. If you’re experiencing warehouse overflow, working with a 3PL can help you to better manage your warehouse and reduce overhead costs. Continue reading to learn how you can manage warehouse overflow with third-party warehousing.  

Common Causes of Inventory Overflow  

Changes in Consumer Spending 

Over the last year, manufacturers have seen an abrupt change in consumer spending as inflation has made its way through every household. There has been less discretionary spending for consumer and luxury goods, causing many big-box retailers to cancel orders due to decreased demand and internal capacity constraints. The changes in consumer spending leaves suppliers with an excess of inventory, leaving them a culprit of inventory overflow.  

Incorrect Forecasting 

Inventory forecasting aims to manage your goods to maximize profits and minimize inventory spending. Although it’s not always a spot-on estimate, forecasting ensures you have enough supply to meet the demand. A spike in demand or a sudden fad for a particular product can make the market demand hard to forecast accurately. Once the fad declines, many businesses are left with excess stock. Poor or incorrect inventory forecasting can lead to inventory overflow, becoming a burden on your overhead costs.  

Inconsistent Inventory Updates 

Most warehouse management systems periodically update stock levels of pre-ordered, back-ordered, and out-of-stock items. Any inconsistency in inventory updates means you don’t have real time data, leading to warehouse overflow. Inventory updates can go a long way toward helping with overflow problems; irregular overflow can help you determine when significant issues are starting to manifest.  

How Third-Party Warehousing Can Help Control Inventory Overflow 

Reduce Supply Chain Inefficiencies 

Your 3PL provider will have the necessary expertise and resources available to adjust your shipping, storage, and distribution when needed. These areas can often be a pain point for manufacturers that operate out of a central location, reducing your overall supply chain inefficiency. Working with a 3PL reduces inefficiencies as they provide ongoing support for continuous improvement in their customer’s supply chains to better help meet the needs of the company.  

Free up Valuable People, Time, and Capital 

Outsourcing operations to a 3PL provider brings the advantage of using your organization’s most critical resources better by freeing up your valuable people, time, and capital. With better uses of your resources, you have more time to focus on what really matters- growing your business. While you focus on the core of your business, your 3PL provider will be focusing on optimizing your supply chain to be more efficient and cost-effective.  

Market Expansion 

Working with a 3PL provider opens up new market opportunities by allowing your organization to easily position themselves in the supply chain of unfamiliar markets. The ability to locate, track, and move products within a new market without having to endure the added cost of equipment, warehousing, and additional labor saves you capital and allows you to better serve your customers. Merging into a new market is no easy task, working with a 3PL can help to alleviate some of the stress and set you up for success.  

Utilize a More Robust, Scalable Network of Resources 

With in-house operations, you miss out on a robust and scalable network of resources that a 3PL provides. With a lack of resources, your business may be limited to the scope and scale of services they can accommodate. When business is booming, your team will most likely be unable to keep up with demand and customers are left waiting. On the other hand, when businesses slow down having a large team can mean an increase in overhead costs. 3PL’s help you when you need it most to make a smooth transition during market highs and lows.  

VeraCore Smart 3PL Fulfillment 

For more than 40 years, 3PLs and fulfillment companies have placed VeraCore’s warehouse management software at the ‘core’ of their business to get the job done right. Ready to take your business to new heights? To learn how smart 3PL fulfillment can help grow your business, check out our solutions.