Setting up a warehouse to store and transport bottling materials for a beverage company can be an expensive undertaking. Depending on the scale of operations, several factors come into play when considering the costs involved. For beverage companies, the cost of warehousing and transporting materials used in bottling is a significant factor that can either make or break the business if not planned correctly. Many of our customers have used this type of analysis to determine that investing in an outsource third-party logistics and warehousing group like Elite make the most sense for scalability and growth. This blog post will explore the typical costs that are related to setting up a warehouse to store and transport bottling materials for a beverage company.
Real estate: The location and size of the warehouse impact the costs significantly. Renting or owning a warehouse in a prime location may be more expensive, but it can have several advantages, such as proximity to key suppliers, reduced transportation costs, and access to a larger market. Also, the size of the warehouse matters; a larger warehouse may require more rent, utilities, and insurance. When considering outsourcing warehousing, consider these costs and advantages for determining your best partner. One of our major advantages to being in Denver, CO is access to western and plains states, making distribution to these areas more cost effective.
Labor cost: Employing staff to operate and manage the warehouse also adds to the cost. The number of personnel required to operate the warehouse depends on the scale of operations. A small beverage business may need only a few people, while a medium to the large-scale business may need several warehouse workers, forklift operators, and supervisors. Additionally, the skill level of the employees and their location affect the cost. In locations where labor is scarce, wages may be higher, adding to the cost. Additionally, temporary staff can also be sourced to provide flexibility when hiring, which can vary in costs. At Elite Sourcing and Logistics, we did the math on temporary versus full time staff and found permanent workers are a better investment. We then pass some of these savings on to our customers who choose to outsource the storage and transportation of bottling containers with us.
Equipment: The materials and machinery used in the warehouse also contribute to the cost. Forklifts, trucks, conveyors, racks, and shelving units are some of the equipment necessary to facilitate the transport and storage of bottling materials. The scale of operation determines the type and quantity of equipment needed. Purchasing or leasing durable and efficient equipment may be expensive, but it can significantly reduce maintenance and repair costs in the long run. Elite Sourcing and Logistics and other outsource 3PLs can spread the costs of purchasing and maintenance of warehousing equipment across a group of customers, ultimately crowdsourcing the expense. This is another potential reason to find a vendor partner to take on this function.
Utilities: Running a warehouse also requires utilities such as electricity, water, and gas. These utilities attract charges determined by the location and scale of operations. Large warehouses consume more power, and as such, their utilities cost can be significantly higher than that for small warehouses. Again, when outsourcing, these costs are typically included in any storage fees, making costs more predictable and manageable.
Insurance: Insurance is necessary to secure the warehouse and its contents. The cost of insurance varies from one insurance company to another, and the premium paid is dependent on the value of the building and its contents, as well as the scale of operations. A note on insurance is that even with outsourcing, additional insurance may be needed. Be sure to consult with your commercial insurance provider for good information to add to your cost analysis.
A beverage company must carefully consider the cost factors involved in setting up a warehouse to store and transport bottling materials. The cost of renting or owning a warehouse location, staffing, equipment, utilities, and insurance can add up to a significant sum. Outsourcing warehousing and transportation of bottling materials could lead to a smoother operation, increased profitability, and growth. It can also provide a great baseline to costs for future planning of an inhouse warehousing solution. Making wise investment decisions by doing good research and relying on the professionals within the beverage industry and warehousing/transportation industry to gather the data needed.
Not sure if investing in your own bottling warehousing and transportation operations or outsourcing this operational function is the best choice? Contact us at Elite Sourcing and Logistics for a conversation. We are happy to share our knowledge and keep you educated!