Yes, we’re a third party logistics company (3PL). So if you ask us, there are lots of benefits to using a 3PL. In fact, if the benefits of outsourcing to a 3PL don’t outweigh the costs, then why would you?
That said, when it comes to a cost/benefit analysis for outsourcing, there’s one thing that few consider. To justify the switch to a 3PL, most companies consider savings like reduced costs in areas that aren’t part of their core business. These include lower costs in maintaining an up-to-date warehousing and distribution system, and streamlined supply chain management. But they often miss one of the largest single costs that a 3PL will completely eliminate
How Reducing Employee Turnover is One of the Biggest Benefits of Using a 3PL
Every business is aware that there is a cost associated with employee turnover. But few appreciate the extent of those costs.
Using warehousing as an example, statistics vary on different aspects of warehouse employee turnover. One statistic that seems universal is that warehousing experiences one of the highest employees turnover rates of any industry sector.
Using general averages, if you have 20 warehouse employees, you can assume the following :
20% Are thinking of Leaving
4 of the 20 people on your warehouse floor are considering leaving. They are likely your most experienced people and most knowledgeable of systems and processes.
20% Are New (less than 3 months)
4 of your workers are still in training or simply getting up-to-speed with their job functions. Of them, 2 will leave before their probation period is over.
The direct costs of replacing a warehouse employee is about 20% of the employee’s annual salary. For a $15.00 per hour role, that’s $6,000.
It’s very difficult for any company to track all the indirect costs of employee turnover. But, from lost productivity, to reduced morale due to high turnover, indirect costs may be the largest cost of all. Some estimates put the direct and indirect costs of replacing a warehouse employee at 150% of salary. That’s $45,000 for a $30,000 position.
One More Benefit of Using a 3PL – No Work Absence Costs
While not directly related to employee turnover, employee absence is yet another huge cost savings offered by 3PLs. According to Statistics Canada absence rates, those for transportation and warehousing businesses are among the highest in the country. At 12.3 business days lost to absence per employee, you can count on losing two and a half weeks of lost time per employee every year.
Or You Could Just Outsource to a Third-Party Logistics Company
If yours is a warehousing, manufacturing or distribution company, any dollar spent on non-core functions is a dollar not spent on what you do best. And that might be as costly as anything else.
To learn more about the benefits of outsourcing your logistics to a 3PL, get in touch with us here at PiVal today.