April 28, 2023

How to Set Up a Warehouse Using a 3PL

How to Set Up a Warehouse Using a 3PL

Most growing businesses will face numerous headaches when determining how to set up a new warehouse. Even locating a suitable space in today’s tight industrial real estate market can prove extremely challenging. Then, the warehouse operator must incur all upfront costs associated with leasing or purchasing a building, staffing the new location, implementing physical and digital technologies, and much more.

Unfortunately, many warehouse users don’t have the expertise in-house to ensure a new warehouse gets established in the most efficient, cost-effective way. That leaves companies with three options:

  1. Hire in-house supply chain leaders with experience in scaling up warehouse footprints.
  2. Contract with a logistics provider to leverage their existing warehouse network.
  3. Delegate the task of setting up a new facility to a logistics provider.

For growing businesses, the latter option often makes the most sense. Partnering with a third-party logistics (3PL) provider lessens the upfront financial impact of expanding into a new warehouse while letting the expanding business benefit from the logistics expertise of the 3PL’s team.

How to Set Up a Warehouse with Your 3PL

If your organization lacks internal knowledge about how to set up a warehouse, then the odds are good that a 3PL can help you. However, if your existing logistics partner can’t or won’t help you expand your warehouse footprint, it might be time to break up with them and find a 3PL better suited to your needs.

To help your logistics provider identify the right warehouse for your needs, you’ll want to come into the discussion with the following information:

1. The amount of space you need

The size of an ideal warehouse depends entirely on the type of business you operate and the amount of inventory and equipment you must accommodate. For example, industry standards typically dictate that an e-commerce fulfillment center requires three times the square footage of a standard retail distribution center since all inventory lives in the warehouse and doesn’t get spread across a store footprint. Meanwhile, a manufacturer’s storage needs can vary widely depending on the type of components, materials, or finished goods the business wants to store.

2. The best location for your warehouse

Even though your 3PL partner should know how to set up a warehouse, it won’t matter much if that warehouse is in the wrong place. Consider your existing customer base and where you hope to expand down the road. If your business only has a single warehouse, it must be centrally located between all your target markets to keep shipping and transportation costs down. If you’re adding a facility to a larger warehouse network, consider how the entire network impacts your organization’s ability to ship to key markets affordably.

3. The features you need in the building

When considering how to set up a warehouse successfully, be sure you provide your 3PL with specifics about your operation so they can help you find the right structure for your needs. For example, ask the following questions:

  • Do you need a facility that can be divided into e-commerce fulfillment and brick-and-mortar retail distribution operations?
  • Do you need cold storage capabilities for some of your products?
  • Do you deal with hazardous materials with special storage, handling, and safety requirements?
  • Do you require a lot of robotics or automation that might exceed the power and infrastructure capabilities of an older building?
  • Do your inbound and outbound shipment volumes require a minimum number of dock doors?
  • Do your company’s ESG policies require sustainable features at your warehouse?

Understanding your unique requirements in advance can help you, your 3PL, and your real estate broker narrow down options for your new warehouse. Find a logistics partner with unfettered access to a broker’s national real estate portfolio if possible. This access will make it easier to find a facility that checks all the right boxes for your business.

About Phoenix Logistics

Strategic Real Estate. Applied Technology. Tailored Service. Creativity. Flexibility. These fundamentals reflect everything we do at Phoenix Logistics. We provide specialized support in locating and attaining the correct logistics solutions for every client we serve. Most logistic competitors work to win 3PL contracts, and then attempt to secure the real estate to support it. As an affiliate of giant industrial real estate firm Phoenix Investors, we can quickly secure real estate solutions across its portfolio or leverage its market and financial strength to quickly source and acquire real estate to meet our client’s need.

As Senior Vice President for Phoenix Logistics, Mr. Kriewaldt oversees the company’s day-to-day operations as well as corporate strategic development. With more than 25 years of experience in the industrial real estate and logistics industries, Mr. Kriewaldt boasts extensive expertise in real estate practices as well as third-party logistics operations, contract negotiation, and new business development. Mr. Kriewaldt proudly fosters long-lasting business relationships by putting the customer first and creating mutually-beneficial partnerships for all involved. He also holds a Master’s in Business Administration from the University of Texas and a Juris Doctorate degree from Marquette University.

Frank P. Crivello is a Milwaukee-based developer and Chairman & Founder of Phoenix Investors.

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